Managing Editor’s Note: On March 16, things could get ugly…
According to our colleague Jeff Brown, once Nvidia makes a big announcement, many stocks, including ones you likely own, could fall 25%, 50%, and even 100%.
But he says at the same time, a group of small stocks could soar to unbelievable heights.
To help you prepare, he’s created a complete action plan. And he’ll share all about it at an urgent briefing on Thursday, March 12, at 2 p.m. ET.
Jeff will also provide the names of a bullish pick and a bearish pick – free.
You won’t want to miss a single minute of the briefing, so be sure to add your name to the guest list with one click right here.
Investors are often told to diversify their holdings.
In theory, allocating money to an array of stocks and other financial assets will help reduce the impact of a risk-off event.
There’s some truth to that, of course. But plenty of times, stocks and other assets have sold off across the board. That can make market shocks painful to sit through.
And that’s not the only trap diversification can create for the unwary…
The problem with choosing a large number of stocks is that it’s simply impossible to keep on top of them all. There’s way too much information to follow.
Stocks can react very differently to the same news. Even stocks within the same sector can vary markedly.
That’s why I’ve specialized throughout my trading career. I use a “trading universe” of stocks and/or indexes that I pay close attention to.
I only look for trades within that group. That group doesn’t have to stay the same forever, of course. When a stock no longer appeals, I’ll drop it and replace it with something else.
The main point is that I develop an instinct for how these stocks move in response to things like company earnings, interest rate changes, and even events like we’re seeing now in the Middle East.
I also watch how the stocks move coming into option expirations.
By limiting my focus to a specific set of stocks, I can pick up on their individual nuances – and use that to generate profits.
To be clear, you don’t have to only pick the stocks that experience the biggest moves. Rather, you’re looking for a niche that suits you and your trading style. For example, you might zero in on a sector that you already understand well.
As we’ve already seen this year, even boring old industrial stocks can deliver outsized gains. So you don’t need to limit yourself to “hot” stocks…
I learned this lesson the hard way early in my career. I kept trying to jump on every trade going around, and it cost me my account several times over.
When your focus is spread across too many things, you can miss signals that matter. A specialist, on the other hand, will be all over new developments and can potentially translate each shift into profit.
By the time others spot the opportunity, the specialists have already banked their gains.
Likewise, specialists will understand when it’s better not to trade. They’ll sit tight until they see the signal they’re waiting for.
And the longer you spend watching the same stock or index, the sooner you’ll start to see regular tradeable patterns.
So just remember: Professional traders don’t trade everything on the menu. And you don’t have to either.
This kind of specialization helps give you an edge as a trader, which is especially important when unexpected events shake the market.
Happy Trading,
Larry Benedict
Reading Trading With Larry Benedict will allow you to take a look into the mind of one of the market’s greatest traders. You’ll be able to recognize and take advantage of trends in the market in no time.
