When the market giveth, you must taketh.
Let’s be honest, one of the most surprising things about becoming a professional Day Trader is how incredibly boring it is at times. There are days, weeks and even longer stretches (think Summer, sans 2016) when the market makes everything even more difficult. The volume dries up, nothing follows through and it feels like you’re the only one trading. During these slow times, traders should cut down their position size, sell more shares sooner and most importantly soh (sit on hands) more frequently. It’s because of these slower times that what I’m about to talk about is so important.
There are times that are the exact opposite of what I just described. Times when an individual stock, a sector and/or the entire market just goes manic. Next thing you know, stocks are substantially higher than you thought possible. During these times, traders should increase their position size, hold more for longer and most importantly stand up and start pushing that freakin’ buy button on every A+ Setup they see on the stocks that are running.
This past Wednesday after the Midterm Elections was one of these times. First, the overall market was very bullish as we had a nice gap up on the day. A little "pro cannabis voting" happened during the elections and that was putting a bid under many of the pot related stocks. The details here really don’t matter, the sector and most of the stocks were simply in play. The pot stocks were on charts and we were already trading them. Here's my watchlist from Wednesday:
Then, the news hits that Jeff Sessions is out. YOU’RE FIRED! Or YOU’RE FORCED TO RESIGN! I fired a lot of people back in the day (or convinced them to leave) but I never had the opportunity to fire a Keebler Elf. I wonder what that was like? Mmmm, Fudge Stripes…
The news starts to ramp the pot stocks even MORE. We now have another catalyst lighting up the sector. Now FOMO really hits. Now the short covering really begins. It’s panic on both sides of the trades.
What did you do when all this happened?
Did you stand there like a deer in headlights?
Or did you do what Day Traders need to do during these types of events?
STEP ON THE FREAKIN’ GAS! Increase your position size. Take every A+ Setup you see on any stock in the sector. Be patient and let things play out. I wrote a blog about that HERE.
My point today is when you have a market event like we saw on Wednesday, you must push on the gas. You must put risk on. You must get more aggressive than normal. Why? Well, these are the days when, if you let it, you’ll make up (or more than make up) for all those slow, dull and boring ones when you were forced to soh. Remember those days during the summer when it was boring as hell and you were happy to squeak out $100? Well on Wednesday, the market gave us the opportunity to make up for some of that, if not A LOT of that.
Here's the chart of $TLRY to demonstrate the type of move I'm talking about. Early in the day we identified $116.00 as being a possible Inflection Point as it was the opening price (what we call the r/g), the level was tested a few times and didn't break, AND the tape was super duper clean. Then by around 1pm, it's slowly made it's way back up to that very level:
By the way, if you don't understand the A+ Setup in this chart and want to learn more about nailing your entries by trading Inflection Points, check out our two webinars on the topic. Simply click HERE and look for "Inflection Points". I recommend watching Part 2 second. There's even a couple of "game tapes" that will walk you through some other live Inflection Point trades...
So, Wayne, how did you do on Wednesday? Did you practice what you’re preaching here?
Honestly, yes and no. I’m really writing this blog to myself as much as anyone else as I often do. I had a great freakin’ day on Wednesday. One of my better days in 2018 for sure. However, I feel like I totally screwed up.
I’m actually pissed off at myself. I left far too much $ on the table. According to my tracker, my worst day in the 10 years I’ve been trading in that respect. For me, this metric along with my "R" is more important than my daily P&L.
In my opinion, once you’re consistently profitable there are two metrics that I deem VITAL to track if you want to strive to get to the next level in your trading career. Your "R" and exactly how much money you leave on the table daily. If you want to get to the next level and make even more money, dive into that math.
Back to Wednesday:
Sure, I identified the event, but I didn't have enough conviction.
Sure, I got aggressive, but not aggressive enough.
Sure, I nailed a few entries, but didn’t nail enough.
Sure, I nailed a few exits, but didn’t nail enough of those either.
Sure, I had an awesome green day, but not nearly green enough.
Sure, I got my piece of the market, but my piece was too small.
WAY TOO SMALL...
I always preach that Day Trading is not about buying the bottom and selling the top. Rather, it’s about taking YOUR piece of the market pie every day.
Wednesday, I sure got my piece. It was larger than normal, fresh and mmmm so good. But honestly, at this point in my trading career, I should have had an entire moving truck full of whole pies driving up my driveway at the end of the day.
So, I’m sitting here staring at my piece. Most traders would probably be thrilled with the P&L. For me, it’s bitter sweet and I’m pissed. Pissed at myself. I’m better than this!
I will NOT let this happen again:
Next time, I will listen to my gut.
Next time, I will have conviction on my ability to identify an event like this.
Next time, I will be even more aggressive.
Next time, I will still leave $ on the table, but not nearly as much.
Next time, I will have enough pie for a month.
And the great thing about being a Day Trader? There will absolutely be a next time. And a time after that. And after that... That's why we must be ready and have this engrained in our brains. NO ONE can predict when, so we must always be ready.
Before we go, for you avid readers of my blog (thank you!), if you feel like you’ve heard a lot of this from me before you have. In a sense, Wednesday was an intraday Fishing With Dynamite event. For those who haven’t read that blog, simply click HERE.
Remember: When the market giveth, you must taketh. As much as you freakin’ can.
Finally, to all the Veterans out there, THANK YOU for your bravery and dedication to our amazing Country. #VeteransDay
Thanks for reading! Questions? Comments? Reach out and/or leave a comment below.