A Tuesday Trade Edition: One of the most important concepts in trading is to review your work, and learn from the good and the bad. It’s critical to identify what’s working — to do more of it. Each week, you’ll get a trade from my trading journal, in which I explain my whole thought process from start to finish. Trading is all about finding something that works, and applying it, over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.
Traders still come to me all.the.time. wondering how it’s possible to trade successfully with a small account — especially in a market like this.
It’s possible of course…
But the quickest answer I have for this is knowing what strategies and setups work best with smaller accounts. Many times you can have a fantastic setup, but whether or not you buy long or short calls, trade a debit spread, or another type of trade, that’s where your account size can really come into play.
For this “Tuesday Trade” I wanted to explore that topic a little more.
So here’s why if you’re trading a smaller account consider a debit spread over just buying long calls…
This was a trade I took in CrowdStrike (CRWD) with my small account (that’s why I went ahead and did a debit spread instead of just buying long calls). Buying long calls would’ve been more expensive, naturally, but still would’ve been a way to play it.
Like many of my favorites lately, it’s a more recent IPO. It’s been out about a year now, and it’s an internet cybersecurity company. Which as we know, is a hot space right now with everyone working from home still, and companies looking to up their cybersecurity game for their employees. This overall industry group has been really hot as we’ve seen with some of my other “Tuesday Trades”.
For this reason I considered it to be one of my Phoenix stocks, and it was also a new Five Star setup.
From 2019 to March of this year it was pretty sloppy, which is very normal for IPOs trying to get their footing, but when COVID hit… this stock skyrocketed and immediately gained relative strength. It rose from the ashes like all my Phoenix stocks do. Plus it developed a Five Star setup.
Naturally whenever I see this combo on my chart… I want to trade it.
Preparing For Entry
Normally, when looking to enter a trade,I want a Squeeze before I jump in because that’s my precise moment in time where I can look for a good entry. So I waited and checked the chart, and I saw a Squeeze as well as a signal on my Turbo VZO Indicator — that’s exactly what I needed to find my entry.
I drew my fib levels to target about the 113 – 116 price area, which would give me a mid range target of $115. Now because this market is so crazy, everything keeps exploding to the upside.
In fact, this trade has already exploded, made both targets, and is still going.
How This Trade Worked Out
What I ended up doing in my Stacked Profits Mastery Program was take a debit spread.
I traded the debit spread so that my cost basis would be lower than just buying long calls. Debit spreads are also good because they help traders sit through volatility a lot easier as opposed to long calls.
I got in for $5.45 a contract, then in a few days, CRWD traded higher to about $110 — that’s where I took my profit. You can actually see that I took my profit pretty early as well. It was already up 4% by that point, so I took some money off the table. That’s always a good idea when a ticker is up that fast, that quickly.
So I closed this trade out for an exact double… at $9 a contract.
Had I let this trade ride into the next day, it likely would’ve been a triple because the following day we did in fact trade up into the $115 strike price. I ended up taking the conservative profit, on the conservative trade.
Now, had I been trading this setup with more capital and a more aggressive approach, I would’ve just bought the long calls.
However, that wasn’t what I was trying to achieve in my Mastery Program, and at the end of the day, I want to continue to show you that you can be successful in this market with a small account.