Stock Selection That Changes Results in Swing Trading: Organizing What I Actually Look At
In swing trading, the importance of entry timing and stop-loss rules is often discussed. However, from my own experience, I feel that what actually determines the majority of the results is the stage before that—namely, ‘which stock to choose in the first place.’ Even if you have excellent entry skills, you cannot increase your profits if the chosen stock itself lacks the foundation for price movement. Conversely, as the accuracy of stock selection improves, there are more situations where results follow even if the entry is somewhat rough.
No matter how sophisticated your technical analysis or timing theory is, if you choose a stock with little price movement or a stock with weak fundamentals, you lack the very stage to utilize those skills. In other words, my experience so far has been that as long as the stock selection is solid, it is not rare for decent results to follow even with somewhat rough entries.
Today, I would like to organize as concretely as possible the perspectives I actually use when selecting stocks. I will leave the discussion of how to use technical indicators and entry timing for another occasion, and this time I will focus on the more preliminary judgment criteria of ‘whether or not to include this stock as a candidate in the first place.’ I will not name specific stocks, but I have organized the judgment process itself as a way of thinking that can be used in any market environment.
When it comes to stock selection, many people tend to focus on predicting ‘which stock is likely to rise.’ However, what I emphasize is not the accuracy of the prediction itself, but the structural part of whether the conditions for price movement are met. No one can accurately predict future price movements, but you can determine to some extent in advance whether the environment is conducive to price movement. I believe that whether or not one understands this difference greatly influences the quality of stock selection.
It is by no means rare for results to differ significantly depending on the stock chosen, even when entering with the same method. Rather, I feel that the turning point between winning and losing lies more in the preliminary stage of stock selection than at the moment of entry, more than many people imagine. In this article, I will verbalize those judgment criteria in as concrete a form as possible.