Is Your Bias Killing Profits?

Have you ever seen a stock spiking in premarket … It has news, volume, and a low float… 

You think it just has to go up. So you start buying because it’s just too perfect to miss.

The stock has a big spike at the open and you think this is it … I’m gonna make so much money on this trade… 

And as soon as you have that thought — the stock slams back down with a giant red candle… 

But you think it’s fine. Dip buyers will come in and hold it up… 

But they don’t. And it starts sinking lower … and lower. It’s through your stop and risk level but you think the news is good and it should go up… 

You’re now a bag holder and a victim of your own bias. 

The right thing to do is to cut the loss. But that can be tough when you’re holding on to your bias. 

But you have to ask yourself — do I want to be right, or do I want to make money?

Cutting a loss might not feel like you’re making money at that moment … But it’s about building the habits and winning over time that can get you to your goals. 

Holding on to your bias will only cost you more over time … Just like it did for some traders in C3.ai, Inc. (NYSE: AI) on Friday… 

Here’s how biases kill profits, and what to focus on instead…

How to Kill Your Biases

Having a bias can get you in trouble whether you go long or short… 

Idiot short sellers love to guess tops in low float runners just because they think the stock is “up too much.”

They say the stock and the company are crap and that it’s going to $0. 

Most times they’re right … Low-float penny stocks are crappy companies. Especially money-losing biotechs. But their biases work against them…

Short sellers’ biases are what create the massive short squeezes we love to take advantage of. 

C3.ai, Inc. (NYSE: AI) on Friday is a good example … The stock gained over 30% after the company announced earnings. 

But during my premarket SteadyTrade Team webinar, there were concerns about whether the stock could spike… 

Spruce Point Capital put out a short report on the company in February. 

And after the earnings report dropped, Spruce Point Capital tweeted about the earnings call which the Breaking News Chat team alerted… 

But I thought all of that would just add more fuel to the fire for AI to squeeze to the upside. 

Because I know shorts are going to get overly biased about the report and the tweet. They’re going to say it’s fluff and the CEO was inflating the company. 

And that means they’re going to aggressively short it. 

But on the other hand, long traders can get overly biased too. And get caught in situations similar to the one I highlighted earlier. That scenario has probably happened to you… 

Here’s what I like to do to avoid getting overly biased…. 

The One Thing That Matters Most in a Trade

Of course, you have to pick which direction you think a stock will go to prepare your trading plan.

And I like to start with building a case… 

Is the stock a box checker? What are people on the other side of the trade thinking? Where will they get fearful?

Then you can make your trading plan and wait for confirmation before you enter. 

But whether you’re just watching stock and waiting for entry, or you’re already in it — the number one thing you must do is respect the price action. 

Because you can be wrong on any trade. 

That’s why our plans always include a stop loss and risk level. There are no guarantees in trading. 

And you don’t grow your account by holding on to biases and trying to will a stock to do what you want. 

You grow your account by following your process and rules, and cutting losses when you’re wrong.

My process led me to believe that AI could go higher on Friday. And I sent my plan and thesis out to subscribers in premarket. 

My signal entry was the $25.09 Oracle level — the stock hit a high of $28.55 and could continue higher this week… 

See how I pick my number one stock for the day and how you can get my next alert delivered to your inbox here. 

Have a great day everyone. See you back here tomorrow. 

Tim Bohen

Lead Trainer, StocksToTrade