Trading PLTR & WDAY, Plus Trading Tips!
A few notes on how I approach each trade and ways to reduce risk.
A big thank you to all of you for subscribing to ATE. I am incredibly grateful for all of your support, your questions, and your shared wins!
This week a couple of you sent me questions and they were excellent. I sent out my responses but also thought it made sense to share these tips with all of you.
If you have been on the winning side of trading lately, congratulations! Wins are always worth celebrating and I hope you have many, many more.
If you have been struggling, that is also part of trading. The struggles become fewer and farther between as you gain experience.
For now, keeping asking questions and sharing your wins and losses with others that will help you learn and grow as a trader.
A Few Trading Tips
When I share the trades I am considering I will refer to taking a trade after breaking through support or resistance.
First, unless noted otherwise I am always talking about the daily candles. That is what I use to set trading levels for multi-week trades and for deciding when to take a trade.
Using an upside trade as the example, the best set up is not just on a break through resistance but actually it is after the second candle gives confidence to enter the trade.
If a candle closes just above resistance, taking the trade just before the close brings a lot of added risk. This level could see sellers come in and have shares opening the next day at a much lower price.
Instead, wait for that second candle to show that it is likely to close above resistance. Or even better, wait for resistance to be retested and bounced off of before entering the trade.
The same approach applies to a downside trade, just in the opposite direction.
Also, if shares have broken through the level you were waiting on to take entry, be sure they have not already reached the next level of resistance.
A good rule of thumb is, if you are entering a trade the share price should not be more than 50% of the way to the next identified level.
Each level presents an opportunity for the trade to reverse, which is why we take profits at these levels. Taking a trade just before crossing one of these levels brings on added risk.
If you want to further reduce risk, consider strike prices that are closer to the money or at the money for the options you trade.
Even if I am considering options that are further out of the money, you can still utilize the same stop loss and profit taking levels but with less volatility by choosing options that are closer to the current stock price.
Similarly, moving your expiration dates can buy you added time which you might prefer and is a perfectly acceptable approach.
It is up to you to find what works best for your approach to trading. Hopefully these tips help you understand how I think about trading.
Now time for the trades I’m watching this week.
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