15 or 20 years ago it was easy to get lured into “bag holding.”
Why? Because you knew there might not be another opportunity for days. Possibly weeks. The current market environment is completely different. This is a trader-friendly market.
The #1 mistake that keeps beginners stuck (and how to skip it)
Table of Contents
The Big Picture
As always, we don’t anticipate anything. Instead, we react.
We take advantage of the current information that we have and make a judgement call. We come up with a thesis and write a trade plan.
Now, some theses play out as true, some theses fail. But that’s why we always have a stop-loss and a trade plan.
The good news is, in the current market environment…
The Narrative Changes Every Minute
Which is exactly why this is a trader-friendly market
Let’s say you create a trade thesis based on the information you have. Then, your thesis gets busted. Something happens, new information comes in, and your trade doesn’t work.
Right now, you don’t have to wait long for another trade opportunity. It’s been going this way for the past decade, but doubly so since 2024.
I think back to when I got started. The market was so much slower that it made the temptation to be a bagholder that much higher. People think I’m making it up, but 15 years ago you might go days without a play.
What I like about the current market is that it rewards good decision making. If a trade doesn’t work, just move on.
There’s no reason to be a bag holder because all that does is distract you from the next opportunity.
If you’re a new trader with a small account you have limited buying power. Which means you have to use a significant portion of your buying power to move the needle.
So, this is especially important for you: There’s no reason to stay in anything that’s not working.
My Take
If you have $2,000 and you’re trading $50 positions, even if you have a good trade it’s not going to move the needle.
Now, I’m not saying go all-in without a plan. As always…
- Be responsible
- Follow the rules
- Don’t be a degenerate gambler
But remember, if you have a significant portion of your buying power tied up in each trade…
The longer you stay in something that doesn’t work, the higher the chance you’ll miss it when another opportunity comes along.
Why? Because it distracts you. But also, if you’re bag holding you have no buying power to take advantage of it.
Watchlist
Universe Pharmaceuticals Inc. (NASDAQ: UPC) was a massive runner Friday (June 26) on news it was acquiring Best Praise International in an all-stock deal.
UPC put in an RCT on Friday night but then faded into the close.
UPC 6/26/26, 5-min candle, after-hours Red Candle Theory (RCT) pattern
Yesterday, UPC gapped up, then faded again setting up another morning fader.
Now, UPC didn’t wait until the open to go parabolic. That said, it was still a perfect example of the momentum shift we look for in the morning fader pattern.
UPC 6/26-29/26, 5-min candle, RCT and morning fader patterns
UPC is now on my rolling watchlist for this week. Can it put in a day-3 surge today?
On My Radar
- AI is a force multiplier but can’t replace human experience. They’ll get it, eventually.
- Elon once posted “Berkshire Hathaway high on Coke” when it earned $700M+ from The Coca-Cola Company (NYSE: KO) dividends.
- Based on KO’s higher dividend and Berkshire Hathaway’s latest FORM 13-F, that number is now $800M+.
- AI chip supply meets demand? Time will tell, but South Korea’s investment didn’t go unnoticed.