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Many Traders Fail Because They Miss The Big Picture
Most newbie traders fail to see the big picture. They’re often focused on one or two elements and forget the rest.
For example, 3 out of 4 stocks tend to follow the overall market’s direction. Now, you might be thinking, Tim, I stick to stocks with catalysts, or I generally trade penny stocks. What does the overall market have to do with my trading?
Well, let’s look back at last January. The Nasdaq was absolutely on fire. Not surprisingly, there were a ton more plays with penny stocks.
And after a huge runup in the Nasdaq, we’re starting to see some selling pressure. Coincidently, we’re not seeing the same type of follow-through in penny stocks, and the price action has gotten notably choppier.
It was a good 2 months, I am flat short-term positions, market shifted to me and I am not making the same mistake in 2021. I am immediately implementing smaller size and singles approach. Have a good weekend –everyone day off for me.
My student Jack Kellogg recognizes the shift we’ve seen and is now trading smaller and looking to quicker profits vs. holding for home runs.
Yes, he focuses on stocks with catalysts, but he’s aware that the overall market can influence small-caps.
If the overall market is weak and the price action is choppy, then you likely need a very strong catalyst for a stock to buck the trend.
That’s why I’m currently taking smaller positions, cutting losses quickly, and trading like a coward.
Many newbie traders go into the day thinking every day is the same.
Some market conditions are harder to trade than others. But if you don’t recognize that and make the adjustment, you’ll get chopped up and take losses when you shouldn’t be trading.
You need to take a hint from what the market is telling you.
I’m not one of those guys who loves trading all day. However, if you stick me in front of a computer screen all day, I will trade, for better or worse…usually worse.
The reality is…great opportunities aren’t available each day. And if you stay in front of your screen trying to trade…you’ll like take subpar setups.
There are just not that many great setups right now.
Instead of taking crappy setups, use this time to study patterns and catalysts and review your trading plan.
Trading all day may seem cool at first…but it’s not. Eventually, you become a slave to the screens. And that’s only if you’re good at it. Most people aren’t, and they end up overtrading, losing a bunch of money, and giving up.
A Checklist To Get Your Mind Right
- The first thing you want to do is get a pulse of the market. How has it been performing, and what is the overall sentiment among traders?
- If the market is weak, ask yourself, is the stock I’m trading have a strong enough catalyst to buck the trend?
- If the market is strong, ask yourself if you should be getting more aggressive with your trades.
- If you’re themed catalysts, ask yourself, where are we in the cycle? A news headline related to AI a few weeks ago will hit differently than one today. That’s because we’re later in the cycle.
- During tougher trading periods, you must focus on discipline and patience. To better do that, you should outline what your best setups are. Do you know what your best setups to trade are? You can trade a subpar setup perfectly and not make much. But you can trade a perfect setup and mess it up and still make out well.
Trading right now has gotten a lot harder. Some of the spikers I like to trade have choppy price action. That’s why I’m trading less and being more patient. Trading more does not equal more profits. In fact, overtrading can hinder your progress severely.
Two types of catalysts I’m watching for are heavily shorted stocks for potential squeeze plays and stocks being pumped by promoters. I’ll take trades in them if my setup is there.
Before making your trades, don’t forget to get a big-picture view of the market.
It’s an ALL-DAY live trading workshop that starts on Friday, February 17th, 2023.