Trading isn’t going to be something that is going to make you rich quickly…
It’s something that could make you rich over time, as long as you put forth the effort.
As a trader, you want to be able to recognize key patterns to help you make a more informed decision before you place a trade.
Instead, I am seeing a lot of traders make this mistake…
I see a common mistake people make is ignoring ugly price action, especially when there's a definitive downtrend & they #HODL & hope for a comeback, rationalizing they're invested in a "quality asset". This happened $META #Bitcoin #Ethereum & now $TSLA too…PRICE ACTION IS KING!
— Timothy Sykes (@timothysykes) December 21, 2022
There are traders who just like to buy stocks based on their name, or what they hear, and ignore even the basics.
It’s about quality over quantity, and it doesn’t matter how many trades you make in a day, that doesn’t determine how effective you are as a trader.
At the time I am writing this, I’ve traded 409 times this year.
In just 248 trading days, that averages to about 1.65 traders per day.
Even with just trading less than 2 trades per day, I was able to profit 72% for the year.
Where else would you find that type of return on your money?
I get it, there is a lot that comes with trading and it can be overwhelming, there is no denying that…
But if you are a new trader with a small account, there is something you can do to help reduce that overwhelming feeling.
Choppy Stocks
You may have heard me say, “this stock is choppy”, so what do I mean by that?
For every trade that I look for I want it to be volatile and have liquidity.
I like to trade stocks that are moving quickly and I can get in and out, not to stay in a position for an extended period of time without any movement.
Let’s take a look at what a choppy stock could look like.
On December 20, 2022, this is the stock chart for Cloudweb, Inc. (CLOW), and as you know I have been watching this stock and will continue to watch this stock every single day.
Take a look at this price movement, would you be able to find a solid pattern to trade?
You can notice this with stocks that have lower volume and the stock isn’t as liquid.
But sometimes the volume doesn’t continue throughout the whole day, let’s look at CLOW on December 21, 2022…
Take a look at the two arrows and look at the candlestick and the associated volume.
You can see the sellers came in strong at the beginning, but the buyers stepped up to the place with enough volume to overcome those short sellers and close the candle stick back near the highs.
This is a more well-defined dip buying pattern that had volume, and then as the volume fizzled you, you noticed the movement was limited, just like the image above.
Timing A Trade Perfectly
Everyone wants to be able to perfectly time every trade to help maximize their profits.
For example, we would want to find a stock before it goes Supernova…
Or buy the dip at its morning’s lows before it bounces.
Unfortunately, a lot of these plays can move rather quickly which makes it difficult to always capitalize on them.
I’ve even missed a few trades because they have moved so fast, so don’t feel discouraged if you miss one!
But these panics may not always happen in the morning, they can happen at any time of the day, just like Global Developments, Inc. (OTC: GDVM)
Take a look…
It is possible for a stock to panic at any time, so you need to make sure you’re prepared for when it happens on these multiday runners…
But I tend to focus on the open as this is when promoters usually dump a lot of their shares, which makes the morning panic so predictable.
More Breaking News
- Is Rigetti Computing a Falling Star or a Buy Opportunity After Sudden Plunge?
- Bank OZK’s Earnings Surge: Is It Time to Dive in?
- Bitcoin’s Surge: Can Marathon Digital Keep Up?
And right now CLOW is a multiday runner, so be sure to keep this on your radar!
Right From Wrong
When you are studying charts, you want to make sure you are learning the right way before you jump into trading.
Do you think any professional athlete made it to where they are today by learning the wrong techniques?
Of course not! If you aren’t practicing the right way, you will start to develop bad habits that may prevent you from being successful.
Every trader here needs to make sure they study my 7-step penny stocking framework as this can help make these patterns more predictable.
But when you look for these patterns, you want to look at the overall charts performance.
You want to be sure you are not trading a stock that is in a constant downward trend, like Inotiv, Inc. (NASDAQ: NOTV)
These are the type of charts that make it difficult to find a good trading pattern such as the dip buy, or breakouts.
Now, let’s look at GlycoMimetics, Inc. (NASDAQ: GLYC)
GLYC is a multiday runner that has spiked from nearly $0.50 to over $2.00 and I am watching it closely for that morning panic.
When you have stocks that had significant gains in a short period of time, it’s only a matter of time before they panic.
For the ones that are on a steady downward trend, I wouldn’t be expecting a morning panic from them as they continue to crash.
Final Thoughts
There was a lot that I had to share with you today, but I feel that it was important for everyone here to see the difference between the good and the bad.
In anything that we do in life, we want to make sure we are doing things the right way, not the wrong way.
The same thing applies to trading.
You don’t want to learn the wrong patterns and guess when the right time to buy is…
You want to execute each trade like a sniper, spotting these opportunities before they happen.
Continue to study up as we head into another short trading week, so take full advantage of the slower market as I expect it to heat up after the New Year!
I hope everyone had a wonderful holiday season and as we look to the New Year, I have one last gift for you, take a look…
Cheers
Tim
Leave a reply