Hello Trader, The market finds ways to humble us all at one time or another.…
After yesterday’s market selloff, I opened up a discussion with my readers to try and help as many of you as possible. It wasn’t too long ago when the market would tank and crush all of my positions… so I know the feeling all too well.
If your trading account took a hit due to the all the whipsaws in the market this week… don’t beat yourself because you can always bounce back. Today, I want to prove to you no matter where your trading account is right now — you could turn the corner and become a profitable trader.
Just a few years, I was a broke UCLA graduate who worked as a real estate analyst… only pulling in $32K annually.
Let me tell you something… that $32K salary wouldn’t even put a dent into my $80K student loan debt. Of course, I struggled and tried to figure out ways to live a comfortable life. That’s when I found the stock market… and I knew that was my ticket out.
Like many other beginners, I thought I was going to be an overnight success. I had saved up $15K and threw it all into a trading account, and I placed random bets… assuming I would magically make money.
However, the markets humble even the best traders out there… and I ended up losing around 50% of my account. That was a near-death blow to my confidence, and I even thought about quitting.
The thing is… trading is my passion and I knew I just needed to tweak my game to turn the corner and become a consistently profitable trader. So I went back and reviewed all of my trades.
After going back to the drawing board, I realized there was a pattern behind the few winners I had.
Those winners all had a catalyst event. What I mean by that is the fact there was a clear reason why the stock moved to my favor, whether it was a news release, earnings, fundamental changes, you name it… a catalyst sparks the move.
Just think back to any winner you’ve had in the past, I’m pretty sure there was a catalyst behind it… even if you didn’t know about it.
Let me show you how it all works.
For the most part, you can time these trades ahead of time… and it’s a simple 3-step process. Imagine if you could time your entries and exits to near perfection and what that would do to your bottom line. That’s one of the cruxes that allowed me to turn $15K into $7M.
Here’s a look at an example of an example.
Proteostasis (PTI) announced it was set to announce data results — that’s step 1. Once you spot the catalyst it becomes extremely easy.
The next step is to plan your trade around the catalyst. With this specific trade, we knew when the catalyst was… and all you needed to do was get in ahead of time, and identify buy, stop-loss and target zones.
The stock shot up from about $0.80 to $4.75 in just a few weeks!
The reason for the move?
The catalyst.
It’s really that simple. Spot the catalyst, plan the trade, and execute. The thing is… this could be done with any stock and even options!
If you’re like me, and you like money, then you’re going to utilize your number one profit bucket (that’s what I call my edge strategies — my highly profitable setups or pattern that have proven to be consistent winners).
Now, I don’t discriminate against any way to make money… just as long as it has a catalyst. My catalyst strategy is my number one profit bucket, and it’s allowed me to turn $15K into $7M in a few short years.
Since I opened up a discussion with my readers, my inbox has been flooded with questions on how to succeed in trading. And while I can’t get to all of your responses… I do try my best to answer the most commonly asked questions.
More specifically, I try to find the ones that have propelled me from a $15K account into more than $7M in just a few short years.
There was one question I saw today that really resonated with me because it was one of the driving forces behind my trading success…
What’s your step by step trading process?
Today, I want to draw back the curtains and give you a taste of the questions I ask myself before I get into any trade.
If you ask any successful trader out there, they’ll tell you they have a mental process they go through whenever they throw down bets on a trade. They don’t just randomly push their chips into a stock or option… they actually have an edge and plan accordingly.
I actually struggled with this when I first started out trading because I was so focused on making money. Let me tell you, being a broke college graduate who earned just $32K annually living in LA was not easy. I wanted to change my life and the stock market was my ticket out.
So I scraped up whatever I could and saved up $15,000. However, I didn’t have a process whatsoever. I just placed random trades thinking I would magically make money… and I ended up losing nearly half of my account.
I went back to the drawing board and tried to figure out what my bread-and-butter setups were. Thereafter, I structured a plan around them. I quickly realized how easy trading is, just as long as I stuck within my guidelines.
Now, I have a mental process before I get into any trade. I ask myself:
For the most part, the reason behind entering a trade should fit your personality. If you’re into chart patterns, news events, fundamentals, or any other form of analysis… stick to that. For me, I focus on catalysts and chart patterns.
For example, here’s a look at one trade idea.
The reason behind this trade was based on a catalyst (the coronavirus) and a bullish chart pattern. Thereafter, I identified clear zones to buy, take profits, and stop out. The last thing to do was just size the position properly.
Pretty simple, right?
Once you get the mental process down, all you have to do is execute and let the stock do its thing. Win, lose, or draw… as long as you stuck to your plan, you should be proud of yourself.
If you haven’t done so already, sign up to Trade With Kyle and you’ll receive complimentary gifts that I think could take your trading to the next level.
Markets are closed today in observance of President’s Day, and while I could take the day off… I’m hard at work stalking stocks to trade for tomorrow. Not only that, but I’m using this time to try to help as many of you out as possible.
One question that I saw come up a lot was, How do I find the right stocks to trade?
While I can’t tell you what to buy and sell, I can show you my method of building a bulletproof watchlist. I know what you’re thinking, “Kyle, if you teach us your techniques, wouldn’t that eat up your trading edge?”
No, because my strategies are not only repeatable but scalable too. That means I don’t care who really gets their hands on them.
Before I found that simple, repeatable, and scalable pattern… I was in the same boat as many of you are now… not knowing what to trade, so I just threw down money on random stocks — that got me nowhere.
The strategy that allowed me to take my account from just around $8K (I started with $15K and lost nearly half of my account from the start of my career) was finding my winners and tweaking the pattern I found. I noticed there was a commonality between all of my profitable trades.
Now, before I get into any trade there has to be a reasoning behind it. In other words, there needs to be a catalyst. Thereafter, I develop an execution plan, which includes the buy zone, stop loss zone and target zone. Once I have this all written down, it becomes really easy and I have a “bulletproof” watchlist.
The reason you get into any trade should be written down whenever you build a watchlist. Your thesis could be anything really — chart patterns, catalysts, fundamental changes, whatever the case may be… just make sure it’s in line with your trading style.
Let me show you with an example of a stock that was on my radar based on a chart pattern, for simplicity.
Check out the hourly chart in Nantkwest Inc (NK).
Check out the chart above. Notice how the stock is “flagging” and curling towards a big breakout over $7.20 area. If it breaks that, we likely could see a move to $8.00+. That could be your thesis right there. A bullish chart pattern with the stock popping.
If you look at the daily chart, it’s the same pattern.
Both charts show a bull flag pattern, and that increases the odds of success when both the short-term and long-term charts are aligned.
So what did I decide to do after I saw this price action?
I quickly developed a plan and threw it on my watchlist. When you look at this pattern, you’ll probably realize there is a clear area where you can buy, stop out, and take profits.
For the buy zone, you could’ve looked to buy between $6.60 and $6.70. The stop zone could’ve been below the lower uptrend line (in the bull flag pattern)… so if the trade went against you, you would look to stop out below it (below $6.50) The target would be above $7 (just above the upper trend line in the bull flag pattern).
Pretty simple, right?
Here was my thesis…
Shortly after, the stock actually made the move! However, I actually tweaked my plan and was watching the stock. Sure I was up $7,000 at one point… but I wanted to see if it could actually get to the key level at $8.
When I saw myself sitting in profits, I knew what I would do if the stock pulled back… I would just take my profits off the table, which I did.
Pretty simple, right?
All you have to do is repeat this process and you’ll have a handful of names to keep an eye on. The best part is you can build watchlists ahead of time. However, if you’re struggling to find stocks to trade… I’ve got you covered.
Today, I am going to release my watchlist for the week… and for being a loyal reader, I want to provide that to you at zero cost. All you have to do is click here and enter your email address, and you’re all set.
