Many traders misjudge their trades.
They automatically assume that if the trade makes money, itâs goodâŠand if it doesnât, itâs bad.
Thatâs a bigtime newbie mistake.
And one that can be catastrophic if you continue to think that way.
Today, I will walk you through two âgoodâ trades I recently hadâŠone made money, and the other didnât.
If you want to take your trading to the next level, then pay attentionâŠthis is the mindset youâll need to develop.
Table of Contents
Before I Break Down These Two Trades
Before I tell you about my two trades from last week, I feel like itâs a good idea to tell you first about my thought process before entering a trade.
I use a system called P.R.E.P.A.R.E.
If you havenât heard of it before, hereâs how it works:
The Power of PREPARE: A Pro Traderâs Checklist for Success
In the trading world, staying curious and questioning everything can make all the difference. When individuals approach me, asking the secret behind my consistent streak of successful trades, I open up about my guiding tool: the checklist.
This isnât just any list; itâs a tool honed over the years that assists in making informed decisions. Letâs dive deep into my process, which revolves around the mnemonic âPREPARE.â
P: Pattern/Price
This is where the price of the stock comes into play. I zoom into its current state, identifying areas of support, resistance, and its behavior across different time frames. When analyzing a stock recently, I noticed a pattern I always look out for â the panic sell-off near the start of trading.
R: Risk/Reward
How do the potential rewards compare to the risks? Itâs vital to balance them. I seek out trades that offer a risk vs. reward of 3:1 or more. Assessing the potential risks and rewards helps me gauge the overall viability of a trade.
E: Ease of Entry
Is there ample volume? Will the exit be smooth or rocky? Monitoring the stockâs price action provides insights into this. A stockâs liquidity and my ability to navigate it without hiccups is crucial.
P: Past Performance/History of Spiking
Here, I assess whether the stock has a track record of explosive growth or not. A stock with a history of significant moves often signals potential future activity.
A: At What Time Is It? / Personal Schedule
Timing is everything in trading. Sometimes, even with a promising setup, I might step back if other commitments or conditions arenât conducive. Itâs not just about the trade; itâs also about being in the right state of mind.
R: Reason/Catalyst
Every stock move is often backed by a reason or a catalyst. Whether itâs company news, sectoral shifts, or global trends, knowing whatâs driving a stockâs movement is crucial.
E: Market Environment
While individual stocks have their dynamics, they donât exist in a vacuum. The broader market mood can heavily influence even the most promising trades. Thus, always keeping a pulse on the overall market sentiment is non-negotiable.
Now that youâve got a better idea of how Iâm sizing up my trade candidates allow me to tell you about these two trades from last week.
You can check out the checklist here.
The first was in the ticker symbol VTGN.
A Good Loss In VTGN
One thing Iâm always trying to do is identify winning patterns. And thatâs something that drew me into trading the ticker symbol VTGN last Thursday.
Why?
Because it was reported that billionaire and Wall Street Legend Stevie Cohenâs fund invested in the company.
From experience, I knew that his small-cap buys did well.
For example, I recall BNOX, CYBN, and PRAX all performing well on his stock purchases.
Whenever a big player shows a vote of confidence in a small-cap company, I call that a legitimizer.
The goal was to buy and sell the stock the next day because I got in after hours.
It is very much in line with my weekend strategy.
Of course, Fridayâs action in the market was wild after the jobs numbers. The market initially sold off hard following the report and then rallied after the first hour or so of trading.
Given the ugly market on Friday, I had no choice but to cut losses short.
I ended up losing $378 on this trade.
Nonetheless, I felt like this trade made a lot of sense. I recognized a winning pattern, got in at a level that wasnât chasing, and had a reasonable target.
It didnât work outâŠbut I still rated it as a good trade.
My Almost Weekend Winner In TTOO
My goal was to buy TTOO and hold it over the weekend.
Why?
Several reasons.
First, I loved the setup.
It was a first green day former runner.
If you donât know what that means, click play on the video below:
Former runners can repeat from my experience.
And the first green day buy after a significant decline is a good level to get in from a risk vs. reward basis.
In addition, what really drove me to take the trade was that the stock had a catalyst.
All these combined made it a good setup for me.
I got in at around $.258.
The plan was to take into the weekend and get out on Monday. But I saw the stock take off in the after-hours, so I decided to take a 9.3% profit.
Notice why I gave my reasons on why I felt both trades were good. None of them had to do with my PnL.
The best traders donât think in terms of PnL. They think in terms of risk vs. reward.
Study check, retweet/favorite this if you're still up studying, reviewing your @StocksToTrade scans or making your watchlist for tomorrowâŠ.how well prepared will you be? Remember that preparation + discipline are the keys to using the markets to change you/your family's lives!
â Timothy Sykes (@timothysykes) October 10, 2023
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