The Daily Ticker: EP 14- Coaching Call Recap: Trade Management

The Daily Ticker: EP 14- Coaching Call Recap: Trade Management

 

  • Introduction

     

    • Importance of understanding normal stock behavior

       

    • Emphasizing the need to trade based on probable outcomes

       

  • Importance of Volume

     

    • Identifying institutional attention

       

    • Using volume to determine potential stock movement

       

    • Tracking unusual circumstances in a journal

       

  • Analysis of Stock Behavior

     

    • Utilizing average true range and average volume

       

    • Understanding the significance of these metrics

       

  • Accumulation and Distribution Patterns

     

    • Explaining the concept of accumulation and distribution

       

    • Recognizing the relationship between price action and volume

       

  • Conclusion

     

    • Summary of insights into price action and trading strategies

    • Importance of being ahead of the game through volume analysis
  • Introduction: The text introduces the topic of understanding stock behavior and emphasizes the importance of trading based on probable outcomes.
  • Importance of understanding normal stock behavior: It is crucial for traders to have a solid understanding of how stocks typically behave in order to make informed decisions. This knowledge helps in identifying abnormal or unusual circumstances.
  • Emphasizing the need to trade based on probable outcomes: Rather than relying on speculation or guesswork, traders should focus on analyzing data and trends to determine the most likely outcomes. This approach increases the chances of making profitable trades.
  • Importance of Volume: Volume refers to the number of shares traded in a particular stock. It is a key indicator of market activity and can provide valuable insights into potential stock movement.
  • Identifying institutional attention: By analyzing volume, traders can identify when institutional investors are showing interest in a particular stock. Institutional attention often indicates a potential shift in stock price.
  • Using volume to determine potential stock movement: High volume often accompanies significant price movements, indicating increased buying or selling pressure. Traders can use volume analysis to anticipate potential stock price changes.
  • Tracking unusual circumstances in a journal: It is important to keep a journal to record and track any unusual circumstances or patterns observed in stock behavior. This helps in identifying recurring trends and making more accurate predictions.
  • Analysis of Stock Behavior: Traders can utilize metrics such as average true range and average volume to analyze stock behavior. These metrics provide valuable information about the volatility and liquidity of a stock, helping traders make informed decisions.
  • Understanding the significance of these metrics: Average true range helps traders gauge the potential price movement of a stock, while average volume provides insights into the level of market participation. Understanding these metrics is crucial for successful trading.
  • Accumulation and Distribution Patterns: Accumulation and distribution patterns refer to the buying and selling activities of market participants. By analyzing these patterns in conjunction with price action and volume, traders can gain insights into potential future price movements.
  • Recognizing the relationship between price action and volume: Price action and volume often go hand in hand. Traders can identify the strength or weakness of a price move by analyzing the corresponding volume. This relationship helps in making more accurate predictions.
  • Conclusion: The text concludes by summarizing the insights gained from analyzing price action and volume. Being ahead of the game through volume analysis is emphasized as a crucial aspect of successful trading.

SUMMARY:

We discuss the importance of understanding normal stock behavior and identifying abnormal situations. It emphasizes the need to trade based on what usually happens and make decisions based on probable outcomes. 

Pete highlights the significance of volume in determining institutional attention and potential stock movement. It suggests keeping a journal to track unusual circumstances and learning from them. 

The text mentions the importance of average true range and average volume in analyzing stock behavior. 

It also briefly mentions accumulation and distribution patterns and the relationship between price action and volume. Overall, the text provides insights into price action and trading strategies.

 Hey everybody. Good morning. Good morning. How’s everybody doing? Hope you had a nice night. I just want to start out with a quick recap of last night’s coaching call. Let everybody know that the replay is already posted. And we did a pretty good job last night of discussing trade management.

So if you happen to have missed last night’s call I think it was just over an hour or, yeah, just over an hour. We got really deep last night into trade management and specifically, How and when to use the profit maximizer, which is a really big topic. And actually a really good topic because quite frankly, that means they were talking about managing winning trades.

We also shifted over into Roseanne actually had a pretty big winner on meta that she’s held onto for a while. Had at a couple of different levels. And then we broke down the discussion around two different kinds of profit maximizer, depending on what your objective for the trade is.

And I don’t remember who said it last night, but that was actually maybe one of the first times that we discussed using different moving averages for the profit maximizer simply based on what your trade objective was, which kind of took us into a whole other conversation. I believe it was Jose. Good morning, Jose, who brought up the question last night about understanding which timeframe you should be watching.

To make trading decisions and we move that over into, you need to know your trade objective before you can know which order flow to be watching. So for example, if you are a day trader, you might only be looking at charts for the last hour and determining what kind of order flow you have for the last hour or from this morning’s opening price.

But if you happen to be swing trading or a little bit longer, obviously the order flow that you’re looking at is going to be a higher timeframe from that, and then you drop down one timeframe to time your entries, which is what we do here every day. So I just want to be super clear about that.

The higher timeframes are giving us direction. Then the shorter timeframes are timing. So we brought Roseanne’s question and Jose’s question together to talk about. A longer timeframe for Roseanne’s trade where you would probably go out a little bit further and not use the 10 period moving average, but use a 20.

To hang onto that trade if your objective is to hold it a little bit longer. Now, if you get to the point where you’re feeling like your spider sense is tingling and you want to book a profit on that trade, then you would stick with the 10 period moving average and use that to hold onto the trade until the profit maximizer gets val violated.

So a good conversation last night, a really good conversation around trade management, which is something that we spent a lot of time on as well. That the whole flywheel of everything that we do is first understanding what to look at, and we had a couple of questions about that last night. Then going to trade, getting feedback from your trading, both from what you’re looking at, getting clarity on what you’re looking at, making sure you’re looking at the right thing.

Yes. And then coming back to Discord to discuss those trade management type questions. So learn what to look at, go and trade, come to the coaching call, and then go back and trade again. That’s a one big, giant learning loop that you really want to have as a part of what you do because look, if you’re learning all the time, you are practically.

Positioning yourself for almost, I don’t want to use the word guarantee because everybody learns at a different process, but let’s actually reverse that a little bit. Is. If you are not asking questions, if you are not keeping a trading journal, you will be doomed to be repeating the same things over and over again.

And that’s just a fact. That’s just a proven fact. One thing that we talked about last night as well is that it’s very important to write down your trading thoughts. While you are finishing up that trader, quite frankly, even while you’re in the trade, because I think you will be shocked at how good you actually are and seeing it written down.

We’ll amplify the fact that you actually know what you’re doing. But I want to take that even a step further and discuss trading journals. So we get this question all the time. What am I supposed to put in a trading journal? How do I write a trading journal? So while ago I actually created three videos.

One of them is pre-market, one of them is during market hours, and then one of them is after the market closes. So I’m actually going to pop this. Into the chat here and everybody could take that link and watch those three videos whenever you get a chance. I can’t explain this to you strongly enough that everybody thinks that writing a journal is a pain in the butt and you don’t have time for writing a trading journal and all that kind of stuff.

I got news for you if you don’t have time to document how to be successful, what you’re doing wrong and need to stop what you are doing right and need to do more of. You’re just going to go in this loop where you’re not going to make any progress. You’re going to feel frustrated, and you’re going to feel like you’re the only person who doesn’t understand trading.

Trust me when I tell you this, take if, take this to the bank and hopefully you will take it to the bank. Spend five minutes, 10 minutes at most, just get it out of you. Here’s what I’m looking at in the market. Here’s what this is telling me is probably going to happen next. Here’s how I manage that trade.

Here’s how I’m analyzing that trade after I get out of it. All those kind of things. Here’s what I’m seeing. Little things like that, little bullet points will make a gigantic difference so that you will move beyond the point of saying, am I looking at this right? To the point where you have minimized mistakes, you’re doing more of what you’re supposed to, and then most of our questions will be about trade management.

Which actually brings me into one other topic that I want to talk about, which was LJS question last night in reference to Zscaler. Zscaler roughly has a $5 average true range, which kind of take a, take us like right into this area. So basically from the open to here or from the low to here, that was basically where the average range of the stock is, and you could actually see what it did after the fact.

Now, again, this doesn’t matter if it’s a day rate or swing trade because the average true move applies the same way that the average true range does. But the average true move is for swing trading. This is really more about making good decisions. So LJ yesterday had brought up the point that He was thinking about getting involved in this trade after it exploded.

So it was a good, it’s a really good question. Did I miss anything or should I have gotten involved because the stock continued to go and almost do almost double what it normally does. Pretty darn close to it, right? Yeah, almost exactly. Double actually. And the answer is no. There, there is. We have to trade what happens most of the time.

We have to make decisions on what’s probably going to happen. So when a stock explodes and does what it normally does, the best case scenario when it hits its average true range is to look for a some sort of a pullback. Generally speaking, that pullback will be to vwap because now you are resetting a new optimal entry.

Then you actually have decent profit potential that justifies the risk in this really strong stock. That’s the right trade most of the time. But what we saw yesterday was the stock traded one 150% of its normal volume, and these are the kind of things that advanced traders like you are becoming will eventually learn.

So the question was, should I have gotten in and. The general answer is you made the right decision passing on it, the adva, because it already did what it normally does. Now, we never want to put a limit on what a stock can do, so we need to make another distinction of how would I know that the stock could have continued?

And that’s institutional attention and we call that volume. So if you know what the stock normally does, or just hop into Fin Vi and take a look and see what the normal average volume of that stock is. You’ll know here’s what it normally does and here’s what the stock is doing right now. And if that stock has reached its average true range early and reached its average true range early on, above average volume, then it’s reasonable to assume that stock is in play today, and there’s a chance it will continue to follow through.

So what I’m basically saying is certain situations are not normal, but in order for us to know what not normal looks like, we need to know what normal looks like. So in this case, I personally think LJ made a good decision not getting involved up here because normally this is what would happen before a new trade comes in.

But in this particular case, the stock had above average volume. There was an upgrade on the stock, which we talked about. Put that in the newsletter this morning. I should say, let me take that back. It was a reiteration of an upgrade. Not an upgrade. Just to be clear on that. And I think the price target was 200.

I put that in the newsletter this morning, so I just want to bring that back up because I don’t want you to beat yourself up if you did the right thing, but something unusual happened. That’s so important to understand that doing the right thing in the long run is where the consistency of your profits are going to come from and not getting upset when something unusual happens and you didn’t act.

Differently if you did what you were supposed to based on what normally happens you are trading well, the only other thing you can do, like I said about writing a journal is mark it down in your journal and say, the next time something similar to this happens, I just need to pay attention to the volume.

And if it’s amplified volume, something different is going on. And that means maybe I could make a little bit of a different decision because of that expanded attention shown by volume. So I just wanted to share that last night because it’s very common to feel like, oh, man, I should have seen that, and that kind of stuff.

This was an unusual circumstance, and LJ did a fantastic job of bringing up the question on the same day that it happened so that we have context for what the stock did. So if we kind of hop on in again, just to really bring this point home and show you how to find this in Fin vi. So when we’re actually looking at stock, you type the stock in, you want to go over here and you want to know the average true range.

So this case, this ever happens again. You want to be prepped for it. Average true ages with the stock normally does. And average volume, I believe this is over 30 days. Yeah. Three month, not 30 days, three months worth of volume averages here. So you can actually see normal volume is 2.95. Yesterday it did 5.3 million, so there was more attention on the stock yesterday.

So just write that down and keep it in your memory bank, because it’s a very slight distinction. But these kinds of days, these kinds of moments when this happens both in the market, As well as in individual stocks, you’ll be happy that you learned how to spot it because you will step up, maybe hold a little longer, maybe even add a little bit more to that trade because there’s more available, because there’s attention.

Now to put this on a little bit of a bigger scale and understanding how to use this in a larger capacity, we all know that very common, we talk about accumulation and distribution. So accumulation and distribution are when heavier volume activity happens in a pause. Accumulation or distribution or heavy volume pause typically means a reversal of that current order flow.

So we’re seeing that right now in meta since the announcement where we’re starting to see heavier volume during this pause. So we’re now expanding from that one day of heavy volume. Let me pull it up over here. It’s a little bit easier to see and you can see there. So since the announcement of threads, now four days of trading on above average volume without the price advancing, and we’re still sitting inside this box, basically where we were yesterday, maybe up a little bit.

So again, I want to make it clear that doesn’t mean, holy mackerel, this thing’s going to reverse. It’s heading in the other direction Immediately when we start to notice exhaustion, when we start to notice accumulation, when we start to notice distribution. That means that something is changing in the order flow and we either need to move up a trailing stop loss and be aware that if what we’re seeing is indeed a change, then we would be needing to act.

But the very active noticing that price, action, and volume distinction. I want to say it one more time. A heavy volume pause puts you ahead of the game because you are now not reacting. If it does reverse, you are already prepared to make a decision because you are not just looking at scans, you are not just looking at price action.

 

You’re actually adding volume into the equation. During that pause to let you know is this pause, light, volume? Cool, we’ll expect follow through. We’ll expect continuation. Is this pause, heavy volume, sit up in your seat. If the answer is yes, that is not what we want to see, and then you would either move up your trailing stop-loss, maybe even take a little bit off the table.

But I would suggest not just exiting, but being a little bit more disciplined, maybe even moving up your trailing stop-loss, that if we do get a big move to the downside, like we saw in Wayfair over here, which this was the day that we. Moved up that trailing stop. You don’t have to sit in this. You’re actually ahead of the game.

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