September 30: CLSI Proves No One Trade Matters

CLSI proves no one trade matters

Today I was reminded that no one trade matters. And it hit me that a lot of students struggle with this. So I decided to do a quick write up of my trades today. I want you to see why the process is SO much more important than one trade.

CLSI: Two Wins and an Encouraging Loss 

I bought Clancy Systems International (OTCPK: CLSI) three times today. CLSI is a multi-week breakout. As you can see from the chart below, the former high was around $0.04 and $0.042 in August. (I’ve added a yellow line at $0.04. Click on the chart for a full-sized view in a new browser tab.)

CLSI six-month chart: breakout level around $.04 no one trade matters — courtesy of StocksToTrade.com
CLSI six-month chart: breakout level around $0.04 — courtesy of StocksToTrade.com

Today — September 30 —  nothing was moving. CLSI was the only big percent gainer on my entire watchlist.

Why did I buy?

The Multi-Week Breakout Buy

I had my first buy today right around $0.04 on the breakout, thinking it could go higher. Normally I don’t like to chase breakouts, but there wasn’t anything else. And that made me think traders would gravitate toward it if it did break out. Why? Because a lot of degenerate traders out there think they need action.

So when a stock like CLSI breaks out and nothing else is moving … it could go to $0.05, $0.06, or, maybe even $0.07. Plus, the volume was pretty big. I bought the first breakout in the low $0.04s and sold it near $0.05 for a nice $1,259** profit. It got up to $0.0535, but it was tough to get executed.

Remember, my results aren’t typical. I’ve been trading for two decades. I’ve refined my process and built my knowledge account the entire time. That’s why I love teaching so much. If you’re ready to develop your process, apply for my Trading Challenge today.

Fake Out on the Dip Buy

My second trade was a dip buy just above $0.04. I thought it would hold and potentially get back to $0.05 or $0.055. But it was choppy, and I got faked out thinking it would crack below $0.04.

It’s nice to see it held $0.04 and consolidated around $0.045 before slowly ramping back to $0.05. In the chat room I said, “I played it too safe but if you tried trading this you see how tough executions are. So I’ll err on the side of caution.” I lost $112** on this trade.

Beautiful OTC First Green Day Runner

My third trade of the day on CLSI was late in the day. I was actually looking for a panic with plans only for a dip buy. I was telling students NOT to chase when it moved to $0.07ish. But like I always say, take what the market gives you.

As it got stronger, it reminded me that these stocks have been going crazy the last 30 minutes of the day. So I bought at $0.073. I chased a bit and was prepared to sell into strength either today or tomorrow.

And that’s exactly what I did — selling at $0.084 about 10 minutes before the close for a nice $825** profit. I was happy to take profits along the way even if I played it too safe on every trade.

Take a look at the CLSI chart below. It shows the entries and exits on my three trades today. (Click on the chart to view full-size in a new browser tab.)

CLSI chart: my trades today; no one trade matters and process is more important than profit or loss — courtesy of StocksToTrade.com
CLSI chart: my trades today; process is more important than profit or loss — courtesy of StocksToTrade.com

Breakout Trading Lesson

Normally you have two opportunities to buy a breakout. Sometimes you get another opportunity if the first breakout holds with consolidation…

The Initial Breakout and the Dip Buy

You have the initial breakout — which worked nicely on this one. Then you have the dip buy. Theoretically, it should have held the $0.04 level. And it did, but it was choppy and not very convincing. So as it was midday, with a stock that’s tough to get executed on, I didn’t mind playing safe.

The Secondary Breakout After Consolidation on a Strong First Green Day

Then with some of these stocks, you get another opportunity. If the stock consolidates near its highs in the afternoon, it can break out again.

Again, I don’t like to chase something up this much. But when it keeps getting stronger and reaching new highs, it can turn into a great opportunity. Especially considering how these low-priced OTC runners have been acting lately.

You Must Remember: No One Trade Matters

I know a lot of newbies get frustrated if they lose on a trade where they should’ve had a profit. Like my second trade today. But what you have to remember is that no one trade matters.

It’s part of the reason I say to focus on your long-term goals…

… if no one trade matters, then you’re working on refining your process.

My first trade today: excellent. I bought the breakout and sold into strength. The second trade, dip buying near support … good entry but bad exit.

But…

... I was on the right track.

Focus on the Process and Good Losses

If I’d just held my second trade, it would have turned into a win. But I focus on my process. And my process says… 

… it was midday and the stock has tough executions. So I erred on the side of caution and followed Rule #1: cut losses quickly.

What if it had cracked below $0.04? What if it quickly failed and went down to $0.035 before I got executed? Instead of losing a hundred or a couple hundred dollars, I could have wiped out my earlier gains.

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My process involves playing extra safe.

And I’m encouraged — not discouraged — when the stock still does what I want. I just got faked out by the midday choppiness. Some people look at their trades and only value them based on profit and loss. But I like to look at how the stock did afterward.

Yes, I played it safe. But I will always play it safe when it’s not a perfect play. With the second trade, I had to consider the lack of news, that it was midday, and that the stock was still up 40%.

Protect, protect, protect. Too many traders don’t focus on protecting. They focus on trying to maximize daily gains. Don’t get me wrong — I like my daily gains. But I will always focus on protecting.

And by following my process and protecting my earlier win, I had the confidence to take the third trade. If I didn’t follow my process, if I broke my own rules and took a big dumb loss, that would have been it for the day.

The Difference Between Good Profit and Bad Profit

I don’t think it’s a bad thing to err on the side of caution. It’s bad to not follow your process. So even if I’d profited on my second trade, it would actually be a BAD profit based on my process.

You can’t judge only based on profit and loss. You have to think about your process and playing it safe.

A Tough Lesson For Newbies

So many newbies experience the emotional roller coaster that can come with profits and losses. Remember this is a marathon — not a sprint. So what can you do today, this week, this month…

… that can help you find consistency in the long run? I’m talking a year, two years, even five years from now. It means risk management. So learn to cut losses quickly, even if you play it too safe.

Were you prepared for CLSI today? If you traded it, what was your experience? If you didn’t trade it, were you at least watching it? If you understand the lesson in today’s post, comment below with “No one trade matters.” Comment below — I love to hear from all my readers!

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