There’s one critical mistake traders make when it comes to entering a trade…
They see a big gainer like Trevena, Inc. (NASDAQ: TRVN) on Monday, they missed the move, and now they have FOMO.
So when they see it trading lower the next day, they think dip buying it is a good idea…
They think they’re getting it at a better price than traders who bought it the day before.
But there are two things wrong with that kind of thinking…
If you’ve ever had those thoughts and been taken over by FOMO after missing a big gainer — keep reading…
I’ll share the critical mistake you’re making, and give you the solution to fix it…
What You’re Doing Wrong With Dip Buys
If you’re thinking of buying the dip on a big runner on day two of the move, you’re probably caught in one of the biggest mistakes I see new traders make…
You believe in the company and the news it put out.
So you think a morning dip on day two is temporary and that it will bounce back and go higher…
It could…
But it could also do what TRVN did yesterday and go lower and lower…
TRVN chart: 1-day, 5-minute candle — courtesy of StocksToTrade.com
So what’s the critical mistake you’re making when you jump into random dips?
You’re not waiting for confirmation.
You want to make the stock prove to you that it can go higher…
You don’t want to play guessing games and try to guess the bottom of dips.
So how can you wait for confirmation?
You wait for the stock to break above a key level to make shorts nervous and more buyers excited…
And I have a pattern for that.
If a stock is hovering around the previous day’s close or just below it after a big one-day gain like TRVN, it’s almost always a watch for a weak open red-to-green move.
A red-to-green move can be confirmation that there’s more potential upside.
And waiting for that move would’ve kept you safe from trying to dip buy TRVN yesterday when none of the dips were holding as support.
TRVN chart: 2-day, 5-minute candle — courtesy of StocksToTrade.com
If you want to learn more about my patterns and when to look for them — get my ebook.
You get it as a bonus when you join StocksToTrade Advisory. Plus, you get my three Market Update videos every week to stay on top of what’s hot, weekly watchlists, monthly reports, and more!
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade