Risk management is a critical skill for successful traders.
And it’s not just about being able to cut losses when your stop is hit…
It starts with choosing the right risk level in the first place.
We can help you make solid trading plans in our free training sessions here.
Because, if you’re using the wrong risk level and taking too big of losses — it doesn’t matter if you stick to your stops or not.
You need the right risk-to-reward ratio as part of your trading plans.
So today I’m showing you how I made two trade plans with only 15 cents of risk each.
This could be what your trading’s missing…
Learn how to find stocks, make trade plans, and see algorithmic indicators at work here.
Two Trade Examples With Good Risk Management
C4 Therapeutics, Inc. (NASDAQ: CCCC) was on my radar in Pre-Market Prep, but I got more excited about it when I saw it pulling back to VWAP later in premarket.
It was one of the first stocks I talked about in my morning webinar (learn how you can get in them daily here)…
And this was my plan:
9:04 AM $CCCC $2 breaks risk on VWAP I think worth risking 15 cents a share for the potential for this to go wild.
Keep in mind, when I made my plan in premarket, VWAP was at about $1.85.
But since VWAP’s a lagging indicator, it follows the price and volume of the stock.
So by the time CCCC broke $2, VWAP was $1.90.
If you stuck to the original plan you could’ve rode CCCC to $2.40 before the stock broke back below VWAP.
If you stuck to the original dollar risk level of $.85, you would’ve gotten stopped out at all. And you could’ve ridden CCCC up to $2.70!
CCCC chart: 1-day, 5-minute candle — courtesy of StocksToTrade.com
This is where you choose whether you want to be more aggressive or conservative with your trades.
This wasn’t my number one watch yesterday morning, so I didn’t give a full detailed plan…
You get to decide whether you take the trade and my advice for risk.
And you get to decide where you want to sell the stock or hold for more gains.
The conservative approach is always best…
Plus, if you have a cash account or you’re over the PDT rule, you can always get back in the stock when you see another setup.
Like my afternoon Daily Double Down idea…
Double Down
$CCCC
Newbs are out, large room sold
Signal: $2.30
Stop: $2.15 Pre Market High
Goal: $2.75 – High float, remember it will probably take some time to get there.
With the larger float of over 40 million shares, CCCC moves a little slower than the low floats that we’re used to…
And it couldn’t quite hit my goal yesterday — it topped out at $2.70. But we don’t nitpick over pennies.
Focus on the process and have the right risk level for every trade.
Both of my trade ideas used risk levels that wouldn’t have stopped out traders before the potential for a winning trade.
As long as you lock in gains along the way when you have them…
You’ll never go broke taking profits!
If you want more trading tips — join a free live training session.
We’ll show you how to spot hot runners, make trading plans, and more!
See you there!
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade