+$23,952.98 Momentum Trading Stocks with NO NEWS 😱

Summary

In this episode, a seasoned trader breaks down their strategies for adapting to hot market conditions. Emphasizing the difference between beginner and experienced traders, the trader shares insights into risk management and how to recognize when to be aggressive or pull back. Through a detailed review of trades such as UPC, ZBA, and ALBT, the trader highlights key decision-making moments, showing both successful trades and small losses. The episode concludes with tips on adapting to the market’s rhythm, managing risk, and knowing when to stop trading, while also promoting educational resources and a community-focused approach to trading.

Takeaways

• 😀 The key to successful trading in both hot and cold markets is adapting your strategy. In hot markets, increase risk and size; in cold markets, pull back and be cautious.
• 😀 More experienced traders tend to have more consistent equity curves because they've learned to weather drawdowns and quickly recognize when market conditions are changing.
• 😀 Taking more risk and being aggressive in hot markets can lead to higher profits, but managing risk carefully during pullbacks is crucial for long-term success.
• 😀 Beginner traders often experience a rollercoaster of gains and losses, while experienced traders have learned to control their losses and manage risk more effectively.
• 😀 It's important to identify when market conditions are shifting and adjust your approach accordingly, whether that means scaling up or scaling down.
• 😀 Trading on stocks with no clear catalyst can be risky, but patterns like those seen in Chinese stocks (e.g., UPC) can offer profitable opportunities if timed right.
• 😀 Proper risk management includes setting tight stop losses to protect profits, as seen in Ross's $600 loss on ZBA, which was contained and didn't derail his day.
• 😀 The ABCD pattern is an effective technical tool to recognize when a stock is trending upward, which can lead to profitable trades as seen with ALBT.
• 😀 Volume Weighted Average Price (VWAP) and moving averages (e.g., 9 MA) are essential tools in identifying support and resistance levels for making entry and exit decisions.
• 😀 Even after a profitable day, it's important to stop trading at the right time to preserve gains and avoid giving them back in a later part of the session.
• 😀 Trading is inherently risky, and while Ross's results are not typical, he stresses the importance of practicing in simulators and managing risk carefully.

Q & A

What is the key difference between beginner traders and experienced traders in terms of market adaptation?

Experienced traders recognize when market conditions change, allowing them to adapt their strategy more effectively. They tend to take more risk during hot markets and are quicker to scale back when conditions cool off, leading to a more stable equity curve. In contrast, beginner traders often experience more volatility in their equity curve, with frequent ups and downs.

How did the market conditions in early December influence the trader's strategy?

The trader noted that the market was very hot at the beginning of December, which led them to take on more risk and be more aggressive with their trades. Hot markets provide more momentum, so the trader felt confident in sizing up and capitalizing on opportunities. However, they also emphasized the importance of recognizing when the market starts to cool down and adjusting accordingly.

Why does the trader consider taking more risk during hot markets?

In hot markets, there is more momentum, which creates opportunities for quick gains. By taking more risk and being aggressive, the trader can capitalize on these opportunities and potentially make higher profits. The idea is to maximize returns during favorable conditions while managing risk.

What psychological challenge did Nick, the Warrior Pro graduate, face in his trading journey?

Nick was concerned that his early success might have been 'beginner's luck' after making $25,000 early in the year, only to lose most of it later. He was nervous about giving back his gains again, which is a common concern for many traders who experience initial success followed by losses.

What did the trader advise Nick about managing drawdowns and loss recovery?

The trader advised Nick that experienced traders have learned to manage drawdowns effectively, using them as learning experiences. Recovering from losses builds confidence and helps traders understand how to handle risk better in the future. The key is to take smaller, more controlled risks and recognize when the market conditions shift.

How did the trader manage a small loss on ZBA?

The trader took a small loss of $600 on ZBA by setting a clear stop loss. When the stock didn’t perform as expected, the trader quickly cut the loss, keeping it tight and within the predetermined risk parameters. This approach prevented the loss from growing larger.

What was the pattern that led to the successful trade on ALBT?

The trader recognized an ABCD pattern on ALBT, where the stock moved up, pulled back, and then resumed an uptrend. By waiting for a solid confirmation of the pattern, the trader entered the trade at around $4.73, adding to the position as the stock moved higher. The stock eventually squeezed to a high of $5.46, delivering a profitable outcome.

How does the trader deal with stocks that exhibit ‘whippy’ price action?

When a stock exhibits whippy price action—large price swings with no clear trend—the trader typically waits for a clearer setup or pattern to form. In the case of ALBT, the trader noticed the stock was moving in a choppy manner but was patient, waiting for it to establish a pattern before entering. They focused on confirmation, which ultimately led to a successful trade.

Why did the trader decide to stop trading earlier in the day, even though there were potential opportunities?

The trader chose to stop trading earlier in the day to lock in their profits and avoid the risk of giving back gains. After having a successful start to the day, they felt confident in ending on a high note, rather than chasing additional trades and potentially risking a loss. This decision was influenced by past experiences of making gains and then losing them later in the day.

What advice did the trader give regarding risk management and strategy adjustment in different market conditions?

The trader emphasized the importance of adjusting your strategy based on market conditions. In hot markets, traders should be more aggressive and take on more risk, while in cold or uncertain markets, it’s important to scale back and wait for clearer setups. Recognizing shifts in the market and adapting quickly is crucial for maintaining profitability over time.