As the Super Bowl rapidly approaches, it sparks a thought…
The coaches and QB possess an arsenal of plays…yet when facing a determined defense, a sudden adjustment may be necessary.
With the play clock ticking away and no time for another huddle…the quarterback must call an audible…
A lightning-fast shift in strategy that gives his team the upper hand in the game.
Just as a defense can disrupt a team’s game plan, the markets can throw a curveball into your strategy.
You want to execute good plans and build confidence, but you also want to avoid catastrophe when trading plans fail.
So here are a few examples of when you should make adjustments in real time.
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When to Change Your Trade Idea
Changing your trading plan too often can create a bad habit and kill your confidence in what you’re doing and your plans.
So how do you know when to switch it up and when to have more conviction?
There are certain factors that can come up that should absolutely make you change your trade plan or thesis…
1. A Stock Becomes a Chat Pump
I might have a trading plan laid out for a stock in premarket, but the moment I see the Breaking News Chat alert that it’s a chat pump — I change my plan.
I wouldn’t change the levels I would look for to enter and exit, but I adapt my timing and add on my 9:45 a.m. or later rule.
Because nine out of 10 chat pumps fail at the open. And giving that stock a bit more time to prove itself can be the difference between taking a losing trade, a winning trade, or no trade at all.
2. News Comes Out
Another thing that would change my trade plans is positive or negative news. Say you’re in a trade and following your plan … waiting for your goal to be hit so you can exit.
Then the company announces a midday offering … Or the Breaking News Chat team alerts you to a short report on the stock.
It doesn’t matter if the stock didn’t hit your goal, or if it’s already below your stop — you’ve gotta get out.
The dynamics of the trade idea have changed.
You have new information and you have to change your plan to align with the new information.
You can adapt your trade plans to good news too…
Say you’re in a trade and planning to ride a quick short squeeze. Then the company drops a midday press release and the stock starts to really run.
It doesn’t mean you get greedy, but depending on the news and price action, you might want to increase your goal for the trade. Or sell some at your original goal and hold some to see how the stock reacts.
Or say you don’t like the looks of a gapper in premarket because you don’t know why it’s up. But once you find out there’s a press release, that might change your opinion about the stock.
3. Macro Trends Change
Even swing traders or large-cap day traders have to adapt their plans…
When news like the Russian invasion of Ukraine, Fed announcements, CPI data, job numbers, or GDP reports come out, they can all have big impacts on the overall market direction.
Some of it might have a shorter impact, while other headlines can put the market in a downturn for months.
If you’re in a swing trade when bad macroeconomic news comes out, you have to decide whether you’re willing to hold a stock to your goal. Or whether to take profits while things shake out and look to reenter later.
These kinds of events won’t happen every day.
So in general, it’s best to enter your trades with your trade plan and try to stick to it. It builds good habits and can help you build confidence.
But just know that things can change fast, and there are certain times you should absolutely change your trade plans. So be ready to react and act quickly.
It will get easier over time and with more experience.
And staying in tune with what’s happening in the market can help. Get my market update three times a week so you know what micro and macro trends I see in the market each week.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade