Back-Track Analysis

Most traders look through the daily winners and losers to look for potential trading ideas. That's not a bad idea and it is also something I do daily as part of my normal routine.

However, I would also recommend that you take the time, just for learning purposes, to see if you can also discover any "tells" that would have led you to think (either technically and/or fundamentally) why those stocks have made significant percentage moves. For example, when I see a stock rally 60% like Ascent Solar Tech (ASTI) or a stock like Diamond Management Tech (DTPI) fall -25%, I want to know specifically why I missed the trade. Just saying that ASTI is rallying because of a news catalyst is not sufficient. That's what a novice trader does. In fact, if you take a closer look at these two stocks, I think some of you will see signs leading up to these big percentage gains and declines and that's important.

Over the years, I've learned a great deal through this investigative method and there isn't a day that goes by that I don't spend at least 10 minutes picking a stock at random and look for clues to why the stock is performing in a certain way. In fact, this simple method is probably better than any book, seminar, or tool you can buy and it is also completely free! Yet, I'm amazed by how many people don't do this. I suppose like most things, it takes a little work and effort. For many, that's enough of a reason to never do this kind of research.

While I know many of you already do this with the stocks you already own or stocks that you've sold or are thinking about buying, as a suggestion you'll want to specifically engage in this kind of back-track analysis beyond the core stocks that you already know and have opinions on. The reason? Whether we recognize it or not, we often bring our own bias to our overall analysis. For example, if you liked ASTI before today, you might just pat yourself on the back and say - "boy, I'm a great trader....look how smart I am." Doing that is not helpful to increase your knowledge about the market and improving your approach. Instead, pick a stock you don't know anything about and, the more unknown it is to you, the better. You'll then be in the position to discover any tells that may be present without your bias, ego, and/or emotion getting in the way.

Over time and with much practice, you'll start to discover similar tells within these large scale movers. While the market is fickle animal and is always more than ready and able to throw you curve balls when you least expect it, some consistent patterns will begin to show up if you integrate this method in your daily routine. In fact, there are tells that I now routinely see that I was blind as a bat to just a few short months ago and I'm a better trader as a result. No matter how much you know, there's always something new to learn. That's probably why I love this game so much!