Most traders are doing this backwards.
They find a random stock on FinTwit, check if it looks cool, then buy it hoping for the best.
I did that for years.. back when mIRC was still a thing. Lost more money than I care to admit. Then I figured out something stupidly simple that changed everything.
You need three things before you ever risk a dollar:
1. Trend - Is price actually moving in the direction you want?
2. Relative Strength - Is this stock beating everything else you could buy?
3. Momentum - Is it accelerating or slowing down?
That's it.
For trend, I just want price above the 20, 50, and 200-day moving averages. All three sloping up. Yeah, the slope thing from 8th grade math actually matters. Upward sloping moving averages tell you the trend has durability.
For relative strength, I compare the stock against the market, its sector, its industry, and its top peers. If it's not beating all of them, I don't want it. Why would I buy something underperforming when I could buy the actual leader?
For momentum, I need to see acceleration. The fastest horse in the race. A Lamborghini on empty doesn't win anything no matter how good it looks.
Here's how it actually works out:
We bought
$RNG at 46.50 using this exact process. It's up over 70% now. Four year base breakout, stacked moving averages, leading software and tech, momentum firing on all cylinders.
Here's the tweet from the day it broke out:
nitter.net/capitalflows/status/20…
Not every trade works. But the ones that do pay for the losers ten times over.
The hard part isn't finding one winner. It's building a system you can repeat forever. That's what separates people who get lucky once from people who actually make money long-term.
What's your process for finding stocks? Do you even have one or are you just winging it?
Beauty of a base breakout in RingCentral
$RNG
4 year highs, post earnings