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Hey Guys and Gals,

In trading, much like in any other field that requires performing at your peak, your emotional state may have a major impact on end result.

If your mind is not in a good spot – there’s a good risk you can do some unintended damage to your account.

And then there’s the negative feedback loop too…

You aren’t trading well, you get frustrated, next thing you know – you’re trading even worse than when you started.

But there’s good news too – it doesn’t have to be this way!

You can learn emotional discipline much like you can learn anything else.

Here are a few habits to practice that can help you keep your cool when making trade decisions:

 

Oversizing Kills

If I had to pick one top reason why some traders consistently lose money – it wouldn’t be bad preparation, bad setups, or bad luck.

The one factor that can time and time again force bad decision-making and send your account down a steep death spiral is oversizing.

The reason I see it occur so often is simple – mentally, it’s really hard to fight that internal greed that virtually all of us have!

And then there’s the negative feedback loop in full swing: the more you lose, the more you have to make back, therefore the more size you have to put on. And the more size you put on – the more you lose.

This is exactly what lies at the core of the issue: force yourself to control your size right away, so you don’t have to put in the extra effort later.

Your risk management has to be your top priority: avoid having a bigger position than you had intended!

I get it, the market is tempting… and the temptation never ends, no matter how many times you get burnt by it.

Therefore, if you’re serious about making it, you have to learn discipline and you have to follow your plan, no exceptions made.

If you’ve just oversized and lost – it’s not a bad idea to walk away for the day.

If you’re having a bad streak – you may want to cut your size down for the next few days/weeks, until you feel confident again.

There’re many ways to go about this, but trust me – I’ve seen far more people regret they got too big in a loser than those who were too small in a winner.

 

Trading is a Process, Not a Chance

What separates a true elite performer from an average guy?

What makes the best athletes the best?

It’s consistency – the ability to come out on top in the long term!

Look, Lebron James or Leo Messi don’t win every single game they play. They don’t win every tournament and every season either.

But they still win enough to be considered among the all-time greats!

That’s because they know they can’t win everything – a failure doesn’t drag them back, it helps them move forward.

When they lose a game, they analyze their mistakes and move on doing the best they can to win the next one.

The same principle applies to trading: you can’t be green in every trade, every day of every month – and that’s ok.

But the best traders I know can’t be bothered by that – they take note of what went wrong and move on to the next trade, next day, or next month.

Don’t sweat a bad trade or a bad streak of trades, a trade is just a trade – one of very many you’ll have in your career.

Analyze what went wrong and keep going like nothing happened.

The path is made by walking.

 

Learn to Admit You’re Wrong

If you want to make it easy for the market to destroy your account, there’s one quick fix: play stubborn with it.

The market always knows best and most big egos get humbled down very quickly and plenty painfully.

If your intended game plan isn’t panning out – learn to admit you were wrong.

There’s one important thing to understand: being wrong doesn’t make you a bad trader; being stubborn and undisciplined – does!

As I’ve said many times through the course of this letter – you are going to lose, there’s no way around it.

If you’re wrong in a particular trade – your best course of action is to get out and identify what got you wrong.

Don’t try to prove anything to the market, it’ll end up a very expensive lesson to learn.

Author: Jason Bond

As you likely figured by now, I love short squeezes.

They might very well be my favorite kind of momentum set up on the long side – the imbalance of supply and demand for shares can drive the price up to mind-boggling levels.

I mean just look at some of those recent ones… GME, AMC, SPRT, TLRY from last year…

The moves they pulled off were nothing short of insane, which is why I’m so excited to share with you a stock that, in my view, may very well soon join the above list!

Short Trap

Before I tell you about the stock itself, let me jump to the drawing board for a second.

In my review of the Support.com (SPRT) squeeze, I broke down the squeeze process into 4 key pieces:

  1. A fundamental event or a technical move that attracts the attention of short traders.
  2. A “short trap” – an area where short traders think they’re right & the stock is headed lower, causing them to pile in aggressively.
  3. A climb above that area, making shorts uncomfortable or outright putting them underwater.
  4. A resulting parabolic explosion higher.

And here’s how this looked and played out in real life and on the chart:

In a nutshell, a squeeze becomes possible when a stock climbs above the area where most people got short, putting them in the red and forcing coverings.

A monster squeeze like SPRT becomes possible when traders keep adding to short positions while a stock keeps climbing higher, immediately making them uncomfortable – the green area on the chart above.

And this is exactly what I’m seeing in…

IVERIC bio – ISEE

Let me give you a quick overview of what’s happening:

  • Last week, ISEE’s main competitor Apellis Pharmaceuticals (APLS) reported Phase 3 data which validated ISEE’s technology, while putting APLS’s own product at a disadvantage.
  • Shares of APLS crashed, while ISEE jumped on excitement over the company’s “validated” potential and market position
  • Many traders were skeptical given their relatively weak cash position and were expecting a stock offering – a great reason to get shorts involved
  • Shorts were involved, to begin with: even before the move, the stock sported a nearly 20% short interest.

And here comes the best part, the chart:

So, plenty of shorts were involved in the 2-month long consolidation of $9-$11 – those are already underwater.

Now note the insane volume on the first day of the move – 160M shares that traded hands that day is almost 3x of the company’s 59M share float.

Imagine if even a tiny piece of that volume is short trades – that adds a lot to the original ~20%.

And best yet? Those traders are also in a bad spot – the stock has never stopped the grind since.

Here’s how it looks on a lower timeframe:

As you can see every short trade of the past few days – and there could’ve been many given the stock offering speculation – is now red.

A Monster Squeeze Coming?

One thing is for certain – short traders are in a real bad spot right now.

The stock keeps grinding higher on low volume, giving them plenty of reason to be nervous.

Any further up move from here may easily triggerr a big wave of covering, and then some more covering as the price advances.

So far the stock has been as strong as they come – a textbook momentum name – if it continues this way, we can easily see some fireworks in the near term.

Trade Plan

At this point, I really want to see the grind continue – I don’t want it to spend much time below $16.

If dips continue to hold above $16, I might go long against it and see what happens.

If I’m right and many people are stuck short from the first, 160M-share day, I truly think ISEE may turn into a monster squeezer – I wouldn’t be surprised to see it hit $25-$30 very soon.

If you’re looking to trade it – bear in mind that the stock offering fears are not baseless and you definitely don’t want to get caught in that.

I’d only trade ISEE with small size and go even lower for overnight holds – this is when an offering is most likely to be announced.

Stay safe, and let’s see how this plays out over the next few days.

Author: Jason Bond

Hey Guys and Gals,

There are many factors that make trading a unique (and tough) job.

But if I had to pick the biggest one out – your performance depends entirely on your mood and psychological state.

You may have the greatest of setups right in front of your eyes – if mentally you’re not up for the job, you won’t be able to profit off of it. Worse yet, you may very easily lose.

Today, I want to talk about a few psychological issues that I see many traders face and tell you how you can eliminate them.

Think Long-Term, Strive for Consistency

Trading is so tough for a simple reason: every trade decision may put you on the verge of extreme fear or greed – some of the strongest emotions to begin with.

With so many things moving so fast, so far, and all at the same time, it is very easy to get caught up in the moment and forget what your true objectives are.

One of the gravest mistakes I see beginning traders make is trying to nail that “one big trade”, and hit the one big winner.

This happens all too often with those aiming to grow their accounts and usually leads to the exact opposite – a quick demise.

I get it, you see one of those insane movers… GME, AMC, SPRT… Shares doubling and tripling, sometimes in a matter of hours…

“If only I was in that” – we’ve all had this thought looking at another one of those crazy names.

And this is exactly the point when things usually go south – you become greedy and your mind grows irrational.

You start to:

  • Oversize
  • Get in too early, fearing missing out
  • Have inadequate stops & unfavorably skewed risk-reward
  • Bag hold big positions against you, because you’re in too deep

I have yet to see one trade that succeeded using the above techniques.

The solution is simple – aim for the long-term.

Your goal is to make the best trading decisions possible, and to do so with a consistent approach.

Don’t become obsessed with huge winners – instead, focus on consistency.

You’ll be surprised how quickly small numbers may add up.

Don’t “Marry a Stock”

Which is a nicer way of saying “don’t be a bagholder.”

Look, trading is called trading for a reason – we’re no investors.

It’s not our job to develop an investment thesis and faith in a company and hold it through any downturn and market cycle.

As short-term traders, we thrive on short-term moves.

Your goal is to learn the best setups for these and take advantage of the best opportunities when they arise.

If a trade doesn’t work – you must cut it and move on to the next one.

You’ll thank me later.

Avoid Bias

I think we’ve all been in situations when we think “this stock has to go up/down.”

Next thing you know, this idea takes over your mind, and all the trading becomes purely “why is this thing not going where I want it to go!”

Well, the answer is simple – why should it?

As traders, we have to react to what we see, now what we wish to see!

You cannot have a bias about what a stock will do next.

In the market, there’s only one thing I know for sure – I don’t know what it’s going to do next.

And that’s how you have to approach every trade – you don’t know what it’s going to do next.

A stock is a clean slate – our subjective opinion on where it’s headed should not impact our intraday trading decisions.

At Times You Will Lose, Get Over it

Last, but not least… Losing sucks!

I don’t think I have to tell you why!

There’s no positive way to spin this – it sucks, plain and simple, and it always will!

If you’re serious about making it as a trader, you just have to get over it.

You will lose – it’s not going to be a smooth ride.

There will be bad trades, bad days, and likely even really bad months.

This is just how this job works.

What you can’t do is allow a loser to affect your next trading decision.

Cut the loss, walk away if you have to. But start the next trade fresh, rational and smart.

The best way to think of this is as a “cost of doing business.”

Losers are traders’ cost of goods sold, rent, and employee salaries – they cut a lot into your bottom line, but you can’t do without them.

Don’t aim for perfect – be consistent and you’ll see great things happen.

Author: Jason Bond