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Floor Traders Program
“We believe every American deserves long-term prosperity™”
When we are teaching all of you how to be Expert Floor Traders we look at various factors and how we teach this to you live while TRADING OUR CAPITAL
How to Screen for Stocks
When searching for desirable trades, there are certain characteristics a trader should seek out that can really help locate a potentially great opportunity. These characteristics include:
• A favorable risk profile
• A high potential return
• It fits the trader's time constraints
• Are within the trader's risk tolerance levels
• Is clearly understood, and,
• Is within the trader's capital constraints.
First, to be a good trader, it is very important that it has little risk. Of course, low or little risk will vary in significance to each individual trader. For instance, one trader might be able to comfortably accept a $6,000 risk, whereas another trader might feel that $600 is too much. Acceptable risk is based on the trader's available investment capital as well as the tolerance for uncertainty. The bottom line is that a trader should only trade with money he or she can afford to lose.
In addition, it is important that before placing a trade that the trader establishes a favorable risk profile. Studying a risk profile can show the trader the potential increasing or decreasing profit and loss of a trade relative to the underlying asset's price over a specified period of time. Of course, as the variables change, the risk curve changes accordingly. In order to locate the best trade, the trader needs to seek out opportunities for trades that offer optimal risk-to-reward ratios. Keep in mind that the risk/reward profile of any trade must take into account the potential risk, potential reward, probability of success, and how long the trade takes to make a return.
The trade must also offer the trader a high potential return. A trader cannot be expected to take a risk unless reward is also in the equation. The best trades have an opportunity for high reward with acceptable risk and typically have a high probability of winning on a consistent basis. Usually anything over 70 percent is considered an acceptable winning percentage.
The trader needs to have enough time to locate and monitor their positions if he or she wants to be successful over the long-term. For instance, if the trader does not have the time to look at the screen most of the day, then the best investments will not be day trades. If the trader cannot monitor their trades over a one-week period, then this needs to be taken into consideration as well. The time the trader has available for making trading decisions and monitoring those trades will impact the types of trades that should be made. The best trades will match the trader's time availability.
Another factor that determines a good trade is if the trader can clearly understand it. If a trader does not understand the precise characteristics of a trade, it is better to walk away from it. It is paramount that the trader becomes familiar with the trades placed. Each trade has a unique personality, and the trade's personality needs to match the trader's personality for them to be successful over the long run.
Finally, the trade needs to meet the trader's capital constraints. For example, does the trade match the trader's capital available for investment? The capital available will have a major impact on what the trader invests in, how often they trade and the number of contracts that are affordable to trade. Keep these guidelines for selecting trades firmly in mind before putting on any trades. This will help tremendously in getting into trades that are suited to trading your style as well as trades that you can profitably manage.