Praise for Trading from Your Gut

Hunt for Good Stocks
The search for good stocks depends on the particular method
you are using. Many different swing-trading methods work. In the
hunt for a stock that meets the criteria of the system, your right
brain will help immensely. Most traders use a combination of com-
puter automation and right-brain pattern matching to narrow the
choice of stocks on which to focus for their methods. This is the
most efficient way for most methods. Use the computer to help you
quickly cycle through a set of charts.
You will monitor three classes of stocks: 
1. Tradable stocks—Stocks that are liquid and priced at a
level that is appropriate for your account balance 
2. Stocks to watch—Stocks that are tradable and that repre-
sent potential trades if they move in the right direction 
3. Potential trades—Stocks that are close enough that you
will place orders if the overall market conditions match
In the previous chapter, I used the rebound swing method as
one example of a swing-trading method. I use that same example
here to illustrate how you would use your right brain to determine
the list of stocks to watch. 
C
HAPTER
7 • S
IMPLICITY AND
S
PEED
: T
RAINING TO
B
E A
M
ASTER
131
From the Library of Daniel Johnson
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With the rebound swing method, you are looking for stocks with
well-defined support and resistance levels. This is a fuzzy, subjective
concept—exactly the kind of concept the right brain was built for. 
As I look for stocks that would make good rebound swing trades,
I use my eyes and my right brain to make the subjective analysis very
quickly: Does a well-defined band of support and resistance exist?
This is a simple question with a yes or no answer. If the answer is
yes, that stock goes on the watch list. If the answer is no, the stock
stays off the list, and I make a note to reexamine that stock in a week
or so to see if it will then meet the criteria.
If it takes you time to answer, you are not using your
intuition; you are using your intellect.
The answer to the important question of whether to put the
stock on the list should arrive immediately. As with judging the mar-
ket condition, if it takes you time to answer, you are not using your
intuition; you are using your intellect. You can’t train your gut if you
are using your smarts instead. So you need to force yourself to
answer the question quickly. Don’t worry about being wrong. Just
answer the question in less than a second. Does well-defined sup-
port and resistance exist? If you can’t tell, it means no; either it isn’t
there or it is not well defined. If you don’t get an immediate yes, it
means no. Go on to the next stock.