Warrior Trading Blog

Red Shirt is bringing me luck! – Up $2435.00!

red shirt

What’s up, everyone? All right, so finishing the morning here up $2435. Another great day of trading. My red shirt, actually, where is it? Seems to be bringing me some good luck. Two really good days in a row, up 12,000 on the week, over 20,000 on the month. $127,000 on the year, and up $462,000 in my account that I started with $583 in January of 2017.

I’m getting close to that half a million dollar mark. I’m excited, I want to break that halfway point, because my target on this account is a million dollars. It’s going to happen, it’s just a matter of time, but this was a great week, and right now March is looking like it’s going to be a pretty solid month, so we’ll break down all of today’s trades in today’s midday market recap.

What’s up, everyone? All right, so we’re going to break down the trades from today. This was another really solid day of trading. First day back at my home office here, after trading the rest of the week in Malibu, California. It’s nice to be home. Lot of snow. I missed like a 15 inch, 16 inch snowstorm while I was away.

It was nice. I mean, California is beautiful. The weather was great, and it was a nice trip. Got some good things accomplished, but now back at the office, and finishing up the week here with $2435.18. Not bad at all. I mean, two really solid days in a row. Yesterday four grand, five grand, today, 2400. Can’t complain about that at all. This has been a great week.

$12,000 of profit on the week. $20,000 profit on the month. 127,000 on the year. $462,777 in my account that I started 15 months ago with $583. $583, literally. All verified by broker statements. It’s been a wild year and this 2018, so far, has been pretty crazy as well.

Amazing month of January. $117,000 of profit. February, gave back some gains, finished down 10,000. Now here in March, trying to get things put back together and making my way back up to all time highs, which is really, really nice. This week I would say the momentum has been interesting, because it’s been really driven by these higher priced stocks, stocks like ZSAN, Z-S-A-N, stocks like DXR, which was really wild yesterday, and a little bit again today.

And then of course, RKDA. I mean, a crazy move, all the way up to a high of … No, $66. I mean this one’s going to go in the course book for the chapter we have on parabolic stocks. It’s another one that just went through the roof. That’s brought some momentum into the market. Stocks like these definitely scare and put the fear into short sellers, and make them a little bit more cautious.

They definitely do get squeezed out, and for long bias traders like myself, it’s what we love to see. Because even if we don’t fully capitalize on that particular stock, that is a sign of strength in the entire market. We often see sympathy momentum, we see traders who start to want to amp up their share size. I mean, I’m doing the same thing. I’m taking bigger share sizes the last two days, because things are starting to work out.

So you think about I’m just one person. You multiply that by 100,000 traders all thinking the same way, and now you have more volume in the market. Now, the pullbacks get bought up with even more shares of volume, and the breakouts are bigger, and everything becomes more exciting and the winners inevitability do become bigger.

That will continue until we start to see where those places where a buyer start to get rejected, and the setups that are working really well right now stop working. That’s when the long bias traders start to recognize that the FOMO and the buying high and selling higher isn’t working, and we start to get a little more careful.

Short sellers, they see the weakness and they jump onto the short side, and then we get that correction. That correction lasts, usually until we have a stock like RKDA, that goes from $10 to $66. All of a sudden, the emotions are back, right? The fear, the fear of missing this huge winner, and the greed. Wanting to have big profits, and it starts the next round of momentum. The train has left the station now. We’ve got three really big ones this week.

RKDA, DXR, ZSAN. ZSAN today I took a trade on and it didn’t really work out very well. I did step up to the plate with slightly bigger size, 2000 shares long, at $20.71, and $20.80. I tried to sell half at 21.44. That would have been awesome, for 1000 bucks, but I didn’t get filled. I put out another order to sell at 21.12. I filled 600 shares. I sold more breakeven, a little bit more at 21.70, a little more at 20.69. Trying to sell on the ask, trying to sell on the ask, finally hitting the bid at 19.44. This chart’s a little slow to load for some reason, but it did a false breakout.

Which we knew was a possibility over 21, although we also know there was a possibility this thing would go straight to $25, so it was worth jumping in there. With 2000 shares, I actually only lost about six cents per share, which is not bad at all. I mean, this is not … I guess it’s nine cents per share, but that’s not bad at all, considering the price range of this stock.

I managed my risk pretty well on that. One of the things I was thinking about last night as I was driving home from the airport at like 2:00 in the morning, I was thinking about my trading and how far I’ve come with it, and I was thinking about my profit/loss ratios, and about the challenge of stocks like yesterday, DXR, where you want to see this big move. You want to see the stock really squeeze and open up.

At the same time, you feel like you can’t afford to just hold the whole position and let it ride. So, what I often do and we’ll look at AMTX as an example, I’m up 1800 bucks on it, which is good. That’s a good trade. My first entry was down here at $1.59, with 7500 shares. So, if I held the whole thing and sold it up, that would have been $7500 of profit, and obviously you know that’s not how I traded it.

I got in at 57, way, way, way back here, on this first little pullback. Right here at 57. It pops up to a high of 70, and then it drops back down to 56, and of course, I stopped out. I took my profit and I was out. It went to 47. Now, if I had held from my entry right here at basically I think my average was actually 61. I got in at 58, and 64, 65, so I had 10,000 shares at a 62 average, basically.

So, 10,000 shares on the ask here I was up 900 bucks. I was hoping it would open up a little bit more but it didn’t. It only tapped a high of 70 and there was a 40,000 share seller sitting on the ask. I was like, “I’ve got to bail out” and I got out 68, and I sold the rest on the bid.

Now, if I had held that whole position, I would have gone from being up 900 to down 1000, right? On this pullback. This of course could have dropped further. This could have gone all the way back down to 20 and I would have been down $3000. I took my profit, I did the right thing. It then squeezes up, and of course, I get back in.

But when I got back in, I was back in at … KBSF was a good trade. Got back in at 98 and 99, and $2.00, 7500 shares. Here’s the problem there. I’m in at $2.00 right here, it pops up to a high of 2.18, and I start taking profit, trying to sell at 2.17, not getting filled, selling at 2.05, sold the rest at 2.00.

Now, if I had held that whole position, 7500 shares, it went down to 1.92. I went from being up 1500 bucks to down 750. No, that’s why I sold half in here, and stopped out the rest breakeven. Then, I get back in. My next entry was long at 40, right? So, anticipating the break over the half dollar.

We hit a high of 43 and then we pullback. No, we hit a high … Let’s see. 46, I sold at 46 and 48, and then I sold the rest down here. What I’m saying is that I have pretty much a 1:1 profit/loss ratio. My winners and losers over the course of thousands of trades are about the same, and that’s because by being a breakout trader, we are buying stocks very close to the highs.

It’s not very common that we’re able to get a three or four to one profit/loss ratio. Mike gets better profit/loss ratios than I do, because of his strategy of buying support levels and shorting resistance levels. That’s a very different strategy. When you’re buying breakouts, you’re almost always going to have tighter profit/loss ratios.

That’s okay. You just have to make sure that you keep your stops really tight, because if you are selling, I had … Let’s see. Five or six trades on AMTX, the average winner was only about six cents per trade. Obviously it adds up. There’s the proof right there, 1800 bucks is great. But if I had held one of those trades down 20 cents, it would have wiped out a lot of profit.

You have to do two things. Number one, you have to keep your losses really tight. You’ve got to make sure that you’re getting in at places where you’re not risking too much. You don’t want to really risk more than 10 cents on these. That’s number one. Then, number two, you have to have a pretty high level of accuracy because if you have a 1:1 profit/loss ratio, 50% is breakeven, not including commissions. You need to be at like 55-60% to make money. I’m at like 68-70% and I’m pretty profitable, and that’s where you want to strive for. 60-65% success.

Then, once you’re at that point, to be more profitable you just take bigger share size. You take larger positions. But I want you guys just to have that in your mind, that you’re either going to be a breakout trader or … You can be both, but there’s two separate strategies. One is being a breakout trader, and the other is being a, I would almost call it like a support and resistance trader, where you buy support and you short resistance.

Now, in that case, like with RKDA, remember yesterday, or the day before, I shorted resistance. I shorted this up here at $33. That actually had a better profit/loss ratio. I made $2 per share, and my stop was pretty tight. I knew that I wouldn’t let it go very far against me.

The profit/loss ratio on that was better. My problem is that for me personally, I’m not good at shorting resistance on small caps, because number one, a lot of small caps, you don’t even have shares available to borrow. I can’t borrow shares of AMTX. I actually can’t borrow shares of any of these four stocks on my level two window right now, so shorting them isn’t really an option.

And buying the pullback on support, that can work but a lot of times when small caps start to show weakness, they just get hammered down and traders just get afraid to buy them. They really don’t always work that well. Like, look at DXR. Any entry on support here, I mean, you know, it’s curling up now, it’s finally breaking over the VWAP, but I don’t know. It’s not with a lot of confidence. It’s kind of choppy.

It’s up, let’s see, this candle was a high of 15.68, and a low of 14.92. It’s been bouncing in this range here. Now it’s breaking over VWAP, maybe looking a little bit better, but the support entry is a little bit more difficult on small caps. When you trade the higher priced stocks, like I know Mike was trading Tiffany’s today. He’s shorting off resistance levels, so it comes into resistance, he’s shorting it to ride it back down.

Adobe, he’s doing the same thing. He’s waiting for it to squeeze up to resistance levels up here, and then short it coming back down. That’s fine. It’s a strategy that works. It just takes a little bit of a different mentality, and a lot of people I’ve found, a lot of our students either connect with being a breakout trader which is kind of like the high adrenalin, going in with 5-10,000 shares for 10-15 cent breakouts.

You’re buying in near the highs, you want to see it squeeze higher, it squeezes higher, you’re caught in a circuit breaker halt, it resumes, and next thing you know you’re up $15,000. So like KBSF, this was a … I mean, this is a red to green move right here, which I didn’t buy mostly ’cause I didn’t trust it. I didn’t think it would work.

A red to green move is probably the only buying off support that I would do for a small cap personally. So, a red to green move, but then right here, this is a breakout setup because it’s a pullback after the fresh break, and then boom, from 7.24, this thing squeezed all the way up to a high of 8.74. I mean, it made a really big move there which is certainly enough for a quick $10,000 winner.

That’s the high adrenalin, exciting, fast moving stock, and then the larger caps usually when you’re shorting resistance levels, if you say, “Okay, well I’m watching” … Let’s just say for example you’re watching maybe around these levels, 28-29, maybe a little bit around 27 for possible shorts.

With this type of thing, you have these lines mapped out. You’re like, “These are resistance points and I want to short maybe at these levels, and my target is that if it fails, we’re going to go back down towards” … I mean, on the daily chart, you’ve got room for gap fill all the way back down to $21. Let’s say you’re like, “Okay, I’m going to take 100 shares of this at 27, and then if it goes up to 28 I’ll add another 100 shares. If it goes up to 29 I’ll add another 100 shares, which will give me 300 shares with an average cost right around this $28 level.”

Then, that’s when you start to work your way into it, adding at these resistance points, and then here, you finally get that rejection and it works. These trades often are longer holds, you’re holding for 20-30 minutes, half hour, maybe multiple hours, and you’re working around core positions. You take starters, so it slows things down, some traders prefer to have things a little bit, just move a little bit slower.

For me, for whatever reason, I have just always liked to go in big, get a winner, and then get out, and be done. Even though it’s riskier in the sense that I’m taking big size and if it goes the wrong way, I could potentially lose thousands of dollars, it feels less risky to me, because I’m in at a breakout spot, and it’s kind of like it either is going to work right away or it’s not.

So if it does, then I’m right out, but in the case of this type of trade, you might be holding it for like 20 minutes, and you’re like, “I don’t know. Is it going to work? Is it not going to work?” And I want to know right away. I don’t like to wait. It makes me feel uncomfortable, it makes me feel nervous. I’d rather just get in and have it work right away, or not work right away, and then I’m back out.

That’s just the way I trade. You can be a breakout trader and try to trade a slightly different version of it. You don’t necessarily have to be really, really fast. ADAP, this one yesterday, you could have taken some trades. You could have held this for a little bit longer. You could slow it down and trade off the five minute chart, and maybe off the 15 minute chart. You totally could.

I find that what I get frustrated with is taking a trade like this on the five minute chart, and RKDA is actually a good example of that yesterday. I’ll go back and look at that trade. Take a trade on the five minute chart … No, sorry. Not RKDA. DXR was a good example yesterday. You take a trade on the five minute chart, which I did right here, and then this … So my entry was right here, the first candle to make a new high.

It pops up to 10.18, it drops down to 10.72, or 9.71, and ends up stopping me out and then running. Again, it’s frustrating because when you step back and look at it, you’re like, “Oh, that ended up working” but inside this period of time, it squeezed up a dollar and a half and dropped a dollar and a half. Even with only 200 shares, do you really want to go from being up 300 bucks to being down 100?

To me, that’s not logical. If you’re up 300 bucks, you should take the profit and get out, but that means you’re always buying breakouts. ‘Cause let’s say it does drop, but then it goes higher, now you’re getting in higher, and where’s the logical spot? Again, it’s at the breakout. Now you’re buying the breakout here at 11.68, which is what I did. Getting in here, adding at 12.30. But of course, if you’re in at 12.30 and it’s up at 12.80, you’re up 50 cents. It’s hitting high of day. The right thing to do is to take profit.

And again, you keep doing that and you get into this pattern of being a breakout trader, which is fine. You can be profitable with that. It’s just, it’s important for you to have that moment of asking yourself what type of trader you are. “Do I want to be a breakout trader? Do I want to go in for the fast trades? The quick entries? The quick exits?”

Even if you’re doing it on the five minute chart, it’s still breakout trading. Or, do you want to be a support and resistance trader? That’s the question to ask yourself, and hopefully you’ll find, based on your risk tolerance, and your comfort level using hotkeys and taking these kind of trades, you get a sense of what is a good fit for you.

There’s thousands of different ways to be a profitable trader. What works for me works for me in large part because it’s a good fit for my personality. What works for Mike is a good fit for his personality. What works for you will be a combination of a couple different things. It takes time to find that perfect combination, and to really own your strategy.

All right, so anyways, just some food for thought there, and again, finishing up here, a great week. $2400 on the day, 12,000 on the week, 20,000 on the month, 127,000 on the year, $462,000 in my account that I started with $583.

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