There are old traders and there are bold traders … But there are very few old, bold traders.
Legendary trader Ed Seykota originally said this. I want you to hear it again…
If you’re not already nodding along, there’s a chance that it applies to you.
It’s the opposite of what you hear from so many traders out there. They share their best trades. They tell you that you’re missing life-changing opportunities.
But that’s not the whole story. We know that most traders lose. It’s pretty improbable that all of these ‘making bank bros’ are profitable.
Reading about other people’s trades can lead you down a dangerous path. It can lead to FOMO. It can lead to overtrading.
It can even lead to blowing your account up.
The reason I give you all these warnings isn’t to scare you. I want you to take trading seriously. And I want to give you a way forward that can work.
This is the best way I’ve found to teach. It’s the kind of material we discuss every day with the SteadyTrade Team.
I’ll tell you about my Monday/Friday rule in a bit. This can be a good tweak for new traders — or anyone who finds themselves trading too much.
I want you to succeed. But first, you’ve got to know what you’re doing wrong.
Table of Contents
How to Know if You’re Overtrading
It’s easy to look back at your trades and figure out the ones you shouldn’t have made. Just take out all the losing trades and you’re golden, right?
Wrong. No trader wins every trade. A lot of the most successful traders out there have win rates near 50%.
What sets successful traders apart is they stick to their trading plans. When these plans don’t work, they cut their losses quickly.
The trading plan stays the same — win or lose. This is the part of trading you can control.
And if you’re overtrading, chances are that this is the part you have to fix. How do you fix it? Again, it starts at the beginning.
How to Avoid Random Trading
It’s easy to get caught up in hype. But hype is usually your ticket to FOMO, not smart trading.
Preparation is key for making good trades. And your preparation should start with your watchlist.
I have several watchlists at any one time. Some are for stocks in hot sectors. Others are for stocks whose charts I like.
Every Sunday, I send out a NO-COST watchlist with some of the stocks I’m watching each week. They’re not stocks I think anyone should just trade. And I’m not saying that I’ll trade them myself.
These are the stocks I’m watching for the week to see if and how they move. And you can learn from it all, then make your own watchlists. Nothing wrong with a little inspiration. Sign up now to get my weekly watchlist delivered right to your inbox every Sunday.
Run Your Stock Screener to Find Stocks That Fit Your Patterns
This step is what separates traders from gamblers.
Gamblers make trades based on unfounded beliefs in stock picks and random ‘hot’ tips.
Traders prepare. They already have stocks they’re watching … And they wait for the right action and all their indicators to line up before they make any moves.
Guess which group I want you to belong to…
Traders build a case for every trade and look for any reason to not make a trade. They believe in confirmation. They’ll use their stock screener to see if their trade ideas are working.
Every trading day, I use StocksToTrade. I get started well before the opening bell to see what’s developing. StocksToTrade has built-in scans that show the biggest percent gainers on the day. When you add unusual volume to the mix, a watchlist stock can become a potential trade.
But there’s so much more you can use this platform for, like…
- Awesome charting abilities that show you how your patterns play out
- A wide-ranging news scanner for breaking news, tweets, and earnings reports
- Exclusive add-on alerts like Breaking News Chat and Small Cap Rockets. They help key you into the catalysts and patterns that move stocks
See what a big part of your trading day your scanner can be? Grab your 14-day trial of STT today — it’s only $7!
How Solid Is Your Trading Plan?
I know. You want to get to my Monday/Friday rule. But first, let’s look at the most important part — your trading plan.
Say you’ve been watching a stock, and now it’s moving. What do you do?
One of the most valuable things my SteadyTrade Team students get to do is ask questions. They can bring up any stock they like, as long as they’re ready for my blunt honesty…
I’ll never knock a trade idea for no reason. What I want to do is test it. So I ask the kinds of questions I want them to learn to ask themselves:
- Is it a real company?
- Does it have unusual volume?
- What about the catalyst — is there one?
- How much is the stock up? Is it up more than 10%?
- Is it a low float stock, a former runner, or at or near 52-week highs?
- Does it have a clear line of support?
If your trade idea checks most or all of these boxes, it might have the makings of a solid trading plan.
If you’re still struggling on this step, come join the SteadyTrade Team for great mentorship, twice-daily webinars, and much more. We break down stocks in this way every day. And then we build trading plans that best fit our accounts, strategies, and lives.
OK! You made it through the trading basics. Let’s get to that rule.
My Monday/Friday Rule
All of the steps I listed above can help you with overtrading. But what’s the best fix? Trade less!
This is where my Monday/Friday rule can help.
So what is the Monday/Friday rule? It’s an easy way for new traders to pick their battles…
If you’re just getting into trading, you need to put in as much time as you can. Study Monday through Friday — heck, get some time in on the weekends if you can swing it.
But I don’t want you making big trades too often. So I’ll give you a simple way to keep yourself from getting in too deep…
Keep most of your trading to Mondays and Fridays. This can help you focus your trading…
And it can help you avoid a trap that new traders fall into — trading just because you can. Why only trade on Mondays and Fridays? Let’s break it down…
Money Mondays
Monday is the first trading day of the week, and well-rested traders can boost volume big time.
Plus, companies like to time their press releases for Monday morning. They know everyone’s ready to trade.
There’s also this thing called the Monday effect…
It’s supposed to be a bad thing. According to this idea, companies release bad news on Fridays. That gives traders the weekend to forget about it.
But some market analysts have mapped a continuation of trends over the weekend. When Monday comes, this bad news will often continue to hurt a stock’s price.
What does all this add up to? Volatility — and plenty of it. Smart traders look for this kind of volatility. That’s what can lead to those huge price spikes we love to see.
If it’s making big enough moves, you can potentially trade it. Of course, you need a great plan and trade thesis first.
And if you want to trade volatility, you need to understand it. If trading volatility sounds scary, check out this no-cost “Volatility Survival Guide.” Trading mentor Tim Sykes put this together, and I make an appearance as well. Use it to learn how to prep for big market volatility and how to get the most out of volatile stocks.
The Friday Short Squeeze
There’s an old saying: “Amateurs open the market, and professionals close it.”
Well, there’s typically no bigger close than Friday.
Fridays are one of my favorite days to trade. There are a few reasons for that…
First is the Friday short squeeze. A lot of short sellers pile into these weekday runners. If the stock hasn’t died by Friday afternoon, they want out. They don’t want that weekend risk. These traders want to rest easy over the weekend. And nobody wants to hold a loser going into ‘Money Monday.’
But if you’re shorting, you have to buy to cover, right? And when these shorts buy to cover, they send the stock’s price even higher. That makes potential momentum for longs.
Some traders even hold these stocks over the weekend, to try to benefit from the momentum. OTC runners can gap up after the weekend.
This often happens with junk stocks — they often get the most heavily shorted. And if they hold up going into the weekend, they can really run next week. If there’s news on Monday morning, like a company press release, it can be explosive.
The Bottom Line
If you’re struggling in your trading or overtrading, my Monday/Friday rule might help.
But don’t expect it to solve all of your problems.
The Monday/Friday rule gives you more time to research potential trades and work on your trading plans. That only works if you put the work in.
You should put your energy into preparation and observing other people’s trades. Finding a community like we have in the SteadyTrade Team can be a big advantage.
We have an awesome collaborative chat room. It’s not just me that you can learn from. Many of our traders share their trades and analysis too.
Once you have enough grounding, start small. When you’ve mastered Monday and Friday trading, you’ll find three other days just waiting for you.
Do you think that you overtrade? What do you think about my Monday/Friday rule? Let me know in the comments — I love hearing from my readers!