Chapter 06 · 5 min
Build a Trade Plan
Use the same sequence every time. A repeatable process makes it harder for an exciting chart or headline to pull your attention away from risk, and makes it easier to compare today's candidate with one you studied last month.
The five-minute first pass
- 01Open Daily Gainers and begin with Leading Alpha or Early Discovery.
- 02Open a ticker and read “Why this result?” before getting attached to its chart.
- 03Review primary blockers, then the evidence supporting the move.
- 04Use the entry label and preferred range to decide whether the setup is actionable now or better left for a pullback.
- 05Write the support level, first target, and the evidence that would invalidate the thesis before taking action.
A hypothetical example
Suppose a software company gains 18% after reporting accelerating revenue and raising guidance. Volume is four times normal, price closes near the high, and the move clears a three-month range. That is a coherent initial story: new information, visible demand, and meaningful price structure.
The funnel may still reveal that the stock trades at an extreme premium, cash generation is weak, or the company recently filed an offering. Those facts do not erase the growth. They change the asymmetry and the standard of proof required before taking the idea further.
Now compare a second stock that gains 35% on a vague press release, trades little dollar volume, and closes far below its high. Its percentage move is larger, but its evidence is weaker. A useful tool should help the quieter 18% move outrank the spectacular 35% spike.
Notice what we still have not done: decide to buy the first stock. We have only earned the right to keep researching it. We would still want to understand the earnings call, competitive context, valuation assumptions, and where our interpretation could be wrong.
Turn the output into a written hypothesis
Because [specific information changed],
and [price, volume, and business evidence confirm it],
the stock may [continue repricing or build a stronger setup],
unless [a price level, event, or fundamental fact invalidates the thesis].
Your final checklist
- ✓ Was there a clear range and breakout?
- ✓ Did volume confirm broader participation?
- ✓ Is there a credible reason for the move?
- ✓ Did price hold the breakout level?
- ✓ What evidence would invalidate the thesis?
For educational and research purposes only. No score or classification guarantees future performance.