- Pete welcomes viewers to the Monday edition of Stocks for Breakfast
- Will discuss the bullish turn in the market on Friday and what it means for trading this week
- Will map out the S&P 500, look at sector rotation, and trading ideas to watch
- Will also share insights from recent coaching session on adapting to different market conditions
Summary: Pete introduces the video and previews the key topics he will cover, including analyzing the market’s bullish reversal on Friday, mapping out potential trades for the week ahead, and sharing lessons on adapting trading based on changing market conditions.
Analyzing the Market Reversal on Friday
- Reviews the bullish “U-turn” candlestick on Friday for the S&P 500
- Contrasts Friday’s action with the bearish tone over the prior 3 weeks
- Discusses how Friday’s reversal sets up a potential relief rally this week
- Expects S&P 500 to rally back toward 446 level which will be a pivotal point
Summary: Pete analyzes the bullish reversal in the S&P 500 on Friday, noting how it contrasts with the bearish momentum over the preceding 3 weeks. He expects this reversal to lead to a relief rally this week, with 446 being an important resistance level to watch.
Jackson Hole Meeting and Implications for Trading
- Notes the Jackson Hole meeting this week is important for monetary policy
- Market does not like indecision, prefers clarity from Fed on inflation outlook
- Expects a “stress-free” week for trading with not much major news
- Nvidia earnings on Wednesday will be important to watch
Summary: Pete explains how the Jackson Hole central bank meeting this week could create some ambiguity on the inflation outlook, which the market dislikes. Still, he expects a relatively calm trading week overall, with Nvidia earnings being a key event.
Adapting to Current Market Conditions
- Given less than perfect bullish conditions, take smaller initial positions
- Implement more two-sided plays and “hedging” strategies
- Great traders adjust risk based on changing market conditions
- When market is not obvious, be more cautious and flexible
Summary: Pete stresses the need to adapt to current market conditions, which are less bullish than earlier this year. He advises starting with smaller positions, using hedging strategies, and adjusting risk based on changing conditions.
Examples of Sectors and Stocks to Watch
- Energy remains a top sector, giving examples like EQT and MTDR
- Also highlights potential opportunities in retail/leisure stocks
- Goes through ANF, ROST, TJX as retail names exhibiting strength
- Waiting for confirmation before entering new swing trades
Summary: To illustrate finding opportunities in the current market, Pete highlights energy and retail sectors. He analyzes a few stock charts in these sectors that are showing relative strength, but notes he will wait for confirmation before entering new swing trades.
Key Lessons on Adapting to Market Conditions
- Great traders adjust position size based on market conditions
- Need to know what “perfect” conditions look like to identify when conditions are less ideal
- Apply right position sizing based on setup quality and likelihood of follow through
- Win percentage metrics overhyped – small losses and managing risk more important
Summary: Pete concludes by emphasizing key lessons on adapting to changing market conditions. This includes adjusting position size based on an assessment of current conditions, ideal conditions as a reference point, setup quality, and follow-through likelihood.
He argues win percentage metrics are overstated, while managing risk is more important.
In today’s video we discuss a strategy to hedge that makes it easier to manage volatility. Pete shares the story of a legendary trader he used to work with who made $3-5 million per year by expertly hedging his portfolio.
This hedging strategy was used primarily for day trading by one of the most profitable traders that I’ve ever met. But it works for swing trading as well.
Hey everybody, it’s Pete. Welcome to Stock Trading Pro, and thank you so much for joining me here today. This is the Monday edition of Stocks for Breakfast. We have a ton of stuff to talk about. I’m actually going to dive into a book that I bought when I first started trading way back in 2000. We’re going to map out the week.
A bullish U turn in the entire market on Friday, which sets up a really interesting play this week. So we’re going to map out what the market’s doing. We’re going to break out the difference between the S& P 500 for the week versus on Friday, what that means for trading this week, how I’m setting up my ideas for this week, the sector rotation.
Which is something that we rely heavily on sector rotation and stacked order flow is very light heading into this week. However, there’s something called buying in the hole, which is really interesting, and I’m going to map that out for you today. One of my friends, Mark, who is one of the most.
profitable traders I think I’ve ever seen. I’m actually going to talk about two today. Mark and Andy. Mark, probably one of the most profitable traders. Andy, probably one of the most consistent. And we’re going to talk about how and why you should be thinking like a hedge fund right now during earnings season, and especially this week.
We’ve got a lot of stuff to cover this week, and we’re also going to talk about What’s going on in Jackson Hole and whether or not that’s going to affect our trading for this week. So we’ve got a bunch of stuff to map out this week. I’m going to walk you through the daily ticker, go behind the scenes.
Plus, something very important, which kind of applies to this book, is I’m going to take you behind the scenes. Every Saturday we have our Swing Trade Gate Plan session to set up this week in our private community. We had a segment on Saturday where we discussed the difference between great trade setups.
And how great traders adapt to the different market conditions, which actually today is going to take us into hedging as well as position sizing and why win loss percentage is the biggest bunch of garbage you’ve ever been sold on in your life, and I’m going to prove that to you today. So we got a lot to talk about today.
I’m really jazzed up for this week, especially the way the market closed on Friday. Stick around. Be back in just one second.
Okay, so obviously everything we talk about here is for educational purposes. It’s up to you to make the final decision. It’s up to me. It’s my mission to help you make better decisions. So we’re actually going to start right out. We’re going to map out the S and P 500. Hey, Joseph. Good morning.
How’s it going? So we’re going to actually start out here. So this is what the market looked like on Friday, right? Pretty darn good. Now, What exactly does that mean? And how does that tie into how we should be trading this week? We need to put it in context. Remember, if you know what you’re looking for, you’re never lost, right?
That’s a phrase that we use quite a bit on this channel, but that means you need to put price action into context. So when you look at what the price actually looked like on Friday, and then compare that to what it looked like over the last. Five days and then even drop that down a little bit more into the last month, you can see it’s longer term large caps are actually performing relatively well, I should say, even positive right over the last month, but it’s over the last week that stocks have just absolutely been getting beat up.
So we work our way over into what that means in the spy this week and how I’m mapping out the trade. This is really the big thing that we’re talking about on Friday, which is this U turn, okay? So if you happen to be new to the channel, and you’re not familiar with I got an itch on my nose. Does that mean you’re going to get into a fight?
I don’t think that’s an old rumor, right? So if you’re relatively new to our channel, or relatively new to the way that we teach things, One of the biggest things is we talk about individual candlesticks must be put in the context of the bigger picture. So when you take a look at what we’re looking at here, this is what a bullish U turn looks like.
And I think it’s very important to understand the context. So a U turn. A bullish U turn implies that there’s some previous price action that there was buying pressure without getting into the details of stacked order flow or dynamic rotational optimization, which is a big part of what we do behind the scenes.
A U turn is essentially an individual candlestick with a recent momentum. In this case, the recent bearish momentum. has reversed and we’re looking for that to be either an entry signal into a new buying opportunity, or if it happens in a downtrend, it’s when you would move down your trailing stop loss to book a profit.
So you might want to take a screenshot of that picture right now. Okay, so this is setting the tone for the week. So coming into the week, and again, I want to make sure that we have this on the video and so you can actually have this mapped out in your head. This is what we have. If we work this chart a little bit more, you need to understand what price action you are looking for.
And right here on this gap down, which kind of coincided with Tesla and a lot of other stocks, Having that bearish gap down, including Apple, right? We could just really give some context here. You can see Apple gapping down and Tesla gapping down almost exactly at that same moment in the spot, right?
So what happens is when we start to pull back, it’s nothing more than a pullback until we have what we might call a confirmed change of order flow, right? So it’s a potential change of trend until that moment is fulfilled. That we finally roll over. So the context, the visualization that we need to have heading into Monday is we have initial bearish order flow starting, but Friday was a bullish reversal of the momentum.
So we have to separate order flow from momentum. So I want to be clear about this. And we’ve mentioned this in the past, when you get this moment in time where you were just shifting from one type of trend. to the other. That’s the toughest moment because you can go right back into what previously happened or shift over and everybody’s caught on the wrong side in that new order flow.
In this case, new bearish order flow takes over and we were heading there last week where it looked like we were going to collapse and then lo and behold, Friday comes in. So let’s talk about this like friends. Let’s really be adults here and let’s not pretend. Okay. The last three weeks, if you are a bullish buyer of stocks, if you’re only long and you just buy stocks and you don’t look to short sell, it’s been a tough three weeks for you.
You probably got a lot more gray hairs and let’s just be honest, get all the YouTube garbage out of your head where everybody’s yeah, you should have killed it. It’s been three weeks of tough trading. However, this week, it looks like, and especially with Jackson Hole going on at the end of the week, it looks like we’re going to have stress free where there’s not a lot of massive news, other than NVIDIA, which we’re going to touch on in a second.
And it looks like the market, based on Friday, based on the follow through that we’re getting this morning, should see a slight relief rally. Now we need to put that relief rally in context. We just talked about the fact that we are in a confirmed initial move on the bearish side. So what we are probably looking at here this week is a rally back up to this level right around the 446 level.
So that’s how I’m mapping out the week. Now, what does that have to do with this book? And what does that have to do with what I want to show you from our coaching call from last week? Great traders, okay? Those traders that separate themselves from everybody else understand that we have all of that information leading up to the trade.
And I just primed the pump for what I’m looking at heading into the week. What I’m expecting. So we have less than perfect bullish conditions, but we have a bullish reversal. So for those of us that a little bit more active, maybe looking to make a few trades a week, we’re not talking about day trading here.
We’re talking about the biggest picture and what’s going on. If you’re not familiar with what’s going on this week with Jackson Hole, that is essentially this. So Jerome Powell and Oelde Bigwigs are in Jackson Hole, and Jerome and assessing the inflation fight and the future, right? So what does that basically mean to us? We know that the market does not like indecision. The market likes clarity so that we can risk our money and have a highly likely chance of it following through in the direction that we expect. So what does that mean for this week?
What does that mean for this book? And what does that mean for the coaching call? If we know what perfect looks like, everything away from perfect means you need to adjust your expectations. You need to adjust your position size. So here’s the biggest thing that I want to get across to everybody. And I really hope you take this to heart.
Okay, some market conditions are perfect. We probably had as close to perfect as we could in May through July. So if you’re not familiar with what I’m talking about there as well, we kind of hop on over and we take a look at where this move actually started. You can see we broke out and there really wasn’t that much stress.
During that period of time, and that’s a time when you would size up, maybe hold a little bit longer. Now this is the part that I want to get across. Your position sizing matters. Your expectation for profits matters. Every single trade is not the same. When you finally admit that different trades require different risk or call for different risk, call for different expectations, you level up your game and you start to trade different risk based on the conditions.
And again, I love to keep things simple. It’s the same thing as you know when to step on the gas. And when you’re in stop and go traffic and you break gas, and we’re more and use the break, use the gas, use the break, use the gas right now, which means we need to adjust to the market conditions.
And now this is the part that I’m giving you a heads up. I want you to screenshot this part because this is a outline from a meeting that we had. It was again, part of our weekend swing trade session. Where I walked everybody in our community to recognize these different market conditions sorry about that, and recognize how you’re supposed to trade when those market conditions happen.
So you’re going to want to screenshot this. I’m giving you a little bit of a heads up. So remember, we’re talking about how the market traded on Friday. How the market looked for the prior week, how the market looked for the prior month. It’s not clear at all. So let’s just be clear about that. Let’s be clear that it’s not clear, right?
But more importantly, what does that mean for trading? This is really where you start to separate yourself. And this is really where you understand. If you’re going to put your money in harm’s way, you better understand when the condition is amazing, but when it’s eh, okay, I’m going to put a little bit into the deal and if I get positive feedback from the market, then I’m going to put a little bit more into the deal.
Some deals go in there a little bit more aggressively because everything is lining up. The market’s lined up, the sector is lined up, the groups have lined up, sun’s shining in and you get the perfect entry. We are not in that situation right now. So I want to walk you through again. You’re going to take a screenshot of this because it’s important.
So I’m going to walk you over into our coaching session from from Saturday, which was actually a game plan. Basically, this is the part that I want you to highlight here and take notes on right? Great setups versus great. traders. Now, here’s the thing. Anybody could find a setup. Anybody could see a bull flag, a bear flag, a breakout to all time highs, right?
A moving average crossover. Great traders put that setup in the context of probability and stacked order flow. Stacked order flow means that smart money has institutional attention on a stock and they are coming back day after day, week after week, paying higher prices, holding higher bids, and you find an optimal entry.
But, inexperienced traders first go for the setup. Just tell me where to buy, just tell me where to get in, that’s all I need. And they don’t factor in the odds of follow through if they’re stacked order flow and what that means for how much you put into the deal. Great traders, and I’m going to use LJ as an example.
LJ’s been in our community for a while now and his growth is just absolutely amazing. We were fortunate to have a one on one call a few weeks ago. This is the big thing I want to get across. Okay, adjusting your risk based on market. Conditions. Okay. Now here’s the part that I want to get across here and I’m actually going to bring this over.
I’m going to head back over. I’m going to come back to this, but I’m going to head back over into our newsletter for the day. Okay. This is the part that I want to talk about here. Okay. And let me actually zoom this in a little bit because this is really important for the week. All right. After a three week decline.
So now we’re setting the tone. We’re setting what’s going on for the week, but giving price action context. Okay, the tape is showing signs of life. So what we’re talking about now three week decline is order flow buying and selling pressure in this case selling pressure over the last three weeks. But the tape is showing signs of bullish life.
The tape is we’re answering now. Is it still valid? Has anything changed? Okay, and we’re implying something has changed. because these bullish U turns with heavy volume were littered across my scan. So what does that mean? Again, just to be super clear, this is the tape, right? And especially here over the last week.
This is the bigger picture of order flow, and this is what things look like on Friday. If you’re new to the channel, or if you’re new to trading, first of all, please give me a thumbs up and hit that subscribe button if we’re doing a good job. But here’s the big thing I want to point out. The hardest part of trading is knowing what you’re looking for.
So even if you just started trading yesterday, it doesn’t make a difference. You need to answer the question, is it obvious? And then the question after that, yes or no, and what do I do? That’s what we’re talking about right now, okay? Alright, so working our way through. Bullish U turns with heavy volume, so we’ve got the context of the entire trade, right?
This is where long term traders separate themselves from everyone else. My friend, Mark, used to call it buying in the hole, all right? A deep decline, maybe even a confirmed change of trend from bullish to bearish is a reason to hesitate, but it’s the right play to look for a long. Okay, now here’s, this is the separation, this is the important part.
Friday’s price action tells me to expect a rally. For the SPY, the upside target is around 4. 42, which is what we just, 4. 44, 4. 46 is what we just mapped out, right? That becomes a pivotal point. As Jesse Livermore would say, if you’ve read Reminiscence of a Stock Op right now, why is that a pivotal point?
Why? Before the market even opens on Monday, we’re asking the question, why? If now, here’s the if then scenarios. If this happens, then I plan to do this. If this happens, that means this, right? If the market can trade above Friday’s high, which is follow through on the strong close with heavy volume.
If the market can close above the opening price, and we say the market, we’re talking about the NASDAQ, the SPY, and the DOW. Those are three indicators that we use when we bring the market into the picture. If they can close above the opening price, if they can close above Friday’s high, and if they can close near today’s high, And if we have higher volume, what does that mean?
A big green candle with volume. That’s what we’re looking for today, right? If that happens, then we’re looking for that run towards 444, 446 in the S and P 500. And then that’s going to be a pivotal moment on whether or not the bears sees charge. Like they take control and say, no, we still here. We’re not going anywhere.
And we start to push down again. What does that mean for you as a trader? Number one, and number two, what does that mean if we punch through that level and start to head back up again? I personally think earnings season has not been spectacular at all. And again, remember, NVIDIA earnings this week is very important.
So that means that I’m actually expecting more two sided trading based on the way the market’s trading. So remember, bullish move, first part of 2023, everything going up for six, seven months. What we’re looking at right now and a very high probability is we’re probably going to do more of this back and forth.
Now, again, being the good traders that we are, what does that mean for position sizing? What does that mean for the types of trades that we’re going to be putting into the market? This is where the term hedging comes into play. So my friend Mark, he used to talk about buying in the hole, strong stocks, deep pullback, getting what he might call that tier one position.
Looking for an initial piece back in the direction of the buying power, because that’s all he ever traded. He was only long. 98% of the trades were buying opportunities versus shorting. Compare that to somebody else that was in the firm, probably one of the biggest, most profitable, consistent traders.
Mark’s P& L was probably more like an EKG pattern. This other trader was very smooth and made a small fortune, okay? Now, the reason his P& L was a little bit smoother is he implemented when the market was a little bit less than obvious, he would use a hedging strategy as opposed to simply buying more aggressively in the hole or buying those deeper pullbacks.
He would actually be short selling either straight up short selling individual stocks or buying puts in weak stocks while he was also legging his way into buying opportunities. And this is all going to tie together with how I’m looking at the market this week and maybe even for the rest of the year.
Great entries happen when you take action with confidence, but here’s where most traders get it wrong. And I’m actually going to highlight that so that it’s really bold there, right? I’m not talking about confidence that stocks are definitely going up. I’m talking about confidence that you’ll do the right thing if they don’t, okay?
The number of stocks that meet stacked order flow declined by roughly 75% from a month ago. And we can actually see what that looked like, right? There’s the last month. A month ago, the majority of these stocks were green. So you can see that two thirds of that has now diminished. So again, we’re not guessing, we’re not predicting, we’re not forecasting the future.
We’re using the information of what’s happening and what does that mean. And I’m going to bring that all the way back to this book that we’re looking at. All right, we can’t fight it or dream of early 2023. The beautiful moment is over. We only have now this is a big lesson for traders. We’re not trading the AI fuel catalyst that we had basically from March through July.
That’s kind of bloom is off the onion. We’ll see what Nvidia does. And NVIDIA, I believe, is scheduled to report on Wednesday. Let’s just confirm that. Where the heck is it over here? Right here. Okay, so it looks like NVIDIA is scheduled to report on the 23rd after hours. So keep that in mind.
Okay? So continuing to work our way through. Let it go. It’s done, right? But here’s the thing, and I’ll get back, now I’m going to get back to the book. Adjusting to the current market means a couple of things. Number one is less initial share size. So again. You see what we’re talking about here? Step on the brake, step on the gas.
Right now we’re at a little bit less obvious. We’re in stock and we’ve got traffic. Maybe it’s raining a little bit. A little bit less initial position share size because the market is not on my side. But because we can see some bullish ideas, sector specific plays are the top priority right now. So that means that if we work our way over into individual sectors, We are now going to be looking for pockets of opportunity because the energy is probably the strongest pocket of opportunity right now across the board.
That’s one thing. Okay, let’s continue to work our way through. Second is more two sided plays and thinking like a hedge fund. You might call it hedging to protect your gains on stocks you own. Hedging can be a great strategy to stay in tune with the market. It allows you to hold long term position. Now I’m going to, just allow me to just go through this, okay?
In this video right here, which you can find the link to this below this video in the description. We discuss a strategy that makes it easier to manage volatility. And we share a story of what I believe is a legendary trader that worked in Florida, actually, who made a consistent three to five million dollars per year by hedging his portfolio.
Okay, now here’s the thing. I want to be clear about this. When the market is screaming in one direction, The smart play is to be directional and build a more aggressive position and hold longer in that direction. I want to be clear about that. What we’re talking about right now, where there is indecision, a potential change of trend, and less clarity on the big picture.
We just showed a three week downtrend in the SPY, the DOW, and the NASDAQ. That’s a little bit more two sided. So hedging means that you are playing both sides of the market, either protecting your long positions, Because if you hedge and you’re betting the market goes down with either puts or short selling.
This stuff going down is going to make money if the market goes down and you are protecting those longer term positions that you want to hold. Now, in that video, again, you can get the link in the description below this video, Andy was a little bit more aggressive. The video talks about him doing it on day trading and 3 to 5 day swings.
That might be a little bit more active than you might want to be, but it doesn’t matter. You can do the same thing on weekly charts and a little bit longer time frame. Essentially what Andy would do is he would work his way into those positions. If the market was going up, he would look for stocks that have relative weakness.
And then there’s a whole strategy around that. That’s now going to take me back to what I want to show you from the coaching call on Saturday. And again, you can take a screenshot of this because I think it’s that important. Okay, and then I’m going to talk about the book. Alright, so we’ve outlined this as great setups versus great traders.
Okay, I’m going to walk you through the outline. Okay, strategy focuses on order flow stacking. So order flow stacking is basically determining, is somebody in charge? Do certain stocks have institutional attention at that moment? Long term mindset managing positions based on market conditions. So that’s what we just talked about.
What are the current market conditions? That’s job number one when you look at the market. Don’t look for entries until you have an answer to, is it obvious? And right now, the answer is no. If the answer is no, that automatically means that we need to adjust our exposure based on the current market conditions.
The only way to do that is to know what perfect looks like in the first place. Here’s the thing, and this is how I described it to everybody on Saturday. The only way to know that the conditions have changed or that the conditions are less than perfect… Perfect is you first need to know what perfect looks like, because if perfect is here and you feel good about getting in there, anything less than perfect automatically means you need to adjust your expectations for profits, which means how much is likely that you can earn, which also means you need to immediately adjust how much risk you’re willing to take on the initial trade Because you’re less than perfect on the scenario.
So all the way, all of that brought back to one thing, the very first thing you need to do before you hit that buy button is you need to assess the conditions. And how strong or how obvious is the market condition in that moment, which kind of takes me to this book. This is a really older book, and I really want to give everybody a heads up on it’s from 1999.
So I bought it in 2000 and this is the name of the book, okay? The Trading Game by Ryan Jones is the author, Playing the Numbers to Make Millions. So essentially what this book talks about, he goes through a whole bunch of different betting strategies and share size strategies and that kind of stuff.
Essentially what this book does, it’s a whole introduction to what we’re talking about right now, which is understanding the numbers of whether or not the conditions are awesome and how you should, great, again, this is setups versus great traders, how great traders like Mark and Andy adjust their position size up or down based on market conditions, based on the likelihood of follow through, based on whether or not they recognize certain stocks, sectors, or the entire market has what we call institutional attention, which means they are putting real money on the line day after day, week after week.
And we can’t say that right now. Other than energy stocks, you want to write that down. Energy stocks and some retail stocks, which I’m going to get to in just a moment. So I’m going to go through the rest of this, okay? Once you know what PERF looks like, it allows you to identify and adjust when conditions are less than ideal.
That is critical. Ask yourself the last time you looked at a stock or looked at the market and said, Wow, maybe I should adjust how I’m looking at this thing or how much exposure I want, simply because that’s what it calls for. Okay? Apply the right position sizing based on the quality of the setup, which includes, obviously, is there stacked order flow or not.
And having conviction to increase exposure on high quality setups, move up the position size as you get positive feedback, hold for bigger targets, and what we call using the profit maximizer. This is a very important part of trading that makes trading 80 million times less stressful because you’re only taking more risk.
Only accepting more risk when the market conditions call for it. Now, probably one of the biggest things I want to get across here is, let’s just talk about it as friends. The market conditions the last three weeks have been tough. And let’s get a visual of that because it’s really important.
We kind of hop on back over here and look at the sector rotation for the last four weeks. This is what the market has given us over the last four weeks. So I want to ask you a question right now. Have you, if you’re an active trader, have you beaten yourself up for not making more the last few weeks the same way that May through July was absolutely amazing?
If that’s the case, again, you need to know what perfect looks like before you can say you traded well or you did not trade well. Everything that I’ve been talking about inside of our private community for the last four weeks has been, this has been tougher, manage the downside, it’s the smarter move right now to lower exposure, and before you beat yourself up and say, I should have, I could have, my god, I’m mad, I wish I would have made more, ask what was available.
Let’s look at that one more time. That’s what was available, okay? When the market is offering scraps And you get mad at yourself. Stop. There’s no other way to put it. The proper risk management for the last four weeks has been very sector specific again, as we’ve been talking about energy stocks, consumer cyclical and a pocket of healthcare stocks, which have mostly been drug manufacturers.
Amgen and AbbVie and a couple of stocks like that. So you need to know that if you had trouble finding the bid the last four weeks, trouble finding your groove and finding some opportunities, you got to take a step back and say, you know what? I found some good ideas, but they didn’t follow through. It’s okay.
Because I managed the downside. I had the right share size because maybe the market was a little bit less than perfect. And if they didn’t follow through, I kicked them out. I paid the expense and I managed my account. That’s good trading. So when you understand the difference between what we had from May, let’s say May through July, and what we’ve had now, and how that translates into what was available, you start to up level where you’re no longer at the mercy of the markets feeling guilty or feeling bad or feeling like you underperformed.
Once you have that side of the market under control where you now know what you’re looking for and you start to take the appropriate risk based on what’s available, you don’t get mad at yourself anymore. You don’t get disappointed. You know where you get disappointed. You get disappointed when you got great conditions and you don’t make enough or hold longer or size up when the market conditions are great.
Which is the whole point that I want to get across about win loss percentage and everybody out there on YouTube and social media saying win loss percentage. What’s your win loss percentage? I’m going to challenge you. Who gives a shit? I don’t care about my win loss percentage. I could make money on 40%.
Never mind this 90% garbage that people are talking about, because I guarantee you, if they’re talking about a 90% win loss percentage, they’re cutting their profits short. I can virtually guarantee that. What we should be focused on is finding good ideas, accepting the appropriate risk, and then scaling in if the market conditions were less than perfect, but they started to follow through, or thinking a little bit more aggressively when the market conditions are fantastic.
I’m telling you straight up, small loss, small profit, small loss, small profit, and a few trades follow through, and those are the ones that pay the bills. I don’t want to be banging out a thousand trades a week. I don’t care about that. I want to find a few good trades that make sense per week. And quite honestly, more often than not, I could find at least one good swing trade per day.
Some have amazing market conditions. Some have okay market conditions. And now you know we can take both of those trades, scale into the one with a little bit less than perfect, what we might call a probe like Jesse Livermore did, a tier one position, or better conditions. And let’s talk about energy stocks right now.
Let’s actually work our way down through that list. And we go on over into sector rotation. Sparse field of bullish ideas, but energy remains the top of my list. So we work our way through this list and we go through EQT, MTDR. Now this is where, again, you do that little bit of extra work and you start to work your way into energy specific ideas or ideas that are still at or near great setups.
This is still relatively close to the optimal entry. So for everybody out there complaining right now that the market’s been going down for three weeks, That just means you need a little bit better process to find good ideas because they’re out there. You just need to say it’s not the whole boat. We just got this one little pocket that I’m looking for.
Now I want to prove that again, by having a process and knowing what perfect looks like and understanding again, how to adjust your position size in and out of those ideas, winning percentage doesn’t matter because if you take less shares or you are disciplined on your stop loss. You’re remaining in the game for the few trades that work out when you have a good system for managing profitable trades.
Everything changes because small loss, small profit, small loss, small profit, you’re paying the bills, you’re taking a small loss, and then all of a sudden, one or two trades per month follow through, and you’re positive for the month. I got news for you. That’s trading in the real world, and that’s the world that I live in, alright?
So let’s work on over now into an individual sector that I’m watching for the week, and again, this is me setting up the entire week so you can see some of the ideas. This is really the other area that’s interesting right now and probably not a group that most of us might be thinking about retail and leisure stocks.
So let’s just take a look at ANF and raw stores. So Abercrombie and Fitch, again, I’d say that there’s stacked order flow there, right? Raw stores actually had a pretty good earnings report, resting right at all time highs, got 120. So let’s continue to work through how we’re mapping out the week. Rush stores hit a wall of sellers at 120, needs a strong move above that before I start a new swing.
You can see the breakout and the levels here. But it’s still a bullish gap. TJ Maxx has my attention. Stock’s price rests near all time highs, solid catalyst price level, sets up a new swing. Basically risking a couple of bucks here if we end up getting follow through. So you’re starting to see now, you look at the bullish gap here now holding, right?
And getting a little bit of follow through this morning. I want to just be clear, both of those ideas need to start moving in my favor before I put the trade on. That’s how I manage all of my swing trades. Probably 99% of them, I want to use a buy stop, it needs to go through. So if one doesn’t get above 120, I’m not doing anything.
If TJ Maxx doesn’t get above 90, I’m not doing anything. I still need it to move in my favor. So I hope that this was a really big lesson for you to understand that it’s okay if you had a tough couple of weeks, the market really didn’t offer a lot. If you want to level up a little bit more, you need two things.
You need to understand how to find stacked order flow and again, what we call dynamic rotational optimization, which is essentially a proprietary way that we look at the sectors and find where the money is flowing at that time. Now, the market is really not offering a lot right now, but we just showed you a bunch of charts.
That were pretty obvious, had relative strength, and were following through. Getting back to the hedging part, again, you can watch that video in the description, the link is in the description here. If the market continues to trade back and forth, then you’d flip that chart around of the S& P 500.
And if we start to look for ideas that are bearish, And a little bit longer time frame. Those would be the ideas that we would consider as a hedge Short sale either through the stock or through puts or you could look to buy the inverse ETFs Which a lot of people in our community do so I hope that you watch this video one more than one time because we spent a considerable amount of time helping you identify That there’s a difference between, I just got to get in there and buy stocks versus maybe I should consider, is this a good deal and what does that mean for how much I want to put into that deal each moment?
Sometimes it’s amazing. Sometimes it’s okay. And you want to put a little in, not to put as much. Because it’s less than perfect, but that requires you first need to know what perfect looks like. Covered a lot of stuff today. Again, watch that hedging video below here. Come back and watch this video more than one time.
I’m going to give you a chance one more time to screenshot this because I think it’s important. All right. So if you want, you can actually maybe pause this a little bit and you can actually see here what the top five topics are in here. The breakdown, getting into how we prepare for the week.
And then the little nuances and distinctions that make a big difference to becoming a better trader. And then we actually have the entire transcript here as well for the members of our community. Oh, John Bates, man. Good morning, John. Thank you for the birthday card. I really appreciate it. It meant the world to me.
So let’s call it a day, everybody. You have the map for the week. Watch this video more than once. Take notes and then if you have any comments, leave those comments below the video, I’ll get back to you as soon as I can. I want you to know how much I appreciate it. All right. If we did a good job, do me a favor, give us a thumbs up and make sure you hit that subscribe button.
Let’s go have an awesome week. Everybody take care.