When should you buy and sell a stock?

There are many ways to actually be profitable trading stocks in the market but what you need to understand is that there’s no magic indicator, there’s no rule that is universal. There are rules that work and there are rules that don’t work, the trick is how do you, as the new trader, learn the difference. The way you learn the difference is by realizing that you don’t want to focus on that individual trade and individual stock, you need a set of rules that you can test a system so that you know that the system is profitable. If I said to you, “Well, a good time to buy a stock is when it hits a 200 day high and the volatility is low and the XYZ indicator is doing ABC, then a good time to sell is when it hits a 25% trailing stop.” If I just tell you that, that might be profitable, but you don’t actually have the confidence in those rules because you haven’t done any other work yourself. You haven’t investigated it.

The best way to find whether or not a particular rule is profitable or it’s a good time to buy, and a good time to sell is to take those ideas, put them into a complete system and use a package like AmiBroker to back test those rules and make sure they’re profitable. What you find is that a lot of the things that people talk about online and in books, just aren’t profitable. You really need to test things for yourself. I have a bunch of trading systems and when you join my program, students get access to 18 different trading systems in a Trader Success System. You can take some of them and use them, or you can modify them for your own purposes but the whole structure of the way I teach is that your success is determined by the amount of control and confidence you have. The way you get that control and confidence is by taking those rules, testing for yourself, see that they work over time and then pressure testing them by optimizing, by doing a robustness test where you vary the parameter values, by testing on different markets and prove to yourself that they work. You can apply those rules consistently and make money. There is no magic one rule, but the idea of systemizing your stock trading is a game changer and will put you in control. It will accelerate your learning curve so much because you don’t have to wonder, “is this rule profitable? Is that rule profitable?” You don’t try things out. What you do is you take your ideas, you put them into a system, you test it. You find out if it’s profitable or not.

Some people will say, “Oh, but back testing, that’s just past data. That’s not the future. So it’s worthless.” Which is to be honest, completely bullshit, because if you have a set of rules and they didn’t make money in the past, if you apply those rules in the past and they lost money, they are not going to make money in the future. They’re absolutely not going to make money in the future so past losses, from a strategy or a system, pretty much guarantee future losses. Past profits don’t necessarily guarantee future profits but there’s a good chance that if you test it the right way with a good process, that past profits can turn into future profits. So back to single rules, learning to trade systematically is absolutely the best way to succeed at this.

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