Ever get your pink levels up to 10,000% and feel like you’re about to get clubbed to death by the market? This feeling is the worst, the pit or knot inside your stomach turns and you’re watching every tick because you bet too big because you’re a greedy son of a bitch.
For the millionth time, I am going to give you ground rules for trading that will reduce your pink levels and keep it fun and easy to do.
These are random rules, in no particular fucking order.
Gravitate towards stocks with 1 or 2% of session highs.
Avoid stocks +500% for the session. Do not even look at them.
Gravitate towards stocks heavily short during rallies.
Gravitate towards stocks within 2% of 52 week highs for overnight holds.
Avoid weighing any one position more than 5% of assets. If doubling down on a trade, max size should be 15% and in that trade your risk must be mitigated by the period of time you are willing to hold it. If the position is large, you must sell it, win, lose or draw, inside a day.
When markets are uncertain, raise cash and/or hedge using 3x ETFs.
If you are 100% long, utilize margin to hedge using ETFs. If you want to be net short whilst long 100%, you’ll need to have a 30% weighting in SQQQQ to get there.
The purpose of hedges should be to make yourself feeeeeel better about risk. When up on hedges, take profits quickly.
Day trades should be plentiful, if you’re ok with taking small gains of 1-2%. If you are waiting for larger day trade gains, you will fail at being a day trade. Stick to swing trades.
Max drawdown on day trade should be 3%. If down 3% in a hedge for a day trade, you can double the size of that position to reduce basis — but that trade must be closed out today.
In choppy markets, holding longs with a hedge is smart. Avoid niche hedges like LABD or FAZ — unless there is specific pressure on those areas.
Identify opening trends over past two weeks and position opens accordingly. If dips are being bought at opens, close hedges and add to longs and vice versa. There will be periods when opens are sold, which is when you should hold hedges and sell longs first.
When lost in a tape, reduce exposure by raising lots of cash. Lots of cash is anything more than 50%.
Avoid stocks with market caps under $1b.
Avoid stocks that trade less than 500,000 shares per day.
Do not chase gap ups on news. News if often sold after the stock jumps on it.
When day trading, focus on stocks moving, not laggards.
I can go on forever. Start following these rules and you too can trade well and be a professional and reduce your pinks levels to bring joy again to your current miserable trading career.