Today I want to talk about something that is very repeatable and follows the philosophy of what I teach.
These 5 principles can change everything. I know they did for me. Don’t be misled by the fact that they aren’t sexy. Good trading is often boring.
The Big Picture
Follow these 5 principles and you will be a much happier trader.
First Principle: Avoid sideways stocks like the plague.
There’s nothing worse than sitting in a speculative stock, waiting hours and hours, hoping something will happen. Not only are you waiting for it to go in your direction, you’re also hoping that the bottom doesn’t fall out.
Second Principle: Right or wrong, get out of the trade as quickly as possible.
Now, often people give me the side-eye when I tell them that.
Here’s why I think it’s smart:
If you’re going to get stopped out of the trade, it’s better to get stopped out in minutes, versus waiting for something to happen for hours. I want to stay agile. I either want to stop out and move on to the next trade, or take profits and move on.
Too many people get married to these positions. That’s where having a plan comes in.
Third Principle: Have a profit target.
I don’t use any made up dollar amounts. None of that. I use the chart to determine the entry, the stop loss, and my goal. Accept that not every trade works, and it’s best to take profits when you reach your target.
Fourth Principle: When it comes to risk, know the number.
Your position size depends on the amount of money you’re willing to risk. I teach having a number, not using arbitrary percent stops. The dollar amount allows you to size your position properly. If the trade goes against you, it’s a small but acceptable loss.
Quick example: If the chart tells you that your stop loss is 10 cents a share below your entry, and your risk is $100, then you take 1,000 shares. For a smaller risk, size accordingly.
Fifth Principle: The rule of 5 rules.
New traders constantly fixate on win rate. That’s all they care about. They want to win 100% of the time.
As long as you know your risk and stick to it, you can lose four days in a row. You can win on the fifth day and still be green on the week. But it 100% depends on sticking to your risk. If your losses are arbitrary, say $100 one day, $400 the next, then $300 the next, none of this matters.
My Take
If you want to trade the smart way, follow these principles. Control your losses, know your risk, trade good risk-to-reward setups, and don’t use arbitrary entries or stop losses. Don’t sit in sideways stocks all day. Remember, we want to be right or wrong as quickly as possible.
Watchlist
On Monday (April 27), Sports Entertainment Gaming Global Corporation (NASDAQ: SEGG) launched a new “sports predictions” platform. SEGG closed up 42% on the day.
Yesterday, the company announced a partnership with Polymarket to “power the platform.” That sent SEGG soaring.
Source StocksToTrade SEGG 4/27-28/26, low-float runner with news
SEGG has shown it can run multiple days in the past. If enough shorts get interested, this one could squeeze even higher. As always, trade the patterns and follow the principles above.
On My Radar
- OpenAI CEO Sam Altman says that he and CFO Sarah Friar “are totally aligned on buying as much compute as we can and working hard on it together every day.”
- All Steve Nison’s stuff is great, but this is the primary one I recommend: “Japanese Candlestick Charting Techniques”
- Following on from yesterday: 4 of the Mag 7 report earnings today. Remember, the Mag 7 comprises 34% of the S&P500’s total weight.
- Next vid is out: Day Trading for Beginners Lesson 2 The #1 Beginner Mistake That Costs You