Have you ever known something, and I mean something that seemed very simple to you, so simple that you have a hard time understanding why other people are confused, and yet other people are confused about this thing that you know, can you think of something like that?
"Have you ever known something that is simple to you but others find confusing?"
Well, I have a few of those, but there's one question that I get all the time and I kind of shrug it off and say, really is that it? The question is "Jeremy, how do I find good stocks to trade?" Even if I might think it's such a simple thing to do, others obviously do not and f you guys are asking the question, it means that you need an answer!
"How do I find good Stocks to trade?"
So I have created this little video to demystify the mystery and reveal to you the secret.
The secret of how and where to find good stocks to trade.
All right. Now let me give you a couple of random facts to get started here. Did you know that there are about 3,671 publicly traded companies in the United States. Now I say about with a very specific number because that's the current number, but the reality is it fluctuates.
We have stocks that come onto the big board with an IPO, an initial public offering. We have stocks that get merged into other companies and you know, this list is always changing a little bit. In fact, over the last 20 years, it's changed a lot. Just 20 years ago when I started trading, there was over 7,000 companies that were being traded and today we're down to half that.
Basically we have just about 3,600.
Now, where did all those companies go?
Well, some of them are out of business, like Enron. See, Enron was in business whenever I started. They're not today and there's a lot of companies that have gone out of business. There are companies that have been merged in with other companies and they've been acquired. And then of course some companies just been bought back and they've gone private again. Because what we find, you know, in today's world it's easier to manage private equity than it is publicly traded companies 'Cause there's all these earnings disclosures and stuff.
So that's where all the companies went. But that doesn't mean that there's still not tons of opportunities out there. In fact, there's new opportunities right now, there's over 2000 exchange traded funds in the United States alone and globally there's over 5,400 so what we've seen is we've seen a decrease in the number of publicly traded companies and an increase in these exchange traded funds.
So there's a ton of opportunity out there, which no wonder people are confused and people want to know how do I find that good stock or that good ETF for me to trade.
So to help you out, I have some general principles.
Liquidity. Now what is this fancy word? Liquidity doesn't really mean like liquid in the terms of like water. No, liquidity has to do with how easy it is to get into or get out of a trade. So for example, if you buy a stock, usually they'll let you buy it, but maybe you decide you want to sell it and there's nobody that wants to buy it. That's an issue of liquidity.
As you trade stocks that are very liquid, you trade stocks that a lot of people are trading, but if you're trading stocks that don't have a lot of people trading them, then you may run into this liquidity issue.
So there's nothing worse that you could possibly get into. Then you have a bad trade and you're trying to get out of it and nobody wants to buy it and it's totally illiquid. That's horrible. It's a horrible experience and you don't want to be there.
So general principal, we want liquidity. It's very important.
Liquidity is very important
We need price movement as traders, it needs the price to go up and the price to come down. We don't really care which way it's going, we just need to know that the price is going to be volatile and it's going to move.
Volatility (price movement)
Now, technically, anything you like, you can trade. But the truth is, while you could trade anything you like, there's quite a few stocks that I would never trade.
Technically you can trade anything you like!
So I thought I would give you my general rules for choosing a stock.And if you can use them, great. If they help you, great. If not, then it's no big deal.
As a Rule...
So as a rule, here's what you want to look for.
Now why would we want 2 million shares? Well, it's kind of an arbitrary number to be honest. I just kind of picked this number. If you have 1.9 million, that's going to be okay folks, 2 million is a target. You know, it's kind of an arbitrary number.
But average daily volume, it tells you how many people are trading the stock. And if it drops below it from time to time, that's fine. You just want the average. You can slap a 15 day moving average on your daily volume and it'll just tell you what the average daily volume is.
And if as long as it's, 2 million or thereabouts, you're going to be fine with your liquidity. So that's a good target number for you.
Now I'm an options trader. I do almost all of my trades with options. And if I do buy the stock, I turn around and sell options against it. So I need to make sure that any stock that I'm trading is going to be optionable. That may not be that important to you.
But for me it's a very important issue that the stock is optionable. And along that lines...
Now 1000 is again kind of an arbitrary number.
If you look at the, at the money options and it has 890 open interest, that's probably going to be okay. Honestly, it's going to be all right. But if you look at the, at the money options and has 50 yeah, we got a big problem here.
So the general target is about a thousand open interest for at the money options. Now sometimes you may pull up an option chain and the immediately at the money option might have like 50 it might be a weekly option that just was issued or something go on strike price above one strike price below. And if those strike prices have some good open interests, then this is going to be okay to trade.
Just make sure you select the option that has good open interest. What you don't want is you don't want to find a great stock that doesn't have great option Open interest, and I'll give you an example of that.
It's a great stock, really love trading it. There's just one problem. The option open interest is horrible and I can barely get in and out of the option trades that I want. And so it becomes a stock that I really can't trade that much because the open interest is not favorable, which is why it never ever makes my list of stocks to trade.
Even though I love the company, I love the airline and it's actually a great stock, just not good for options.
In other words, I want volatility. Now volatility is also somewhat arbitrary. You know, on a stock like Amazon, is almost a couple thousand dollars a share. Uh, you can see that thing moved 10% in couple of days and it's $200.
So you know, dollar amount is not the number and really percentages isn't even the number. I just want to see something that we can work with, on a $50 stock that might mean, over a 12 month period, it's moved from $50 up to $75 and back down to $50. Something like that, a good 50% movement.
There's some volatility we can work with on, you know, maybe $150 or $200 stock. You know, maybe over a 12 month period it might move up and down $50. You know, that's some good volatility we can work with. What you don't want is, you don't want to stock that's a flat line.
You don't want to stock that has, um, that's maybe on a $200 stock, and it goes up to $205 and down to $195. That's what you don't want. You do want stocks that have a lot of volatility that move up and down.
And the reason for that is because you can actually trade that. You can't trade a stock that doesn't move. So we need price movement. And that brings me to a list of what you don't want.
And I say boo for penny stocks for a lot of reasons. Number one reason is liquidity It's hard to get in and out of penny stocks. Now they'll let you buy them, they'll let you get into them, but then after the price runs up, what happens? You can't get out of it and you end up holding that thing all the way back down to the bottom and it is a pain.
So if you want the ROI percentages that you get with penny stocks, you need to look at a different market, look at trading options or look at trading forex or something different. Penny stocks don't really have much good that comes out of them.
Let's just put it that way. You also need to know that penny stocks are not regulated the same way as big board stocks, they don't have the same rules governing them. Including the rules of promotion, which means all those newsletters that you see, that say that this hot penny stock is going to be the big winner. Guess what? They got paid to send that to you and they have no financial responsibility to tell you the truth at all. They're just simply doing a writeup saying, hey, such and such gold company is a great company.
It's a penny stock. It's trading for 14 cents a share and we believe in the next four weeks it's going to be over $2 a share. You should buy... They can make up whatever they want to make up and there is no regulation about it. That's why I hate penny stocks. Penny stocks are not liquid and they do not sell based on the truth, and that is a big problem to me and that's why so many people get burned and lose so much money with penny stocks, so avoid penny stocks. That's the number one thing.
You do not want stocks that are trading say less than 100,000 a day with average daily volume. Now does that mean 101,000 is okay? Well, no, I really wouldn't do that either. I mean that's kind of an arbitrary number.
But I would lean towards the several million shares a day as opposed to several hundred thousand cause what you're going to find if as if a stock is trading like 100,000 shares a day, then when he gets into trouble and it starts going down, there's not enough people to buy your shares whenever you want to get out of it.
And that comes down to that issue of liquidity. So we can't get in and out when we need to. So low volume stocks, you don't want to trade stocks with very little price movement. A good example of this, our utility companies, a lot of times utility companies, they just don't move very much. The price for the year might, might fluctuate $5 and on a $50 stock, that's just not very much. It's not something you can work with. So you need stocks that have a price that move.
If they don't move very much, then you don't want to trade it.
I am not a fan of trading IPOs. IPOs very rarely work out the way that you want them to. You know, I think about some good ones such as Facebook for example, and even Facebook when it IPO'd, the first thing it did was sold off and it went down.
Now the first day or two you might see a really big spike. You might see even a 50% or a hundred percent gain, but then it just crashes very quickly and there's a lot of rules around the IPO.
So I suggest that you do not trade IPO stocks for a little while.
Now I don't have a problem with trading new stocks, I just want to see some history on it.
Remember we're technical analysts we're technical traders and we were going to make our trading decisions based on what the stock has done. Well, if it's an IPO, it has no trading history so you can't make a good trading decision.
So there's so many reasons to not trade IPO stocks. They rarely, rarely work out the way that you want them to. I know there's a lot of hype around it. It makes you feel good in the moment you feel like you're on the cutting edge of investing. Guess what? You're not. You're not.
There's millions of other people that are also deceiving themselves and thinking they're on the cutting edge of investing by buying an IPO and they too are not on the cutting edge. You are on the cutting edge when you follow the kind of trading rules that I have taught you. And when you learn to identify trading behavior, not whenever you chase IPOs.
Now you're ready to hit the ground running and to go trade like a pro. You know how to pick a stock and we're done. Right? Well, how would you like to have a list? What if I gave you a list of maybe the best 150 stocks to trade on the US stock market? Would you like that? I bet you'd like a list like that.
Something like the trade smart top 150. Okay, well I'm not saying that these are actually the best. In fact, I'm sure they may not be. I don't know, there's some great stocks in those lists. But here's what I can say...
So That's It!
TradeSmart has put together a list of 150 stocks that fit the criteria that I just laid out for you. They are great to trade, they provide plenty of opportunity. And here's the other thing we always pick from this list.
All of our power trader classes our trade ideas, they all come from this list. So I don't know if it's the top 150 of the world, I can't prove that or disprove that. But it is 150 really great stocks that you can work with and you can start trading and it's gonna provide some really good winning trades for you.
So where can you get this list? Well, I have news for you.
TradeSmart Top 150
It Is a list that we built exclusively for the TradeSmart students. And more importantly it's a list that works. I mean this list continues to produce at least 10 great trades a week. How much money could you make with 10 great trades every week. If you could find 10 great trades, how much money could you really make over the next six months, the next 12 months with just 10 great trades.
This is a list that has done that every week since we started the list since we conceived it and it continues to produce and it's going to continue to produce because every stock on here fits all those criteria that I gave you. So what would a list like this be worth to you? And I want to remind you, there is no scanning involved. There's no wondering if this is a good company that you should trade. It's just a solid watch list of 150 stocks and ETFs that meet our criteria.
Fit the criteria we laid out
And it provides plenty of great trade ideas. So again, what would it be worth to you? Would you pay $1,000 for a list like this? Would you expect to pay maybe $2,000 what about $5,000 you know what, $5,000 it's probably worth it. I'm pretty sure it's worth it because there's a lot of people, including myself, who have made that much money or more from just one of the great trades that we pull from this list on a weekly basis.
Are great to trade
So yea it's worth $5,000 in fact, I'm going to say that the truth is this list is priceless.
It provides continually great trades every week, week after week, month after month, year after year. So the truth is, I think I can charge any amount that I want for this list. I mean, it's proven list. It continues, to produce and anything that produces is worth a lot of money, right? I would say it is.
Provide plenty of opportunity
And you know, some people go out there, you might be one of those people that go out and they spend hundreds of dollars. They spend $200 a month or $300 a month every month for a piece of software that just scans and gives them a list. Kind of like this, but you know what? Our list is better and it's better because we've already proven it and it's better because we work with it every week, day in, day out.
We know this list, we know that it works, and if it works for us then it's going to work for you. So what you think, what's it worth to you? What would it cost you and what would you be willing to pay to get the list? Well, I have great news for you. I'm not going to charge you $1,000. I'm not gonna charge you $2000 and I'm definitely not gonna charge you $3,000 or more for this list.
We always pick from this list in our classes
That's right. I don't charge anything for this list, I'm just gonna give it to you. And like I say, it is a great list that has continued to produce great moneymaking trades week after week, month after month.
All you have to do is download the list!
And that's it. That's all you have to do. Okay. That's it. I hope you find this valuable and I really hope you go find some great trades to take and go make a lot of money. Because when you're winning, I feel like I'm winning and that's what I love. So go do it. Let me know how it works out. And until next time, happy trading.