HOW and WHEN to play the markets to your style
On Monday, I reached out to help you all understand WHAT exactly you should trade in the markets.
To this day, the thing that’s always worked the best for me is playing earnings reversals around the VWAP.
That is when if a stock is gapped up, I look to short it and if it’s gapped down I look to buy it.
Today, I want to go over two more concepts that will help you flesh out your own trading strategy — how you’re going to trade these names, and when you are going to trade them.
Both of these seem simple enough to answer…
But if you’re just starting out, you’d be surprised to know how difficult it can be to stick to what works for you. And furthermore, to completely abandon those that don’t.
Let’s get started then with HOW we’re going to trade…
Determining HOW to Day Trade
You have to first decide on whether or not you are comfortable and fast enough to do options on VWAP breaks.
If you aren’t, don’t trade options.
Simple as that.
Options can give you a better profit in the long run.
But if you’re new to day-trading, you need to be careful.
You also need to determine how much you’re able to lose on a trade when it comes to options.
Let’s take TQQQ (the leveraged NASDAQ 100 ETF) to give you an example…
If you’re buying 100 shares of the stock at $25.00, a ten cent loss is a $5.00 loss.
Options multiply that because you are, in essence, buying one contract that is representing 100 shares of the stock.
A ten cent move on a stock could represent a $50.00 loss on your option trade if you buy multiple contracts.
If your maximum loss per trade is $20.00, you have a lot more leeway staying in the stock over the option.
If you can do options however, I know plenty of people that just play options on ETFs or on earnings reversals and make themselves a killing on the day.
On top of options, know your position sizing going into a trade.
Maybe every trade $1000 or $500 or however much you want to put into it, but you must keep it consistent.
Don’t make $20 on a trade and be conservative in your winnings… then blow up your account with an out of the money $1000 loss on a options play.
That won’t only ruin your account, but it’ll ruin your confidence.
Determining WHEN to Day Trade
Ok, what does your schedule look like?
Are you doing this full time? Only have a couple hours a day? Only have a couple days a week?
Whatever your case, stick to it, and stick to those times.
If you can only day trade two days out of the week, that’s fine.
If you’re on the West Coast, and only can trade before you start work, then you have a whole two or three hours in the morning to do this.
If you have all day to trade, five days a week, then try and do that.
But you know what I do? I wake up for the pre-market five days a week, and sometimes my day is done by 10 am.
If I play an earnings reversal and make my day’s pay, I’m done for the day.
I’m taking a nap, or going to the beach. My day is over.
If you’re boss walked over to you at 10 am and told you your day was over, you can go home now…
Of course you would head home.
Know that with day trading though there’s one particular moment that you need to be careful about…
The first 15 minutes of the day.
Options pricing doesn’t make any sense. The market is always choppy. And you have to be quick to be able to get in and out of a profitable trade.
You can trade the opening bell and make a profit, but you can also wait 15 minutes for the market to cool off and get yourself a better setup.
In a different way, the pre-market can be extremely volatile, but extremely profitable.
The problem is that sometimes a stock takes off at 4 am and you have nothing to say about it.
A lot of earnings will come out at 8 am ET, so if you were looking to play the markets around earnings, that’s a good of a time as any to show up.
On the other hand lot of the small biotech firms will release their clinical trials as early as possible in the morning, so there’s no telling when you can play those.
Comments
3 responses to “HOW and WHEN to play the markets to your style”
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February 10 2023
Thanks Kenny! You always give sound advice. My problem is just sticking to my rules which I have based off of yours.
Getting there.
That you. You make it very understandable. I am glad to be part of your VWAP community .
Very respectfully
Harold Lang
I am new to trading and would love to join you.How much support will i get? after all you have all these advanced people joining you?
I have 3 days a week to do this.
I would like to speak to someone before joining.
Thank you