I told a friend that I love trading ugly stocks.
He asked me “why on earth” I would do that. My answer was that at third of my job as a trader is as a risk manager.
Don’t get me wrong, most of my trades come from the best stocks in the best sectors.
These are knows as momentum stocks, and most of our trades should come from these stocks.
However, there are many ways to turn a profit, and it’s good to diversify your strategies.
Especially in extended markets.
What I love about beaten down stocks is they offer fantastic risk ratios. Because of that, I only need to be right once in a while to make consistent profits.
For example, every stock I mention in today’s video offers at least 5:1 reward to risk. This means for every $1oo I risk, I have the potential to make $500. If I am right only 3/10 trades, I end up $800 ($1500-$700=$800). I break even if I’m right only 2 out of 10 trades.
That is risk management at it’s finest.
While we search for ugly stocks, we want to put the odds of success in our favor. What if we are right on 50% of the time. Now we are talking crazy gains.
To do this, we look for ugly stocks that are showing subtle clues of turning things around by focusing on money flow and price action.
That’s exactly what I’ve done in today’s video, which lays out the exact triggers and RR ratios for each of our five potential ugly stock reversal entries.
Swing Trade Service
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