Short lessons on momentum trading, every day.

You Can Be Wrong and Still Be a Profitable Trader

You can put the probabilities in your favor and still lose the trade. You can lose several in a row. Some stretches, almost everything you do will feel wrong.

That’s trading.

Even the setup you’re most confident in can fail. Having an edge doesn’t guarantee a return today, next week, or next month.

An edge plays out over a series of trades. Your job is to follow a sound process and manage risk so you can stay in the game long enough to give that edge a chance to work.

A losing trade doesn’t automatically mean your process was wrong. A winning trade doesn’t automatically mean it was right.

I challenge every trader to develop a deeper understanding of probability. When you stop expecting every good decision to produce an immediate reward, losses become less personal.

You can focus on the quality of your decisions instead of letting the last outcome dictate your next move.

I Used to Run 20 Miles. Today, I Struggled With 4.

Three years ago, I was running 10 miles a day, with 20-plus-mile runs on the weekend.

That wasn’t some genetic gift. I studied the science of running and put in the work, day after day.

But over the last year, I fell off my routine. Today, I struggled through four miles.

I didn’t lose my running knowledge. I lost the consistency that made me capable of performing.

And I’ve learned the same lesson in trading.

You don’t suddenly forget everything you’ve learned. You start cutting corners.

You skip your weekend big-picture review. You stop preparing before the market opens. You stop reviewing your trades and decisions after the close.

You still know what you should be doing. You just aren’t doing it.

At first, you might not notice a difference. You might even keep making money. That makes the shortcuts easier to justify.

But over time, those skipped repetitions add up. Your preparation slips. Your execution gets less consistent. Mistakes you used to catch start creeping back in.

When I look back at some of my rough patches in trading, I often find that I had pulled back on my process. Not every losing stretch comes from poor discipline, but neglecting the work certainly hasn’t helped me navigate one.

It’s the same lesson those runs taught me: knowing how to do something doesn’t preserve your ability to perform it.

The road doesn’t care how far I used to run. The market doesn’t care how well I used to prepare.

And before anyone says, “You’re just getting older,”I’m not using age as an excuse. I stopped running consistently. I let my discipline slip, and my performance followed.

This is as much a reminder to myself as it is to anyone reading:

Protect your process. Do the preparation. Stay disciplined.

The knowledge you’ve accumulated is valuable, but it doesn’t do the work for you.

The Next Market Leaders Are Leaving Clues. Are You Watching?

A market correction doesn’t just expose weak stocks. It can help reveal the next leaders. Save this as a reminder for the next market correction.

William O’Neil put it plainly in How to Make Money in Stocks:

“Once a general market decline is definitely over, the first stocks that bounce back to new price highs are almost always your authentic leaders.”

Notice what he emphasized: the first stocks back to new highs. Not the stocks that fell the furthest or suddenly looked the cheapest.

During a market correction, I’m watching which growth stocks hold up better than their peers. Which maintain constructive bases? Which recover quickly instead of struggling through every bounce?

When the market turns, I want to see which names are leading the recovery.

That is relative strength. It is central to the “L” in CAN SLIM: Leader or Laggard.

A beaten-down stock bouncing off its lows is one thing. A strong stock recovering to new highs while others are still repairing their damage is another.

This is why getting defensive doesn’t mean disengaging. I can reduce exposure, protect capital, and keep building my watchlist.

Relative strength alone is not a buy signal. I still want strong fundamentals, a valid setup, and defined risk, but it tells me where to focus my attention.

You can be defensive with your capital and aggressive with your preparation.

Don’t spend an entire correction looking backward at what you missed. Study what is holding up now. Those stocks may deserve your attention when conditions improve.

The Indexes Are Near Highs. So Why All the Red?

26 consecutive trading sessions with more Nasdaq stocks making 52-week lows than new highs. That’s what my calendar shows from September 8 through October 13.

We’ve seen similar persistent weakness before:

March 2026: The Iran conflict accompanied a correction that took the major indexes below their 200-day moving averages.

March–April 2025: The tariff scare brought a much deeper market breakdown.

September–October 2023: Treasury yields surged toward 5%, “higher for longer” became the concern, and stocks underwent a substantial correction.

The difference this time? The major indexes are still sitting near highs. The weakness isn’t showing up the same way in the major indexes.

Now compare that with the December 2020 through February 2021 calendar I’ve attached. Every trading day shown is green. New highs consistently outnumbered new lows.

For those who didn’t experience it, that was one of the best stretches for growth-stock momentum trading.

For anyone questioning whether new highs and lows tell us much about market conditions, look at the contrast.

An index near its highs doesn’t necessarily mean strength is widespread.

Stop Guessing Where the Strength Is. Check the New-High List.

One of the simplest places to start looking for market leadership is the new-high list.

But don’t just look at the individual stocks. Look at the sectors and industry groups those stocks belong to.

In How to Make Money in Stocks, William O’Neil describes reviewing a new-high list organized by the sectors producing the most new highs. His guidance:

“Just note the top six or so sectors, particularly in bull markets. They usually pick up the majority of the real leaders.”

One stock showing strength is a reason to investigate. Several stocks in the same industry showing strength can point you toward something broader: group leadership, rather than an isolated move. O’Neil emphasized looking for that confirmation across related stocks.

As you review the list, ask yourself:

• Which groups keep appearing?

• Are more stocks within those groups participating?

• Is leadership staying in the same areas or beginning to shift?

Instead of starting with a story about which industry should be strong, start with the evidence of which industries are showing strength.

Then study the leading stocks within them.

That does not mean blindly buying everything making a new high. O’Neil specifically cautioned that a new high alone does not make a stock a timely purchase. The base, the buy point, and how far price has already moved is important.

Use the new-high list to narrow your search.

The question isn’t just, “Which stocks are making new highs?”

It’s also, “What are those stocks telling me about where the market’s leadership is concentrated?”

You Can’t Improve What You Keep Defending

Some traders ask for feedback, then spend the entire conversation explaining why they don’t need to change anything.

Over the past year of writing on Substack, I’ve had a lot of traders reach out with questions or ask for help.

Some are incredibly humble, grateful, and receptive. They listen, ask thoughtful questions, and genuinely consider what you’re saying.

But in my experience, that hasn’t been the majority.

The moment the feedback challenges something they believe or something they did, the defenses go up.

“Yes, but…”

“The reason I didn’t take that trade was…”

“I still don’t think that setup was clear enough…”

An explanation for every decision. An objection to every observation. Very little willingness to consider that their interpretation might be what needs work.

And the most revealing part is where that pushback comes from.

You might expect it from traders who have studied the great trading books, spent years practicing, and developed a different perspective through experience.

But that hasn’t been my experience in these conversations. The resistance has come from people who haven’t studied the foundational work and whose questions reveal that they’re still struggling with the basics.

There’s nothing wrong with being inexperienced. Every one of us started there.

But you have to consider that the work you haven’t done might explain what you’re not seeing.

I used to laugh when Mark Minervini expressed his frustration with this. After a year of these conversations, I understand it much more personally.

It’s difficult to help someone improve when every suggestion becomes something they need to defend themselves against.

One of my greatest strengths as a developing trader was being willing to hear uncomfortable feedback from people with more experience than I had.

That didn’t mean every criticism felt good. It meant I was willing to study it, test it, and consider that someone else might see something I couldn’t yet recognize.

I wanted to get better badly enough to admit I had things to learn.

And I still do.

I didn’t invent a single chart setup I trade.

I have preferences. I’ve developed variations that fit my personality and approach. But when I teach, I deliberately focus on the established foundations before adding the nuances of my personal style.

These patterns and principles have been studied and written about for decades, with roots stretching back roughly a century:

• William O’Neil’s How to Make Money in Stocks

• Robert D. Edwards and John Magee’s Technical Analysis of Stock Trends

• John J. Murphy’s Technical Analysis of the Financial Markets

• Richard W. Schabacker’s Technical Analysis and Stock Market Profits

• William Jiler’s How Charts Can Help You in the Stock Market

There is a substantial body of work available to learn from.

Yet when a trader struggles to recognize a setup, the conversation often becomes a list of reasons the chart didn’t look exactly the way they wanted.

At some point, you have to ask yourself:

“Am I missing what the market is showing me because I’m too attached to what I expected to see?”

You don’t have to agree with every piece of feedback. You should ask questions and think critically.

But there’s a difference between trying to understand an observation and immediately searching for reasons to dismiss it.

Missing a trade is normal. Passing on something you don’t understand is reasonable. No setup guarantees a winning outcome.

The problem is repeatedly defending your interpretation without examining whether it needs to improve.

The market is not going to redraw the chart until you feel comfortable.

Supply and demand will continue to unfold whether you recognize the opportunity or not.

Your job is to develop the skill to read what’s there.

And that starts with being willing to admit you might not be seeing it clearly yet.

You’re Copying the Trade Without Understanding the Trader.

Two things completely derail new traders:

They misunderstand time frames, and they mix incompatible risk-reward expectations.

They see someone posting a setup, explaining an entry, or taking a profit, and immediately try to apply it to their own trading.

But they never ask whether that person is trying to make the same type of trade.

Even the label “swing trader” doesn’t tell you enough.

One swing trader might hold positions for only a few days. Another might hold for several weeks. One might typically place stops 1–3% below entry. Another might allow 4–7%.

Now add position traders looking to hold for many weeks or months, and the differences become even greater.

Two traders can study William O’Neil, Mark Minervini, David Ryan, and Dan Zanger and still develop very different approaches. Shared influences don’t mean identical entries, holding periods, or exit rules.

For example:

One trader might use a stop 2–3% below entry, accept frequent small losses, and take profits around 12–15%.

Another might allow 6–8% from entry to stop, plan to hold considerably longer, and look for a 20–30% advance before taking an initial partial profit.

Those are illustrative approaches, not universal rules. And those stop percentages describe the distance from entry to stop, not the percentage of the account being risked. Position size determines that.

The problem starts when a beginner borrows pieces from both without understanding how they fit together.

They allow the wider loss but keep taking the smaller profit. They buy an entry designed for a short burst and expect a sustained advance. Or they plan to hold for months, then panic because a short-term trader sold after three days.

They’re mixing approaches before mastering one.

Your holding period, entry technique, stop placement, position size, average gain, and win rate all need to work together.

Before copying a trade or applying someone’s advice, ask:

• What is their typical holding period?

• How far is their initial stop from entry?

• What are their average gain, average loss, and win rate?

• What price action are they using to enter and exit?

• Does that approach match the trade I’m trying to make?

Social media puts all these approaches in the same feed. A trading room can put them in the same conversation.

That doesn’t make them interchangeable.

Learn from other traders. Study their reasoning. But understand the complete approach before borrowing individual rules.

Know your time frame. Know your risk-reward profile. Know whose advice actually fits your style.

Back at Your Entry Doesn’t Automatically Mean Sell.

You buy the breakout. The stock moves higher. Then it pulls back toward your entry.

Suddenly, you’re questioning the entire trade.

Ideally, a stock takes off after you buy and never looks back, but good trades don’t always develop that cleanly.

Mark Minervini discusses this in his explanation of “squats and reversal recoveries.” A breakout can stall, pull back, and still recover. He cautions against abandoning a trade prematurely when the stop remains intact and major technical violations aren’t developing, particularly in a healthy market.

DHT illustrates the broader lesson.

On the chart, price clears the base, advances, then pulls back toward the original breakout area in its first natural reaction. It finds support and resumes moving higher.

That return toward the breakout area didn’t automatically mean the trade had failed.

Depending on your original stop, time horizon, and the stock’s behavior, this may be a situation where you simply follow your plan and allow the reaction to play out.

Minervini describes a natural reaction followed by a recovery to new highs as an opportunity to raise your stop. Once that recovery occurs, moving the stop to breakeven or better may make sense, depending on the structure of the trade.

How far the stock has already moved in your favor matters, too.

A small initial gain pulling back toward your entry is different from surrendering a profit worth several times your original risk.

Minervini also discusses raising stops after gains of roughly two or three times initial risk, particularly when those gains exceed your historical average. Protecting that progress may involve raising your stop or taking some profit into strength, depending on your plan and market conditions.

The distinction is between normal fluctuation and price action that invalidates your setup. Is support holding? Is selling pressure easing? Or are heavy selling and technical violations piling up?

Respect your stop. Respond to genuine deterioration. Give the trade room to develop within the risk you planned.

Your entry price is a reference point. Returning to it is not, by itself, a reason to sell.

Missed the Breakout? Learn to Buy the Pullback.

A stock moving beyond its base breakout doesn’t mean you’ve missed every opportunity to get involved. But if you want to participate in the next leg higher, you need to learn how to recognize and buy constructive pullbacks.

You also need to understand which entries the market is rewarding.

Just as we study the market environment, we should study how leading stocks are behaving.

Are breakouts to new highs following through? Or are better opportunities appearing earlier, as stocks find support and begin turning higher?

If you’re always waiting for a new high before entering, pay attention to how much of the move has already happened by the time you buy.

Buying pullbacks has been critical for me over the last few years. It has helped me get involved in several of my biggest winners. LITE and SNDK.

The key is recognizing a pullback within an established uptrend, watching for evidence of support, and identifying an entry where you can clearly define your risk.

Study more than which stocks are working. Study which entries are working.

That can make a meaningful difference in both the opportunities you recognize and the risk you take.

The Easiest Way to Spot a Beginner Trader

They're searching for certainty in a game built on probabilities.

• Will this stock go up?

• Which way will the market go?

• Will this setup work?

• Is the market going to crash?

Almost every trader goes through this phase. It's practically an initiation into the markets.

The problem is that many investors never move beyond it.

Here's what experienced traders eventually understand:

Mark Minervini doesn't know whether his next trade will work. Warren Buffett doesn't know whether his next investment will succeed. Neither does anyone else.

They can identify favorable opportunities, assess the odds, and make educated decisions. But they cannot know the outcome.

Especially in a sideways market. Nobody knows with certainty whether the market will break higher into a new advance or roll over into a Stage 4 decline.

And if someone claims they know for certain, I'd recommend running the other way.

And here's the part that changes everything:

You don't need to know what's going to happen next to make money in the markets.

You need to understand probabilities, expected value, risk management, and the mathematics of compounding.

Consider venture capital.

A venture capitalist might evaluate 100 promising companies and invest in only 10. Even after extensive research, many of those investments could fail to return their original capital.

But the portfolio doesn't necessarily need most of them to succeed.

One extraordinary winner can potentially generate enough returns to offset all the failures and produce substantial profits.

The same fundamental mathematical principles apply to trading.

You can be wrong more often than you're right and still make substantial money, provided your winners sufficiently outweigh your losers.

The professional's edge isn't knowing what happens next. It's knowing how to manage the possible outcomes.

The beginner asks: "Will I be right?"

The professional asks: "What are the odds? How much can I lose? And how much can I make if I'm right?"

Bottom line: Stop obsessing over the outcome of individual trades. Follow a proven process with positive expectancy, execute it consistently, and let the probabilities play out over a large number of trades.

My trading strategy and process are built around positive expectancy. Over a large number of trades, that gives me a mathematical edge, provided I execute consistently. But it doesn't guarantee the outcome of any single trade, or even any particular series of trades.

I stopped needing to know whether my next trade would work a long time ago.

And once you let go of that need for certainty, it's incredibly freeing.

That shift in thinking is one of the biggest milestones in becoming a consistently profitable trader.

You Don't Have Enough Lifetimes to Learn Every Market Lesson the Hard Way.

It would take me multiple lifetimes to learn everything about the markets through trial and error alone.

That's why I've spent years studying the greatest momentum and growth stock traders in history.

Do I still learn through my own experiences, failures, and mistakes? Absolutely.

But why spend years learning a painful lesson when someone before me has already learned it and written an entire book about it?

Think about this.

Take 1,000 traders and throw them into the markets to figure everything out themselves. Take another 1,000 who first study the principles, successes, and failures of history's greatest traders.

Which group would you bet on?

As a father, it reminds me of raising my sons. You can teach them something a hundred times, explain why it matters, and show them exactly what to do. Yet sometimes, they insist on learning the hard way.

Years later, they finally understand what you were trying to teach them all along.

Adults aren't much different.

What amazes me is how many traders refuse to learn from previous generations because they believe the markets are somehow completely different today.

Markets evolve. Technology changes. But many of the underlying principles of speculation, risk management, and human behavior have stood the test of time.

Being willing to learn from others isn't a weakness. It's a strength.

You're going to make plenty of mistakes of your own. That's inevitable.

But by learning from those who came before you, you can avoid repeating many of those mistakes, and perhaps prevent some altogether.

Why insist on learning every lesson the hard way?

Two Traders. Same Market. Same Opportunities. Completely Different Results.

Over 100 years ago, Richard Wyckoff shared a fascinating story in Studies in Tape Reading.

Two traders started out watching the same ticker, trading the same small positions. One eventually built a fortune. The other never progressed beyond trading ten-share lots.

What separated them?

Wyckoff believed the difference came down largely to their mental qualities, discipline, and ability to interpret what the market was telling them.

He emphasized several principles:

• Study price and volume to understand supply and demand.

• Recognize accumulation, distribution, and changes in leadership.

• Control fear, greed, anxiety, and recklessness.

• Protect capital and manage risk.

• Study your mistakes relentlessly.

• Develop what he called a "trading character."

Here's what I find fascinating.

More than a century later, we have advanced charting software, sophisticated screeners, thousands of indicators, and now AI.

Yet traders still struggle with the same problems Wyckoff wrote about.

They chase tips, fight trends, abandon strategies, refuse to cut losses, and allow emotions to dictate decisions.

The technology has changed. The market has evolved. But human nature hasn't changed.

Perhaps the greatest edge in trading isn't discovering something nobody else knows.

It's developing the discipline to consistently execute principles that successful traders have understood for over 100 years.

That's exactly why I built the MTS Course around principles that have stood the test of time.

If you're tired of chasing gimmicks, following hype marketers, and searching for the next "hot new strategy," maybe it's time to stop searching for something new and start mastering what has worked for generations.

That's what the MTS Course is designed to help you do.

https://tradingmomentum.substack.com/p/momentum-trading-strategy-the-100

William O'Neil Recommended 4–5 Stocks. But That Doesn't Mean You Start With 4–5 Full Positions.

In my last note, I shared William O'Neil's recommendation of owning roughly 4–5 stocks for an account equivalent to $100,000 today.

But there's an important distinction between building a concentrated portfolio and already having one.

Imagine the market is emerging from a correction. Several industry groups are showing strength, and leading stocks are beginning to break out.

You don't necessarily jump straight into five stocks at 20% each.

Instead, you might begin with smaller positions, perhaps 5–10% of your account, sometimes less, and let your trading results determine when to increase exposure.

Here's a hypothetical example using a $100,000 account:

• You begin with two or three smaller positions, perhaps 5–10% each, keeping most of your capital in cash while testing the market.

• As those trades begin working, you add to successful positions at proper entry points or establish new positions in other qualifying stocks.

• You might eventually hold five positions at 10% each, representing 50% portfolio exposure.

• Some stocks fail, stall, or simply aren't performing as expected. You cut losses and eliminate weaker holdings according to your rules.

• Your strongest positions may gradually grow from 5–10% to 15%, and potentially 20–25%, through price appreciation and additional purchases at proper entry points.

• If the market remains healthy and your trading continues working, you might eventually reach 100% exposure concentrated in 4–5 leading stocks.

But that progression isn't always linear.

During the process, you might temporarily hold 8–10 smaller positions, or more depending on your strategy and market conditions. That doesn't mean all of them will become full-sized positions.

This is closely related to what Mark Minervini calls progressive exposure.

Minervini explains how he starts with smaller positions and increases exposure as his trading becomes profitable. He may accomplish that by increasing position sizes, initiating additional trades, or both.

David Ryan describes a similar approach in Momentum Masters, starting with 5% positions when conditions are uncertain and allowing successful positions to grow toward 20–25%.

Dan Zanger also adjusts his number of holdings and position sizes based on market conditions and how many strong opportunities are available.

And O'Neil himself discussed adding to winning positions while eliminating weaker holdings, although he preferred keeping the overall number of stocks more tightly limited.

Here's the important takeaway:

You don't need to identify your biggest winners in advance or force your portfolio to reach a predetermined number of holdings.

You identify promising opportunities, manage your risk, increase exposure as your trades prove themselves, and direct more capital toward your strongest positions.

And remember, 100% exposure is not the objective in every market. You work toward greater exposure only when conditions and your trading results justify it.

As Minervini wrote:

"Build on success. Subtract on setbacks. Let your portfolio guide you."

The objective isn't to force concentration. It's to let your best opportunities earn it.

How Many Stocks Should You Own? William O'Neil's Rules, Adjusted for Inflation.

In How to Make Money in Stocks (4th edition, 2009), William O'Neil explained why he believed individual investors should concentrate their portfolios rather than over diversify.

He even provided specific recommendations based on account size.

But that was 17 years ago. What would those dollar amounts look like today?

O'Neil's Original Recommendations vs. 2026 Dollars

$3,000 in 2009 → $4,700 today

Recommended: 2 stocks

$5,000–$20,000 in 2009 → $7,800–$31,200 today

Recommended: 3 stocks maximum

$20,000–$200,000 in 2009 → $31,200–$312,300 today Recommended: 4–5 stocks

Over $1 million in 2009 → Over $1.56 million today

Recommended: 6–7 stocks

Dollar amounts adjusted using the U.S. Consumer Price Index through August 2026, approximately 56% cumulative inflation since 2009.

Think about that.

According to O'Neil's inflation-adjusted guidelines, someone managing a $100,000 account today would generally hold just 4–5 carefully selected stocks.

His philosophy was simple: Concentrate your capital in your best opportunities, know your holdings exceptionally well, and avoid spreading yourself too thin.

But concentration didn't mean blindly buying a handful of stocks and hoping for the best.

O'Neil emphasized buying correctly, cutting losses, adding to winners as they proved themselves, and reducing exposure when market conditions deteriorated.

The objective wasn't to own fewer stocks simply for the sake of owning fewer stocks. It was to put meaningful capital behind your best ideas while maintaining strict risk controls.

“The best results are usually achieved through concentration, by putting your eggs in a few baskets that you know well and watching them very carefully.” - William O’Neil

How many stocks do you typically hold when you're fully invested?

The Stock Was Up 133%. Nobody Chose Buy. Here's What Happened Next.

First, thank you to everyone who participated in the chart challenge! Not a single person selected Buy. Most chose to wait or avoid the trade, and I understand why.

The stock had already rallied 133% in approximately four weeks. Surely it was too extended to buy, right?

Not necessarily.

The stock was CELH, and what you were looking at was a High Tight Flag, a rare but powerful chart pattern documented by William O'Neil.

In How to Make Money in Stocks, O'Neil describes the characteristics:

• Explosive advance: Generally 100% to 120% in just 4 to 8 weeks.

• Consolidation: A sideways correction of roughly 10% to 25%, typically lasting 3 to 5 weeks.

• Volume: Ideally, selling pressure diminishes during the consolidation, followed by renewed buying demand as price breaks out.

Notice what happened on the chart.

After that enormous advance, the stock stopped climbing and began consolidating. Price held relatively tight, volume quieted, and a new potential buy point developed.

The arrow marked the breakout above that consolidation.

The overall market was in a Stage 2 uptrend, and CELH belonged to a strong industry group. The broader conditions were supportive.

O'Neil documented examples of these formations dating back to 1915, including some of history's greatest stock market winners. He even bought Syntex from a High, Tight Flag in 1963 before its subsequent enormous advance.

But he also warned that these patterns are extremely risky and difficult to interpret correctly. A valid-looking setup can still fail.

The opportunity isn't simply buying a stock because it doubled. It's recognizing when that explosive advance produces a new, actionable setup with defined risk and potentially asymmetric reward.

If you didn't recognize it, no big deal. That's the whole point of studying historical winners and putting in the reps.

Go back through O'Neil's charts and study these formations. You'll start recognizing similarities in how exceptional stocks behave.

Now look at the second chart and see what happened next.

Here's the biggest takeaway:

Too many traders dismiss potentially exceptional setups simply because a stock has already made a massive advance. But a stock can double, consolidate, and offer an entirely new buying opportunity.

I've written a deeper article explaining this concept, but one of the best ways to train your eye is to study historical winners using Chart Bar Replay. Look at the charts BEFORE the breakout, make your own assessment, then advance the chart to see what happened next.

STOP thinking big moves = extended

START thinking extended = distance from the buy point

Your Favorite Growth Stock May Have Already Grown Up

You watched it make other people rich.

Now you finally feel comfortable buying it.

But are you buying its next growth phase, or the reputation it earned during its last one?

That’s a trap William O’Neil discusses in How to Make Money in Stocks.

He describes a company with a strong three-year earnings growth record of 30%, whose recent quarterly growth has slowed to 10% or 15%. Its impressive history can disguise the fact that it’s behaving like a mature growth company.

The business may still be profitable. Earnings may still be great. But great earnings and accelerating earnings growth are different things.

A growth stock can deliver for years. The mistake is treating that label as permanent.

O’Neil also writes:

“Many growth leaders in one cycle do not repeat in the next cycle.”

Yet traders can act like generals preparing to fight the last war. We keep returning to familiar names because we remember what they did.

Meanwhile, the next generation of leaders may still feel unfamiliar, uncomfortable, or “too expensive.”

That doesn’t mean an older company can’t reaccelerate or lead again. It means it has to earn its place through current evidence.

Ask yourself:

• Is earnings and sales growth strengthening or fading?

• Is the stock showing leadership in its price and relative strength?

• Am I buying because of what’s happening now, or because I remember what happened before?

Is your watchlist built around today’s leaders, or yesterday’s memories?

Not Every Soaring Stock Is a Growth Stock

A stock breaks out. Sales surge. Earnings jump triple digits. It starts appearing on your growth screens.

But what’s actually driving those numbers?

In Chapter 4 of How to Make Money in Stocks, William O’Neil explains that three out of four big market winners historically were growth stocks. One in four was a cyclical or turnaround situation.

He specifically describes how China’s industrial expansion drove demand for steel, copper, chemicals, and oil after 2003, bringing cyclical stocks back into leadership. Their earnings exploded, but their businesses remained cyclical.

I believe parts of today’s market illustrate that same distinction.

Consider the forces behind several areas attracting attention:

• Oil producers and refiners: The Iran conflict has disrupted energy supplies and transportation. Producers can benefit from higher realized oil prices, while refiners benefit when the spread between crude costs and refined fuel prices widens. Those are different earnings drivers. We have been seeing several U.S. refiners reaching all-time highs alongside triple-digit profit growth.

• Marine shipping, particularly tankers: Disrupted routes and tight vessel availability can push freight rates sharply higher. That can produce an earnings boom without a company adding many ships, although operating costs and risks also rise.

• Copper and energy infrastructure: Electrification, AI, and data centers create longer-term demand for copper and electricity. Natural gas is an important part of the U.S. power supply supporting that demand. These structural trends can strengthen the outlook while commodity-sensitive businesses remain cyclical.

A company can report tremendous sales and earnings growth because the price of what it sells has increased, industry capacity is constrained, or margins have expanded. That is different from growth driven primarily by new products, new customers, and sustained market-share gains.

Both can produce exceptional stock moves. And a business can have both cyclical and long-term growth drivers.

The mistake is assuming a few explosive quarters establish a durable growth business. Strong earnings and relative strength may satisfy parts of CAN SLIM, but understanding the earnings history and what is driving the acceleration still matters.

Both can be big winners. Understanding what’s driving the earnings helps you avoid mistaking a cyclical boom for growth that can last for years.

You Can Memorize Every Chart Pattern and Still Miss This Setup

Look at DDOG today.

From October 1 through October 8, price formed a tight little handle, moving sideways and slightly lower while finding support near the rising 10-day moving average. Volume dried up during the consolidation.

Today, price is breaking through the high of that handle with a strong momentum move toward its prior highs.

This is the kind of setup I love because I have a clear line in the sand where I'm wrong.

I can use today's low for a tighter stop, the low of the handle for a little more breathing room, or split my position between the two.

Now here's the lesson.

We spend so much time studying cup-with-handles, VCPs, flags, pennants, and other chart patterns, but what do they all have in common?

1. Strong upside price movement, ideally on expanding volume.

2. Tight consolidation or a controlled pullback, with volume drying up.

3. Renewed price strength through resistance, ideally with volume expanding again.

4. A logical place to define risk if the setup fails.

You don't always need a picture-perfect textbook pattern. You need to understand what price and volume are telling you.

And you don't need to know how high a stock will go. You need to know where you're wrong and whether the potential reward justifies the risk.

That's how I look for opportunities where a relatively small, controlled loss could be offset by a winner worth several multiples of my initial risk.

Millions Know This Trading Strategy. So Why Does It Still Work?

Here's something I've been thinking about.

I've spent years trading a strategy that's been around in various forms for over 100 years. Trend following, relative strength, price and volume, buying leading stocks, and cutting losses. None of this is a secret.

William O'Neil's How to Make Money in Stocks has sold over 2 MILLION copies. Mark Minervini has roughly 766,000 followers on X. Countless books, courses, and services teach these same principles.

So if millions of people know about this strategy, shouldn't the edge have disappeared by now?

Then I started talking to traders on Substack, and something became obvious.

• Buying a book doesn't mean you've read it.

• Reading it doesn't mean you understand it.

• Understanding it doesn't mean you know how to execute it.

• Knowing how to execute it doesn't mean you have the discipline to follow it consistently.

And even among those who have spent years studying and mastering a strategy, how many actually follow their own rules when real money is on the line?

Legendary trader Richard Dennis understood this decades ago. In Market Wizards, he said:

"I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline."

But there's another part of this that I think gets overlooked.

Even if millions of retail traders understood these principles and followed them perfectly, we'd still represent a relatively small part of the enormous amount of capital moving through financial markets.

Institutions are a major force behind sustained stock trends, and most institutional capital isn't specifically trading O'Neil-style growth stock breakouts or Minervini's VCPs. It's spread across passive indexing, value investing, asset allocation, hedging, quantitative strategies, and countless other mandates.

Even within the retail trading community, those of us following this particular style of growth and momentum trading are just one segment of a much larger population investing and trading in completely different ways.

We might feel like the majority because we surround ourselves with traders who think like us, but step outside that bubble, and you realize we're actually a minority.

So there are two important reasons a well-known strategy can retain its edge:

1. Knowledge isn't execution. Millions may know the principles, but far fewer understand and consistently apply them.

2. Popularity within a community isn't dominance of the market. Even millions of traders following the same approach can represent a small fraction of the capital and liquidity driving prices.

Maybe the edge was never knowing something nobody else knows.

Maybe it's consistently executing something most people won't, while recognizing that the market is much bigger than the trading community we live in.

I'm curious: Have you ever known exactly what your strategy required, but found yourself doing the complete opposite when real money was on the line?

IOVA: A Great Example of Price, Volume, and Trend Alignment

This is exactly the type of price and volume action I look for in leading stocks.

• Volume expands on advances, suggesting strong institutional buying demand.

• Volume dries up during sideways consolidations and pullbacks, indicating relatively light selling pressure.

• Price remains tight during pauses before momentum returns.

• Moving averages are properly stacked: 10-day > 20-day > 50-day > 200-day, all trending higher.

• Relative Strength: 99, demonstrating exceptional price leadership.

Now, let's look at the fundamentals, because this is a biotech.

$IOVA reported quarterly sales growth of 65.7% YoY, while EPS improved 66.7% YoY. However, earnings remain negative at -$0.11 per share, and forward estimates are still negative.

That EPS improvement means the company is losing less money, not that it's generating positive earnings. I place much more weight on the actual sales growth and the trend toward profitability than on that EPS percentage.

This is where William O'Neil and Mark Minervini differ somewhat.

O'Neil's CAN SLIM methodology strongly emphasizes positive, accelerating earnings and sales growth. A company reporting smaller losses generally wouldn't meet his preferred earnings criteria.

Minervini, while also favoring strong earnings and sales, makes exceptions for certain situations, particularly biotechs. He explains that many biotechs lack positive earnings, so he will evaluate them based on technical strength, price and volume, and potential drug-development catalysts.

I take a similar approach. With biotechs, I'm willing to overlook negative ROE and pre-tax margins when other characteristics are compelling. That doesn't mean fundamentals don't matter. Strong sales growth, improving losses, and a potential path to profitability are still important.

IOVA is an excellent chart to study for price and volume characteristics, relative strength, and moving average alignment.

Not every leading stock will check every fundamental box, particularly in biotech. Learn to recognize the characteristics that matter, understand the industry you're trading.