I received a mail from someone who wanted to know the hottest growth stocks to buy right now so he could invest his idle N4million and cash out in 2 months. His mail reflected his curiosity and how my response would greatly assist his choice of stocks to buy. But you know what? I disappointed him, I told him,” no stock to buy”. Why? he replied, then I said the stocks available doesn’t fit into your trading style.
A lot of stock market traders and investors lack patient when it comes to picking stocks, they really do not understand that there are perfect buying and selling opportunities. Don’t always force yourself to pick stocks rather let your trading strategy you. It’s time you began to trade like a sniper who doesn’t shot at anything but focus on a particular target. A sniper will not shot a closer or related targeted but is mandated to take on the exact person on the radar, even if there is someone in front of the target, he has been trained to wait until setup is complete.
Many traders just pick different random stocks; they lack the discipline to focus on few top-performing stocks. Anytime, a broker or someone mention stock A, you will see them rush in and you know what? they rush out too. Stock market trading doesn’t reward impatient trader with no consistent strategy, you need to exercise patience in order to survive those scary daily up and downswing.
This is how your trading style should be. There is always a targeted time to buy or enter a stock but you know what? you can’t spot it if you don’t have a trade setup. How do you know when it is time to buy your next stocks if you have not perfected or backtested your trading strategy?
To be a sniper in the stock market, you must create your own proven and tested strategy, a strategy that, when backtested, is able to spot buy or sell opportunity several times with more winning than losing. No trading strategy is perfect but if you have one that has over 70-80% winning rate, stick to it. Successful traders win and lose but you know what keeps them? they make more winning than losing besides, I already shared a strategy you should adopt on one of my investing guides, leverage on trading volume not price. A stock may rise by 10-15% and not make small investors much money but did you also know that the same little increase had made institutional traders millions of trading profits? the difference is in volume traded. These guys buy millions of shares when they trade.
Let’s use NEM Insurance, the shares gained 35k last week to close at N2.25 as at 2nd March 2018. A top trader that bought 1,000,000 units would have made N350,000 in 5 days while a smaller trader that bought 10,000 units is still waiting for the price to double or even triple because the 35k gain is only N3,500 in his account.
When a sniper takes on his target, he expects the shot to be highly profitable, hence he doesn’t target low-level personalities.The best way to start a profitable trading business as a sniper is to focus on buying in large volumes so you can take advantage of the moderate share price growth on a weekly or monthly basis. Leave the zone of small traders and trade like the big boys. I am not saying you should buy 1,000,000 units on every trade but at least focus on larger units compared to your previous volume; if you have been buying 10,000 units of 5 different shares, that’s like 50,000, why not cut the stocks and increase the unit on the best picks. You can buy 20,000 and 30,000 unit of the two top performing stocks in your portfolio.
The second strategy to trading like a sniper is to create a trading journal. Snipers have a history of successful shots and how they locate their target.
Your trading journal lets you document all your trading decisions and why you selected a stock. For instance, I bought Zenith bank at N22 because it is one of the top drivers of the bank sector index, it has good fundamentals like increasing earnings, low cost of risk and profit margin, and currently trade below its intrinsic value of N37. Technically, the stock is bullish on all indicators.
Comments on a trade like this will help you spot a winning strategy over time. What I do is to check my top performing stocks and look for a common comment I documented in my trading journal about them before again. When next you want to buy a stock, make sure the reasons you bought your best-performing stocks are also visible to increase your chance of picking the right stock that will make money.
The third strategy to trade as a sniper is patient. Snipers don’t rush into their target region, they take calculated time to perfect their shot. This is one of the biggest flaws of many traders today, they just jump into a stock because it’s one of the top gainers for the week, no due diligence or fundamental analysis. I think they actually skipped the simple valuation metrics I shared here otherwise they would wait to buy the stock at a cheaper price.
And lastly, know your exit before taking a shot. Professional snipers already have a perfect plan on how to leave or the next best exit door before hitting their target. As a stock market trader, you need to learn how to plan your exit before buying. You might enter a trade at the right time but leave at a loss because you never had a selling strategy that tells you when to pocket your profit. I already shared one of my mistakes here. Successful traders already know their profit target or the market reaction that will prompt immediate exit.
Here are investment guides that will help you become a better sniper:
- Learn how to pick top performing stocks
- Learn how to value a stock using 10-year bond yield
- Learn the best time to buy
- Know when to sell your stock
A summary of these investing guide is that you just need to be patient and wait for your trade setup to complete before placing a buy order with your stockbroker.