I’ve banged on before about the importance of having a good list of core stocks to watch. A well-selected daily watchlist makes the actual trading part of day trading much simpler. It’s easier to profit from good setups than bad ones. Having good core stocks to back up the watch list makes the job easier still, it takes some of the pressure off building the list.
Good core stocks are those that move predictably and with regularity. We don’t need many — half a dozen at the most. With a solid selection there should rarely, if ever, be a trading day with no decent setups to take.
This week a new stock graduated to my core list. Here’s it’s chart for Tuesday:
The first entry of the day on BYND actually wasn’t all that great, but that’s okay because at that time of the morning I’m paying more attention to non-core stocks anyway. They are the backup plan, something to fall back on.
When the second entry came along there was a bit more momentum behind it and it was worth taking. By the time a second entry sets up, much of the move tends to be over, so we look to get out pretty quickly. I hung on a few minutes while the price bounced around the bottom, but the momentum was gone so it was time to exit.
If this had been the only trade of the day it would have been fine. Making $1,500 four days a week and trading 48 weeks of the year means $288k profit a year, which is enough to live on in most places in the world. I’m not saying that’s easy or likely, this is simply an illustration of what’s possible. But it demonstrates why good core stocks are such a benefit; if we can make a living from the core stocks alone, it takes a lot of the pressure off selecting daily stocks. We don’t have to get them right every day because the chances are we have something worth trading among the core list anyway.
BYND might have graduated to my core list, but that doesn’t mean I’ll treat it any differently. I’m not going to start researching the company and learn the directors names or anything like that. I don’t care and I don’t need to know. The only thing that’s different between a core and non-core stock is that the core stock is automatically included on the daily watchlists.
How long it stays there depends on how it performs. BYND has been cropping up several times a week, and tends to make nice moves that are easy to read and very profitable. It’s slightly over-priced for my regular stocks, but not by much and it’s performed so well I’m willing to overlook that. At some point in the future its good run will come to an end and it will meander day after day instead of offering up nice setups. When that day comes, it will lose its coveted spot on the list and will be removed to make room for something new.