How to Screen or Pick Stock for Stock Trading

Picking a stock is an important step to stock trading. There are hundred of stocks out there and the choice can drown you. I wrote previous about how to screen stocks here from perspective of various traders; there is even the Mark Minervini trend template you can use to screen stock

Again here are ways to screen stock for stock trading using technical analysis. These uses a stock screener

Option 1
- EMA price above

Option 2
- MACD about to cross signal from below

Option 3
- MA 20: moving average about to  EMA 13

Option 4 (Mark Minervini Trend Template)
- current stock price is trading above the 50-day moving average
-  50-day (10-week) moving average is above both the 150-day and 200-day moving averages
- price is 30 percent above its 52-week low
- current stock price is within at least 25 percent of its 52-week high

Option 4 (ABS trading)
- MA 20 price is above average
- MA 50 moving average below MA 20
- MA 100 moving average below MA 100
- Value average (10 days) above 20
- RSI 14 equal or more than 70

After stocks are screened this way, look individual into the chart and plot entry, exit and cut loss points

Stock Trading Planning

Money Growers PH shares how to plan your trades in stock trading

• set entry point
• set sell point
• set stop loss or stop profit
• risk computation (risk reward ratio of 2:1)
• portfolio allocation
• potential reward

He first draws a line on the chart for the lines of support and lines of resistance. Buy on support, sell on resistance

Chris Cruz shares his reasons for buying

• Uptrend
• Old resistance becomes support
• Fibonacci 23.5%
• MA 20 support

Abraham Avila Jr of Abs Trading shares

What's a trading plan?

Trading plan helps you to organize your thoughts and takes the emotion of the stock trading

Structure of set of guidelines, define your trading activity, and what and when and how to trade

Why create a trading plan?

manages your risk better

streamline decision making

helps you enter and exit based on strategy and not emotion

maintain disciple

How to develop a trading plan?

Answer the 7 questions

1. what markets are you trading?

- US market? Futures? Crypto currency? Commodities? Stocks or Equities?

- mastery or focus; pick one market then once mastered that's when you pick another. There is also a saying not to limit to once income vehicle

2. what time frame?

- as newbie, focus on one thing. Pick on the set-up most suitable to you. Position trading? Momentum trading?

- as a newbie, master daily candle or daily time frame for now

3. how much are you risking one each trade?

- risk first before profit; how much are you willing to loss to lose?

- started with 25,000; newbies advised to risk at 5 digit amount to as much as 100,000

- biggest lost placed at 2,000

4. What are the conditions of your trading set-up?

- what are the criteria to enter a stock

5. How will you enter your trade?

- breakout? retracement? pullback?

6. Where is your stop loss?

- 5%? Break of resistance?

7. Where is your profit target?

What markets are you trading?

PSE Market capitalization

Blue chip (top 10 companies): Investors; mabagal ang returns

2nd liners (good fundamentals): Investors/ Traders;

3rd liners (Basura stocks): Traders

What is your time frame

Position trader:

- look at big picture--weekly

- Entry/ Exit--daily

Swing trader:

- look at big picture--daily

- Entry/Exit--intraday (minute chart/5 or 15 

Day trader

- Entry/Exit: intraday

How much as you risking on each trade?

Risk should no more than -1% of total portfolio per trade e.g. 100K portfolio lose only 1K

Position sizing and allocation. Avoid buying a lot of varied stocks with low volume.

Buy 8,000 per share to save on transaction fees

Risk Reward ratio 1:2 or better

What are the conditions of your trading setup? Parameters

downtrend? range? uptrend?

Range trend better for experienced trader; buy on support sell on resistance

Uptrend: you just enjoy the ride; recommended (trend or swing) for newbies

Downtrend: avoid for newbies; may be done by experienced traders with success

If price > 20 MA >50 MA > 100 MA then the trend is bullish; AOTS by ZeeFreaks

How will you enter your trade? Triggers

buy on support, sell on resistance

buy on breakout: recommended

buy on retracement

if trend is bullish, then identify the resistance where price could breakout to

if price break the resistance at near end of day, enter an allocation 50% max of total accounts

Where is your stop loss?

If price return back below the previous resistance or reached -3% to -5% loss then cut loss

Where is your profit target?

If price snaps the 20 MA, then take profit

Sample Trading Plan

Trade setup: breakout play

Trade objective: trend following

Primary Criteria

- prior consolidation

- breakout of resistance of the consolidation

- volume spike

Secondary criteria

- longest range in the past 10 days or 2 weeks

- new 2 month price high

- price closed above the upper 50% of the day's range or better

Indicators

- AOTS

- RSI 71

- MACD crossover

Abs Trading checklist for Breakout Play (old study)

AOTS
Breakout of resistance

Supply and demand

Prior consolidation

Longest range in the past 10 days

Price closed above pivot point of the day's range 50%+

RSI above 70

Stock Indicators to Buy More Stocks

I wanted to get into stock trading, and what are the indicators I need to know at the minimum to know to enter and exit or how to set buy and sell triggers

• moving average 20: when the price pierces the MA 20, time to probably sell
• candlestick: watch out for the doji
• MACD: when the histograms almost flattens
• RSI: line goes below the 30

Trendline, Hang on, Let Go

The YouTuber Jack Angel mentioned in one of her post that she has been greatly influenced by another YouTuber Alex Onze on stock trading.

Alex Onze was among the first to used his mother tongue to talk/ teach about stock trading and there is Money Growers who brings a more aesthetically pleasing videos on trading.

In Alex Onze's early videos,

• he talked about plotting trend lines and identifying support and resistance. In an uptrend, he advises buy on support, then at sell on resistance. If you miss selling on the first time the price hit resistance, sell when it is at 50% between support and resistance..In a downtrend, after identifying support and resistance, same technique: buy on support and sell on resistance.
• he demonstrated that in an uptrend, once the supply is almost too much, avoid buying that stock; but in an downtrend, once the price drops so low it becomes a hot stock with tendency to bounce back; buy once initial bounce back is equal or more than 50% as the trend is the price will go higher

He goes on to say that there are 5 chart signals to use

1. Stochastic: 0-20%
2. RSI: below 30 and uptrend
3. MACD: flattening histogram and uptrend
4. Volume oscillators: more positive 20-50, the more the price drops; the more negative the price will climb up
5. Candlestick/ heikin ashi: candle body almost the same size or falling wedges, there is reversal to downtrend; in rising wedges, the trend is upward

His take on chart timeframe

• daytrader: 1 min to 5 mins chart system or 15-30 min chart system; others employ the 1 min-15 min-30 mins-1 hours then 4 hour chart system in the morning to check if the chart is bullish or bearish

Charting Tool for Stock Trading

Joseph Busto documents how to use the charting tool in Investagram in the following YouTube videos

Here is Investagram Charting 101

Pinoy Stocks Central shares how to customize charts on Investagram here and even shares about indicators and oscillators here like MACD, EMA. RSI. DMI, Ichimoku clouds and Bollinger bands. The problem with his site is numerous pop ups.

Stock Trader's Tool and Set-up

ZF shares
On trading tools commonly used:

• Moving Averages (MAs), 
• Darvas Box Method, 
• Fibonacci 
• RSI (Relative Strength Index)

On buying and timing

• buy in tranches - 3 tranches to be exact : Before, During, and After breakout point.The tranches can be done in weeks, several days or all in one day. 
• The safest to buy is during the matching or run-off at 3:15-3:20 PM since at that point, the possibility of a whipsaw is close to none.
• If you're an active trader, probably 2-5 times a week. 
• If you like to diversify and do low volume trades, then you can do 5 trades a week. 
• A Trend follower can trade once every month or even 2 months

MACD or MacDonalds

Photo by freestocks.org on Pexels.com 

I first got introduced to MACD and RSI while following the blog of a prominent trader. He mentioned about MACD along with buy signal and RSI in acceptable levels on the chart screenshot of a $BHI and $NI. I was puzzled; it was something I need to learn. Lifted from Investopedia:

MACD shows the relationship between two moving averages MACD is The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. The result of that calculation is the MACD line. A nine-day EMA of the MACD, called the "signal line," is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals MACD is often displayed with a histogram which graphs the distance between the MACD and its signal line. when the MACD falls below the signal line, it is a bearish signal which indicates that it may be time to sell... when the MACD rises above the signal line, the indicator gives a bullish signal, which suggests that the price of the asset is likely to experience upward momentum

Another explanation from David of Trading 212 at 3: 38 of video

If lines are about Zero line, it is upward trend (bullish) and if the line is below the Zero line, it is a downward trend (bear).

Comment from CallousDnb

Generally if the averages cross AND the RSI is over 70 sell, if they cross low AND the RSI is near or below 30, buy.

Here is a video by Ricardo Alvaro on adding MACD on your Investagram chart. But instead of the usual 12- ,26- and 9-period EMA, he uses 15- and 30- period. He had not provided reason for changing the default. But other opinions are that, it may be adjusted to 24, 52, 9  which makes the MACD slower and it removes most of the noise. RSI deserves another post.