In part two of his trading hacks series, Michael dives deeper into the mindset shifts and tactics that can truly transform your trading game.
This is the second article in my two-part series ‘How to hack your trading’ – you can read the first part here where I cover the first three points.
We left the article with creating a pre-trade checklist.
It’s worth thinking about this for yourself.
Use my list as a guide and then consider what is important.
After I’ve completed the red flag checkup, the goal is to then look at a potential catalyst for the price.
- Are earnings growing?
- Low PE/PEG?
If so, you have the potential for a re-rating and earnings growth.
For example, if a stock is growing its earning at 20% yet valued on a PE of 10, that would give a PEG of 0.5.
Therefore, if earnings keep growing, the market may decide to rate this towards a fairer PEG ratio which would mean a doubling of the share price plus any additional earnings growth.
Of course, this is by no means guaranteed. But quality stocks are often highly prized by the market when they’re discovered.
I also check for director alignment, although for short term trades I place less importance on this.
Check if these shares were bought or given. There is a difference.
SETS or SETSqx?
Another thing I’m looking at is if the stock is SETS or SETSqx as this will determine how I enter.
These are tactics of the overall strategy.
Where can you put your stop loss as close to the entry as possible without being too tight and not giving the trade to breathe?
Make sure the risk/reward is attractive.
Check where support and resistance are because there’s no point having your reward above a significant resistance zone the stock needs to chew through first.
Bulletin boards
Finally, onto bulletin boards.
Most people here are morons but occasionally you get someone sensible.
I usually use this as a barometer of sentiment. If there are tens of posts a day then it’s clear that the stock is frothy with punters.
If there are no posts then it can be a sign that there is no market hype in the stock.
Plus, as mentioned, there are sometimes astute posters but you do need to take everything with a huge dollop of salt.
Anonymous bulletin board monikers are rarely there to put money into your pocket.
But as an example, I found out someone who wasn’t talking rampy nonsensical drivel had mentioned a PCIP offer at 90p.
So I called the PR and asked about it, and it turned out to be true. I never would have found that out otherwise as the company chose not to report it.
But do remember here that usually the majority of posts are trash and should be ignored.
4. Read less news, cover more charts
Most retail traders drown themselves in news.
They think reading ten articles on inflation is going to help them catch a breakout.
Unfortunately, it’s not. Nor is knowing both sides of the argument on any financial decision that will be completely forgotten about next week.
We tend to overweight the importance of current news due to recency bias.
But here’s the truth: your edge probably doesn’t come from knowing what’s happening.
I say probably, because even the best minds backed by the biggest computers with the biggest bankrolls in the industry can’t even call it right consistently.
It comes from having a system that you know works in the long run.
One trade is variance. 100 trades is data.
Focus on the chart because price doesn’t lie.
People lie, but charts are the money-weighted sum of opinion, and the price is the reality.
Some of my best trades have been ignoring the noise and focusing on clean setups with strong momentum and volume.
5. Look after yourself
You can have the best system in the world but if your mindset is garbage, you’ll still fail.
Trading will expose every flaw you have.
Impatience, overconfidence, fear of missing out, need for control… it will all come out eventually.
Therefore, your job isn’t just to trade well.
It’s to be a person who can trade well.
That means looking after yourself and removing unforced errors.
Here are a few things that help me:
- Regular walks to clear the head pump endorphins
- Exercise to reduce stress and manage energy
- Drinking a big glass of water when waking
- Stretching to improve mobility
- Regular sessions with your process and journal
This doesn’t need you need to be getting up at 4am, sinking green juices, completing an hour of yoga and meditation before the open.
But it does mean making better decisions and doing this most of the time.
If you eat right most of the time and exercise frequently – you’ll look and feel like someone who eats right most of the time and exercises frequently.
And it will definitely have a positive effect on your P&L.
6. Know your edge — then work on it frequently
Most traders don’t know what their edge is.
If you don’t know why you win, how do you plan to scale?
For me, it’s simple: breakouts and cup and handles on stocks in an uptrend, with solid risk management and position sizing repeated enough times to allow my edge to play out in UK stocks.
I’m not trying to be a macroeconomist (which is good, because I’m not).
Nor am I trying to make judgements on a Phase III trial.
Your job is to find your edge, then build everything around it.
If you win on breakouts but keep losing on earnings gamble… guess what you should do?
If your diary tells you that you consistently lose money on a Friday… guess what you shouldn’t do?
Exactly. Don’t trade on Friday.
The real “hack” is subtractive. Strip away the garbage and do more of what works.
Final Thoughts
Unfortunately, you can’t control the market.
Or at least I can’t.
But you can control your preparation.
You can control your rules and how you respond to stress and setbacks.
This is what I believe separates profitable traders from everyone else.
There’s no secret indicator. Just consistent and sometimes boring work.
Michael Taylor
Get Michael’s trade ideas: https://newsletter.buythebullmarket.com/
Instagram: @shiftingshares | Twitter: @shiftingshares
This article is for educational purposes only. It is not a recommendation to buy or sell shares or other investments. Do your own research before buying or selling any investment or seek professional financial advice.
