Hey there VWAPians,
I’ve got a quick lesson for you this morning.
And it’s about none other than…
Can I get a drumroll?
Yes that’s right my friends… It’s about trading.
Yesterday we pounced on a trade in Leap Therapeutics (LPTX).
As simple as it was, the trade was a great example of what trading is all about.
So today I’m going to spend a few minutes harping on it so you don’t miss the lesson.
To top it off, I’m also going to check in on the potential Marin Software (MRIN) trade I scouted at the end of my time yesterday.
And of course, don’t miss my LIVE trading hour at 9:30 a.m. ET…right here.
THIS IS HOW WE DO IT
We traded Leap Therapeutics (LPTX) right off the open yesterday morning.
I got in at 3.33 as the stock broke above the premarket consolidation, just above VWAP.
I was able to take a little off at 3.43 right away and then it quickly retraced, making a low at 3.27.
At this point I said to put a stop at 3.23 for the rest.
This let us play out the trade with just a ten cent risk… 3.33 to 3.23.
And luckily LPTX started to move back up from there.
Sell on the way up
Right again my VWAPians – take some off along the way.
If there’s one thing you’ve learned from watching me, it’s this… you never exit your whole position at one price.
We piece out of it.
This allows us to lock in a winner, but still participate in any further moves in our direction.
So while LPTX was making its move up, I was locking in profits along the way.
30 minutes into the day, A Day’s Pay
At this point we’ve been paid on the way up and we still have a little left to participate if it keeps going.
But I’m not giving this money back, so my stop is going to protect me and capture the last of the gains.
In case you haven’t caught on… We aren’t trying to catch the top.
There’s a lot of meat in the middle and I’m just looking to take a bite out of it.
That’s where professional traders make a living.
Now check out the Marin Software (MRIN) chart I left you with yesterday.
The theory was based on support at 3.53 and the exhaustion of the massive sell off.
If you bought some as it bounced off that level, you could be looking for a little pop from short covering.
The stock was extended from VWAP at this point, so this was a reversion play with a tight stop under support.
The moral of the story – as long as you define the trade, it’s okay if it doesn’t work out.
There was a potential 60 cents (red line) to one dollar (VWAP) in the trade… all on about 10 cents of risk.
And by taking profits along the way, like at 10, 20, and 40 cents, we would be able to manage it the same way we did in LPTX.
MRIN was moving in our direction when my time was up, and I had already said to take some off at a 20 cent gain.
And looking at the chart below, you can see how the trade played out after I was off the air.
Chart: courtesy of thinkorswim
The red line under it was the stop, and the red line above was a 60 cent target.
MRIN made a clean move giving us outs at 10, 20, 40, and 60 cents… and potentially even $1 depending on how you moved your stop after the red line (60 cents) was hit.
Grabbing 20 – 60 cents on an $8 stock…
That would take you 48 years to make in a bank.
And That’s Trading.
Join me LIVE every day at 9:30 a.m. ET and let’s keep this train moving.
Kenny “The Warlock” Glick
3 responses to “And That’s Trading”
September 23 2021