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Fishing With Dynamite

Has the market been great or what!? Crypto Mania! This truly has been a dream market for Day Traders recently. All some random company has to do is mention blockchain, crypto and/or coin in a press release and their stock will skyrocket. Traders who miss the early move in that stock will push it even higher by buying upside shape and/or start looking for the “next” one. Cue all the tweets about "the next one!!!!!" and that stock starts to run merely because of the possibility that it might be crypto related. FOMO at its peak.

Now that I think about it, I probably would get more reads on this blog if I called it something like CRYPTO, CRYPTO and more CRYPTO!!! Or better yet:

If you know me at all or have read anything of mine before, you know I NEVER say Day Trading is easy. It’s not. It’s freakin’ hard. However, in this type of market it’s far “less hard” than it will ever be. This market is very forgiving. This market lets you get away with things you normally would get slapped in the face and punched in the gut for even trying.

  • Take a trade during lunch? It will probably work.

  • Chase upside shape? It will probably work.

  • Stay in a trade longer than you should? It will probably work.

  • Hold something overnight thinking it’s going to gap up even more? It will probably work.

  • Get a bad fill and don’t immediately follow Rule#25 and jump out? It will probably work.

  • Trade a stock through some random whole# (rather than a whole# INFLECTION POINT)? It will probably work

  • Break almost any of your rules and throw money at a stock? That will probably work too.

Heck, I was upset on Friday because a stock we were trading “only” went up $1. Can you believe that? I thought for sure it was going to keep going and at least test the hight of day. I thought for sure we caught one:

Basically for many traders, it feels like almost anything is working right now. That’s why often in chat you’ll hear this market referred to as "fishing with dynamite". For those who aren’t familiar with the phrase, it’s often used to describe something that can be accomplished easily. Another way to put this is that it’s a dart throwers market. Traders who really don’t have a process and just throw darts all the time are suddenly making money too. They start to think that they finally have it figured out. They’re finally making $.

According to social media EVERYONE is making $. Or should I say just killing it? Banking? Ballin’? Whatever... New twitter gurus are popping up daily. Existing twitter gurus are showing you MASSIVE daily gains. New chat rooms seem to be popping up daily too. Hey, I’m good and posting ideas on twitter along with some timely news, join my chat room for only $500 per month! As Mike would say, I'll take two! NOT! EVERYONE is allegedly making a killing in the market and/or trading Bitcoin or some other coin. Thanks Trump!

What happens when the Crypto Mania stops? What happens when things calm down?

For traders who don’t really have a process (those dart throwers who have been really lucky lately), the market starts to take all that money back and then some. All this time the market has been letting traders get away with stuff, it’s also been doing something else. It’s been teaching them bad habits. REALLY bad habits. Any trader that doesn’t already have a rock-solid process and is even slightly impressionable will quickly become incredibly frustrated. Suddenly the dart throwing stops working. Taking trades during lunch stops working. Chasing upside shape stops working because stocks are barely moving. Holding something overnight leads to a big gap DOWN. For many it will seem that everything stops working. The losses start coming and piling up as quickly as the frustration.

On the other hand, consistently profitable traders will go on doing what they always do. They will quickly refocus, stop breaking/bending their rules and get back to trading only A+ Setups. Basically, they will quickly adapt back to only doing what makes them consistently profitable over the long haul in the first place. They will also say something like that was fun while it lasted and I can’t wait for the next market mania to begin!

So, how do you prevent yourself from letting this market teach or even reinforce bad habits? How do you prevent engraining these bad habits into your brain during the current market mania?

Be brutally honest with yourself about your trading. Don’t think you’re suddenly some master of the markets. Be grateful the market is being so generous but know it’s the “less hard” market causing the rise in your P&L.

Here’s what I do: Every night when I fill out my trade tracker I’m hyper focused on analyzing the trade(s) and deciding if they were truly A+ or did the market let me get away with something. If it was A+, something I would trade in ANY market, I quickly move on. If it’s not, I highlight that trade and type into the tracker exactly what I got away with in detail. I remind myself that tomorrow, next week or next month the market may not let me get away with that again.

Then each morning, I’m mindful and get back to trading ONLY A+ Setups. As the day progresses if we notice the fishing with dynamite market is continuing, I’ll take on more risk, trade a B- Setup or two and continue to ride the less hard wave…

To sum this all up, please remember this which is one my personal Top 50 rules: NEVER confuse luck with a truly profitable long-term day trading strategy. It doesn’t matter if it’s a single lucky trade or a lucky streak of any length, luck is just luck. Be thankful you were lucky enough to get away with something and then quickly put rules in place so you never repeat those same mistakes again.

Thanks for reading! Merry Christmas everyone!

Questions? Comments? Reach out and/or leave a comment below.

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