Bulls on Wall Street
Last week, the move to $ DWAC caught the world’s attention. A couple of times a year we’re going to get some insane stock that goes up 1000% in a couple of days.
A crazy move like this always produces some big winners, but it also leaves a lot of broken accounts and pain. It’s a zero sum game.
How do you make sure you are on the right side with parabolic movements like $ DWAC?
Today we’re going to cover the 7 most important lessons you will need to get off the $ DWAC run, whether you traded it or just sat on the sidelines. If you keep these lessons in mind, you will stay on the right side of profitability during the next parabolic move like this one.
Always respect your stop
Without a stop, months of great trading activity can be wiped out in minutes.
Plain and simple.
If you’ve been short $ DWAC or even $ PHUN (the stock that has moved in sympathy for $ DWAC) and didn’t stop or respect it as they hit new highs, you can easily blow your account … FAST. Always have your stop set on any trade and respect it when it hits that level, especially when using a mental stop over a hard stop. Use these strategies to properly place your stop loss:
Act without bias
This stock has caught many with political prejudice. When you trade, you have to leave political views, beliefs, emotions and prejudice behind when you sit at your desk. Trade the chart.
Getting too short OR too long on a stock can be catastrophic to your account and cause tons of problems. Prejudices and beliefs invading trading cloud your decision-making skills and prevent you from making sharp decisions at all times. Just trade the chart and leave beliefs behind.
Pay attention to the size
Overestimating a trade can be devastating to your account if a stock goes against you. Always make sure to match your size parameters and never be too sure about a pull. Even if you were oversized in $ DWAC and the stock was long, a quick down stick can blow your account and leave you in your pocket. Keep the size constant, respect your stop, and act with your mind clear.
Take the volume into account
$ DWAC traded in extreme volume on days 1 and 2.
Day 1: 498 million shares
Day 2: 133 million shares
Anytime a stock trades in such extreme volume, especially on the first day of the move, and not rolled over, it is a very bullish sign. There was a lot of demand in $ DWAC, especially on Day 1, and little supply. Being aware of this situation can help you avoid taking the wrong side of the trade. Day 1 short setups are risky in this type of game. The likelihood of them turning over on the first day of a strong movie is much lower than on days 2-4.
Of course, when you know that there is an overwhelming demand for the amount of supply in the market, the price will go up. Learn more about the concept of float rotation. Economics 101.
Be careful with SPACs
You can trade SPACs (Special Purpose Acquisition Companies, learn what they are) consistently and effectively, and we do it a lot here, but you have to be careful if you don’t know what you are doing. You have basically and technically only limited data on which you can base your trades when trading with SPACs.
Never underestimate a stock
Never underestimate a move a stock can make. It doesn’t matter what the stock is, who owns it, who runs it, or what its history is. Any stock can go parabolic … FAST. Hit and run is the best attitude, don’t stay and pray. I did a quick bounce play last Friday after it dropped from $ 170 to $ 85:
This is a day trade, not an investment. You don’t have to be right with the company in the long term to benefit from the momentum in the short term.
Never track a stock
You hunt, you die. Avoid the FOMO. When chasing a parabolic stock, the bag can be easily held up. Wait for a dip and get into a strong technical setup. Be more afraid of hunting than of missing the train. Patience pays off.
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