Playing the markets can be overwhelming…
There are so many investment opportunities, terminologies and tools to utilize that even the most experienced trader can find themselves being a bit overwhelmed every now and then.
Yet, their importance should never be questioned.
And in the vast dictionary used by Wall Street professionals, there’s one term that I’d like to bring to your attention today that I’ve found very helpful over my years playing the markets…
Have you ever heard of a model book?
If not, let me explain what it is and why you need to make one as soon as possible.
What is a Model Book?
A model book is a collection of stock charts that led to huge gains.
Now, most traders mark up these charts with notes, and these notes then act as clues that should have led them to buy and sell.
Over time, you’ll find your model book will become the blueprint for your trade setups, and will also help train your eyes to identify the next big opportunity.
Now, I’m fully aware that it’s one thing to write about something you know. That’s the easy part. It’s another thing, however, to try to learn something new from a text.
That’s why I’ve included an example below to help illustrate exactly what I’m talking about in today’s article…
Shopify Inc.
The image above shows a breakout in Shopify Inc. (SHOP) stock from December 2019.
Now, as you can see above, SHOP had been on a pretty solid upward trend leading to the chart above.
After trending higher and establishing itself in a Stage 2 uptrend, shares compressed and formed a base.
Pullbacks were able to decrease from 30% down to a tight 3% range, accompanied by a big decrease in volume at the end of the base.
As we’ve talked about previously, to me, this was a clear sign that supply was no longer coming to market.
In other words… no one else was selling.
It was shortly after this when shares began to break out on two and a half times the average daily volume.
Shares were never able to fully retrace, however.
Over the next two months, SHOP advanced 74% before rolling over.
The big gap up to a wide trading range with no follow-through the next day was a red flag to get out of most of the position.
Learning from Our Past
So, whether you’re new to trading or you’ve been doing it for decades, I guarantee keeping a model book will help you.
Keeping track of the past enables us to better prepare for the future and, by studying the last 200 big trade setups, you will greatly increase your odds of spotting the next one.
Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
