Creating our shortlists

When Gary says to look for stocks that are moving well, is the only thing to be considered here the dollar amount the stock is moving, or should we be looking at how this stock moves in relation to how it usually moves? The $4 dollars per week or more rule always confused me a little because for the most part, a stock that trades at say for example $500 is going to be moving more dollars per week then a stock that trades at $50, however the percentage of movement compared to the stock price could be relatively the same or even greater on the 50 dollar stock. I'm sure there is a good reason this rule is in place, i'm just trying to figure out if thats all I should be using to determine how "well a stock is moving"...it seems that if i am only judging stock movement by how many dollars the stock moves, i will pobably never put a stock trading less that 50 dollars a share on my shortlist (for the most part) because there are always going to be stocks that trade at a higher value that are naturally always going to move more even when they arent moving as well as they could be...

Anyone with some good perspective on this who has taken Gary's Survival classes?

JMHO... Rules are sometimes put in place to keep folks within the guardrails. There are no black and white answers as we live in a gray world. Short answer - must move well relative to that particular stock. You are going to get burned attempting to continually trade a $4 mover on a $200 stock. Forget about any particular dollar amount. Pull up a chart and decide if it moves. It either moves well with clean moves that you can see within context of how GW teaches you to trade or it doesn't. I've had $20 to $30 dollar stocks that moved great compared to the stock price (e.g., $6 to $8 or more). There are also $100 - $200 stocks that move $8 I wouldn't touch. I never had a particular move price in mind - it makes moves I can see or it doesn't. For comparison purposes, even during the teeth of the summer most of my shortlist moved $8 to $10 or more on the low end. During other times of the year, decent movers were $15 to $20 with minimum of around $10 and had some that moved $25 to $50+ Regardless of all that, it's always about does it move relatively speaking, can I make up the spread and be profitable, it must move NOW, always looking to make dollars, trading within the rules and preferably with the market.

Also, consider having a larger basket than what you see folks talk about in this forum. Concept of trying to trade the same 6 to 10 stocks year-end and year-out is outdated. Most successful, professional traders that swing trade with 3 to 10 day expectations have 200+ stocks. I read books on folks having 400+. Some of these go through the entire list each night. They know within 3 to 5 seconds of the chart coming up if a trade within their rules will present itself in the coming days. There is a hint there. If you look at a stock today and know a trade will not setup in the next few days, is there any reason to look at that stock over the next few nights? Have a way to narrow down your list. Anyone familiar with recent teachings knows there are ways to narrow down the list to a more manageable number. You might have the same 8 to 10 great movers on your watch list all year but the remaining list will probably change. Having a larger number affords more opportunities, keeps you from being married to any one particular stock, and prevents you from forcing trades on stocks that have gone dormant. Best of luck!

NCT



Edited 3 time(s). Last edit at 11/18/2017 12:51PM by NCTrader.

Thank you for the quick response! Its always tough trying to understand the grey in the lessons when things are taught to do exactly as instructed. At the same time, we have to learn from the black and white and then grow into the grey and that it seems is one of the many challenges with teaching something of this nature. but what you have said here in regards to looking at a stock and determining if its moving well in regards to that stocks typical movement makes sense to me.
For the most part, I try and stay away from forums because its hard to know who really knows what they are talking about , but its nice to be able to hear some perspective from others who have been exposed to the same info as me who might have also dealt with simular issues and deciding where to go from there.

Hopefully it will help over time. There still is validity in the $4 min thought process. You can pull up a $25 stock, look at the chart,and it appears to be moving well only to find out that those moves you think you see are only $1.00 to $2.50. Then you have to ask "is this worth my time". The $4 rule, knowing about option spreads, time decay, etc. would probably suggest "no". But I have seen really good moving stocks at that price level so I would never filter out my list just on current stock price. I want to consider everything. As I mentioned earlier, the other side of the spectrum is also true. You will get killed trying to play a great moving stock for $4. That said, a stock with average moves of $4 is not a great moving stock so it is a moot point. Wish you the best in your trading endeavors!