Lesson 10: Position Sizing & Share Quantity
In this Chapter, you will learn about position sizing. You only have a certain amount to trade with and want to know how much of it should you trade with at any given time. So, you want to know ho much % or $$ should you risk per trade?
1 Risk management: you should ALWAYS have 80-90% cash on hand. You will be required to only spend 10-20%. Example If you have $500... you should spend no more than $50-$100 (10-20%) AT A TIME. That means you should have NO LESS THAN $400 of cash at a time.
2 TRADE High Probability Setups ONLY: Chart patterns (flags, symmetrical triangles, ascending triangles, pennants, etc) Candlestick patterns (hammers/pin bars & engulfing have the highest probability), Divergences (bullish & bearish), and breaks of support & resistance. If you get into a trade because it is going up you are at risk... there should be a reason for each trade you enter. Alerts help with this!
3 create a stop loss! Stop-loss is a manual setup when options trading. Stop loss will be @ 30%. The reason I use 30% is because I the most recognized Stop losses are 20% & 50% so I decided to meet it in the middle. A stop-loss is a percentage in which you should exit a losing trade to protect your money.
4 Do NOT enter anything within the 1st 30 mins of the market being open. If so stay away from stocks like NFLX, AMZN, GOOG, TSLA... because a 30% stop loss with those can result in huge losses. The market is extremely volatile within the 1st 30 mins to an hour. It’s also hard to predict a trend at open. There is no support or resistance to guide you.
5 we will not have more than 2 trades open at a time. All trades will be monitored closely.
6 Take profits when we have a nice gain! We can always reenter.
7 CONTROL your FOMO! (Fear of missing out) We do not have to enter EVERY trade. We do Not have to play every Earnings. If you see a stock doing great, be satisfied with your gains and know that plenty of opportunities are to come.
8 NO EARNINGS, we will not risk our money on earnings.
9 NO SWINGS during choppy news markets. We are trying to build our accounts. Day trades & Scalps will help with that. We have no way of exiting trades after-hours so it will be in our best interest to put ourselves in the best advantage possible.
10 NO impulsive trades... every trade should be entered with a gameplan.
1. Never buy at the Opening Bell
2. Wait for the stock to choose its direction
3. If you buy an option with News and without Technical analysis... You are taking a huge risk. That does not mean you won't get lucky one day. But more times than not... You'll get burned.
4. You should not be trading with all of your money in your account. The rule of thumb is to not trade more than 10% of your account each day.
5. Learn to take profits! If you feel like those gains are good enough to screenshot... Lock them in! You can always buy it back (except with Robinhood)
6. Every day will not be a big day! Catching the right trade takes time. Sometimes things have to set up.
April 12, 2020
ONLY ENTER SETUPS YOU KNOW CONSISTENTLY WORK These are the only strategies I use:
• 15min ORB strategy breakouts with VOLUME
• ABCD (always enter at C)
• breaks of support/resistances
• breakouts of key levels found from previous days on the 5min, 15min, 1hr, or 1Day chart
• Bearish or Bullish divergences (RSI, MACD, OBV)
• Candlesticks patterns= Pin bars, Engulfing, and inside days are the highest probability.
• 3rd touch of trendlines 2. Never enter a trade before the first 15mins of the opening bell.