Always be prepared for a bad trade – even before you make one.
Never “hold and hope.”
Instead, take a loss, get out and come back for the next trade wiser without blowing up your entire trading account.
To show you what I mean, I want to share a stock trade that went south quickly and “squatted” following a breakout.
Then, I’m going to show you how to learn from this to maximize your own trading for the better.
Meanwhile, the newest stocks for this week are not in squat city – they are on the Watchlist for this week, and they are good to go.
Now, on to how I got squatted and what we can learn from it…
Plan the Trade, Trade the Plan
You can’t win ‘em all.
And yesterday, I took a hit trading Verve Therapeutics, Inc. (VERV).
The good thing about trading breakouts? You usually know very quickly if you’re right.
The bad thing about them? You also know very quickly if you’re wrong.
And the market told me, in no uncertain terms, that I was in fact wrong on this one.
This was the setup:
After its IPO earlier this summer, the stock set up in an ascending triangle base.
Pullbacks became shallower on higher lows, and there was clear resistance at the $75.00 level.
So, as soon as VERV broke out, I bought it.
At first, the trade looked great.
The stock went from $74 to $78 in just three minutes.
But things quickly turned south…
Following a textbook breakout, VERV “squatted.”
Three hours after peaking, shares fell from $78 to $68 and stopped me out of the trade.
It is never fun to lose money…
But it is part of the game.
This is what I like to think of as a “good loss.”
Yes, I lost money. But I followed my rules.
I limited my risk to 6.5% and traded according to my plan.
Again, you can’t win ‘em all…
But this setup pays out more often than it doesn’t.
If it sets up again, I will trade it the exact same way.
Learn to take “good losses.” They will make you a better trader.
They’re going to sting at first, but you have to remind yourself that they are part of the journey.
Instead of associating the loss with feelings of pain, take pleasure in the fact that you kept the loss small and didn’t let it get away from you.
Embrace the Surge,
Editor, Traders Daily Direction