Mar 15, 2021 19:00 · 3660 words · 18 minute read

Look at my trading day today! Traders, I’m done trading for the day as you can see I’m up seventeen thousand nine hundred and six dollars, actually a little bit more with my open trades in LLY and you can see that my best trade today is LLY. Surprise, surprise usually it’s Tesla. Did well, better in LLY and the topic of our lesson in fact is how to add to a winning trade which is in this case LLY and that’s why LLY is my best trade today because I kept adding to a winning trade.

So we’re going to talk about this real soon just a quick look at Tesla. The moment I moved into Tesla was right over here over 691, the reason for that was that at that time the market was moving higher and I believe that it’s likely for the market to continue moving higher, which I was wrong, but, if you look at Tesla’s daily you can see that the daily of Tesla is very, very nice for long. It’s right over here. It moved down recently. This could have been a reversal to move lower but then as you can see it’s trying to move higher again now, so the daily of Tesla, as Scott noticed and mentioned earlier, is very, very nice and as you can see here the technical formation right here to go long worked out very nice and Tesla continued to move higher.

So, I had a very nice trade in Tesla. I had a losing trade in BABA because BABA is really just going sideways, so the moment I moved in here was the moment where it continued a little bit to come down then started to move higher. I had a relatively small a relatively small losing trade in BABA and again if you take a look at my results here you can see that I let my winners ride like Tesla and like LLY. I add to my winners, however, I try to terminate my losers relatively quick so if you take a look at my average winner it’s not always like that I’m not always that successful in doing that but right now as you can see here, you can clearly see the difference between a losing trade three thousand dollars in BABA and some of my winners today.

So let’s go back to LLY and discuss this one, because I think it’s extremely important to understand this trade. So, here’s LLY and another important factor is here the S&P 500 and in my opinion you can always or should always watch both of them. So let’s start with LLY. LLY started today with a big gap down like eight percent and when a stock is starting down that much you expect a gap and go, you expect it to continue coming down and therefore it’s quite a very simple decision to go short.

The question is just when. Now when I first moved short under 189. 20 which was right over here I was expecting it to come down but no it went sideways and for a while there i was worried but you know you hang on to a trade that is going sideways and you wait for a decision. The thing is don’t be too quick about your decisions, for example, look at this look resistance line over here which it has crossed. You see, so technically speaking your stop should be right over this point here 191.

60 something maybe 70 - 191. 70 however if you think about the stop loss you always need to think about the next whole number, especially if it’s relatively close now in some stocks 30 cents is your stop loss and then you add another 30 cents it’s double stop loss so you can’t do that, but in the case of LLY, the stock to start with was one and a half point so if it’s a one and a half point stop loss and you add another 30 cents it’s no big deal and therefore you do go for the whole number.

It is important to have stops over whole numbers because whole numbers, usually, when you move up to whole numbers you will find a lot of sellers. Why? Because people have to sell with whole numbers. You know it beats me, I don’t know why people do it. They think about shorting a stock or selling a stock they think well it’s going to come up to 192 I will sell it they don’t think if it’s gonna come come up to 191. 95 I will sell it When there’s a person who doesn’t know much about trading, thinks about where I should sell he’s thinking whole numbers.

Big mistake. Why? There will be a lot of sellers at whole numbers because there’s a lot of people like him who thinking when well when it comes up to 192 yeah I will sell it a whole number. In their mind they only think in whole numbers, if they’re thinking okay when would I buy LLY? Well, if it comes down to 190 I will buy LLY. They don’t think I’ll buy at 190. 01 which is the right point if they want to go long for whatever reason they want to they should be buying it at the point where other people don’t buy it or selling it at the point where they have an advantage which is a cent under the whole number they don’t need to sell it at 192 they will have a lot of people out there with them who are trying to do the exact same thing and when you have a lot of competition that’s selling at 192 you want to be selling a cent under or five cents under but people do that nevertheless they do it so they put sell orders or short orders at 192 and once the stock did get to 192 you could see on the level 2 that it has a lot of sellers and it sometimes you don’t see that because it could be hiding the orders, but this stock came up exactly to 192.

Touched 192 and it’s not a miracle. It’s a whole number. It’s holding it and my stop was exactly a cent over 192. I would have clicked that button because it slowly moved up to 192. You know that I don’t like moving out on spikes so if LLY would have moved up and spiked over 192 I wouldn’t move out I just wait for it to come down which is exactly the opposite of what we’re going to see very soon about this spike down we’re going to talk about it really soon because it’s a different thing and you need to realize that as well.

We’re going to talk about it really soon. Anyway it came up gradually slowly to 192, touched the 192 slowly. If it would have moved a cent over my 11,000 to almost 12,000 dollar winner in LLY would have become several thousand dollars stop loss. I believe I was down like five grand, six grand I’m not sure. So at that point I was just waiting for it and hoping it’s gonna bounce from the 192 and it definitely did. At the same time, the market, the S&P 500 continued to come down so I was watching the S&P 500 slowly coming down and I was kind of hoping that it’s going to take down LLY with it because LLY really hasn’t done anything wrong as you can see it was slowly trending lower, well not as fast as I was hoping for it to come down.

I was definitely hoping that it’s going to come down faster and I was looking for more fear than we actually had in LLY, but it did come down slowly. Now, when it’s when the stock is going your way and finally proving to you like - look at the point where it started coming down from 192 it started slowly coming down there is a point where it’s proving to you that it wants to continue coming down there is a point where you should consider that point as the point of no return the point where, well if it crosses that point I believe it really wants to come down.

You should think about it in terms of is there like an 80% chance that once it comes down under this point it’s going to move under the lows? You will not be always right, definitely I’m not always right, but is there a point where you believe that there’s an 80% chance that the stock once it comes under that point will actually move under the lows as it did but it did a little bit later than what I was hoping to, but it definitely did. So once it did come under this point, that was the point where I would have liked to add to LLY.

I did add to LLY, now remember you do not add to a losing trade, you never add to a losing trade. I just met two days ago over here I went walking with a guy who mentioned that he had the losing trade he was actually trading crypto and he mentioned I have a losing trade and I made a mistake he made a zero mistake he moved with extra quantity he went longer i believe a currency and it came down he had a losing trade and it continued to come down he had a big losing trade and then he added.

End result, he was proud I finished in green. You know, when you finish in green by doing the wrong thing, if you win by trading the wrong way, you will pay it back. You will pay it back if you win the wrong way you will pay it back in interest. The market has a nasty way of making you learn that you’re trading the wrong way. It will let you win several times if you’re winning the wrong way it will let you win several times you will keep winning in fact you will win more than you will lose.

If you will average down your losing trades you will win more than you will lose. So why am I complaining? Because once you lose, you will pay it all with huge interest. You’re just going to pay it with such a huge interest that it is very likely that your account will be terminated. I’ve seen so many people who you know they’re talking to me and they’re like begging for me to understand that they’re doing the right thing and believe us they’re saying we’re doing it we already done it for a month, for two, for three, we’re doing well.

Every time we’re losing we’re adding to losing trade and then we will come out winning or whatever. But they only need one loser and again the market will take your money with huge interest because you’re winning in the wrong way and there’s no way in continuing to trade that way without terminating your account. There’s just no way. So, when you’re thinking like okay anyone just bounced off the 192 mark and it’s starting to come down and I was at that point - I had a losing trade - look my entry point was right over here.

At that point I had a losing trade. Would I add because I think it’s likely to come down? Well, firstly I didn’t know if it’s going to pull back down a little bit and then continue its uptrend and move over 192. That was my biggest concern but then I looked at the S&P 500 and I saw the S&P 500 coming down and I was a little bit more quiet but, would I add to a losing trade? Make it a habit never add to a losing trade, no matter what you think, because you add to a losing trade, at that point when you’re adding, it’s not likely that you’re thinking straight.

At that point mentally speaking you’re at a mental situation where you beg the stock to move down. Please come down another 50 cents. I promise I’m going to stop smoking whatever you’re saying to yourself and the stock starts coming down at that point you convince yourself that it’s going to come down and that’s why you want to add to a losing trade and you just don’t do it, so make a habit never add to a losing trade. Never ever add to a losing trade.

Doesn’t matter what you think, because you will be thinking that you’re doing the right thing. I promise you; you will be thinking that you are doing the right thing. Okay, so now the stocks comes down. At the point once it crossed your entry point I allow you to add. I did add there. The fact that I added at that point was I did not add to losing trade I saw the market coming down the S&P 500 was approaching the lows and LLY definitely bounced from the 192 once it came under this level over here it looked like, well it is approaching the lows now and it’s likely to continue so i gladly added and then we had this beautiful breakdown formation right here under 189.

  1. Look at that point. Now that’s the point where you probably you know - and when I said earlier you need like an eighty percent reason to say well it is very likely to move under the lows. It’s like eighty percent is going to move under the lows and it did move under the lows. That’s the point where you can say well it’s like 95 chance that it’s going to move under the lows and that’s the point of the technical breakdown. The point of the technical breakdown and look at this beautiful breakdown we had here look at this bottoming tail which I have something to say very important about it very soon.

Look at this breakdown over here once we move to a new low, but look before that look at this - I don’t even know what to call it there’s just no name for it in technical analysis - it could be called uh head and shoulders this is the head probably the left shoulder the right shoulder actually two right shoulders so it’s a kind of an extended head and shoulder formation. You know the longer the technical formation the more people are watching it. Who’s watching? It only traders only intraday traders; it’s not that the core investors are going to be watching this right now breaking down under the lows.

They don’t do that. They don’t watch it intraday as we do - well some of them probably do -  but it’s more likely that traders like us will watch it. We’re a very small part of the market. Extremely small part of the market. Our volume is extremely low, but our volume at certain points at certain technical points is very high when we concentrate power - when I say we I’m talking about all the day traders all around the world - when we look and we find a nice technical formation like that of a breakdown and we think well at that point this beautiful technical formation if it’s going to work I want to short it there, then at that point when we are shorting, us the day traders, then we have a lot of power because we concentrate our power at a very certain small point.

Look at the red candle once it came under and look at the extended volume bar that you’re seeing here if I’m going to click that that extended volume you will see the volume is 200,000 shares. The volume of the candle before that 100,000. The one before that 34,000 40,000 so you’re seeing 30,000 40,000 and the breakdown volume was two hundred thousand shares just think about it two hundred thousand shares is not much. It’s not much. Two hundred thousand shares it’s a few hundred people.

It’s a few hundred people all around the world believe me there’s thousands of people who are watching LLY all around the world today why because it get down eight percent it’s a big move it’s a big company as well people have to watch big companies especially when they have a big gap down. You’re not going to be there by yourself. 200 thousand shares short at that point. That’s not much. Look at what 200,000 shares created and moved from 189. 70 to - actually what is the lows - 188.

20 - one and a half point - that’s a one and a half point which is a lot for us traders right. It’s one and a half point crash with 200,000 shares when there’s not a lot of people but the volume exceeds at that point and again you don’t need the whole world to start shorting LLY you only need a certain group of people who will short it at that point two hundred thousand shares and look at what happens so if you have a nice technical information and again technical formations or should I say technical analysis is really a self-fulfilling prophecy once a stock is at a technical point it means that a lot of people just like you are watching expecting it and at that point clicking the button and moving in short.

When they do that, then that’s the self-fulfilling prophecy that’s the time where the stock should crash and it did crash and we did take our partial and you did take our partial real quick and that’s the last thing I want to say about LLY today. The last thing I want to say about LLY is something I believe I never said it in trading room. Its quite rare. It doesn’t happen often often, but sometimes a stock is getting to your target by spiking down real quick.

You heard me talking about spikes the wrong way when you have a stop loss never put a stop loss when you have a spike don’t move out on spikes. Why? Because spikes - I’m going back to something else I used to say how I said plenty of times in the last few weeks - never move out on spike. If you have a stop loss and the stock is spiking over your stop loss, let’s say you’re short and it’s moving up never move out of spite just wait to the spike to calm down because it’s very, very likely to come down and then slowly wait for it if it continues the wrong way move out if it goes all the way down again you may have a winner and it’s true for long or for sure doesn’t matter the same applies for a spike for your profit.

In this case, this stock spiked down like crazy. Why? Because at that point instead of thirty thousand shares on average it had two hundred thousand shares short or actually I don’t know if they’re short or there are people who are selling their longs. It could be long selling, could be short or whatever but it spiked down. When you on one hand on one hand you never move out on spike. On the second hand, if you are at the point where you have a winner, you also expect the spike to go the wrong way in this case the wrong way right after it occurs so when the spike happened when the stock moved down on spike even if it did not reach your target and it certainly did but even if it does not reach your target take your partial.

18:33 - Take your profit and run away because it’s likely to go back the other way and look it did move the wrong way. It moved all the way back to my entry point in fact. So, at that point right over here I took my partial real quick - at the first sign of a pullback - at the first sign of pullback - so use spikes to your benefit, not only when you need to move out on a stop loss and you do not move out on the spike but at the point where stock is spiking your way.

Now, it doesn’t matter where your target is, even if you have a target which is lower than the spike price don’t bet on it to return down to the lows. Take the spike as a present that you just received from 200,000 short sellers or sellers or whatever they are, take your partial, put the money in their pocket, have a big smile, tap your shoulder because you’ve just done the right thing and that’s it. Enjoy your money and that’s what I did with LLY. That’s why LLY is my big biggest winner and I’m still riding it and I’m over it shows here $11,900 but in fact I’m open with more so it’s gonna be over twelve thousand dollars for me in LLY.

Beautiful trade and plenty of things to learn from just one trade, right? I mean just one trade look at how many things we can talk about and discuss in just one trade. Well, thank you all that’s really beautiful one thousand four and we’re going that’s amazing tell us thank you very much you made our day I hope we made yours as well so just moved over 1,000 likes and that’s absolutely amazing. Thank you all I’ll see you all tomorrow. Enjoy the rest of your day.

Bye traders. .