40. Trading Review
[1. Setup Mastery] - [1.6 Trading Review]
Two ways to make money, One is to focus on 8 to 20% moves. If you do that you need to do 500 to 1000 trades a year. Second is to focus exclusively on finding stocks which make 40 to 300% moves. In this case you will or may not get that many trades but you will get anywhere from 50 to 100 trades which is more than enough.
If you want to make money on the bullish side you should know 3 setups that are bottom bounce, Consolidation breakout and you should know 2lynch or continuation setup.
If you want to make money on the short side then you have to know, The most important setup you need to know is the weak structure short (WSS). And on any specific day where SPY is going down then you should look for a straight breakdown.
If any one of BB, CD and CT you find with 9M volume then that setup is a more valuable setup for both bullish or bearish.
If you are running EP 9M then you're not looking at 8-10 20% moves but to find big trades, So then divide them into CATS, DOGS and Liquid lava (LL).
In the first category where you are looking at 8 to 20% there stops are in the range of 2.5% or less and this is the objective to do that kind of thing as it makes sense that you are going to make 8 to 20%. Here when you're in trade and this has limited potential so you have to very aggressively manage the trade.
In the second category where you are looking for 40 to 300% moves there you need 8 to 10% stops as it's not possible with 2.5% stops. Here you have to pre determine catalyst strength and then let the trade work to your price target. Object of the trade should be to get to breakeven, Like out with zero money or with 40 to 300%.
Whenever you find high conviction trade do size. If you do size you will make lot more money as you would have done all the required work to find this and everything is lined up, With 10% size 300% move is just 30% move in account but if you show guts, Believe in your research and size like 100% then you will move your account by 300% that is the whole idea.