Exactly what do I think about running a stock screener pattern finder? It’s moronic. Keep away!

Ok, I’ll clarify.

I recommend stock screeners a whole lot. I am a huge fan of them. They scan a large number of stocks in seconds. They are able to do what a human is able to do in an 8 hour work day in five seconds. But you should find out where to draw the line with stock screeners.

Employing a stock screener with specifications like the price of a stock, the volume traded per day, and even a candlestick pattern is great. Where I draw the line is attempting to employ a stock screener to do the very subjective interpretation of stock patterns.

All pattern recognition on a stock chart needs to be left to a human. This is because computers lack good judgment. They’re wonderful at doing huge amounts of objective computational work. They’re awful at doing subjective analysis that will require sound judgment.

Using a stock screener to provide you with buy signals on patterns is stuffed with hazards.

For instance, a bullish channel breakout can be a awful buy if the stock has a history of forming erratic v tops. Especially if the v top forms on an individual stock while the entire S&P 500 is in a downtrend. Or imagine if unemployment numbers are coming out in a day that could possibly be bad? Or let’s say the larger pattern on a weekly chart shows a bearish engulfing candlestick or a MACD going negative? Or what about the market entering into the two weakest months of the year, September and October? Or a hundred other things a computer that lacks wisdom can not contemplate.

Technical analysis is as much an art as it is calculating numbers. Once you learn all the technical analysis patterns over many years of trading, afterwards you need to forget all of that objective data and learn to let the trend guide your understanding of patterns. It is easy to look in the center of a stock chart and say could of, should of, would of. Though the real challenge is existing in the far right most part of the chart. Only master traders with the right balance of left and right brain hemisphere processing and a whole lot of luck, can prosper in this area of the chart. Something a stock screener pattern finder will not have the ability to accomplish.

I’ve Been Showing Traders The Best Stocks To Buy Right Now For Years. The Popularity Of My Stock Picks Is Evidenced By The Fact That This Blog Has Broken Within The Coveted Top 60,000 Of All Blogs In The United States (Check Alexa To Verify). Would You Like To Learn The Method I Use To Pick The Best Stocks To Buy?

It’s quick and easy, and in the video below I’m going to show you exactly how I find the best stocks.

Goldline International is under investigation by the Santa Monica City Attorney’s office, jointly with the Los Angeles County District Attorney’s office, as well as being the subject of a separate investigation by Congress into possible criminal practices. The firm has been the subject of an ABC Nightline News Exposé, as well as an investigation by NY Congressman Weiner.

This investment scheme, hyped by Fox News, is really nasty when you consider that Fox News was running a disclaimer on the Glenn Beck program claiming that advertisers do not influence the content of any Fox News programs and that a message from advertisers is not the views of Fox News. It should have been disclosed to viewers of the Glenn Beck program on Fox News that Glenn Beck is a paid spokesman for Goldline. It should have been disclosed to viewers that Glenn Beck had a financial interest in pushing gold higher.

Folks, this is a rare glimse into how mainstream media groups are used to manipulate financial markets.

Jess Bachman turns his graphic expertise to the Glenn Beck/Goldline endorsement scheme:

The SEC announced last month fraud charges against InvestSource Inc. OTCBB. Basically what they did was they were given lots of shares in thinly traded stocks over the pink sheets or the OTCBB by companies that hired them to promote stocks. Then they pumped those companies to push the price up, which they then sold into the upward move and left investors who bought on their stock advice screwed.

Folks, this is why I’m so against OTCBB and pink sheet stocks. If it was up to me, I’d eliminate these shadowy markets forever. I don’t believe in the legitimacy of the pink sheet and OTCBB markets.

I myself was the victim of a scam by Jim Turek in the pink sheet listed company Plasticon. I still get a pain in my chest and an empty feeling in my stomach to this day just thinking about it. But I suffer through the physical pains to re-tell my story so that others are not scammed out of their life savings like I was.

If you try and go to the InvestSource Inc. website, you will find that it has been shut down.

Here’s something else I think the SEC should do. I think the SEC should investigate any website or blog that syndicated stories from InvestSource. For example, TradingMarkets published numerous pump and dump articles from InvestSource on their website. In fact, it’s safe to say that thousands of traders were scammed out of their money from reading articles published on TradingMarkets. What is the relationship that TradingMarkets had with InvestSource? Was TradingMarkets paid by InvestSource out of the profits made from the pump and dumps scams they ran? If so, should not TradingMarkets return some of that money to victims of the various pump and dump scams ran by InvestSource?

You see, when you cast a wider net and start making websites accountable that publish these scams, perhaps they’ll stop promoting pink sheet and OTCBB stocks.

I’m of the opinion that any reputable website will say no to thinly traded OTCBB and pink sheet stock articles. The very fact that it is a thinly traded stock should fire off the this is not ethical alert in webmasters brains. With thinly traded stocks, the temptation to try and manipulate the price in your favor is just too great.

I do not allow any OTCBB or pink sheet stocks to be talked about on my blog. I do not allow so called ‘profile’ articles about these thinly traded companies. I do not allow comments posted on my Facebook wall or Youtube profile that talk about such companies. The idea is that if I feel I can move a stock or influence its direction, then I’m not going to talk about it or allow anyone else to use my website or social 2.0 sites to talk about it either. The ethical standard for stock trading blogs and websites should be above price manipulation and if there is even a doubt, an editor should not allow an article or story to be published.

Sadly, it’s not just TradingMarkets that ran InvestSource pump and dump articles. GlobeNewsWire ran their articles and even had this to say about the company, “InvestSource Inc. is an investor relations firm headquartered in Irvine, CA that specializes in bringing in project specific market opportunities to the investing public. Working closely with our client companies, InvestSource showcases the latest financial and market news as it happens.” HighBeam Research published articles from them under the headline of “Coverage Alerts”. I guess HighBeam stands for the searing heat from the laser that’s going to burn a hole in your wallet if you follow their picks. Worse, a website called AccessMyLibrary ran articles from them with the tag line next to their logo, “Search Information That Libraries Trust”. Perhaps they need to rethink the definition of trust. I could go on and on with hundreds of websites that helped InvestSource Inc. scam investors.

What entices traders into OTCBB and pink sheet stocks is greed. If I buy a stock at $.01 and when it goes to $1 I’ll be rich! The truth is that they never go to $1. And those that do are so rare, you’d have better odds at winning the lottery than hitting one of them. This is why it is important to not focus on greed. The emotion of greed prevents rational, logical thinking from taking place. What you should focus on is risk mitigation. How do I lower the risk of loss in my next trade? The answers are obvious. Demand full disclosure of a company’s financials before investing anything. Not partial disclosure but the same level of disclosure and accounting standards that are required for a listing on a major exchange. When you read great things about a company, check the average daily volume. Is it thinly traded? Is it traded on the OTCBB or pink sheets? If the answer is yes then chances are someone is running a pump and dump scam. Always remember, a company is traded on the OTCBB or pink sheet markets for a reason. There is a reason they are not traded on a major exchange. Do they not release timely quarterlies? Are they behind on whatever financials they do release? Find out the reason and you’ll see its not a stock you’d want to invest in. If a company was really good enough for your money, they’d be trading on a major exchange and even that’s no guarantee to protect you from fraud.

Being a technical analyst, occasionally you see things that you question why have more traders not seen or carefully considered this?

For example, Fed Ex.

Fed Ex is a fantastic future price prophet for the S&P 500 and really the whole U.S. economy.

On October of 2007, Fed Ex dropped and broke underneath the S&P 500. That move down led the S&P 500 by 2 months. In other terms, Fed Ex predicted the nose-dive in the S&P 500 by 7 weeks.

In this video, I study 8 years worth of data on both Fed Ex and the S&P 500 to show you the inter-market relationship between both of these stock charts.

The stock charts demonstrate that when Fed Ex is above the S&P 500 and leading higher, it gives a very bullish signal not only for the S&P 500 but the entire U.S. economy. While the S&P 500 is above Fed Ex and Fed Ex is leading lower, this provides a extremely bearish signal for markets.

Looking at June of 2009, Fed Ex started leading the S&P 500 higher. Something that is really interesting is that when Fed Ex leads the S&P 500 by an adequate amount to make a big gap, it is even more bullish for the stock market. So you can measure the gap between Fed Ex and the S&P 500 to calculate bullish outlook of investors in addition to current health of the U.S. economy.

The gap between Fed Ex and the S&P 500 lessened at the first part of April 2010 before the Euro crisis hit mainstream news and the S&P 500 fell 3 weeks later.

Studying June of 2010, once again, Fed Ex started to gap ahead of the S&P 500 and that big gap still exists on today’s chart. This wide gap forecasts an upward future price move for the S&P 500 in short order.

On July 26 2010 Fed Ex raised its earnings outlook for the fiscal first quarter and remainder of the year, with the transport monster telling us express and ground volumes have been higher than projected.

The basis for why Fed Ex is a great future price forecaster of the S&P 500 and in fact the entire U.S. economy should be evident. When business and industry improves, shipments explode. For you Dow Transports theorists, Fed Ex is what trains were to the U.S. economy many years ago. Obviously we do not use trains like we use to anymore but instead shipping businesses like Fed Ex.

A good example of how Fed Ex is mixed up in most things can even be applied to a diverse sector such as property management. As banks start to release credit and apartment complexes start to sell, property management services are required. Mortgage payments need to be made when sufficient rents are collected. The mortgage payments are then paid by checks via overnight Fed Ex. This is merely one case of how interrelated our economy is and how no matter how diverse a business is, it is linked to Fed Ex somehow.

Institutional stock traders have besieged trade the trend investors like us. In cold, evil, rage, Institutional traders are selling into the up swings and buying to cover shorts into the down swings to compact the swing range too narrow for the majority of us to make money in. This has made head fakes both to the upside and to the downside over the past week.

What has scared bears like myself is that an official higher low is now in place with confirmation today.

Like I wrote about last week, the life cycle of the previous downtrend channel has come to an end. We are now in nomad land while a new channel is being created. We do not have sufficient data as of the close today to figure out if we are moving into a sideways trading channel, or an uptrend channel.

As there is no obvious trend, then what must trade the trend traders do? Move to the sidelines and the shelter of cash.

At present we have been in cash twice over the previous couple of weeks and when we thought a new trend had been established making us jump back in, it turns out we were head faked and slaughtered. I do not know about you but I’m tired of getting my butt kicked by the better equipped and armed Institutional traders.

Someday we may have a Traders Bill Of Rights where the battleground is made just, but for now, inequalities continue to exist amid professional and amateur traders such as Institutional traders have access to all limit orders, they have direct access to market makers and can make non-open market trades, they have access to a faster stock data feed and can use high frequency trading schemes against us, and they use the media groups to manipulate public opinion about a corporation or the economy as a whole.

Something that is also key is that on the daily chart of SPY, bulls have re-taken the 50 day MA although we still need verification of the break.

The mistake I made was leaping back in this market twice now and being incorrect both times. This suggests that I ought to raise the bar for what I judge to be a new trend taking shape. This suggests that I should find more bullish or bearish indicators on the charts of stocks than I have in the past. Even a Bearish Head and Shoulders Top and a Burial Cross was not enough to bet my money on the short side. Not even a Bullish Downtrend Channel break was enough to place my money on the long side. Each and every one of these indicators have meant nothing over the last several weeks. The only thing that these technical indicators have accomplished is to lure us trade the trend traders from off the sidelines and into an ambush where we have been slaughtered by the thousands.

Your search on information on the topic of avoiding losses in trading says to me that your brain is in the correct place. A large amount of newbie stock traders concentrate on greediness or the reverse of risk aversion. Amateurs imagine how much money they can make if their stock goes up to xx, and not about how they can lessen stock trading losses.

Can you avoid losses in stock trading? Nix that idea. My own 10 year accuracy rate varies between 70% and 80%. In other words, 20% to 30% of my positions result in losses. However, there are steps you can take to shrink losses when stock trading.

1 – Don’t try and earn back your losses. The most awful action you can do after a loss in stock trading is to make a decision that on your next trade you will make back the loss. Lots of amateur traders will put on a riskier stock trade in a penny stock or any stock they think can appreciate in value even greater than their original losing stock trade with the plan that they will make back the money they lost. Do not do this. Getting in a riskier trade suggests you now amplified your chances of having a second losing trade. Do not get gluttonous and lose all awareness of fear because of a loss. Instead look at your stock trading method. Did you hold to your stop loss strategy? Did you rationalize and give reason for why you were continuing to hold the losing stock even while your original profit thesis was broken? Make any adjustments you need to your stock trading method then move on.

2 – Hold to your stock trading method. Quit jumping around from stock trading method to trading system when you incur a loss. No stock trading system is flawless. Continue with your stock trading system and make changes as desired but don’t hop from trading system to trading system. Get very good at a trading system before you make your mind up to machete it. As well, don’t become frightened and be exceedingly conservative.

3 – Determine the trend of the most important indices. Use either the S&P 500 or the Nasdaq and determine the trend prior to buying or shorting a stock. The idea is to trade with the trend, not counter to it.

4 – Determine your profit thesis before you enter the stock trade. The profit thesis must include what percentage profit you will have before you sell, and what percentage loss you will have before your sell. You must never risk more than you are attempting to profit. For example, in company ABC I am going for a 5% to 10% gain, with a 5% stop loss. Cut your losses quickly but allow your winning positions to ride.

5 – Enter your positions at a better level. I have found that when I go long a stock, if I’m up the same day of buying, my likelihood of it being a winning trade for me go way up. The entry is so vital that several famous traders have gone as far to say that they make their money on the entry, not on the sell. In the video below, I show you a method I use to time my entry better. If you have a Scottrade account, you will be able to employ this tool.

If you typed into a search engine “best stocks to buy right now” boy are you stupid. This reflects a complete and total ignorance of how the market really works. You sort of deserve what you get if you’re that stupid.

In this video, Lance is not mad about amateur traders searching for what are the best stocks to buy right now. What sets Lance off is that organizations that you think have standards like Yahoo Finance, CNN Money, Fortune, and Investors Business Daily routinely publish so called “news” about what are the best stocks to buy right now. The truth is that money managers have paid to be listed in these articles and the real reason for these articles is not to help you make money but instead to push up the stocks for these money managers who already hold positions in these stocks.

One of the first things you should do to start making money in the stock market is to stop getting your stock picks from articles on Yahoo Finance or money managers who appear on TV.

In the video below, Lance reveals a recent article over Yahoo Finance that will get you screaming mad. He performs technical analysis on these so called best stocks to buy revealing horrible charts and institutional selling.