A trade I didn’t take, twice

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.

The focus of today’s piece? Several trades I didn’t take.

Why? Because it’s important for traders to understand that they’re never going to be able to touch all the water. There’s going to be trades out there that you’re going to miss, or trades that you never saw in the first place. But that’s okay… you know why?

Because the most important thing to do is…

To learn a setup, watch for that setup, trade that setup over and over again, and understand that you’re not going to get every single trade that forms from that setup. That’s fine because you can still learn from those trades that you don’t take too.

Here’s one of those trades, for me.

Workhorse (WKHS)…

This is one that started to come up in the past couple of weeks in the live trading room, and when I looked at the chart I immediately knew this was a short squeeze.

What I’ve circled as #1 on the chart above is exactly what a short squeeze looks like.

We started to see high volume via the Trend Strength Candles, and then as it started trading higher, it just kept going higher, and higher, and higher on a high volume move before it eventually topped out and started to pull back.

That was the first trade I didn’t take.

It was a move that lasted all the way from the beginning of June to July —  a 1 month move that just exploded to the upside. Had I taken this trade, it would’ve been a great short squeeze play.

And the strategy I would’ve used? Well I talk all about it (and teach it) in my Short Interest Secrets class. You can either follow this link, or click on the image below for more information!

What About Circle #2?

Now after that, it consolidated again and we also got a squeeze. Whenever you see price consolidate and you have a squeeze, you’ll get some Ready. Aim. Fire buy arrows. What’s that mean? A fantastic setup.

When I saw this setup forming, I wanted to get in on it. So why didn’t I? At the time I remember I saw this on a Friday, and I thought, “I really don’t want to add a trade at the close on a Friday, I’ve been doing really well, and it’d be nice to be flat for one weekend.”

And then boom, off it went into short squeeze #2.

The move the second time has lasted again about 3 weeks to a month. So the same amount of time as the first one. In conclusion, it also would’ve been a really great short squeeze play.

But I didn’t take either and that’s okay.

The Lessons Learned:

The reason why these short squeeze trades are so good is because a short squeeze:

  • Helps you identify an explosive move,
  • Helps you identify a move that’s going to last a couple weeks which makes for a great trading environment,
  • And especially when you can identify a short squeeze on such a cheap stock (like this one which at the start was only $5) you can get some really cheap options which helps immensely with growing a small account.

This is most definitely one of my most success strategies when it comes to consistently growing a small account.

Up Next...

Intraday to Swing Trading Indicator

 Since Danielle is out this week for spring break, Allison Ostrander, Director of Risk Tolerance, will cover how she’s used her Divergent Bar indicator for short-term earnings trades. This tool has allowed Allison to take low-risk trades prior to an earnings announcement with a good probability of following through with a higher high. She’ll also … Read more

Read More

The Monday Kickoff

Hey Traders! It’s only Tuesday, yet so much has already occurred in the market. Bank news rattled the markets last week and continued rattling them over the weekend. CPI data hit this morning, and it was in line with expectations. I view that as a positive because anything other than an inline reading could have … Read more

Read More

The Relative Strength Winners

The indexes have been sloppy, in addition to being relatively weak. The choppiness has some benefits, though, as this choppiness has meant that squeezes are consolidating everywhere. I can’t say I recall a time in which I have seen so many squeezes across so many different indexes and sectors simultaneously. What does that mean? It … Read more

Read More

Subscribe Today!

Want to walk the path to trading success together? Join Danielle’s “Five Star Trader” E-Letter for market insights, tips, tricks, and special bonuses.

Sign Up Now