Ever been stopped out of a trade just to see it run without you a short time later? I HAVE!
If you’re an active and defensive trader, you probably see this from time to time. In some choppy markets like we've seen lately, you may see it frequently.
For many, it’s difficult to jump back into a trade a 2nd time after they took a loss on the stock. Just like the old saying goes it's hard to jump back on that horse quickly after you just got thrown off. Today I’m going to talk to you about why I think you SHOULD jump right back on.
While we’re talking today please remember one other thing I strongly believe in: what happened on your last trade should have ZERO impact on your next trade. You can read about that HERE.
Before we dive in today, please understand one other thing too: I only recommend trading the 2nd Mouse if you’re trading actual proven A+ Setups. If you’re a "random dart throwing" trader and you try to implement what I’m talking about today, you’re simply throwing another dart. This will make your trading worse not better. So rather than reading my blog today, please go learn some A+ Setups and then come back to this. Consider learning about Inflection Points HERE.
Wayne, how do I know if I'm a "random dart throwing" trader or not?
Simple: Go look at your win rate.
But I don't really know what my win rate is, especially on specific set ups. I mean I kinda know my overall %, but...
My thoughts on this: When are you going to start taking Day Trading seriously, treat it with the respect it demands and start tracking your freakin' trades?
For you A+ Setups ONLY traders, let’s jump in!
First, let’s define the 2ndMouse Play.
You take a trade (again, a trade that was an A+ Setup) and it doesn’t work too well, if at all. Often times, especially on "Whole# Inflection Point Breaks" on more crowded stocks, you see a quick buy stop run or some other move that was not what you were looking for. Then sometime later, you see the EXACT SAME A+ Setup set up again! It’s like déjà vu. The "sometime later" can be 2 minutes, 20 minutes, 2 hours...it really doesn't matter. What does matter is that it's the same A+ CLEAN Set Up you took the first time. Clean chart. Clean level2.
Here’s a chart example of my favorite pot stock $TLRY:
In the A+ Inflection Point Setup above, you can see it broke through $80 and quickly failed. About 40 minutes later, after staying in a tight range, it sets up again. This time on the break, it runs to $82.25 after doing the flush and go! That's a text book trade straight out of our course. And that's $2.25 above the entry. Some nice R!
Here's another example on $CGC (please note, the chart below is 1 minute candles so we can really zoom in and see how clean it was):
I like this $CGC example because it shows these can happen anytime during the day. The time it takes for the 2nd Mouse to set up can be minutes or hours. In this case, just a few minutes. The chart doesn't show it but the stock ran to $49.46 after the entry. Nice R again! And yes, you needed to use BID SUPPORT to stay in on that little pullback you see. It was crystal clear support on the tape and it only went down to $48.02.
One thing I want to clear up. Many get confused because technically in the $CGC example the trade we took was the 3rd break through $48. Same could be said for $TLRY. However, neither example was an A+ Setup on the "early high" break. We don't chase upside shape. When $CGC first broke $48 and popped to $48.10 around 9:33am THAT WASN'T AN A+ SETUP and I would have never taken that entry. When $TLRY first broke $80 around 11:15am THAT WASN'T AN A+ SETUP and I wouldn't have taken that entry either.
Many of you may be wondering, is it a good idea to avoid the first setup all together and wait for the 2nd mouse? My answer, ABSOLUTELY NOT! You have no idea if the first setup is going to work or not. MANY "first mouse" setups work all the time. This isn't about "waiting out" the first break. If you do, you're going to have way too many trades run without you!
We saw SEVERAL of the 2nd mouse plays work well the past couple of weeks, these were just my 2 favorite examples. If you were trading with us in chat, you may have heard us talking about them. I captured the GAME TAPE of how $TLRY played out LIVE in chat. So if you're interested, give it a watch. What you'll hear is exactly how we talked through the trade idea in chat. Plus you get to see the trigger on the trade.
Please note: to watch the video, simply click HERE or the picture below. This will open a new window in which you can watch the short 6 minute video. When you're done, please come back and finish reading and maybe even leave a comment on how you liked the game tape!
Remember, the dead mouse on the trap took the risk for the cheese and got killed for it. He can’t get the cheese, he’s dead. Then the lucky 2nd mouse comes along and takes the prize. Luckily for you as a Day Trader, as long as you don’t risk too much on the first trade, you’re still alive and can go take the prize. Unlike the 2nd mouse, there’s no luck involved. You just have to push that buy button when you see it. Often times when you DO push that buy button on the 2nd mouse, you wont' find yourself lying dead in the trap, rather this will be you:
Enjoy the Super Bowl! GO SAINTS! Oh wait... Go any team besides New England!
Thanks for reading! Questions? Comments? Reach out and/or leave a comment below.