I have something special to share with you today. This is the system that changed my life. I call it the "TPS system." It satisfies two major hurdles many traders face when starting out... First, it's simple. I'm a busy man with a wife, kids, parrots, frogs and dogs. I don't want to spend hours combing through charts or obsessively refreshing my browser to see how my trades are doing. Second, regardless of what the market is doing, this system identifies the trades I want to make. I can find trade setups I like in up, down and sideways markets. And I named it "TPS" because of the three components you need to identify. I'm going to show you exactly how it works using visual examples below. Let's dive into the first letter. The "T" in TPS: Trend The first letter stands for "trend." When you're looking at a stock chart, you want to see consistent data pointing in one direction. It can be either direction - what's important is that the trade goes in the same direction as the money flow. You'll see this in the example below for SunPower (Nasdaq: SPWR). Notice the upward direction? That means money is flowing "into" the stock. When I make a trade, I want to ride with the tide of money flow. Beginner traders often try to predict when a stock will "hit bottom" or "break out to the upside." This is usually a mistake. Why? Because there's no clear trend. Maybe they heard some speculative hot take on a finance website or news channel. But it was just speculation. And I know from experience that trying to predict a stock's direction without a clear trend is a losing game. So before you even think about making a trade using this system, it's crucial to identify a trend like you see above. The "P" in TPS: Pattern Next, you need a clear pattern. Why look for a pattern? Once you've seen a particular pattern enough times, you have a good idea of how a stock is going to behave after it appears. This gives you the opportunity to grow more confident in your trades. Case in point... In the chart below, you'll see a flag pattern on the right. For those of you who haven't traded before, this pattern is called a "pennant," and it's among the most consistent patterns you'll see when doing chart analysis. Other common patterns include a bearish flag, bullish flag and ascending or descending triangle. If you don't see a common pattern within a chart, then scrap the trade entirely. And a pattern is something that you should be able to see both quickly and clearly. If you have to spend more than five seconds looking for the pattern, there likely is no pattern! However, if you notice a pattern you've seen before and you're confident in how the stock will behave, then you have the second letter in the TPS system. We're almost there. Now let's get to the final component. |
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