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A Winning Trading Strategy

In the past few weeks I have looked at my trades for the past year and realized I don’t have a winning trading strategy.  I have been making a lot of trades with varied amounts of success.  The trades put me in the hole quite a bit and I knew I needed to change something.  I signed up for one of Timothy Sykes’ education courses and hit the books studying!  Follow the links to get more details about those items.  Here are some of my early trades as my education starts to show.

Losing Trades = Learning Opportunities

On 8/29 I watched as GOL, a Brazilian Airline, was on the upswing after bouncing off support around $5.  As the stock pushed higher, I decided to buy in order to capture the momentum.  I bought 911 shares for $5.55 each, total cost $4,997.23.  The price seemed to stall but I stayed optimistic that it would stay above $5 and soon make a move toward $7 or $8 as it had earlier in the year.  On 9/4, I saw the price drop toward $5 and decided to buy more in order to lower my average cost.  I bought 1956 additional shares for $5.12 each, total cost $10,014.00.  My total position was 2,867 shares with $15,011.23 invested at an average of $5.24 per share.

That same day the $5 support didn’t hold and I sold all 2867 shares for $4.98 each.  In hindsight I could have seen this coming.  See the graph below, notice the obvious downtrend?  Despite the $5 support level, when the trend is down it will eventually come to a point, quite literally.   When it reaches this point, it will either reverse direction into an uptrend or fall through support.  The thing to remember is no one knows what it will do.

So the only safe move is no move.  Sure, you could guess and maybe you’d be right, but maybe not.  Either way, it’s a gamble, and to me it’s not worth taking.  This lesson resulted in a loss of $737.66, about 5.3%.  In perspective, I paid $1900 for my educational material.  I now have a firm understanding of what can happen on a downtrending chart.

Ford: Downtrend with Good News

Ford (F) had a similar graph when compared to GOL.  It was downtrending in a similar manner but was slightly different.  They released earnings and the initial reaction was positive.  I believed it could reverse its trend.  On 9/4, I bought 1571 shares for $9.54 each, total cost was $15,007.74.  Turned out I was wrong, the trend reversal didn’t hold.  I cut my losses quickly when the price dropped to $9.35 the next day.  This resulted in a loss of $305.53, about 2%.  Despite being wrong I think this was still a good trade.  They had positive news and were bouncing off a support level.  But it didn’t go the way I thought so there was no reason to stay with it and hope I turned a profit in a few days or weeks.  Hope is not a strategy; I am committed to playing my strategy.

ALERT!

On the morning of 9/5, I received an alert from the education program I bought.  WATT was flying upward and Tim Sykes himself had bought in.  In pre-market trading, I bought 361 shares for $13.94 each, total cost $5,036.97.  I didn’t have any other reason other than the alert to buy this stock.  I did take a smaller position, around $5K instead of my usual $10K – $20K, to limit my risk.  As 9:30 approached, the price jumped all over the $13-$14 range but never went above $14.  Tim had sold out only a few minutes after buying in but I held until the market opened.  After a few minutes the price continued on a downward spiral and I sold when the price reached $13.  Total loss was $349.03, about 6.9%.  The lesson I learned here is not to go blindly into any stock even if it comes from an expert alert.  You need a plan to make a trade, I had no plan.  $350 to learn that lesson.

The WINS!

OK so I’m down $1,392 after making those trades and learning those lessons.  Not everything went wrong, after enduring those losses, two of them completely avoidable, I hit a stride and started making money again.

NLST is a penny stock that had been moving quite a bit this week.  Twitter and chatrooms were buzzing and there was plenty of volume to support a quick trade.  On 9/7 the stock opened at $0.36 after closing at $0.16 the day before.  That is more than double in price!  It quickly moved up to $0.40 before going back to $0.30 in the first 10 minutes of trading.  After touching $0.30 it hovered around $0.31 until it began an upward move.  I bought 35,000 shares for $0.315 each, total cost was $11,029.95.  The chart moved up slowly and seemed to stall at $0.35, when the price retreated I sold.  I sold all my shares for $0.345 each, total sale $12,065.72, a profit of $1,035.77, about 9.4%!  All this happened in the first 20 minutes of the market opening.  I had ideal conditions, no one was bothering me at work.  After this trade I went on with the rest of my day!

This trade was on my watchlist of 6 stocks in the morning pre-market.  As 9am rolled around I checked again and 4 of those stocks weren’t acting like I wanted.  As 9:30 hit, NLST was moving quickly so I ignored the other stock I was watching.  Had this pattern not emerged I would not have traded.  Here is the chart I was looking at as the market opened:

It doesn’t matter that some people held overnight and doubled their money.  It doesn’t matter that the stock now trades at $0.38, so I “could” have made even more.  What matters is that I saw a pattern and took some profits from that pattern.  Don’t get greedy and don’t get scared.  Keep emotions on the sideline and take predictable profits when they are available.  This is the winning strategy of a day trader.

More Victories

With a similar mindset as the trade above, I typically select a few stocks to watch between 7am and 8am, before the market opens.  As it gets closer to 9am, I check on all those stocks again for a strong open.  At 9am I typically cross off any stocks that are not acting favorably.  As 9:30 arrives, the markets open and this is when I look for patterns to develop; the one above held support at $0.30 and began moving up.  I don’t try to predict the move, I wait for the move to show itself and then capture a portion of it.  If the stock moves against me I get out immediately.  No “hoping” because hope is not a strategy.  If you are hoping for a stock to go in your favor, you are better off buying a lottery ticket and hoping you win.

9/11 CVSI was just one of these stocks on my pre-market watchlist, and survived multiple list reductions to be the sole survivor.  I bought 3,000 shares for $5.25 each, total cost $15,754.95.  Within a few minutes I sold them for $5.37 each, total sale was $16,104.48.  This was just another disciplined trade.  Total profit was $349.53, about 2.2%.

The Gap-Up Strategy

Another strategy I am using is the Gap-up strategy.  This is a simple move that is relatively safe.  All you do is look for a stock that made a large move, 5% or more, and see if it closes near or at the high of the day.  The next day, after a strong close, you will typically see a strong opening.  Even when you don’t get a strong open, you will usually have a chance to get back out even.

9/12 No trades in the morning but as 4pm neared I bought 50,000 shares of SGMD for $0.1175 each, total cost $5,879.95.  I was attempting to use the gap-up strategy.  The next day it worked!  The stock opened at $0.1190 and began inching upward.  I got distracted in another trade and missed an opportunity to sell above $0.13.  I did manage to sell at $0.1227 per share, total sale $6,126.52.  Total profit $246.57, about 4.2% a solid profit!

The trade that was distracting me was NIO.  Today I worked from home as hurricane Florence moved toward North Carolina, so I had plenty of time to prepare a watchlist and narrow it down as the market open came close.  I was still holding the SGMD I discussed above so I had to pay attention to that, too.  RIO is an IPO (Initial Public Offering) that claims to be challenging Tesla (TSLA).  The day before it made gains but failed to break through $7.  Today it moved through and rocketed past $7.  I made a typo on my first order and ended up buying higher than I hoped at $7.20.  I bought 1,000 shares for a total of $7,204.95.  A few minutes later I sold as it was rising and distractions from house guests increased.  I sold for $7.49 per share for a total sale of $7,484.83.  A profit of $246.57, about 3.9%!  I made over $500 before 10am!

Final Thoughts and Notes

From all the trades above I netted a profit of $519.53.  Including all my trades since beginning the training course, my profits are $1,558.60!  I have nearly recouped the entire $1,900 cost of the course.

Contributions of $450 in side hustle income.

Contributions from my paycheck totaled $200, $100 each week.

I am finally beginning to feel more comfortable trading!  I am confident in my plans and the profits are proof of concept.  There is still much more studying to do.  Please follow my blog to learn with me and get inspired yourself!

Check out all my trades here at Profit.ly, the social media for traders!  You can keep your account private to create an easy to use trading journal.

Follow me on Twitter for live trades!

Thanks for reading and happy trading!

The Secret Sauce: What it Takes to be a Winning Trader

We all have aspirations of buying into the next Apple or Amazon for a few dollars or even pennies a share.  The problem is the waiting, we all want that return tomorrow.  Take a look at the charts for Amazon and Apple below; a $10,000 investment 15-20 years ago would make you a millionaire now.

I want you to understand something right now, no one knows what a stock will do tomorrow.  Apple is an industry leader with revolutionary products.  One of Apple’s most successful products was the iPod.  It’s mostly obsolete now but they were all the rage in the early 2000’s.  Do you remember the Zune?  That was Microsoft’s competing product, it was a total flop.  Had the Zune become the dominant product, Apple might never have achieved all the success that the iPhone and iPad have brought it.

AAPL was able to build off its success and start the smartphone as we know it today.  Without that initial success of the iPod, we might only remember that AAPL built the first personal computer  then competed with HP and Dell in the personal computer market.  Instead, we have a revolutionary company that leads the tech sector in innovation.

One more thing to note on these charts, look at the dips that occur as the stock price rises.  Some of the dips are 10-15%.  Not everyone has the nerve to ride this roller coaster for this long.

Investing vs Trading

The INVESTMENTS in Amazon and Apple could have brought you fortune if you were able to accurately predict the future 15-20 years ago and had the discipline to hold the stock even during down times.  Trading is very different than investing.  While both are essential parts of the market, but they have very different requirements.  Investing requires patience and diversification.  Trading requires you to be able to gauge reactions in the short term.  The topic of trading v. investing is more complex and I have addressed it further here.

Ok enough is enough, I promised you the secret to profitable trading.  I can bore you all day with definitions and charts.  What does it take?

The Winning Trader

Nothing worth having in life comes easy or fast.  So if you are expecting to stand on your left foot and jump three times and trading success will arrive please stop reading and find another scheme.  The secret to being a winning trader is experience.  Not a special formula or chart overlay.  No amount of artificial intelligence or reading will make you a winning trader.  If you want to learn to trade and get good at it, you must start trading!  That’s it!  Simple right?

Simple, yes, but long, tedious and excruciating.  You will lose money at some point, guaranteed; maybe not your first trade and maybe not in your first week.  The key is to manage your money and manage your risk.  Managing those two items takes, you guessed it, experience!  Before starting this journey I read Toni Turner’s A Beginner’s Guide to Day Trading (follow the link to get a copy for yourself).  She spent the first 4 chapters talking about the mental game of trading.  It wasn’t until chapter 5 that she discussed actual trades and actual stocks.

Trading is a very emotional game and if you have read enough of my earlier posts, I have plenty of tales to tell about losing money when I let emotion get in the way.  You must condition yourself to detach from the trades.  Forget that the money you are trading with is real and your own.  You must concentrate on making good trades and then you will become a profitable and winning trader.  The discipline is only achieved with experience.

Your Next Step

Start trading!  Open a FREE account with Robinhood and start trading for free!  The money is real but they don’t charge any commissions.  I have a full review of the platform here.  Follow this link and when you sign up and make your first deposit you will receive a free share of stock!  What better to start off you trading endeavor than with a guaranteed profitable move?

Thanks for reading and happy trading!  Follow this blog for lots more insights and lessons.  Follow me on Twitter for live trades.