Hey 5-Star Trader,
“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my 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.
For this week’s “Tuesday Trade,” I want to outline my trade in Apple (AAPL).
At the beginning of the month as I was combing through the market at the open looking for possible setups. AAPL had just come up and I noticed they were showing relative strength. Upon further inspection, AAPL was also experiencing several multi-time-frame squeezes (one of my favorite setups to trade) so I knew I had an opportunity in front of me.
Not wanting to jump in right away, I decided to manage my other trades and watch AAPL in the background. Finally, a few hours past the open I went in and bought four butterflies — BUY +4 BUTTERFLY AAPL 100 20 AUG 21 145/150/155 CALL @1.31 limit order (LMT).
Because this was a bullish trade in nature, I kept the trade small with a total risk of approximately $500, targeting a $150 price point.
Over the course of the next few days, AAPL began to consolidate and was right on track. However, the market’s price action was beginning to make me nervous. More news of the Delta variant of Covid-19 came out leading to notable sector rotation and the market was beginning to shake things up. AAPL begin to break down (down more than 2% and continuing to sell off) all bets to the long side were off. I decided to give myself one more day before I made the call to stay in or out.
As it turns out, the next day AAPL was able to stop the hemorrhaging. Near market open, AAPL was able to get close to my center strike and I was able to get out for a profit — SELL -4 BUTTERFLY AAPL 100 20 AUG 21 145/150/155 CALL @2.25 LMT.
Sometimes staying in a trade during rocky market conditions can be unnerving, but if you exercise patience and follow your trading rules, there is a good chance you can still turn a profit.
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