There’s an old adage that says, “If it’s not broken, don’t fix it”.
Right now this market has been red hot…
And as some traders may think about changing their strategy around, I’m not.
Over the last several months, I’ve been focusing on these early morning squeezes…
And that’s what helped me get to $7.5 million in profits…
But yesterday, even when my strategy was spot on…
I let my emotions get the best of me.
So today, I’m going to show you how even when your strategy can be right…
It could all go downhill if you make this one mistake.
Big Runner In This Market
Every day I remind my students to keep focusing on big percent gainers.
I know, I know, I’ve told you a million times already, but I’ll continue to say it until I’m blue in the face.
I’m still seeing countless newbies make the mistake of focusing on stocks that are spiking 3%, 7%, 10%, and have little to no volume.
If you want to find the same trades as me, you need to make sure you’re focusing on big percent gainers with volume.
The first thing I did yesterday morning was scan the market for some of the biggest movers…
And if you go back and look at my trades, the majority of them over the last few months are from short squeezes.
As we continue to see these beaten-down stocks spike day after day, I’m not looking to shift my focus anytime soon…
So let me show you why that is with my latest trade.
Take a look at WeWork Inc. (NASDAQ: WE)
Source: StocksToTrade
At the time I’m writing this, WE was spiking over 50%…
And before I dive into any trade of mine, I typically ask myself these three questions…
- What does the long-term chart look like?
- Is there volume?
- Is It A First Green Day?
Let me explain why that is.
My Trade on $WE
Let’s take a look at the long-term chart…
Source: StocksToTrade
Looks hideous, right?
Way too many traders look at that and think the company is completely worthless and isn’t worth their time.
Let me tell you, they’re not wrong, the company is worthless…
But looking back at the history can help you see if the stock has a history of spiking.
In this market, we’re seeing countless stocks like this that are beaten down, but end up spiking time and time again…
So just because the stock looks hideous, doesn’t mean there won’t be an opportunity to trade it.
Remember, we’re not buying and holding these crappy companies…
We’re just looking to get in and out and take the meat of the move if the setup is right.
The second thing I look for is to see if the stock has volume.
I like to trade stocks that have volume (typically above 10 million shares traded) to give me the price action I need.
I don’t want to trade slow movers where I have to hold onto and be patient with them…
If you know me, I’m the most impatient person there is when it comes to trading.
I want to be in and out of my trade as quickly as possible.
At the time I’m writing this, WE already had over 27 million shares traded.
Finally, I ask myself, is it a First Green Day?
With these stocks being beaten down, and in a market like this, we’re seeing traders jump in and short over aggressively on the first green day.
When you have these stocks that are a big percent gainer with volume, holding gains, and have a potential news catalyst…
That’s when the magic can really happen.
Now let’s break down my latest trade.
In the chart below, you can see I traded it three times!
Source: StocksToTrade
I traded WE on the early morning dip with a goal of 10-20% because I saw how volatile it was….
I entered my trade at $4.53 and exited at $4.94 for a 9.05% profit. (Risked $8,154).
Just a few minutes later, I saw another dip buying opportunity and bought WE at $4.38, and exited at $4.50 for a 2.74% gain. (Risked $10,950).
But I didn’t stop there, I decided to trade it a third time…
Now, I typically don’t trade a stock multiple times, but it looked too good to not try it again.
I traded WE at $4.17 and exited at $4.16 for a loss of 0.24%. (Risked $12,510).
But then, this is where it all went downhill…
Everything was perfect until this point.
When I trade a stock, it’s typically once or twice within a day…
Not four times, that’s something I warn every single one of my students about.
Overtrading can be detrimental to your trading progress…
And I want to show you that today.
On my fourth trade of WE, I gave away all of my profits, plus some…
Take a look.
I entered my trade at $5.7623 and sold it at $5.48 for a 4.9% loss.
This loss made me sick to my stomach…
And this is a good example of how overtrading can crush you in an instant.
I knew better, but I let my emotions get the best of me and now I have to put myself into trading timeout.
I want you to learn from my mistake yesterday…
And make sure you just focus on the best possible setups out there…
That’s why I encourage you to join this FREE trading session to help you get a better understanding of what’s working in this market….
WE could offer a dip buying opportunity today…
And if it does, remember not to overtrade!
Study up and I’ll see you in chat.
-Tim
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