Trade Stocks You Align With - SOFI vs JPM
Just like with trading strategies, it is important to find the right stocks for you.
You may have heard the advice to find a trading strategy that aligns with your personality. I hope you take that advice.
What I don’t hear enough discussed is selecting the right stocks to trade based on who you are as a trader.
While there will always be a long list of tickers you will check in on and have interest in, there should only be a handful that you actively trade.
This is because you want to become familiar with the movement and price action of the stocks you put your money to work with.
It is impossible to truly know how every stock acts on a watchlist that is 30 tickers deep. You can get a sense but that is about it.
When you narrow down your list to just a few stocks, the stocks you select become very important. And if you do this correctly, you can make a lot of money.
I thought taking a look at SOFI and JPM and comparing the two would help highlight what I’m talking about.
Which ticker aligns best with your trading style?
You might be surprised.
SOFI
If you are impatient, have a hard time waiting weeks or months for a trade to play out, and enjoy being actively trading, I have news for you.
You’re just like I am.
Most traders fall into this group, which is why the most popular stocks tend to be those that make big moves and come with added volatility.
Stocks like SOFI.
One of the many things I enjoy about trading is there are opportunities for everyone. Even those of us that wake up impatient.
If you know that you are going to want to make trades on a daily basis, a slower moving stock might actually cause you to make poor decisions.
Instead of waiting for the move to play out, you might close the position early (even for a loss) when you see another set up that might look more attractive at the moment.
To avoid making these mistakes, you might want to consider a stock that moves more often and with a wider range. This forces you to pay closer attention and therefore be more involved.
The chart for SOFI shows that it can make big moves higher but can also give back those gains quickly. It is a volatile stock and volatility brings opportunities.
So, is SOFI the ticker for you?
If you are comfortable taking losses on your way to acheiving outsized gains, look forward to big swings in price, and want to actively trade every day, you might enjoy trading SOFI.
Yes, there is risk. Yes, the stock has pulled back quite a ways from the highs near 10.00 and 11.00 in 2023 to where it sits now at 7.71.
But did you also notice it has moved up from lows near 4.50 at the start of 2023 to where it is now, roughly 71% gains over this span.
If you are willing to take the risk and enjoy the active trading, SOFI might be perfect for you.
I’ll add in the ability to trade either common stock or options is also a bonus.
JPM
While the general pattern is similar, notice the chart for JPM is far more orderly and the candles are smaller.
This is because JPM trades with more stability and rewards the patient trader.
There are times when this stock can make a big jump, but those instances happen far less often than with a stock like SOFI.
Sell offs are less steep and moves higher experience less volatility on the way up.
The trade off is you do not get nearly as much “action” which means potentially fewer opportunities to trade.
It absolutely means there is less risk from a purely technical perspective.
If you do not require daily action and instead enjoy taking a trade and watching it play out over weeks, JPM might be worth looking at.
A lot of money was made trading JPM in 2023 and there is no reason to think that won’t continue. You don’t need volatility to build your account.
If you want to understand more about how much a stock moves on average, you can use Average True Range (ATR) to get a sense of exactly that.
For example, JPM has an ATR of 2.47 which means it will on average move $2.47 between the high and low during a single day’s trading. That is about a 1.4% move overall for the stock.
Taking a look back at SOFI, the ATR is 0.43 for a stock that trades at 7.71. That equates to a 5.6% move for the stock on any trading day.
The difference between an average move of 1.4% and one of 5.6% is huge and creates two different trading scenarios.
Understanding which you are most comfortable with and which plays to your strengths is a key part of becoming a successful trader.
Set yourself up for consistent success by trading stocks that align with your trading style and personality.
Just another simple step to take to help bring consistency to your trading.
I hope you found this information helpful and are starting your week off with profitable trades in stocks you enjoy.
Thank you for reading!
-Nate
When you are ready for TrendSpider, please use the link below to sign up!
Anchored VWAP is just one of the many top notch features TS provides.
Check out TrendSpider and let me know if you have any questions.
This service is for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice. These are my opinions and observations only. I am not a financial advisor.