I use a variety of approaches to the market, but my biggest profits come from one key strategy: identifying stocks that I like longer-term and then trading them aggressively.
I don't just buy and hold on to the names that I think will make big moves over time. I take advantage of not only the movement in the stock but weakness and strength created by overall market conditions.
Good traders can trade anything that moves, but when you combine good trading with good stock-picking, then you have an extra edge. Good stock picks will help bail you out of bad entries, and they also give you confidence so you can be more aggressive.
I will discuss this issue in-depth in my weekend column, but the key to effective trading isn't predicting future prices. The key is dealing with the current price action. It is extremely easy to identify a stock you like and then become frustrated when it languishes and doesn't do anything, although the story has not changed. The best way to deal with that is to trade.
A good example of a stock that I have liked for a long time and that I think will eventually be a big winner is Aurinia Pharmaceuticals (AUPH) . The company's key drug has been approved, it is starting to sell it to a huge market, analysts have substantial price targets, and it is a potential takeover target.
The problem is that AUPH has traded poorly and is frustrating anyone that has been holding it. So I'm trying to pick my spots when it looks better and see if I can catch some quick moves.
With the current positive action and the chart setup, I thought AUPH looked like a good entry for a shorter-term trade, so I bought a chunk. I'll use a very short-term time frame for some and a longer time frame for others. I already have some, but since I'm confident about the stock longer term, I have no problem increasing my exposure.