Sometimes I’m dead-on right about a trade but a little voice says.
“Maybe it’s too much risk…”
So, small win or small loss, I do this…
Only for the stock to do exactly what I expected going into the trade.
It would be easy to get frustrated when that happens.
But instead, I walk away VERY encouraged.
Here’s an example that shows exactly why…
Table of Contents
Expectations and Weekend Risk
The Nasdaq surprised me yesterday (Oct. 19).
I was expecting a Black Monday crash.
Especially after last week, when the Nasdaq Composite closed down 4.5%, including a 2.14% drop on Friday.
So, when I took my weekend trade on Friday (Oct. 16), I was a little hesitant.
Exascale Labs Holdings Inc (NASDAQ: XLAB) WAS a nice setup.
As you can see, it held up well despite the ugly market:
When I dip-bought XLAB my thesis was that it could bounce because of how it was holding up.
I even added to my position and thought about holding over the weekend.
Then I saw the market futures and decided to lock-in the tiny win on this speculative trade:
At the time, I was VERY happy with my exit, because XLAB was a gradual fade into the after-hours close.
So, imagine my surprise when XLAB did exactly what I thought it could do in premarket yesterday…
By the time I sold on Friday, there were no signs XLAB would do that.
So, even though I traded it cowardly, that doesn’t mean you have to do the same.
In fact…
This Kind of Trade Encourages Me
If you’re reading this and you are a beginner, it’s a good lesson.
I don’t have that extra level of aggression (and I don’t think you should, either).
But it does show you the upside, and there are lessons from my trade…
Lesson 1: Plan for All Possibilities
I know that doesn’t sound like very much fun, but it’s better to go into a trade asking yourself…
“What could go wrong?”
For example, what if XLAB had gapped down instead of spiking in premarket?
For me, I’m happy to plan for a crash (and be wrong) while managing my tiny trade.
Lesson 2: Know the Difference Between Knowledge and Money
I played it safe, which I don’t regret.
If you traded XLAB there was an opportunity to learn big time.
No matter how you look at it, that’s a giant win.
This is how you have to think (especially in the beginning of your journey). The money you make or lose is negligible.
But the knowledge you gain every day, trade by trade, adds up over time.
Remember, most of my 55 public millionaire students broke out in year 2 or 3. Some took 5 years to get there.
Lesson 3: Build the Process Before You Size Up
A lot of people are skeptical about this. They think you have to start trading as big as possible, as soon as possible.
But that is the exact OPPOSITE of what it takes to be my next millionaire student.
Once you know the patterns and have the experience, THEN you can take bigger size.
XLAB ran nearly 75 cents a share during premarket yesterday. Once you know how to trade that kind of move, it’s possible to make solid gains.
But if you don’t have the knowledge or experience, it doesn’t matter how big your account is.
In fact, if you’re a beginner, you risk losing more with a bigger account.
Finally, if you have a trade like my XLAB trade, where you were right but traded cowardly…
Stay Cautious and Get Encouraged
I always try to adapt. But I also take the win when I’m right, even if I got out too soon.
The point is, I was very encouraged by the fact that XLAB was one of the biggest winners in premarket trading yesterday.
And there were multiple ways to trade it, which is even better.
- You could’ve taken more risk than me, held over the weekend, and been rewarded.
- You could’ve waited until yesterday and caught the premarket bounce.
- And you could’ve waited for it to regain VWAP at the open yesterday.
To discover more about my weekend trading strategy, and how I’ve used this pattern consistently for over 25 years, check out this short video.
Key Takeaway
I get encouraged by being on the right track (and you should too).
Keep trading small. Keep forming a thesis and then track the outcome, even if you don’t take the trade (or don’t trade it well).
Every time you do that it’s another deposit into your knowledge account.
Cheers,
Tim Sykes
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