One of the stocks from my weekly watchlist still hasn’t made its move — but it’s getting close…
So to help you prepare to trade it, I’m sharing a simple trick.
You can use this for plenty of stocks to help you determine the right position size and goals for your trades…
And it can also help you trade stocks that won’t get you shaken out of your position so easily.
Ready to dig in?
This move could happen as soon as today, so get ready NOW!
How to Trade Higher-Priced Stocks
Last week, Manchester United plc (NYSE: MANU) went from roughly $13.50 to almost $23 in two days. Now that recent high is a key breakout level to watch.
To me, this is strictly a higher-priced short squeeze.
And when I trade higher-priced short squeezes, I like to use the rule of 10.
What’s that?
It’s simple math I use to determine position size and expectations for the trade while trading with a small account.
Use The Rule of 10 In Your Trading
This is how I use the rule of 10 to trade higher-priced stocks…
Instead of looking at MANU as a $13 stock that went to $23, I look at it as a $1.30 stock that squeezed up to $2.30.
Now you can figure out how many shares to buy…
So if you’d typically buy 500 shares of a $2 stock, you can buy 50 shares of a $20 stock.
Then if you get a 10%-20% move, you’re making the same dollar amount on your trade.
Here’s how it works…
A 20-cent-per-share move on a $2 dollar stock with 500 shares makes you $100. A $2 per share move on $20 stock with 50 shares gives you $100.
So as long as the higher-priced stock you’re trading is volatile enough. You can still trade them and grow your small account.
And with higher-priced stocks, you typically won’t get the same volatile price swings as penny stocks that can shake you out of your position.
But you also have to be a bit more patient to see the gains you’re aiming for.
The Trade Plan For MANU
As I said in my weekly watchlist… (You should be getting it, but if you don’t — sign up here.)
MANU is a watch for a breakout over Friday’s high.
Right now it’s looking like a similar setup to a day-three surge pattern … It doesn’t matter what day we get the move, the thesis is the same…
The stock had a big run, now it’s consolidating near its highs. That shows me, shorts are still trapped…
And if it breaks above $23 we could see more squeeze.
But if it dies it dies.
If you like my rule of 10 idea for trading higher-priced stocks, then follow and subscribe to StocksToTrade’s YouTube channel…
I push out weekly videos covering all kinds of trading ideas, tips, and tricks to help you master the market. We have over 100,000 followers, so don’t miss the next video!
But if you want more hands-on daily guidance from me to determine which tickers to watch and trade — join me in the SteadyTrade Team.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade