4 Key Factors in Selecting Runaway Stocks
Selecting winning stocks to trade comes down to a few key fundamental and technical criteria.
Modern technology has made the stock market more accessible than any other time in the financial history of the world yet traders still struggle to find worthy investments to trade. Despite having access to advanced charting packages, real-time news, and instant access to a company’s financial performance, finding worthy stocks to trade continues to be as much of a challenge in the 21st century as it was in the past centuries.
Explanations as to why this is so difficult are as numerous as the challenges that they attempt to explain away. Like the Hydra, you chop off one head only to have another head grow back to take its place, and you’re left with more unanswered questions leading to frustration and overwhelm.
The focus of this article is to offer a framework to find winning stocks to trade. Rather than offer some step-by-step, “one-size fits all” approach, this framework will act as a guide to find stocks that stand the greatest chance of emerging as a potential leader in the stock market. It is a flexible approach that is based on what works that allows some deviation. Flexibility is important because if you get too locked in to the “right” way or become to rigid in your approach then you will fail to miss out on viable opportunities. Later on, I’ll go into more detail about that later but, for now, understand that these 4 keys will act as a guide to help you find stocks with leadership potential in the stock market.
Stock leaders are responsible for taking the overall market to higher levels but, more importantly to you, they offer the greatest overall return. They have “runaway” potential where they outrun the overall market and go on to rack up returns of 25%, 50%, 100%, and even greater.
To help, you’ll need an understanding of the two dominant schools of trading: fundamental and technical.
In this video, watch how Bilgari Holdings (BH) rose to an all-time high but then see the signals that its advance was weakening. Successful trading is about identifying the strongest stocks to find the best trends but you have to be able to spot when weakness sets in and causes the trend to halt and roll over.
In the following case study, you’ll learn:
- How to spot faltering price action with specific price highs and lows.
- What a “Death Cross” is and what it means.
- Why short-selling isn’t for everyone (and the smart way to play it if you do).
- Why the reversal point and the trigger were at the same price point.
- What to look for if you missed the initial move.
And much more.
Swing trading has 5 key advantages that can lead to higher returns in less time.
Swing trading is a successful method of stock trading that is often used by traders who make a weekly or monthly living on their investing. It is considered a near or medium term investment because it is a trade that either makes or breaks itself usually in two to thirty days. It is not the type of trade that long term investors would be interested in. (Camarilla 2013) “Swing Trading attempts to combine the best of two worlds – the slow pace of investing and the rapid potential gains of day trading.” (Page 1)
So what is the definition of swing trading? It is accomplished through the analysis of stock data. It seeks to identify a current stock or security that is rising in price quickly and looks to do so for a short period of time. A swing trader purchases the rising stock, rides the wave of increasing value, and then gets out before the market corrects and the price quickly drops back down. And that is the trick of swing trading; identifying when to get in and then when to get out to generate the greatest profit.
(Forex Guy 2014) “Swing trading is a type of methodology that sits in a ‘sweet spot’ between the caffeine fuelled day trader, and the ‘buy and hold’ position trader. Swing trading is a medium term approach to the market centered around momentum trading. When you’re swing trading, you let your trades run and think on a bigger scale in terms of profit.” (Page 1)