This Tool Points to Winning Trades
What’s up everybody? It’s Eddie Z here from EZ Trading Computers, and you’re watching Eddie Z’s Tools, Tips & Tricks. In this series, I will show you cool online tools for better computing and better trading.
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Hi everybody, Eddie Z here. People ask me every day, how do I get started with the stock market? What’s like the best thing to study to be a good stock trader? So I just wanted to tell you about what I feel are the best tools for trading stocks.
First of all, the single best thing you can do is read this book: How to Make Money in Stocks, by William O’Neil. In my opinion, this book is the absolute Bible of trading stocks. William O’Neil, the author of the book, explains how the stock market works better than any other book out there, hands down.
Now William O’Neil also is the founder of the Investor’s Business Daily newspaper. In fact, if you go to the website known as investors.com, you should see a pop up that looks like this, that offers you two free weeks.
Now the great part about getting this, you also get access to investors.com website, which I think is an excellent, excellent tool. I use this site frequently.
One of the coolest things about the site, first off, is the IBD stock research tool… if we expand it all the way… once you’re a member and once you can log in… is that this tool points you to stocks that have very high volume that day… Stocks that are trading way above average volume… that’s signaling what institutions are working on. These are the stocks that institutions are really digging their hands into today.
And if any of these stocks were of interest to you, you could quickly bring up some information about them by just clicking on them. So it brings up like a little chart for you, a quick stock analysis, some fundamental information. But we know for sure institutions are at work today because the volume is very high on it.
Other cool features of the Investor’s Business Daily investors.com website are the IBD University. This is a great place to find additional information, and explanations of what’s inside the book How to Make Money in Stocks.
So there’s sections on the CAN SLIM investing system, which he details in the book. If you go here to IBD TV, there’s tons of different videos, not just on educational stuff, but also on the market direction… on a section of the newspaper called New America, which explores newer companies that are growing rapidly… So investors is chock-full of excellent information.
There’s also an electronic version of the newspaper, so you can get a free trial on this page as well. Of all those tools, my favorite tool by William O’Neil is a product called MarketSmith. MarketSmith is not inexpensive, but it has all the information you need as a stock trader all in one place. Let me show you.
So here’s a quick picture of the charts that MarketSmith produces, and they are just gorgeous. You get a lot of information all in one place.
So this is a daily chart on Monster Beverage, but I can also see the earnings of Monster Beverage the last four quarters. So I can see here, last quarter sales were up 12%, earnings were up 64%. Quarter before earnings: revenues were up 8% and earnings were up 32%. Quarter before that: 9 and 31.
On a bar chart, I can see the 50-day moving average. I can see William O’Neil’s Relative Strength rating, which is detailed in the book How to Make Money in Stocks, and I can also see the 200-day moving average.
If I click on weekly, I can get a lot more information. Besides seeing the chart pattern going all the way back to 2008, I can see the last eight quarters of revenues and earnings.
I can see a list of other stocks that are in the group. I can see the market cap, the shares in the float, the shares outstanding. To me, these are all super-important pieces of information. Cash flow. I can see how many mutual funds actually own Monster, and if that number has been rising the last several quarters.
What makes MarketSmith such a powerful tool is the ability to screen the entire universe of New York Stock Exchange, NASDAQ, and AMEX stocks very, very quickly, looking for characteristics that mean something to you and your trading.
So for example, if you like stocks that trade between say $40 and $80 a share, that have over a million shares average volume, and are less than say 10% off their all-time high, you can pull up a list very, very quickly.
Check this out. You go to the screener tool, and I can start by looking at price. These are the different categories. There’s all these different options that you can change. So let’s set price at $50 to $100, and it shows me this universe of stocks. I can then set other parameters.
I said at least a million shares. So let’s look at price and volume, and let’s go down to 50-day average volume. And let’s set this to one million. Now let’s set stocks that are only 10% off their high… minus 10. So we’re just looking at this little slice of the market.
So then what we can do is, this is actually going to generate my list. So here are my lists of stocks that meet that criteria, and I can sort them by their earnings, by the Relative Strength. And these numbers are 1 to 99, 99 being the highest. So let’s just go with Relative Strength.
And here are my top stocks. I can just click on them and the chart loads. So if I’m looking for a very specific pattern, I can go through these very, very quickly looking for whatever pattern I’m interested in.
Well look at Juno. It’s like a cup and handle. Ugly handle, but a handle nonetheless. So it’s a way to quickly go through the whole market looking for stocks that meet your criteria.
And here’s just some of the other criteria that you could select from:
- You have all of the Investor’s Business Daily proprietary ratings. These are all proprietary ratings. And when you read the book, it explains them in detail.
- All of these Earnings ratings like the Due Date, Percent Quarterly Change for the last quarter, for several quarters ago, EPS Trailing 4 Quarters, Fiscal EPS… so all of these different earnings parameters you could set for, or a bunch of them at the same time.
- Annual Sales as a total, Annual Sales Growth, Accelerating. For Sales, you have all these different categories.
- Industry & Sector: how the group is ranked, the name.
- Margins & Ratios: Return on Equity, Price-to-Book.
- What exchange, if it’s an ETF, if they trade options on the stock, what year they went IPO, what year they incorporated, what state they’re in.
I happen to use this tool extensively, and it really is my favorite charting software.
I’m Eddie Z, and I certainly hope you found value in this video. And may the trend be with you!
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My name’s Eddie Z. Thanks for watching, and I’ll see you in the next video.