Becoming a Better Trader

Too Much Backtesting, Not Enough Modeling

I see endless social media posts about backtesting. I see far fewer about modeling. Yet studying exceptional stocks and successful traders was foundational to several of the approaches everyone loves to quote.

Mark Minervini makes that distinction. He describes factor modeling as studying the biggest winners and identifying their common characteristics, much like studying gold medalists to understand what they did similarly. His criticism targets testing endless possibilities and backing into whatever historical relationship produces an attractive result: “That’s called curve fitting.”

William O’Neil built CAN SLIM from studying the characteristics of past stock market winners. Minervini describes his own approach as modeling success, studying both exceptional stocks and legendary traders. Kristjan Kullamägi built a database containing thousands of historical setup examples, examining the charts, catalysts, and conditions behind the moves.

Dr. Van Tharp approached modeling through the trader: how successful people think, research, manage risk, and size positions. He also recognized the value of testing. In Trading Beyond the Matrix, he writes: “Backtesting is fine, but some people do way too much.”

You can spend years optimizing settings and still struggle to turn that research into actual profits. An impressive historical equity curve does not automatically give you the judgment or discipline to execute when money is on the line. Backtesting has its place, but it cannot do every part of your development for you.

William O’Neil, David Ryan, Mark Minervini, Dan Zanger, and Kristjan Kullamägi share an important thread: learning from successful traders and studying the market’s past winners, then refining their approach through experience with real capital. Ryan learned directly from O’Neil, and Zanger describes O’Neil’s teaching as a turning point in his development. Their careers demonstrate the value of studying excellence and putting those lessons into practice.

Athletes study champions. Musicians study masters. Traders can follow the same principle: study successful examples, understand the decisions behind them, examine failures, and test what you learn, but if you’re endlessly testing strategies without modeling excellence or learning to execute, you may be perfecting the research instead of developing the trader.

If you’ve spent hundreds of hours backtesting, how many have you spent modeling the stocks and traders you want to understand?

Your P&L Can Hide Bad Trading

A profitable month doesn’t mean everything you’re doing is working. Some of your trades may be making the money while others quietly take it back.

Peter Brandt shows this in Diary of a Professional Commodity Trader. During the five-month period he reviewed, Brandt reported $5,473 in net profits from 68 trades per $100,000 trading unit. But underneath that total, major-pattern completions earned $6,089, while just eight “miscellaneous” trades lost $3,960.

Knowing he made money was not the same as understanding how he traded.

That’s why Brandt’s monthly, quarterly, and annual reviews went beyond the account balance. He tracked how often his trades were profitable, average profit per winner versus average loss per loser, how his trades were distributed across categories, and the win/loss results within each category.

Those measurements help you ask better questions:

• Are you losing too often, losing too much when you’re wrong, or making too little when you’re right?

• Are you repeatedly taking trades in a category that is subtracting from otherwise good results?

• Are those losses part of executing your strategy, or are they coming from decisions outside your plan?

A losing trade is not automatically a bad trade. A profitable trade is not automatically a good one.

He also tracked what he called “net bottom liners.” Historically, roughly 10% of his trades accounted for his net trading profits, while the remaining trades effectively offset one another. That was a characteristic of his trading, not a percentage everyone should expect. But it reveals why counting winners alone can miss what actually drives performance.

The review also exposed behavior. Brandt acknowledged that some minor-reversal trades involved patterns shorter than his own guidelines allowed. His journal was revealing where his decisions had drifted outside his plan.

Despite decades of experience, he said keeping and writing about his trades forced him to examine his process more deeply than ever before.

That is why I built a Trading Journal and full Trading Analytics inside MTS Velocity. Recording what you bought and sold is the starting point. The real value comes from investigating what deserves repeating, what needs improvement, and what may be holding you back.

Start putting your own trading under the microscope.

What Did the Numbers Look Like Before the Breakout?

I need to do a better job highlighting some of the features I’ve added to MTS Velocity. One of my favorites is chart replay.

Rewinding a stock’s chart helps you train your eye to recognize the setup before the breakout. You can also see what its earnings, sales, margins, and relative strength ratings looked like at that point in time.

That makes it useful for studying past winners. Go back before the big move and examine the whole picture: the setup, the growth, the profitability, and the relative strength.

Were the characteristics there before the breakout? Would this stock have earned a place on your watchlist?

That’s how I want people to use it: to study what made a stock stand out before the outcome was obvious.

The Future Isn’t Priced In.

We live in a world of probabilities, not certainties. Even the most powerful AI cannot predict every invention, human decision, or unintended consequence.

There will still be surprises. Some developments will be overestimated. Others will be underestimated. Knowing AI and robotics will change the world doesn’t mean knowing exactly how that change will unfold.

When investors underestimate a major change, they can spend months revising expectations as the evidence builds. Earnings surprise. Forecasts rise. Capital follows. That adjustment can sustain a trend.

AI may erode some trading edges, but I doubt it eliminates trend and momentum. Faster computers don’t make the future certain, and faster information doesn’t guarantee everyone interprets it correctly.

That’s why I believe both will continue to have a place in markets.

The opportunity is in the gap between what the market expects and what actually unfolds.

A Winning Strategy Can Still Be Wrong for You.

I didn’t start out as a growth stock and momentum trader. I started with The Intelligent Investor by Benjamin Graham and spent a lot of time studying Warren Buffett. Value investing was my starting point.

So I’m not here to convince everyone that my way is the best way. There are many ways to make money in markets. Sometimes the struggle isn’t that a method doesn’t work. It’s that it doesn’t work for you.

Your personality, goals, time frame, and life circumstances all play a role. A strategy needs a real edge, but you also need to be able to execute it consistently. The approach you admire isn’t always the approach you can live with.

That’s why I’m resharing my article on growth stock and momentum trading: what it is and what it isn’t. It doesn’t explain everything. It’s a brief introduction to an approach that might resonate with you.

My free articles on Mark Minervini, William O’Neil, Dan Zanger, and David Ryan offer more insight into the work that shaped my approach. Module 1 of the Momentum Trading Strategy Course goes deeper. There’s plenty to explore beyond this introduction.

Maybe you’ll read it purely out of curiosity. I still enjoy learning about other disciplines, not because I’m looking to jump from system to system, but because markets are fascinating. You can study another approach without abandoning your own.

Or maybe something will click. Maybe this becomes your introduction to the same work and teachers that helped me find my path. Not because you need to trade like me, but because you recognize something that fits your goals and the trader or investor you want to become.

Start with the article. If it resonates, keep exploring. You might find an approach that fits you better than you expected.

Regardless of which path you choose, I wish you all the best in this amazing game of markets.

https://tradingmomentum.substack.com/p/growth-stock-and-momentum-trading

Are Options Keeping You a Rookie?

In Momentum Masters, Dan Zanger says he didn’t really start making money in stocks until he stopped playing with options. Then he delivers this line:

“Rookies love options, which is why they stay rookies.”

He’s far from alone in expressing caution.

William O’Neil, Dan Zanger, and David Ryan have all described their own options use as rare. O’Neil explicitly advised investors to demonstrate success trading stocks before considering limited options use. Ryan emphasized the problem of time decay, while Zanger acknowledged occasionally finding a stock worth buying calls on.

Mark Minervini and Kristjan Kullamägi have both publicly stated that they don’t trade options. Minervini described too many factors working against the trader. Kullamägi strongly cautioned beginners against them, while acknowledging that options can add value in certain situations.

All five have expressed caution about options. That deserves attention when you’re still learning to trade.

It’s easy to understand the attraction. You have a small account, you see enormous percentage gains, and buying shares starts to feel too slow. The temptation is to reach for a bigger payoff before you’ve built a repeatable process.

But buying an option adds expiration, time decay, and changing implied volatility to the challenge of getting the stock right. You can correctly anticipate the direction and still lose money.

My takeaway: learn to trade stocks first. Build your screening criteria, study quality setups, and organize your watchlists and alerts. Refine your entries, control your position size and risk, and follow clear selling rules. Develop a repeatable process you can evaluate and improve.

New in Velocity: RVOL Now

Volume is the best tell that something is happening in a stock. The problem is that at 10:15 AM, the daily bar always looks small, because most of the day hasn't traded yet. A stock can be doing three times its normal volume and you'd never know it from the chart.

RVOL Now fixes that. It compares today's volume with what that stock normally has traded by this exact minute of the day, based on its own last 20 sessions (earnings days and half days left out). 3× at 10:15 means three times its usual volume for 10:15, whether or not the daily bar shows it yet. It updates every minute.

Where you'll find it

Two new columns, RVOL Now and Pace, under Data Columns & Layout → Volume. Pace is where the day finishes if the rest of it is ordinary, so 1.4× means "already on track for a 40% above-normal day".

A new preset, Today's Vol Movers: every stock trading at 2× or more its normal volume for the time of day, sorted biggest first, live all session.

A Live Volume filter in Advanced Filters: set your own minimum, choose up or down movers only, and pick the lookback (5 to 60 sessions, or any number you like).

Ticker Lookup gives you the plain-English version: "3.5× its normal volume by 10:04 AM · on pace for 1.4× a normal day."

On the chart: intraday volume bars glow brighter when they're well above normal for that time slot and dim when below. On the daily chart, today's bar shows a faint projection of where it's heading, and the legend reads RVOL and pace.

Both chart visuals are on by default; turn them off in the Volume settings if you prefer the classic look.

Why it matters

Big volume early in the day, before the daily bar shows it, is often the first sign of institutional buying or a real breakout. This shows you that while it's still happening, not at 4 PM when everyone can see it.

There Is No Holy Grail. Only Trade-Offs.

“There are no solutions, only trade-offs.”

—Thomas Sowell

Beginner traders can spend years searching for the holy grail: huge winners, a high win rate, tiny drawdowns, constant opportunities, and very little downside.

Eventually, the question must change from “How do I find the perfect strategy?” to “Which trade-offs am I willing and able to accept?”

But the order matters:

Choose among systems with a genuine edge, then consider which trade-offs you can sustain. Personality fit cannot substitute for positive expectancy or disciplined execution.

You are choosing among systems with evidence of positive expectancy after costs, not assuming a system works because it feels comfortable.

One system may win more often with smaller gains. Another may lose more frequently but profit from fewer, much larger winners. What matters is how your wins and losses work together.

Active intraday trading offers short-term opportunities but demands attention, quick decisions, and screen time. Holding for major trends requires patience through normal pullbacks and some giveback of open profits. Giving a winner room is not the same as letting a losing trade get out of control.

A wider initial stop gives price more room but requires a smaller position to maintain the same planned dollar risk. A tighter stop leaves less room for fluctuations.

Proven rules and disciplined risk management remain essential. As O’Neil emphasizes, adapt yourself to the market, not the market to you.

Don’t ask only, “Which system could make me the most money?” Ask, “Can I handle its losing streaks, drawdowns, holding periods, and time demands without abandoning its rules?”

A profitable system you can execute sustainably is better for you than one with higher potential returns whose demands you cannot tolerate long term. But sustainable does not mean comfortable every day.

Stop searching for a strategy with no weaknesses. Find a genuine edge, then choose the trade-offs you can live with in exchange for the strengths you want.

Momentum and trend have worked for more than 100 years.

They’ve been studied academically, traded successfully by some of the greatest individual traders, and used systematically by major firms for decades.

That doesn’t mean they work all the time.

There are periods when momentum dominates and periods when it struggles. But over the long run, momentum and trend have continued to reappear because the forces behind them haven’t disappeared: human behavior, institutional money flows, and supply and demand.

The mistake is thinking that means you trade every market the exact same way.

Different environments favor different setups.

There are markets where momentum is working, but pullbacks, low cheats, and middle cheats are producing most of the opportunities.

Then there are markets where flat-base breakouts, VCPs, and stocks pushing into new highs are dominating.

Same underlying philosophy.

Different execution.

That’s why I believe in having a playbook, not just one setup.

Know your strategy. Know the market environment. Then adapt your execution to what the market is actually rewarding.

He Gave You Belief in Yourself, Not Hype

One thing I always loved about William O’Neil was the integrity I saw in his teaching. I admired him as an investor, trader, businessman, and educator. But what stayed with me most was that he came across as a straight shooter, not someone willing to tell you anything to sell another IBD subscription.

Watching his old videos or reading his book, I never felt like I was being sold a fantasy. He made me believe I could learn this. He didn’t make me believe I was one secret hack away from becoming a millionaire.

In How to Make Money in Stocks, he wrote:

“You can definitely learn to invest wisely.”

But he paired that encouragement with responsibility. He emphasized serious study, learning from mistakes, and revisiting the material rather than expecting one reading to be enough. The opportunity was real, but so was the work.

The world needs more of that. Encouragement without deception. Confidence without guarantees.

That’s the message I want to pass along here.

You can learn this. Study the good books I share, work through the MTS course, and revisit the articles. But don’t confuse finishing the material with learning the skill. Don’t just read it, listen to it, or watch it once.

Absorb it. Study the charts. Practice with small risk. Review your decisions, especially the uncomfortable ones. Give yourself time to turn what you understand into what you consistently do.

You’re going to make mistakes. You’re going to have frustrating stretches. That doesn’t automatically mean you aren’t capable. It means you have something to examine, learn from, and improve.

O’Neil also wrote:

“No one can hold you back but yourself. Think positive.”

I take that as a call to take responsibility, not a promise that success is guaranteed. This is a marathon, not a sprint. Your willingness to study, practice, and keep improving matters.

You don’t need someone to convince you that trading is easy. You need to believe you can learn something difficult, then be willing to do the work.

See the Entire Market in 10 Seconds

We just pushed a new Matrix Heat Map live inside MTS Velocity, and this is quickly becoming one of my favorite ways to scan the market.

Instead of flipping through hundreds of charts trying to figure out where strength is concentrating, you can see it immediately across sectors, industries, and market-cap tiers.

You can sort the entire market by:

• Price performance

• Relative Strength across multiple timeframes

• Custom Relative Strength periods

• MTS Score, our proprietary composite ranking

• Market cap and size

The real value is being able to quickly answer questions like:

Where is the money flowing?

Which industries are showing broad strength?

Are the leaders mega caps, small caps, or somewhere in between?Which stocks are separating themselves from their peers?

Hover over a ticker and you can instantly see the chart, Relative Strength readings, earnings and sales growth, margins, and other key data.

Then, if something catches your eye, just click the ticker and it opens directly inside the RS Scanner for deeper research.

Big shoutout to Raj for suggesting this feature. So many of the best additions to MTS Velocity have come directly from ideas shared by MTS members, and I really appreciate everyone helping shape the platform into something better.

If you already have access to MTS Velocity, go give the new Heat Map a whirl and let me know what you think.

O’Neil Didn’t Invent CAN SLIM in a Vacuum

William O’Neil didn’t build his strategy by locking himself in a room and inventing everything from scratch.

He studied the people who were already winning.

In 1960, O’Neil analyzed more than 100 purchases made by the Dreyfus Fund, one of the top-performing funds at the time. He noticed something that went against conventional Wall Street thinking:

They weren’t buying cheap stocks. They were buying stocks breaking into new highs from sound chart patterns.

That became one of the foundational ideas behind O’Neil’s approach.

Then he studied Jesse Livermore, who influenced his thinking on pivot points, pyramiding, and adding to winners instead of averaging down. O’Neil explicitly said he adopted Livermore’s pyramiding method.

Gerald Loeb reinforced aggressive loss cutting.

Bernard Baruch reinforced the idea that you don’t need to be right most of the time if you keep losses small and make enough when you’re right.

O’Neil also studied the chartists who came before him, tested their ideas against actual historical winners, kept what worked, and rejected what didn’t.

And maybe his greatest teacher was his own mistakes. After watching profits disappear in 1961, he went back through every trade, marked his buys and sells on charts, and studied exactly what he had done wrong.

That is exactly what we are doing with Momentum Trading Strategy.

O’Neil built on the work of the great traders who came before him. We are building on O’Neil, Livermore, Loeb, Minervini, Ryan, Weinstein, Darvas, Zanger, and the other great momentum and trend traders who followed the same lineage.

We’re not trying to reinvent the market.

We’re studying 100+ years of what has actually worked, taking the best ideas from the traders who proved them with real results, testing them, and continuing to refine the playbook.

That’s how trading knowledge gets passed down: study the winners, keep what works, learn from your mistakes, and build on the shoulders of those who came before you.

Algorithms Changed Trading. They Didn’t End Trends.

Trading went from ticker tape and phone calls to electronic markets, quantitative models, and AI.

Through those changes, momentum and trend following have built an extensive research record.

Narasimhan Jegadeesh and Sheridan Titman documented profitable strategies buying previous stock winners and selling previous losers over intermediate holding periods. Brian Hurst, Yao Hua Ooi, and Lasse Pedersen later extended historical trend-following tests across markets and back to 1880.

There’s also research connected directly to the growth-stock approach we study.

In a 1988 Financial Analysts Journal paper, Marc Reinganum identified accelerating quarterly earnings and high, improving relative strength among characteristics preceding exceptional stock advances.

His nine-characteristic model produced an average one-year holding-period return of 30.6%, versus 6.9% for the S&P 500, in its historical test.

O’Neil cited Reinganum’s work. Minervini described it as an influence on his own approach.

One plausible explanation for momentum’s persistence is human behavior.

Investors can initially underreact to change, then chase a move once it becomes obvious. Harrison Hong and Jeremy Stein developed a formal model of that process.

Faster computers don’t automatically eliminate those forces.

That gives me a reason to expect momentum opportunities to continue.

Momentum and trend following form the foundation of Momentum Trading Strategy.

You Can’t Master a Strategy You Keep Abandoning

Call it squirrel syndrome or shiny object syndrome. It can keep traders stuck for years.

They discover a strategy and get excited. They start learning it, take some trades, and feel like they’ve finally found their approach.

Then it hits a rough patch.

Suddenly, another system looks better. Someone else is making money. They abandon what they were learning and start over.

Repeat that long enough and you can spend years in the market without becoming proficient at anything.

Mark Minervini puts it clearly in Think & Trade Like a Champion:

“But you won’t overcome less favorable phases by adopting a different style each time you run into difficulty.”

A proven strategy will still have unfavorable conditions. That’s when you review your execution, manage your exposure, and study what needs improving. Sometimes the adjustment is smaller positions or sitting out.

Also, you may be walking away from the learning process just as the experience could start becoming useful.

Even experienced traders pay for wandering outside their strengths. Many market wizards describes taking trades outside their competence, then losing money and being forced to refocus on what they do best.

Yet someone who hasn’t found consistency assumes they can keep bouncing between approaches and somehow get there.

Master one approach first. Then earn the right to expand.

Once you’ve demonstrated consistent execution and results, you have a foundation for adding setups to your playbook or carefully testing another approach for different market conditions.

If you’re brand new, exploring makes sense. Learn what’s available and what fits your personality, schedule, and temperament.

But eventually, you have to choose a proven approach and give yourself a real chance to learn it.

Pick your style. Commit to the work. Then get after it.

The AI Trading Trap

I’ve been getting a lot of messages about AI and how it’s going to change trading.

Of course technology will change trading. We already went from floor traders and phone calls to computers, algorithms, and instant access to information.

But supply and demand won’t change. Human emotion, new trends, innovation, and speculation will still exist and continue driving markets.

You do not need AI to become a successful trader.

The trap I see forming is traders who haven’t found consistency searching for AI to solve the problem for them.

It can become the same rabbit hole as indicator obsession: constantly chasing the next tool while avoiding the work that would actually improve their trading.

A better scanner won’t fix chasing extended stocks, oversizing positions, ignoring stops, or trading out of boredom.

It’s no different than systematic or algorithmic traders ruining a perfectly good system by constantly overriding it.

So the bottom line is this: your time is probably better spent becoming a better trader.

Then, when better technology arrives, you’ll actually know how to use it and profit from it.

And remember, experienced traders will have access to the same technology. They’ll likely understand how to use it, what questions to ask, and when the output is wrong better than the inexperienced trader.

With that said, I’m building some interesting things inside MTS Velocity, including pattern recognition and experimenting with AI agents that scan stocks, review charts, and analyze technical and fundamental data.

In my early testing, combining traditional screening with AI visually reviewing charts looks more promising than trying to hard-code every possible variation of a cup-and-handle, VCP, pullback, or other setup.

The goal is to guide that analysis using the trading books, model books, and methodology we actually use, then eventually bring it into the platform for paid members.

I’m excited about the potential.

But there’s something traders need to understand:

AI becomes more useful as your own knowledge increases.

You need to know what questions to ask, which variables matter, when the answer is wrong, and how the setup fits into the broader market environment.

An inexperienced trader may benefit from AI.

An experienced trader will probably benefit even more.

A solid fundamental and technical screen, followed by a trained eye and disciplined risk management, is already enough to find and trade great opportunities.

If AI makes that process faster and better, fantastic.

We’ll use it.

Until then, control what you can control.

Study charts. Refine your setups. Manage risk. Review your mistakes.

Use AI to amplify your trading skills. Don’t let the search for better technology become a substitute for developing them.

Set Goals That Sound Insane

Set trading goals that sound completely insane to other people.

Most people underestimate what is possible because they underestimate themselves.

But belief alone is not enough.

I actually like the SMART goal-setting framework. Specific. Measurable. Achievable. Relevant. Time-bound.

But I have always had a problem with versions that tell you your goals need to be realistic.

Realistic according to who?

Most people who accomplish extraordinary things set goals that looked completely unrealistic to everyone around them when they started.

So make your goals specific. Make them measurable. Give yourself deadlines. Build a plan.

But do not let someone else's definition of realistic put a ceiling on what you are willing to pursue.

There are plenty of people with huge dreams who never get anywhere because their daily habits do not match their goals.

That is where the real difference is made.

Today there are more gurus, fraudsters, and fake success stories than ever. But once you filter through the noise and find people with legitimate results, something becomes obvious:

The blueprint already exists.

Trading is no different.

People have built extraordinary careers using the same technical and fundamental principles I preach. Why? Because they did not come from me.

Growth stock investing and momentum trading have been around for decades. I have shared the books to read. I have built affordable software that does many of the things much more expensive platforms do. I have built a course for people who learn better visually and through instruction.

The information is available.

The question is whether you are willing to do the work long enough to see the results.

Big goals are achieved through very small actions repeated over and over again.

Build a process and routine that fits your life, but it needs to include the things that actually move you forward:

• Read. Study. Absorb. Repeat.

• Read the great books more than once. I have read the same life-changing trading books over and over again.

But more importantly, put them into practice.

Do not just read about trading.

• Review charts and stocks daily.

• Master stock screening using the growth fundamentals and technical characteristics that actually matter.

• Master how to build and manage watchlists, identify potential setups, and set alerts so you are prepared before a stock becomes actionable.

• Improve your risk management and position sizing.

• Improve your trade planning.

• Conduct after-action reviews of your trades.

• Keep a trading journal. Track both technical mistakes and emotional mistakes.

Continue learning. Continue studying great traders who have succeeded in the same discipline.

Then do it again tomorrow.

And the next day.

And the next month.

And the next year.

Most of the journey will be quiet.

Nobody is going to congratulate you for studying charts while everyone else is watching Netflix.

Nobody is going to applaud you for passing on a mediocre trade or sitting in cash because the market environment is poor.

Nobody is going to notice the hundreds or thousands of hours you spend improving before the results finally show up.

That is why the road can feel lonely.

That is also why you need to love the game of trading.

And stop comparing yourself to everyone else.

Your goal is not to become somebody else. Your goal is to become the best trader you are capable of becoming.

The goal gives you direction. The habits get you there.

Set the goal high enough that it scares you.

Set a goal that might even seem impossible today.

Then stop obsessing over how far away it looks and start working backward.

10-year goal. 5-year goal. 2-to-3-year goal. 1-year goal. 6-month goal. Quarterly goal. Monthly goal. Weekly goal.

Then ask the question that actually matters:

What am I doing today?

Big goals become much less intimidating when you break them into smaller goals, and smaller goals eventually become today's tasks.

Focus on today.

Then tomorrow.

Then this week.

Stack enough of those days and weeks together and eventually you look up and realize you are much closer to that insane goal than you ever thought possible.

Extraordinary results are usually ordinary actions performed consistently for an extraordinary amount of time.

David Ryan Went From $52K to $16K. Then Made 1,379% in 3 Years

David Ryan knew how to find great stocks.

That wasn’t his problem.

He turned $20,000 into $52,000, then watched the account collapse back to $16,000.

His biggest mistake?

He kept buying the right stocks at the wrong prices.

Ryan was chasing leaders 15% to 20% above proper buy points, getting caught in normal pullbacks, and staying aggressive when the market weakened.

Then he went back and studied his own trades.

That review changed everything.

From 1985 through 1987, Ryan went on to compound a 1,379% return and become a three-time U.S. Investing Champion.

My newest article breaks down exactly how the William O’Neil protégé approaches:

• Finding true growth-stock leaders

• Breakouts vs. pullback buys

• Precise entries

• Adding to winning positions

• Holding major winners

• Cutting failed trades quickly

• Reviewing mistakes so they stop repeating

👇 Read

https://tradingmomentum.substack.com/p/market-wizard-david-ryan-how-he-made

Swing Trader or Position Trader? The Difference Is Management

The underlying strategy may be the same. What changes is the entry, holding period, and method used to manage the trade.

Time frame affects how long we hold a position and how we manage the trade. It does not necessarily change the foundation of the strategy.

Mark Minervini describes swinging in and out of stocks to compound capital, while David Ryan emphasizes holding winners as long as the uptrend remains healthy. These are tendencies, not rigid rules.

Minervini may hold an exceptional winner for multiple quarters, while Ryan will exit immediately if a new position hits his stop or doesn’t act right.

William O’Neil also combines profit-taking rules with provisions for holding exceptional winners longer. Position trading does not mean holding every purchase for years or tolerating big drawdowns. The longer holding period applies only to stocks that continue acting correctly.

NVDA illustrates how the same opportunity can be managed differently depending on the trader’s time frame.

In this example, both traders enter at the same breakout.

The swing trader may capture the faster portion of the move and begin selling as the stock loses its shorter-term 10-day or 20-day moving averages. The position trader may give the stock more room and use the 50-day or even the 200-day moving average, along with the larger price structure, to participate in a longer advance.

They do not have to use the same entry, either.

One trader may enter on an early cheat, pullback, or pullback reversal, while another waits for the traditional breakout. These are differences in execution, not necessarily differences in the underlying strategy.

Many newer traders confuse a trader’s time frame with the time frame of the chart being viewed. They are related, but they are not the same thing.

A setup can be visible on the weekly chart that is not as clear on the daily chart. A shorter, tighter setup may also appear on the daily chart without creating a distinct pattern on the weekly chart.

Ideally, as we see in this NVDA example, the daily and weekly charts are aligned. The weekly chart confirms the larger Stage 2 uptrend and overall price structure, while the daily chart provides a more precise view of the setup, entry, and risk.

David Ryan is primarily a position trader, but he studies both daily and weekly charts. Minervini generally trades shorter-term swings, but he also uses both.

A swing trader may naturally rely more heavily on the daily chart for setups, entries, and trade management while using the weekly chart for context. A position trader may rely more heavily on the weekly chart for the larger trend and base structure while using the daily chart to refine entries and manage risk.

The chart time frame is the lens being used. The trading time frame is how the position is managed.

A position trader generally seeks to compound capital by giving winning stocks more time to produce larger gains. A swing trader seeks to compound the account through greater trade frequency.

What they share is more important than what separates them.

Both are buying a high-relative-strength leader in a confirmed Stage 2 uptrend with constructive price and volume characteristics. The opportunity may be the same. The difference is how each trader chooses to manage it.

You Can’t Trade What You Haven’t Learned to See

Many traders simply haven’t spent enough time studying charts to consistently recognize great setups. That skill takes practice, repetition, and studying how price and volume behave before, during, and after a move.

There is nothing wrong with mastering just one or two setups. If your thing is VCPs, flat-base breakouts, or cup-with-handles, you can build an entire trading career around those patterns. BUT a smaller playbook generally means fewer opportunities. You have to be willing to sit on your hands until your setup appears.

A broader playbook that includes bull flags, pennants, and upside reversals on pullbacks can give you more opportunities. But knowing the names of more patterns doesn’t mean you’ve developed the skill to trade them. The problem I see is traders who only understand one or two setups trying to trade as though they’ve mastered ten. Their activity exceeds their skill.

With enough chart time, you also begin to realize that a setup doesn’t always need a perfect name. You start recognizing the underlying price and volume behavior: a powerful advance on heavy volume, followed by a controlled pullback or tight consolidation as volume contracts, then renewed buying as price pushes into new highs.

That tight area might be a handle, the final contraction in a VCP, three weeks tight, or a short flag. The shapes differ, but many share the same characteristics: strong demand, evidence of selling pressure drying up, and buyers returning to support the next advance. You learn to recognize where an entry makes sense and where the setup would be invalidated.

There is both an art and a science to reading charts. Spend time studying successful setups and failed ones, learning their differences, and understanding the price action behind the pattern. Expand your trading activity only as your ability develops.

These price and volume patterns have appeared in winning stocks for more than a hundred years. They’re unlikely to disappear anytime soon. The time you spend studying them is an investment in a skill you can use throughout your trading career.

When Your Favorite Setup Stops Working

One mistake traders make is assuming that when a setup stops working for a period of time, the entire method is broken.

Sometimes the method is fine, actually, most of the time it is.

The market environment changed.

Morales and Kacher ran into exactly this in 2004 and 2005 in Trade Like an O’Neil Disciple. Traditional base breakouts were struggling in a choppy, sideways market. Instead of abandoning growth-stock trading, they adapted their entries to the environment.

Sound relevant right now?

Van Tharp taught a similar principle: there is no trading system that works in every market environment.

I’d take it one step further for most growth and momentum traders.

Sometimes the best adjustment in a sideways market is to stop trading.

If existing positions are holding up, I may keep them, take some profit, and trail stops. But I do not need to keep forcing new buys while breakouts are failing, leadership is rotating week to week, and the market is chopping sideways.

Morales and Kacher make this point elsewhere in the book too. There are periods when the best decision is simply to sit in cash, study, and wait for conditions to improve.

For me, that means waiting for the Stage 2 uptrend to reassert itself, the sideways action to resolve, and consistent leadership to return.

You do not have to change your entire method every time your favorite setup stops working. Sometimes you just have to wait for the environment your method was built for.