We Don’t Trade Stocks, We Trade Patterns

Trading decisions aren’t always binary. They aren’t as simple as “yes” or “no.” But new traders get this wrong…

They think every stock is worth holding forever or it’s the worst stock in history. It’s red or green, one or zero. I don’t understand that mindset. I think that mindset is why so many people get into trouble trading.

Free Workshop Reveals How to Target Gains Every Week

The Big Picture

Remember, most of the stocks we talk about and trade aren’t the kind of stocks that you put in your retirement account.

These are day trades. They’re speculative stocks. That includes the stocks I add to the watchlist here. Or those on the weekly watchlist. What we’re always looking for is a pattern.

Now, sometimes the pattern plays out faster or slower than I thought. Or not at all. That’s okay, too. You keep them on your watchlist until the idea is busted.

If you’re smart, you keep a rolling watchlist. So, you can keep checking each day. If it’s still not following the plan by next week, cut it or put it on a backburner list.

Yes or No, Black or White, One or Zero

Sorry to get philosophical, but I think this is a big problem with our society. Everything has to be yes or no.

With trading, people think…

“It’s the best stock in the world (and it’s going to $100).”

Or…

“It’s the worst stock in the world (and it’s going to $0).”

What I’m about to share might just be the most important “secret” in all of trading…

When We Trade Patterns, It Could Be Both

Again, this isn’t about the stocks in your retirement portfolio. I’m a short-term trader. We primarily focus on patterns so we don’t get caught up in emotions.

I’m always very dubious about penny stock financials. But when a company drops two positive press releases within 5 minutes of each other, there’s a reason. When they brag about stats, potential new contracts, or billionaire investments, it paints a picture.

Now, if it’s a pretty enough picture and the stock builds momentum, then I start looking for patterns.

Does it mean I love the stock? Or that I think it’s going to $100 (or even $0)? No.

I have no idea, and I don’t care…

I trade patterns, not stocks.

My Take

It can be the best stock and the worst stock. If you trade the price action, you don’t care. You just trade the pattern.

Too many people let emotions come into the game. They love it or hate it… It’s the best, it’s the worst… Who cares?

Trading isn’t the opening sentence to a Charles Dickens novel. Trade the pattern.

Watchlist

Expion Energy, formerly Expion360 Inc. (NASDAQ: XPON) had two news headlines yesterday (August 24).

1. The company announced it “acquired an oil and gas exploration opportunity.” This expands the company’s focus beyond batteries and solar power to “the other end of the value chain.”
2. The company also announced a $9M private placement with an option for the investors to purchase up to $91M of additional shares.

XPON pulled off a beautiful RCT in premarket trading yesterday, hitting 3:1 reward-to-risk within 5 minutes. There was a potential 12:1 reward-to-risk in 25 minutes.

XPON hit the Oracle signal in the morning session, pulling back to the stop-out level. That said, it held at the RCT entry and traded sideways in a consolidation zone.

Watch today for a 2nd-day continuation. If it chops sideways all day, watch for a day-three surge tomorrow.

On My Radar

• Nvidia (NASDAQ: NVDA) reports earnings tomorrow (I’ll have more to say then)
• Ahead of earnings, Nvidia announced its Groq 3 LPX chip is in full production
• In case you missed it on Sunday, watch the 24 Hour Payout Plan livestream here
• Last chance: Ben Sturgill’s Fast Fall Workshop starts today (it’s free)