Short lessons on momentum trading, every day.

98% of the Big Winners Had This in Common

Mark Minervini explains that, in his historical studies, 98% of the big market leaders made their major advances during a Stage 2 uptrend.

That should tell you where to concentrate your search.

Yet traders spend countless hours looking for a bottom, buying stocks because they look cheap, or convincing themselves that a great company deserves their money while its stock keeps falling.

For my approach, the first question is simple:

Is this stock in a confirmed Stage 2 uptrend?

Before I get attached to the name or start finding reasons to like the company, I want the trend to qualify.

Stage 2 is the advancing phase. I’m looking for an established uptrend, price above rising longer-term moving averages, and constructive price and volume action consistent with institutional accumulation.

A stock being down substantially from its high doesn’t satisfy that requirement. Neither does a few strong days inside a longer downtrend.

But Stage 2 alone doesn’t make a stock a buy.

I still need the earnings, sales, relative strength, setup, and entry to meet my criteria. And I need a stop and position size that keep the planned risk within my limits.

The trend qualifies the stock for further consideration. The complete setup determines whether I trade it.

Stage 2 first. Every other requirement still applies.

Every Add Has to Be Good Enough to Be a First Buy

Buying a stock well doesn’t automatically make buying more a good decision.

The first entry may have been excellent, but after the stock moves higher, the distance to a sensible stop can widen, and the risk of adding can look very different.

Before I increase a position, I ask:

If I didn’t already own this stock, would I buy it here?

I want a qualifying entry with clearly defined risk. That might be another pivot within the base, a breakout from a new consolidation, or a constructive pullback that turns back up.

“Because I’m already in” doesn’t qualify. Neither does wishing I had bought more before the move.

A profitable position can make it easier to overlook an extended entry. Your original shares have a cushion, and you start treating the additional shares as if they do, too.

The new shares carry risk from the price you pay for them.

Before adding, I need to know where I’ll exit those shares, how I’ll manage the original position, and what the combined risk looks like. A larger position still has to fit my account risk limits.

I want to build on a trade that’s working while keeping control of the downside.

Every additional purchase has to earn its place, just like the first one.

There goes IBIT, moving into new 52-week highs

William O’Neil’s research found that, during bull markets, stocks making new highs tended to keep moving higher. The strongest opportunities emerged when price broke out of a sound base with strong volume. What looked “too expensive” to many investors could be the beginning of a substantial advance.

Nicolas Darvas built his approach around a similar principle. He watched stocks consolidate within a defined box, then bought as price broke into a higher range. He deliberately sought strength near new highs, allowing the market to demonstrate demand before committing his money.

A new 52-week high puts the entire past year’s trading range beneath the current price. Buyers have absorbed the selling encountered along the way. Why is this important? Because investors trapped at higher prices can create resistance when they finally get an opportunity to sell near breakeven.

That’s what makes IBIT’s move worth paying attention to. The next evidence is whether the breakout holds, and follows through.

One Exception Can Undo Months of Discipline

You can follow your rules for 20 trades, then give back much of that progress on the one you refuse to sell.

Maybe it was your biggest winner. Maybe you love the company. Maybe you’ve become convinced that its entire industry has an incredible future.

Then the price action changes. Sell signals appear. And you start explaining them away.

“This one deserves more room.”

“The market doesn’t understand it.”

“I’ll sell when it comes back.”

The danger is giving your favorite stock permission to break rules you would enforce on everything else.

Some stocks will continue higher after I sell. That alone doesn’t make the exit a mistake. I can accept leaving money on the table when I’ve followed a sound sell plan.

But ignoring my stop or abandoning my profit-protection rules because I’m attached to a stock can turn a successful stretch into a damaging drawdown.

Before I enter, I need a plan for handling both a losing trade and a profitable one. Then I have to follow it when the decision becomes uncomfortable.

A stock doesn’t earn an exemption from my rules because it made me money in the past.

If You Could Only Take 10 Trades This Year, Would This Be One?

Think about how carefully you would choose.

You’d probably spend more time checking the earnings, sales, relative strength, industry group, and price action. You’d wait for the setup to develop and make sure the entry offered clearly defined risk.

“Close enough” would become harder to justify.

So would buying because you’re bored, chasing because you missed the move, or overlooking a weakness because you really like the company.

Your capital deserves that level of selectivity even when you’re free to trade all day.

The ten-trade limit is a thought experiment. My actual trade count should come from the qualifying opportunities the market presents.

The purpose is to catch the compromises that creep into our decisions.

Does this stock meet my criteria? Is the setup ready? Is this the right entry? Can I define and accept the risk?

When those conditions are met, I want to act decisively. Until then, I can wait.

Make every trade earn its place in your account.

Nine Straight Sessions of More New Lows Than New Highs

The market’s underlying health has been deteriorating.

In How to Make Money in Stocks, William O’Neil explains that his research found stocks making new highs tended to continue higher, while stocks making new lows tended to continue lower. He used IBD’s new-high list to help identify leading stocks and the sectors driving a bull market.

That’s why we track net 52-week new highs: the number of stocks making new highs minus those making new lows. It helps reveal whether strength is spreading beneath the major indexes or weakness is becoming more prevalent.

The combined readings across Nasdaq, NYSE, and AMEX show a clear shift:

• August 3–28: Positive in all 20 trading sessions.

• September 1–18: Negative in 11 of 13 sessions.

• Through September 18: Nine consecutive sessions with more new lows than new highs.

On September 10, new lows exceeded new highs by 418. On September 18, the deficit was still 205.

Sideways indexes can make the market look relatively stable, but when more stocks consistently reach annual lows than annual highs, that stability deserves closer scrutiny. Large stocks can support the indexes while weakness develops underneath.

We want quality stocks reaching new highs, supported by other leaders and successful breakouts. Persistent negative breadth gives us less confidence that the broader market will support those moves.

O’Neil placed the greatest weight on index price and volume action and the behavior of leading stocks. These breadth readings add to that assessment.

The quietest volume can come right before a powerful move.

Look at $NVDA before and after its January 2024 breakout.

First, understand the context. As the market emerged from the 2022 bear market into 2023, AI became one of the new bull market’s defining themes. Semiconductors were a major leadership group, and NVIDIA was a standout leader.

Before these contractions developed, NVDA had already advanced more than 300% from its 2022 low.

That matters. A quality VCP starts with a stock that has already demonstrated powerful price performance and high relative strength, backed by the characteristics I look for in a potential market leader.

Then comes the tightening.

On the right side of this base, the pullbacks became progressively smaller: approximately 22% → 10.8% → 6–7%.

Before the move, price tightened near the $50.50 pivot. Volume dried up along the right side of the base.

Then demand showed up. Price broke through the pivot as volume expanded.

By May 31, NVDA was trading at $109.63.

But look closely at what happened BEFORE the breakout.

The tighter price action. The quieter volume. The stock holding near resistance instead of giving much ground.

That’s the character I look for in a VCP setup: volatility contracting and selling pressure easing as the stock approaches its pivot.

A lot of traders focus on the contractions and overlook the move that preceded them. I want proven strength coming into the base, followed by progressively tighter action that creates an entry.

The appeal is a clear entry with a nearby level to define risk. You don’t need to know how far the stock will run to plan where you’ll get out if the trade fails.

These before-and-after charts in MTS Velocity’s Replay make that transition easy to study.

My rule for this setup: Look for price tightening and volume drying up into the pivot, then volume expanding on the breakout. If that character is missing, I don’t force the trade.

Also, look at the numbers BEFORE the breakout: quarterly earnings growth of 567% and sales growth of 206%, both year over year. A 58.8% pretax margin, 56.8% ROE, and a one-year RS rating of 98. All within an industry group ranked in the top third of the market.

SMTC: New Highs. Big Volume. Accelerating Growth.

SMTC showed up in our RVOL Now scan in MTS Velocity on Wednesday morning, September 16. Three consecutive sessions of heavy volume followed through Friday’s close as the stock broke out to new 52-week highs.

The setup had been developing: a strong earnings release on August 25, followed by price tightening up the right side of the base before this week’s breakout.

And the numbers behind the chart?

• Earnings growth accelerated: +10% → +34% → +73% over the last three reported quarters.

• Sales growth accelerated: +9% → +16% → +33% over the same period.

• Fund ownership expanded: 460 funds → 610, a 32.6% increase from the previous quarter.

• Return on equity: 23.7%.

• One-year Relative Strength rating: 96.

Earnings and sales figures above are year-over-year growth.

This is the combination I look for: accelerating earnings and sales, increasing institutional sponsorship, strong relative strength, and strong price and volume action backing the breakout to NEW Highs.

A Busy Account Doesn’t Mean You’re Making Progress.

Charts open. Orders going in. Positions constantly changing.

You feel productive. But your equity curve is going nowhere.

One place to look: Are you taking qualifying trades, or lowering your standards to find something to buy?

That can show up as:

• Buying a setup before it has finished forming.

• Overlooking weak earnings, sales, or relative strength.

• Chasing a stock after the proper entry has passed.

• Making exceptions to your growth stock criteria because you’re tired of waiting.

For my approach, a confirmed Stage 2 uptrend is a starting requirement. Stage 1 can tie up capital for months. Stage 3 brings topping and distribution risk. Stage 4 puts you on the wrong side of a declining trend.

I want to participate in the advancing phase.

But Stage 2 alone isn’t a buy signal.

I still need a qualifying setup, a properly timed entry, and clearly defined risk. Even a strong stock in an uptrend can become a poor trade if I buy it carelessly.

When those pieces aren’t there, I can keep researching, building watchlists, and waiting. That’s productive work, too.

The market doesn’t owe me a setup because I’m ready to trade. My standards and what the market is willing to give will determine my activity.

The Story Can Still Sound Great After the Stock Has Topped.

“The earnings are still growing.”

“The company is an industry leader.”

“The long-term opportunity is enormous.”

All of that can be true while the stock is breaking down.

Stocks trade on expectations for the future. They can peak while reported earnings and sales still look excellent, then decline as investors anticipate slower growth ahead.

That’s why I don’t wait for the business story to fall apart before selling.

Earnings and sales help me find potential leaders, but once I own a stock, strong fundamentals don’t give it permission to violate my sell rules.

Normal pullbacks are part of an uptrend. I’m watching whether the stock continues to act constructively or whether signs of abnormal price and volume action are piling up.

If my sell rules are triggered, I act. I don’t need the next earnings report to justify the decision.

By the time the fundamental weakness becomes obvious, the stock may already have surrendered a large part of its advance.

Don’t let a good story talk you out of a disciplined exit.

If You Don’t Know Your Stop, You’re Not Ready to Buy.

A stock looks great. You buy it. Then it starts falling, and suddenly you’re deciding how much you’re willing to lose while you’re already losing money.

That decision belongs before the trade.

Before I buy, I want three things defined:

• My entry price.

• My stop-loss level.

• My position size, so the planned loss fits my account risk limit.

Once money is on the line, it becomes easier to negotiate with yourself.

“I’ll give it another day.”

“It’s still a great company.”

“I’ll sell when it gets back to breakeven.”

Those thoughts can turn a manageable loss into a serious problem.

If my stop is reached, I exit. I don’t move it lower just because I still like the stock. If the setup deteriorates, I may exit sooner.

And if the stock recovers after I sell? I can reassess it. Getting stopped out doesn’t mean I can never buy it again.

The discipline is making the decision before emotions take over, then following through when it’s uncomfortable.

Know your stop. Size the trade. Honor the exit.

3 Trading Rules I Wish I’d Taken Seriously Sooner.

Some of the biggest improvements in my trading came from ideas I already knew, but wasn’t consistently putting into practice.

1. Cutting losses short and letting winners run. Actually doing it.

Everyone knows the mantra. Following it means accepting when you’re wrong, taking the loss, and giving your winners a chance to become meaningful.

Knowing the rule doesn’t protect your account. Following it does.

2. Position sizing.

Arguably the most important of the three, and often one of the last things traders learn.

Your position size and the distance to your stop determine how much you’re planning to risk. A good setup can still be a bad trade for your account if you size it too large.

3. Progressive exposure.

When my trades are working, I build on that success: more qualifying setups, larger positions, and gradually more account exposure.

When things stop working, I reverse that process. Smaller positions. Fewer new trades. Less exposure.

Sometimes I pause new buys and manage the positions that are still working. Sometimes I move to cash.

My results help determine how aggressive I get. The standards for taking a trade stay the same.

The personal bonus: protecting break-even helps me hold winners.

This is something I picked up from Mark Minervini, and it fits my personality.

Once a trade has made meaningful progress, I may sell some into strength and raise my stop to break-even. Or I may keep the original stop and take enough profit to cover the planned risk on the remaining shares.

The aim is to protect the overall trade around break-even or better at my planned exit, while leaving room for a larger move.

Taking partial profits can reduce my eventual gain. I accept that trade-off because reducing the original downside helps me stay patient with the remaining position.

It also helps me stay willing to take the next qualifying setup when my results justify adding exposure.

I screen for characteristics shared by some of the biggest winners in history. That gives me a process for choosing candidates. It still doesn’t tell me which one will become the big winner.

Some will fail. Some will go nowhere. Others may run much further than I expected.

That’s why Minervini’s approach resonates with me: taking some profit to help finance the remaining risk makes it easier for me to give a winner time.

Know yourself well enough to build a process you can actually follow.

Larry Hite put it perfectly in Market Wizards:

“If you don’t bet, you can’t win. … If you lose all your chips, you can’t bet.”

The Pullback You Fear May Be the Setup You Want.

Ever watched a stock run, wished you had bought it, and told yourself you’d wait for a pullback?

Then the pullback arrives, and suddenly you’re afraid to touch it.

That’s where price and volume deserve a closer look.

In A Complete Guide to Volume Price Analysis, Anna Coulling emphasizes reading them together. Volume helps us assess the activity behind the move.

Look at the sequence in this chart:

1. Price advances as volume expands. Larger up candles accompany increased activity. Price is making meaningful upward progress.

2. Price pauses and volume dries up. The stock gives back relatively little ground, consolidates near its highs, and trading activity fades. That combination can suggest selling pressure is easing.

3. Price clears resistance and volume expands again. The breakout develops into a strong advance, with substantially higher volume supporting the move.

The quiet middle step deserves your attention.

A controlled pullback on diminishing volume tells a different story from a sharp decline that breaks support on heavy volume. Both can have red candles, but the context matters.

This is also why a big volume reading alone isn’t enough. I want to see where the volume appears and how price responds to it.

In this example, the quieter consolidation was followed by renewed strength.

Before you fear the next pullback or sideways pause, check its volume. It may be part of the setup you were waiting for.

Four Stages. Only One Where We Buy.

If you call yourself a growth stock investor or a momentum trader, this should be a core rule:

When we trade the long side, we buy stocks entering or advancing through Stage 2.

We do not buy in Stage 1, Stage 3, or Stage 4.

Stan Weinstein laid out the framework in his 1988 book, Secrets for Profiting in Bull and Bear Markets. Decades later, the lesson remains relevant:

• Stage 1: Basing. The decline has lost momentum, but a sustained uptrend has yet to emerge. Buying too early can leave your money sitting idle for months or even years.

• Stage 2: Advancing. The stock breaks out of its base and establishes an uptrend. This is where we look for buying opportunities.

• Stage 3: Topping. The advance loses momentum. The story may still sound great, and earnings may still look strong, while the chart starts showing deterioration.

• Stage 4: Declining. Support breaks and the stock trends lower. What looks cheap can become much cheaper.

We may use different entry tactics, moving averages, and holding periods. The shared discipline is buying strength and respecting the trend. Fighting that discipline can do serious damage to your account.

Stage 2 is a requirement, not an automatic buy signal. You still need a proper entry, a protective stop, and a position size that controls your risk. Chasing an extended stock can turn the right trend into the wrong trade.

Weinstein’s warning about Stage 4 went beyond avoiding new purchases: he also urged traders not to keep holding stocks once they entered that declining phase.

Resist the urge to get in early during Stage 1. Resist the exciting news during Stage 3. Never let a Stage 4 “bargain” pull you away from your process.

Let the stock prove its strength before you commit your money.

The Heat Map Said Shipping. The Stock Scan Said $FRO.

Marine shipping has been one of the strongest industry groups for some time. You can see it on our MTS Velocity heat map, and you can see it showing up in our stock screens.

Today, $FRO stood out among the volume movers meeting my CANSLIM-based screening criteria:

• Big earnings and sales growth

• Strong margins

• High relative strength

• A strong industry group

And look at the trend it has formed this September. The moving averages are stacked exactly how I like them:

10-day > 20-day > 50-day > 200-day. All pointing higher.

You Might Trade Better If You Cared a Little Less.

A lot of new traders turn every pullback into a personal emergency. They refresh their account, chase explanations, and second-guess a plan they were comfortable with yesterday. All that worrying can create more bad decisions than the pullback itself.

In Market Wizards, Brian Gelber identified this lesson: “The realization that when you don’t care, you do well, and when you try too hard, you don’t do well.” He was discussing the temptation to force trades when good opportunities weren’t there.

One of the biggest differences between a new trader and an experienced trader is perspective. Trading through periods like the 2008 financial crisis, the panic in early 2020, and the 2022 bear market can change how you respond to uncertainty. You’ve seen frightening headlines, sharp declines, and recoveries. An ordinary pullback starts looking like something you can handle.

Brett Steenbarger captures that in The Daily Trading Coach: “Confidence doesn’t come from being right all the time; it comes from surviving the many occasions of being wrong.”

But you don’t need 20 years of scars to start learning from people who already have them.

If every normal fluctuation rattles you, examine what’s underneath.

• Are your positions too large?

• Do you understand your strategy?

• Do you have sell rules, and can you accept the potential loss?

• Do you understand probability?

Bruce Kovner warned that novice traders often trade far too big. Larry Hite explained how controlling risk helped him stay composed: “By only risking 1 percent, I am indifferent to any individual trade.” That was his account risk per trade.

Sometimes you need more experience. Sometimes you need smaller positions. Sometimes you need to admit you’re risking money without a process you understand and trust.

A strategy with an edge, sensible position sizing, and disciplined exits help you prepare for difficult markets. They cannot guarantee you’ll escape the next crisis untouched. They can help limit the damage and preserve your ability to keep trading.

Think about an athlete. You study, practice, and prepare throughout the week. When the game begins, you need to trust that preparation enough to execute. Obsessing over every possible mistake can interfere with the skills you worked so hard to develop.

As Gary Mack writes in Mind Gym: “Remember, fear doesn’t keep you safe. Your training does.”

Trading requires that same preparation. Study the market. Know your setups. Manage your risk. Review your mistakes. Then practice following your process when the pressure arrives.

Care deeply about doing the work. Give yourself permission to stop agonizing over every outcome.

You can learn every lesson the hard way or you can start listening to the people who already paid for it.

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.

Seven Distribution Days. O’Neil Took This Seriously.

My current distribution-day count over the last 25 trading sessions:

• Nasdaq Composite: 6

• S&P 500: 7

• Nasdaq 100: 4

William O’Neil treated repeated distribution as evidence that institutions were selling and the market’s uptrend was becoming vulnerable.

In How to Make Money in Stocks, his down-day rule was specific: an index declines more than 0.2% on higher volume than the previous session. He also recognized distribution through stalling, when heavier volume produces little upward progress.

The market can come under distribution while it is still advancing. That is what makes these warnings easy to overlook.

O’Neil wrote:

“After four or five days of definite distribution over any span of four or five weeks, the general market will almost always turn down.”

He took these signals seriously enough to act.

In his discussion of the 2007 market top, O’Neil explained that investors should have taken some selling action by the fifth distribution day and cut back further after the sixth. By the seventh, he described “seven crucial warnings.”

That historical example does not mean today must unfold like 2007. It shows how much weight he placed on repeated distribution.

Another detail matters:

“It takes only one of the indexes to give you a valid repeated signal of too much distribution.”

The Nasdaq 100’s lower count therefore does not cancel the warnings from the Nasdaq Composite and S&P 500.

Seven distribution days on both of those indexes deserves serious attention.

O’Neil also watched leading stocks closely. Are breakouts working? Are leaders holding support? Are declines attracting heavier volume while rebounds struggle? He considered the behavior of leading stocks the second most important indication of a major market change, after the indexes themselves.

The count belongs alongside that evidence. How closely the distribution days cluster, how the indexes respond, and how your stocks behave all matter.

As those warnings accumulate and price action deteriorates, O’Neil’s approach calls for selling, raising cash, and protecting capital.

You don’t have to know how far the market will fall to recognize when the evidence calls for less risk.

Rates Up. Growth Holds Up.

The initial reaction caught my attention.

The Nasdaq 100 and Russell 1000 Growth led the indexes I track. Technology was the top sector, with strength in memory and semiconductor names.

That same theme showed up when I opened the MTS Velocity RS Screener and looked for today’s strong performers meeting my growth-based earnings and sales criteria.

One standout: SMTC, Semtech, up 11.03%.

The numbers behind the move:

• Quarterly earnings growth: +73.17% year over year.

• Quarterly sales growth: +32.73% year over year.

• Return on equity: 23.66%.

• Quarterly pretax margin: 16%.

• One-year relative strength rating: 96.

And institutional sponsorship is expanding. The latest reported fund count increased 32.6%.

That’s a semiconductor stock showing strong growth, profitability, high relative strength, and increasing fund participation, gaining 11% with BIG volume on a rate-hike day.

One session doesn’t settle the market’s direction. But seeing the same strength emerge across indexes, sectors, and individual stocks is information worth paying attention to.

The First Rate Hike Matters. Martin Zweig Explained Why.

Today, September 16, the Fed raised rates 0.25 percentage points to 3.75%–4.00%, its first increase since July 2023.

We went from cutting, to holding, to raising.

Even an expected hike changes the monetary backdrop.

This is where Martin Zweig’s Winning on Wall Street deserves another read. In his chapter “Don’t Fight the Fed,” he wrote:

“Generally, a rising trend in rates is bearish for stocks; a falling trend is bullish.”

He also emphasized that the trend in interest rates mattered more than the level itself.

When rates rise, savings accounts, CDs, and Treasury bills can offer higher yields with considerably less risk than stocks. Stocks may still deliver greater returns, but some investors may decide the potential extra gain no longer justifies the additional risk. Meanwhile, businesses face higher borrowing costs that can eat into their profits.

Zweig turned that observation into a specific rule.

In his Fed Indicator, a rate hike clears any remaining positive points in the affected component and adds one negative point. Each negative point expires after six months unless a reversal toward easing in that component removes it sooner. His revised rules explicitly included changes in the federal funds rate.

The positive points awarded for earlier cuts also expire according to his rules, even when rates remain unchanged.

In Zweig’s model, earlier easing does not provide permanent bullish credit. That credit fades with time, and a hike wipes out whatever remains in that component.

And with the 10-year Treasury yield around 5%, longer-term borrowing costs deserve attention alongside the Fed’s decision.

Zweig’s work earned respect from some exceptional traders. In Market Wizards, Michael Marcus, Bruce Kovner, Richard Dennis, Paul Tudor Jones, and David Ryan all praised or recommended his work. Marty Schwartz also described consulting with Zweig.

During Marcus’s interview, Jack Schwager observed that Zweig was probably the person most mentioned by the traders he interviewed.

One hike does not automatically mean a bear market starts today. Zweig also followed the tape, combining monetary conditions with market momentum in his broader model.

William O’Neil made an important distinction in How to Make Money in Stocks. He considered Fed rate changes valuable and discussed three successive significant hikes as a historical warning. But he explicitly cautioned:

“Fed rate changes, however, should not be your primary market indicator because the stock market itself is always your best barometer.”

That is how I’m applying these lessons: give the change in policy weight, evaluate it alongside breadth, leadership, and credit conditions, and let the indexes’ price and volume action and the behavior of leading stocks guide my trading decisions.

I remain open to a rally despite the hike. How stocks behave in the coming days will help us judge how well the market is absorbing tighter policy. A rally that gains participation and shows accumulation would tell us something different from a weak bounce that quickly fails.

We have to remain open to that evidence while recognizing that the monetary backdrop has changed.

Although today’s rate hike was widely expected, “priced in” does not mean “irrelevant.” Yesterday’s easing is no reason to ignore today’s tightening.