When I started trading, I made decisions based on feelings. A stock looked interesting. Someone mentioned it on social media. The chart seemed to be going up. I bought.

Sometimes I won. Often I lost. I never really understood why.

The problem was not a lack of research. The problem was inconsistency. I had no repeatable process. Every decision was different, driven by whatever information happened to cross my path that day.

So I built a simple process. Not to eliminate thinking, but to eliminate the noise.

Step 1: Find Candidates Worth Researching

I do not start by staring at charts or scrolling through stock tickers. I start with recommendations from analysts who do this full-time.

Where I look:

  • Morningstar (4-5 star ratings)
  • Investing.com Pro (monthly AI stock picks)

These analysts spend their careers valuing companies. A 4 or 5 star rating from Morningstar means their research suggests the stock is undervalued. I am not blindly trusting them. I am using their work as a starting filter.

Think of it like apartment hunting. You could drive around every neighborhood in the city. Or you could start with listings that match your budget and criteria, then visit the promising ones.

Step 2: Check the Sector

This step surprised me when I learned it. Research suggests that roughly 50% of a stock’s price movement comes from its sector, not the company itself.

A great company in a struggling sector will often underperform. A mediocre company in a booming sector might outperform.

Before I dig into a specific stock, I ask: How is the sector doing?

What I look for:

  • Is the sector in favor or out of favor right now?
  • Are there tailwinds? (Example: aging population benefits healthcare)
  • Are there headwinds? (Example: rising interest rates hurt real estate)

If the sector is facing serious headwinds, I move on. I do not want to fight the current.

Step 3: Run My Chart Rating

Once I have a candidate in a healthy sector, I evaluate the stock itself. I use a simple scoring system I call the Chart Rating.

The key question: Is this a quality company at a good technical price?

I look at two things:

Fundamental quality (from Morningstar):

  • Star rating (is it undervalued?)
  • Economic moat (does it have competitive advantages?)
  • Uncertainty (is the business predictable?)

Technical positioning:

  • Is the price near the 100-month SMA? (Long-term support level)
  • Has this stock historically bounced from this level?

I combine these into a score out of 10. If the score is below 7, I pass.

The details of each component are documented in my full strategy PDF. But the core idea is simple: I want quality companies at prices where they have historically found support.

Step 4: Get an AI Second Opinion

Numbers on a page can be deceiving. A company might look cheap but have hidden problems in its financials.

I use AI to analyze the financial statements (income, balance sheet, cash flow) and summarize what I might miss:

  • Financial health (margins, debt, cash flow)
  • Competitive position (market share, pricing power)
  • Management quality (capital allocation history)
  • Red flags (litigation, patent risks, regulatory issues)

The AI gives me a rating out of 5. If it scores below 3.5, I pass.

This is not about replacing my judgment. It is about catching things I might overlook when I am excited about a stock.

Step 5: Check the Upside

Here is where many beginners (including past me) go wrong. We find a good company and buy it without asking: How much can I actually make?

I look at the fair market value estimate versus the current price. I want to see at least 20-25% upside.

Why this matters:

If a stock is only 5% undervalued, even if everything goes right, my gains are limited. But if a quality company is 25%+ below fair value, the risk-reward becomes attractive.

This is not about greed. It is about making sure the opportunity justifies the risk.

The Honest Reality

This process does not guarantee profits. I have followed every step and still lost money. The market does not care about my checklist.

But here is what the process does give me:

  1. Consistency - Every decision follows the same logic
  2. Confidence - I can explain why I bought something
  3. Learning - When I am wrong, I can trace back and understand why

Before this process, my losses felt random and frustrating. Now they feel like tuition. I can learn from them because I know exactly what I was thinking when I made the trade.

My Takeaway

You do not need a complex system to start. You need a repeatable one.

Find candidates from people who research stocks full-time. Check if the sector is working for or against you. Score the company on quality and technical positioning. Get a second opinion on the fundamentals. Make sure the upside justifies the risk.

Five steps. That is it.

The details can get more sophisticated over time. But starting with a simple, consistent process beats making random decisions every time.

Start here. Build your own version. Then refine it.