Wall Street big money and investors are anxiously awaiting the Fed meeting later this week. That’s creating choppy price action in the markets…
It’s tough to execute a successful trade without getting stopped out or missing your entry or exit.
On days like yesterday, sometimes it’s best to sit on your hands…
Because you can’t force trades when they aren’t there.
And there are other reasons you got into trading — freedom, control, independence…
And those benefits mean YOU get to decide when to trade and when not to.
So before you stay chained to your computer all day and boredom trade, look for these specific things EVERY trader should consider before they trade…
Table of Contents
Three Things to Look For Before You Trade
Every trader’s process is different. But considering these three criteria can help you cut out subpar trades, and wasted time and frustration…
Float Rotation
Float rotation means a stock is trading more volume than shares in the float.
If I see a low-float stock with 10 million shares in the float trading 20 million shares in premarket — it has 2X float rotation. That’s what I like to see…
There are plenty of stocks that can rotate their float throughout the day. But seeing that kind of volume in premarket shows me that traders are interested … Like all eyes are on this one ticker.
And because float rotation means new buyers are coming in, they’re willing to buy at higher and higher prices just to get in.
Remember: Unusual volume creates unusual moves.
So a stock trading high volume relative to its float size has the potential for explosive moves and range.
To learn more about float rotation and other trading terminology — watch this NEW video!
A Frothy Market
A frothy market doesn’t necessarily mean the overall markets are trending upward…
It can also refer to trends in small caps. After all, those are the stocks we care about the most.
So if you’re trying to determine if it’s a ‘frothy’ day, ask yourself these questions…
- Have there been a lot of big runners recently? One big runner can usually spark others and generate momentum in small caps and sympathy plays.
- Is there more fear or greed in the market? A frothy market feeds off greed … We want traders to be excited and looking for the next big potential play.
- Is there upcoming news that creates uncertainty? Events like the Fed’s upcoming meeting create uncertainty. And market participants hate uncertainty. It can mean lower volume as safe traders sit out and wait for the news and market direction.
You’ll learn to spot a frothy or slow day in the markets with seat time and experience.
If you want to speed up that learning curve — click here to join me every morning in Pre-Market Prep.
Your A+ Setups
Everyone has a bread and butter pattern and price action they like to see. And one trade in your A+ setup can make your week or month!
So it’s essential to understand the patterns and setups that equal success for you.
But what happens when traders don’t see those setups, is they start trading C or D setups.
Then they take losses and get frustrated…
Then when they do see their A+ setup, they’re gun-shy. They don’t want to take another loss so they struggle to get aggressive on their best patterns.
They miss the trade or trade it with too small of size and don’t maximize the potential of the trade.
That can lead to losing confidence and create bad habits like revenge trading.
Don’t let that happen to you!
Experienced traders know when to get aggressive in their best setup and have conviction in their trade.
Or when the setup isn’t ideal and they’re bored trading.
Staying disciplined to avoid those subpar setups and focusing on the best setups is crucial.
If you want to stay in tune with the markets, learn how to recognize a frothy day, and what patterns to focus on — join me every morning in Pre-Market Prep.
See you there!
Have a great day everyone. See you all back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade