Paul J Singh

“Don’t be afraid to give up the good to go for the great.” — John D. Rockefeller

Only trade high quality stocks

One of the most critical decisions a trader makes daily is stock selection. It’s the foundation of every trade. While I’ve often said that stock picking is only 33% of trading—risk management and trade execution making up the other 66%—the reality is that risk and execution don’t even come into play if you’ve picked the wrong stock. Poor stock selection sets you up for failure before you even enter a trade.

Yet, despite knowing this, I constantly see traders gravitating toward low-quality setups. I see it in my Trade Report members, my students, and even seasoned traders who should know better. It’s one of the most common mistakes in trading, and it comes from a mix of psychological biases, impatience, and lack of discipline.

So let me be clear: you should only be trading the highest-quality stocks and setups available to you.

The Temptation of Low-Quality Stocks

There are thousands of stocks out there. Even if you do the work to narrow your list, you’ll still have 50-100 that meet some basic technical and fundamental criteria. But most of us can only trade somewhere between two and ten stocks at any given time. That means we can afford to be extremely selective.

Yet, traders still talk themselves into taking low-quality setups. Why?

Here are some common reasons:

1. FOMO (Fear of Missing Out) – You see a stock moving and feel the urge to jump in, even if it doesn’t meet your ideal setup criteria.
2. Revenge Trading – You just took a loss and want to make it back quickly, so you force a trade.
3. Boredom – You feel like you “should” be trading, so you take a subpar setup just to stay active.
4. Overconfidence – You’ve been on a winning streak, and now you think you can make anything work.
5. Ignoring the Market Environment – You’re not considering whether the market is favorable for your style of trading.

These psychological traps lead to bad trades and prevent you from focusing on the best setups.

What Makes a High-Quality Setup?

A high-quality setup has multiple factors lining up in your favor. Here’s what I look for in my swing trades:

1. Strong Technical Setup – The stock should be at a key breakout or breakdown level, forming a clean pattern like a bull flag, range breakout, or momentum continuation.
2. Volume Confirmation – There should be clear signs of money flow. If big players aren’t interested, why should you be?
3. Relative Strength – The stock should be stronger than the overall market. If the S&P 500 is flat but your stock is making new highs, that’s a good sign.
4. Catalyst or Narrative – Whether it’s earnings, sector momentum, or institutional interest, something should be driving the move.
5. Risk-to-Reward Ratio – If you’re risking $1, can you realistically make $3-$5? If not, it’s not worth it.

Example: High-Quality vs. Low-Quality Setup

Let’s say you’re watching two stocks:

Stock A: A biotech company breaking out of a long consolidation period with rising volume. It’s outperforming its sector, and institutions have been buying for weeks. The stock has a tight stop and a potential 5:1 reward-to-risk ratio.

Stock B: A low-float penny stock that just spiked 30% on no news. The chart is erratic, and volume is inconsistent. It could go up more, but it could also crash in minutes.

Which one do you trade?

Stock A is the obvious choice—yet many traders will pick Stock B because it “feels exciting” or because they see other traders chasing it.

The Power of Selectivity

Since you can only trade a few stocks at a time, why waste your trades on low-quality setups? Imagine an NBA player who only gets 10 shots per game. Do you think they’re going to take wild, off-balance shots? No. They’re going to wait for the highest-percentage opportunities.

Traders need to think the same way. The best traders don’t just take trades—they eliminate trades.

When you look at your watchlist, you should be asking yourself:

Is this truly one of the best setups available today?

Does it align with my strategy?

Am I trading this because it’s high-quality, or am I forcing it?

If a trade doesn’t check all the boxes, skip it.

Real-World Example: A+ vs. C- Setups

A while back, I had a choice between two stocks:

1. Sprouts Farmers Market (SFM) – It was forming a textbook breakout pattern, consolidating near all-time highs with increasing volume. The stock was showing relative strength, had strong institutional accumulation, and fit my trading criteria perfectly.
2. Microsoft (MSFT) – While a big-name stock, it had been showing relative weakness, lagging behind other tech stocks that were breaking out. The setup wasn’t clean, volume was mediocre, and it lacked a strong catalyst.

Many traders stuck with MSFT simply because it was a well-known name, but SFM was the A+ setup. I took the SFM trade, and it worked beautifully, breaking out and running higher. Meanwhile, Microsoft continued to chop around and underperform.

The takeaway? Even among strong stocks, you must choose the best of the best. Just because a stock is popular doesn’t mean it’s a high-quality setup. Stick to the trades that give you the best edge.

Actionable Steps to Improve Your Stock Selection

If you find yourself trading low-quality setups, here’s how to fix it:

1. Create a Strict Entry Checklist

Before entering a trade, ask yourself:
✔ Does this setup align with my strategy?
✔ Is there a clear technical pattern?
✔ Is volume confirming the move?
✔ Is the market environment favorable?
✔ What is my risk-to-reward?

If you can’t confidently check off all these points, skip the trade.

2. Use a Tiered Watchlist

Organize your watchlist into tiers:

A+ Setups – The absolute best trades that meet all your criteria.

B Setups – Decent but not ideal.

C Setups – Trades you’re considering but should probably avoid.

Your focus should be almost entirely on A+ setups.

3. Limit Your Trades to the Best Setups

Give yourself a rule: I will only take 2-3 A+ trades per week. This forces you to be selective.

4. Review Your Trades Weekly

Look back at your trades and ask:

Did I take the best possible setups?

Did I trade out of boredom or FOMO?

What could I have done better?

Self-review is the fastest way to improve your discipline.

5. Adopt the Mindset of a Professional

Professional traders don’t chase random stocks. They wait for their setups. The market is full of opportunities—you just need the patience and discipline to wait for the right ones.

Final Thoughts

At the end of the day, trading is about stacking the odds in your favor. The best way to do that is to only trade high-quality setups.

The next time you find yourself considering a low-quality trade, ask yourself: Would I still take this trade if I had only one shot today?

If the answer isn’t a resounding YES, then it’s a no.

Stay disciplined, trade smart, and focus on quality over quantity. That’s what separates consistently profitable traders from those who struggle.

Want more insights on high-quality setups? For more on swing trading check out my swing service at bullsonwallstreet.com

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