Why 98% of Stocks Are Worthless to Me

By Michael Salvatore

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Why 98% of Stocks Are Worthless to Me

BY TOM GENTILE, EDITOR, PATTERNS & PROFITS

Today, I’d like to share one of the top secrets to making money in the stock market.

This market intel levels the playing field and gives you, the “little guy,” a real shot at making some serious cash… the kind of cash that can pay off all your debts, send your kid to a nice four-year college, or cover that dream vacation you’ve wanted to go on.

I wish I had known it when I was just starting out at 20 years old. But I’m glad to know it today and be in a position where I can share it with you.

Ready? Here it is…

Most stocks and ETFs are trash.

That’s right… pure junk.

Now, I realize that this probably goes against everything you’ve ever been told. In fact, I’m willing to bet that at some point in your life, you’ve probably been told to dump your cash into a bunch of different stocks, mutual funds, and even annuities to make the most of your portfolio.

But here’s the problem…

Right now, there are over 4,000 public companies listed on U.S. exchanges and over 25,000 different stocks to trade worldwide.

This is great for the big banks and brokerage firms that want you to gamble your money on all of them.

They don’t actually care which ones you buy and sell. All they want is to give you as many options as possible to hand over your hard-earned money to them.

Whether you’re buying stocks, mutual funds, or even annuities – the Wall Streeters want you to spend your hard-earned cash on investments that’ll take 10, 15, or even 25 years to give you a mere 10%.

And that’s 10% in a good year – if you’re lucky. Most of the time, the returns are far less than that, and they don’t even begin to factor in current inflation levels.

It doesn’t matter if your trade is a winner or a loser; your broker still gets paid. Maybe your investments actually will make you some money, but the big investment banks are taking the thousands of dollars you’ve worked your entire life to save and are putting it to work on risky speculative investments to enrich themselves either way – through fees and commissions.

That’s how they rig the game against you.

They’re not looking out for your financial interests or your financial future.

And that’s exactly why it’s time for you to take back control.

It starts with getting rid of the junk – you know, the 98% of stocks and exchange-traded funds (ETFs) out there that simply aren’t worth spending even a penny on.

Even the latest IPO that’s getting everyone’s attention… that hot stock tip from your friend… and that company you’ve spent hours researching and are convinced is a sure bet…

All of them most likely belong in the junk pile.

So what are we to do?

Simple… Find the 2% that aren’t.

How to Find the Top 10 “Movers” to Trade

There’s one thing you should know before we move on.

I’m an options trader. A large chunk of my active trading is in the options market.

I do this because options give you so much more flexibility in how you approach trades – along with responsible leverage to help you turn small moves into much bigger ones.

Because of this, I’m naturally inclined to only trade stocks that have options. And you should also know that when it comes to trading options, the higher the volatility you can find, the better. You just have to choose them and handle them very carefully.

Now, with so many “junk” stocks and ETFs out there, the last thing I’d ever recommend is trying to sort through all the optionable stocks (stocks that offer options) one by one – that will eventually drive you crazy.

Fortunately, I’ve developed a great method to whittle it down to the 10 best stocks at any given time.

I use my proprietary tools to run a scan that searches for what I call my “Top Movers.”

First, I look for only the stocks with options that trade in penny increments, typically within a $0.05 bid/ask spread. That narrows it down to around 250 stocks in total.

You can find that list of stocks without having your own software by looking at the Options Penny Pilot list here and clicking on the “MIAX Options Penny Class List” CSV file under “Classes in Options Penny Pilot Program on the MIAX Emerald Exchange.”

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But even though you know exactly where to go, sifting through 250 stock charts to look for the most volatile ones is still a lot of work.

So, these are the three parameters to cut that number down even further:

  • Look for stocks over $100 per share
  • Look for stocks that move an average of 1% a day between the high and low
  • Look for stocks that correlate to the market

Here is a snapshot of the stocks that meet the criteria above and have been on the move over the previous seven days. Keep in mind that this list changes daily, so these results could be different from what you’re looking at when you open it:

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You’ll often see exchange-traded funds (ETFs) in a few of the top spots, but we’ve got a solid collection of stocks here, including Apple Inc. (AAPL), AbbVie Inc. (ABBV), and Amazon.com Inc. (AMZN).

Now the two most important numbers to use in combination with this list are the stock’s percentage move over the last seven days and how well the stock correlates to the SPDR S&P 500 (SPY).

With those two numbers, you can figure out how well a stock moves, and if it’s moving with or against the markets.

Once you have this list of stocks, you can run any number of screens and filters to assess which of these “Top Movers” would make the best option play.

And now that you know exactly how to get rid of the junk, you’ve taken the first step toward trading options just like the pros do.

This is an essential element to my five-part Cash Course that I recently published for my readers. You can find part one here and part two in the video linked below.

I highly recommend checking out the Cash Course. As you can see from the name, it’s where I give you a crash course of all my top techniques for trading options with consistent profits.

Click below to get started.

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You can also click here to sign up for my free newsletter, Patterns & Profits, where I share my top trading insights five days a week.

To your continued trading success,

Tom Gentile
America’s #1 Pattern Trader