The "Fallen Angel" strategy is a specific, structured approach to trading stocks that are experiencing a long-term trend continuation, focusing on identifying optimal entry points in the early morning trading session.
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So, good evening everybody and welcome
to this webinar focused on the fallen
angel strategy. Really happy to have you
guys here and invite you to ask
questions along the way. I'll do my best
to uh take your questions as they come.
Really, the intent of this strategy is
to go over a highle um approach to the
markets and how you can trade the
so-called fallen angel strategy.
Uh as always we need to let you know
this for information and educational
purposes and uh is uh proprietary to
trading terminal and its website. The
data for tonight is broken up into five
distinct steps. I'm going to talk to you
about this strategy in five steps that
are going to start with the trade
overview. What is the fallen angel
strategy? Uh we're going then going to
go into the conditions behind the
strategy, right? What are the setup
conditions that you need to see? Then
how do you set up the trade and get
ready for the potential opportunity to
trade it? What does the trade entry look
like? And last but not least, how do you
manage the trade once you're into it?
Uh we'll go through this in a step-wise
fashion. Like I mentioned, if you've got
questions, jump right in there. I'll do
my best to pick them up. Let's start
with the trade overview. Uh the fallen
angel strategy is actually part of a uh
series of four strategies that are very
similar but have slightly different
configuration options. Um the fallen
angel and uh rising devil are the most
popular ones. They're the ones I trade
most often. And being that I'm short
biased, I tend to trade the rising
devil. That's a short trade. The Rising
Devil and Lead Balloon are both short
trades. Fallen Angel and Phoenix are
both long trades, but most people like
to trade long. So, we're going to focus
on the Fallen Angel, and I'm going to
explain what that means. Now, most like
most trade names, it's just a name,
right? There, this strategy has lots of
different versions out there in the
world uh that you can find usually with
slightly different configuration options
or ways people have put it together for
themselves. I'm going to explain to you
what it means to me and how you can
trade it. Now, specifically, the fallen
angel strategy sort of has these these
items. It is a long trend continuation
strategy. So, we're looking for
something that is already heading in a
direction, and we want to figure out a
good entry point so that we can get on
board and have it continue. We're
looking for strong stocks that are
moving higher on positive news
pre-market. So, this is an early trade.
This is going to happen right at the
beginning of the day.
We're also looking for stocks that are
going to be sitting above the VWAP. Now,
a few times in this webinar, I'm going
to be using terminology that you may or
may not be familiar with. I'll do my
best to explain them, but if I miss one
and there's something you want to
explain, do not be shy and jumping in
and asking. Okay? Uh, VWAP stands for
volume weighted average price. And it's
a very common sort of uh uh average, a
moving average that people use to
measure sort of uh price performance
over the course of a day. I use it quite
heavily and it's one I like because it
helps me understand is the price sort of
moving higher or moving lower. That VWAP
is usually sort of your net zero line.
When something is at or just trending
around the VWAP, you know that mostly
it's not going anywhere. It's basically
at its average price for the day, hence
the name, right? If it's above it, it's
above the average price. If it's moving
below, then it's below. So, so you know,
on the fallen angel strategy, I'm
looking for something that's sitting
above that average price. I want to see
a rising price uh in the early stages. I
then going to take this trade within the
first one to five candles of the open.
Now, I've worded it that way, one to
five candles, because that implies you
can trade this in multiple time frames.
You could trade this using a one, two,
or five minute chart. You really cannot
trade this strategy with a higher level
chart because now you're getting into
longer time periods that have bigger
builds and you should be looking for
slightly different criteria. Now, I say
one to five candles and and I would say
it's a little variable. I'm going to
touch on this a little bit later. It
could be up to five candles if you're
using a one- minute chart, maybe four
candles if you're using a two-minute
chart, and three or so if you're using a
fiveminute chart because, of course, the
actual elapse time increases, right,
with that chart. You know, three candles
on a five-minute chart, you're looking
at 15 minutes of elapse time. After that
point, the strategy sort of loses its
effectiveness, and now you're moving
into other types of strategy uh definitions.
definitions. Um,
Um,
what differentiates? Oh, one thing that
you should pay attention to in this
chart are the green words. Those that
are in green are the things that
differentiate the fallen angel from
those other three strategies I
mentioned. So, if I look at the
different criteria on all four of them,
you can see I've sort of given you idea
of what they look like, right? The
fallen angel is longbased. It's mo a
stock that's moving higher on positive
news that is above the VWAP as opposed
to the rising devil for example which is
a shortbased trade that's moving lower
on negative news below the VWAP. And
then you can see the Phoenix and the
lead balloon uh described trades here.
Those are the criteria they look for.
You could trade all four of these
strategies using the information I'm
going to provide you in this webinar
because uh the uh basically the trade
setup, the trade entry and trade
management elements of what I'm going to
talk to you about are otherwise the same
if you just sort of replace the long
with short, right? The green with the
red as applicable in each strategy.
We are going to focus however just on
the fallen angel today. I'm going to
explain that in detail and give you what
you need to know if you want to see if
you want to try and trade it. Okay.
All right. So, let's move to step two.
We need to understand the conditions
under which you would identify a stock
to trade this. Well, like I mentioned,
this trade happens right at the
beginning of the day. Overall, I'd be
looking for a stock that has to have
these criteria. First, I'd be looking
for a stock with a float of over 50
million shares. What is the float?
That's the total number of shares
available for trade. Uh, anything lower
than 50 million, you tend to get less
predictable on the strategy. And they
tend to get, you may have heard people
talk about lowflat tra uh, stocks. Those
are often ones that have less than 20
million shares. 20 to 50 is sort of a
gray zone. And over 50, you tend to get
larger uh, stocks that trade a little
uh, a little, frankly, less crazy,
right? A little more mature fashion. I
like to focus on the ones that have over
50 million shares. However, you can
certainly trade this on smaller stocks.
Just know those low floats can be less
predictable. They're higher risk. All
right. Second criteria. I'm looking for
a stock that has that trades more than
five million shares per day. That just
shows me that there's volume in the
stock and I know I can count on regular
volume being available for my trade, you
know, so that it can be filled whether
I'm going short or going long. I'm
looking for an ATR of over a$150. Now,
the ATR stands for average true range.
This is an indicator of how far a stock
moves on an average day. Now, I'm
expecting the stocks that I'm looking at
to be in play. Remember I said it has to
have news. Well, I'm looking for one
with news. Therefore, it should be
trading more than a$150 on this given
day or I wouldn't be looking at it. But
I want to know that it has enough range
that I can make money off of it, right?
That it's going to move sufficiently for
to make it worthwhile me spending my
time paying attention to it.
Okay. So,
uh and I see your question. You got it
exactly correct.
So Shay, you're asking what is the best
place to get the news. Now I'm a little
biased on that. I would argue the best
place to get the news is Trading
Terminal. That's usually where I go. And
I'll show you I'll I'll sort of show you
what that looks like and and how you can
get the news. I do have an example that
we're going to go through. And you can
get all of this information, by the way,
from Trading Terminal. There there are,
of course, other news sources that you
can get it from as well. All right. I'm
looking for uh stocks that have a share
price of over $10. Again, for me, that
just allows me to get my risk-to-reward
in line. And uh, you know, under $10,
once again, sort of like a low float,
they tend to trade differently. They're
not there's not as many institutional
buyers in there, and they just become a
little more erratic in my opinion. So,
uh, that's why I look for shares, sorry,
stocks with a share price of over $10.
Uh, the last thing I have on here is
that I'm looking for a short float of
less than 20%.
Now, the significance of that is on a
fallen angel strategy, right? I'm
looking for this to go long. It's one
that's moving up on good news. I'm
looking it to continue going long or or
north. Um, and I don't want a heavy
short float. Why? Well, if you had a
really really big short float, you could
get a short squeeze out of it, which
means that, you know, if it's moving
higher, uh people could have to close
their shorts and and that would actually
cause it to move higher. But it what
sort of like the share price and the the
float, it can create erratic behavior
because don't forget people that are
short have a vested interest in this
thing going down. And unless they're
severely overpowered by the stock
movement, they're going to try and push
it down, right? Especially if there's a
lot of deep pockets who who are trying
to to make it move that way. So, I don't
if I'm looking for a fallen angel
strategy, I do not want to see a big
short float just because it introduces
risk. While it could support my trade, I
don't like the risk parameter to it.
Once again, Tony, you can check the
short float on a trading terminal. And
and why don't we do that since you guys
are asking the question? If you just go
to the main page on Trading Terminal,
this is what main page would look like.
You can just type a ticker in here. I
was looking up some earlier. Let's let's
take a look at Oracle. And as you guys
can see right here, you know, here's the
it's got the market cap, the float,
right? So 1.6 billion shares, so well
over the 50 million. Nothing to worry
about there. Right up here, it's got the
ATR, average true range. You can see
that's $1448
on this stock. And down here, we've got
the short float, which is only 1%.
Typically, it's pretty low like that.
It's only one, it's even half a percent.
Like if we were to call up something
like Apple, uh the short flood on Apple
I think is probably about half a
percent, no 75%. So it it's pretty low
on the major stocks, but when you get
into smaller things like there was a
stock that we were looking at today that
was moving heavily called PRA, you know,
it's got a bigger short float that's got 16.8%.
16.8%.
And as you can see, the total shares is
only 15.6 million. So, you know, that
would one that doesn't quite meet my
criteria, although I mentioned as a
potential option only because it
happened today for a rising devil. But
anyways, that's where you can find the
information. Some of the other stuff
that you that you might want to look at.
Uh it's it's down here under the price
highlight section, right? You can see
the opening price. You can see so notice
it's got the volume weighted moving
average. This is sort of the VWAP stuff
that I was talking about. I'll show it
to you on a chart later, so don't worry
about that too much. Okay. The other
thing that I mentioned was the average
volume. How I said I want more than 5
million shares a day. So if we're
looking at something like again this
PRA, notice the average trading volume
here is only 466,000.
Again, going back to something like
Oracle, its average volume is 20 million
shares a day. Right? Right. So, again,
these are all just indicators that I use
to make sure I'm getting stocks that
have uh the ability to move, but enough
stability that I'm not likely to
increase my risk more than I'm
comfortable with.
So, back to the presentation. Um then,
so those are the overall conditions,
right, that the stock can have. And you
can look that stuff up at any time. Some
people like to start really early in the
morning. Whether you're doing that at 7
am or 8 am or 8:30, I don't care when,
but you can, you know, you you could
filter some of your stocks that you may
be looking at based on on that
information. Now, by 9:15, here's the
specific criteria I want to see on the
day. Like I mentioned, I need positive
news. I want the news to know there's
some driver. There's a catalyst for this
stock moving higher. I want it to be
gapping higher on that news. When I say
gapping, we usually mean basically it's
the differential in price between where
it closed at 4:00 the previous trading
day compared to wherever the price is at
the time at which you're looking at it.
In this case, I'm suggesting it's around
9:15. So often we look at stocks in the
morning, if you follow the pre-market
show that we have with Carlos and I, for
example, you know, we look at gappers.
They're moving more than 2% higher from
the previous close. I want it to be
gapping at least 2% although the number
isn't um important as long as it's
higher than it closed yesterday. That
that's what's important to me when I'm
looking at the fallen angel strategy. I
also want to see that there's been at
least 500,000 or half a million shares
traded at by 9:15. The more the better,
but if there's less than half a million
shares, that tells me there might not be
a lot of enthusiasm for this move. the
news might not be strong enough to
really drive the type of uh activity
that I'm looking for. And I typically
would avoid a trade if it's got less
than half a million shares traded. I'm
also looking for a stock that is showing
consistent price action. And by that I
mean it's got regular trading volume
when you look at a fiveminute chart
again premarket.
This is also important because when you
look at charts premarket sometimes you
see these big gaps, right? If if there
was 500,000 shares, but almost all of
them traded in a 15minute block between
6:45 and 7 a.m., well, that's not very
good, right? Because that was like two
hours, two and a half hours before the
market open. And it could be that this
thing is not going to move when the
opening bell rings. I want to know
there's consistent price action, that
volume is showing me candles in every
minute. There's shares traded every
minute or at least every five minutes
premarket. That gives me confidence that
this trade again has some of the
criteria that I'm looking for. Last but
not least, I want the price to be above
the pre-market VWAP. Now, I say that
because VWAP traditionally is a measure
that is used only after the market open.
However, nowadays, every people use it
all sorts of times, intraday on on
different scenarios, and of course,
pre-market. So, the VWAP will be
available on any platform that you're
using. you can see it pre-market and
it's usually good for the fallen angel
that it's above the VWAP. If you
remember, there's four different
criteria where I could have something
that is trading below the VWAP with
strong news, right, that I might want to
look at for a gainer. And we've seen a
lot of those recently, by the way,
right? Because the market's been gapping
down and then it it jumps up pre-market.
Uh that would be a Phoenix type trade,
but we're talking about a fallen angel,
so I want it gapping above the VWAP premarket.
premarket.
Okay, so that those are the background
conditions. That's step two. Step three,
let's look at the actual trade setup.
What am I looking for? Between 9:25 and
9:28, right? So, these are just the few
minutes right before the open, the stock
must have target profit levels above the
current price. Now again, I'm going to
show you on a chart what I mean, but
really I want to know how far can it
move. If I think this thing is going to
h going to go higher, where's it going
to go to? How far is it going to go?
Right? You must be able to identify
them. If you can't identify those
levels, you might want to consider not
taking the trade. Now, there's a couple
of exceptions to that. For example, if
you've got a stock that's at all-time
highs, well, you don't have any levels,
right? It's never been here before. So
what do you do in those cases? You
usually use whole dollar numbers, right?
You go to the whole dollars. Those are
usually good targets because stocks love
to move the whole to and through whole
dollars. Okay.
Second, I do not want to have
significant support or resistance levels
in the active price range. So what does
that mean? That means, you know, if I'm
looking at this thing to move higher, I
don't want it to be all congested with
areas where a ton of trades uh a ton of
shares have traded hands many times and
it's created levels. Now, the levels
depend on you in your trading, right? Do
you use uh uh Camarilla pivot points? Do
you use regular pivot points? Do you use
moving averages? Do you set daily
levels? Again, I'll go through and I'll
show you sort of the type of levels I
look for. But if you have levels that
you rely on and they're all within the
price action pre-market and all over the
area where you think it might trade
through, it's likely to have more
difficulty moving higher like we want
this stock to do. So I would probably
abort. By the way, any of these criteria
I'm telling you about, if they don't
occur, generally I say not this stock,
not this day. Right? So these when I say
the stock must to me these are criteria
that have to be there. If any one of
these conditions fail, I don't take the
trade. So, you may understand I don't
take all that many of these, right? This
is a strategy that works very well when
you identify it, but you can't force the
rules. Either the rules are present and
you have an opportunity to trade or they
do not present themselves and you abort.
No trade. Okay, let's go back to the
criteria. Next one. It must be the stock
must be able to deliver a minimum of a
2:1 win loss ratio. What do I mean by
that? Well, specifically, you know,
those levels we just talked about
between the place at which I think I
could probably get an entry and the
price target. I want to know that it's
got twice the range between those two
levels as it does between where I think
the entry will be and where I would
likely put my stop loss. Now, again, I
can I can't tell you exactly what that
looks like in every stock because it
depends on the situation. But this
brings us to our our next points, right,
which I need to find out where to put a
stop loss. So,
So, um,
um,
the other, uh, setup criteria that I'd
uh, that, uh, I'm looking so by
basically the time at which you want to
have executed the trade. And I say 9:35
because some of this could happen
pre-market or it could happen in the
opening minutes of the market, right?
But if it goes past 9:35, remember I
told you my one minute criteria. Sorry.
If you're trading off a one minute
chart, you can trade it for roughly the
first five time periods, which actually
gets you from 9:30 to 9:34, right? If
you really count it, because, you know,
9:30 is a minute. 1 2 3 4. Anyways,
there's your first five time periods.
But, so if it hasn't done these things
by 9:35, it's an abort on the trade. But
again, it's not a bad thing if it
happens earlier, like 9:25, 9:28, 929,
that's okay. I just want to see it h
happen within the opening minutes, okay,
of the stock uh of the trading day.
Okay, so first item I'm looking for the
pullback to the VWAP and or a
significant level. This is important for
this strategy to work, right? I need it
to pull back a little bit. Remember,
it's gapping higher. It's moving higher
on uh good news, but I want a little bit
of a pullback. Why? Because that gives
me a good riskto-reward. that gives me a
good entry point at which I have a
greater probability of success. I'm not
chasing it higher. I'm not risking
entering at the high of day and having
it go higher. There are great trade
strategies where you can trade something
at the high of day and look for it to go
higher. That's not this strategy, right?
Don't confuse them. If you want to trade
a high of day break strategy, right,
that's great. Don't confuse it with this
specific strategy. That's not what I'm
looking for in this case. So, I'm
looking for a pullback that I can take
advantage of and then a trade to move
higher. Okay. Second item under this
section, I'm looking to show support at
or near the support level with a strong
order book.
This specifically means that I again
once it gets to the level I've
identified for the low, right, where
that pullback goes to, I want it to like
halt. It doesn't have to halt for a long
period of time. It could literally be
seconds, but I want to know that it's
reversing that. I'm also seeing stuff on
the ask, right? Meaning higher orders.
Uh, you know, you can use a level two
bid and ask. You look at the ask side.
Where are the big orders? Hopefully,
there's more there than there are in the
bid. Or you could use a visualization
tool like uh our Atlas tool that you've
got in Trading Terminal to see where the
volume sits. Ideally, you want it above
the price that the stock is currently
trading at.
Okay. Now, Anony's asking a good
question. Do you use a screener for
these criteria? You can. The more
criteria you try and put into a
screener, the more complex that screener
needs to be, right? I generally don't. I
I do to identify the gappers, right? I
have a gapping criteria I use in the
trading terminal scanners that allows me
to identify things that are moving on
the day. Uh but a lot of the criteria I
go and I look up myself. I look up
manually. I make sure it's in place. uh
because it one it gets me familiar with
the stock and what's happening. It gives
me an opportunity to sort of just take a
look at it, get a feel for what's going
on. Um but two, I I feel that it just
gives me that that uh that comfort that
I've done my due diligence, right? I'm
not just trusting the tool to have done
the filtering. I've looked it up for
myself. I've checked the boxes. And
maybe that's just my bias, but that's
how I do it.
All right. All right. Back to the the
data. Next point, I want to start the
move higher
uh sorry uh move sorry I want to start
the move higher above the identified
support level. So this means again it
shouldn't still be dropping when you're
entering this thing. I this is a long
trade. It should have been moving long.
It pulled back yes but now I want to see
it start to go back in the direction of
the trade. It's just a shortterm
pullback. Sounds probably similar if
you're familiar with an ABCD
type trade, right? Where you're looking
for that pullback and then a move
higher. A lot of the same principles
apply. This is just a very specific
criteria to trade at the open. And I'm
looking for it ideally to still be above
the VWAP or have regained the VWAP at
the point at which I take the trade.
Meaning, I want it to be above that
average price that shows me their
strength and it has an indication that
it's interested to go higher.
Okay. All right. So, that's the third
step. That's all the setup criteria. And
there was a lot in there, right? But
that's the stuff I look for. It's not as
complicated as it may sound once you've
done it once or twice because most of
that stuff you can clear well before you
have to worry about the trade entry,
which is the next thing we're going to
look at. Right? So, when it comes time
to make a decision, are you entering
this trade or not? What do you need?
Well, um, first at the trade entry, and
remember I told you about that criteria.
Here it is written out. If it's a one
minute chart you're looking at, that
would be the first sort of 9:30 to 9:34,
right? The first five time periods, two
minute, 9:30 to 9:36, the first four
time periods roughly. And the five
minute, the first three, 9:30 to 940. So
that answers one of the questions you
guys had earlier. Okay.
So at trade entry, I am going to be
looking to identify before I enter, I
want to know where my stop is. It's very
important, I believe, in any criteria
for you to know where your stop is
before you hit that button. Don't figure
it out after you've bought the shares.
Make sure you know where it is before.
Make sure that it gives you the right
risk to reward. So, I'm identifying that
stop below the targeted level of support
or at the low of the day, right? So, I I
may say, look, I had a targeted level,
but maybe so oftent times it goes right
through it. Levels are rough estimates
of areas, right? So if it if this thing
if the price had spiked through that a
little bit lower, I might put my stop at
that low of day. Now if it spiked lower
in a giant wick, I may say, "Well,
that's a really long wick. I might sort
of, you know, sort of half the distance
and not go all the way to the bottom of
the wick." It depends on the scenario.
But if you want a strict rule, I would
say put it just below whatever your
targeted level is if the price didn't
quite get to the level or pick that low
of day, whatever that number is. That
would be your absolute criteria. Okay,
next one. Confirm that orders exist on
the ask. I'd mentioned this earlier,
right? I want to see that they're still
there. Remember when we had the previous
step, I was telling you, check see if
there's orders there. Make sure there's
a little bit of an order book. Uh when
you're about to enter, make sure they
haven't disappeared because sometimes
those orders go in and they get pulled
off quickly. That could be a sign that
there's a change of of attitude, right?
and they're thinking, well, maybe it's
not going higher. They're going to pull
their orders and wait for another
opportunity. That would weaken the
stock's ability to move higher. So, make
sure those orders on the ask still exist.
exist.
Um, like I said, you want it to be
rising. Confirm that the price found
that support level and is starting to
rise. It doesn't have to go far, but you
want it to have started to rise so that
you you have confidence on where you're
putting that stop.
And like earlier when you wanted to when
I said you want to make sure you've got
a 2:1 risk ratio, reconfirm it. Notice
that most of these actions are sort of
reconfirming things, right? You checked
out earlier the ask levels, make sure
they're there. You want to make sure
that that price support that you
identified, did it actually adhere to it
or did it bust through it? Right? You
got to make quick decisions, but it's
not you're not finding new data. You're
just validating the data you were
already looking for and then
reconfirming. Does my riskreward ratio
still work? Yeah, it does, guys. And I
know there's a lot of stuff. I'm going
to take all of this and put it into a
very quick example for you in just a
minute or two. Okay. All right. And
then, of course, you just take the
trade, right? Super simple. That's all
you need to do. Take the trade. Um,
Um,
when you take the trade, you know, the
next thing you need to do at trade
entry, of course, is to set your stop.
Now, some people like to have mental
stops, others like to do, you know,
toolbased stops. I would highly
recommend an automated stop. Uh, that's
up to you. We don't have we're not going
to be getting into using hot keys and
setting your stop automatically. There's
tools to do that, but if you know where
it is, you know what you should do.
Don't ever let yourself go past your
stop. That should be a cardinal rule. I
don't care what strategy you're trading.
And as people are saying, you guys know
me, you're saying, take the damn trade.
Absolutely right. Take the trade. That's
step four. So, you're in the trade. What
now? Well, now you need to manage it,
right? And managing a trade tends to go
one of two ways, doesn't it? And anybody
who's traded even once knows what that
looks like. It either fails or it
succeeds. Now, I'm defining failure here
as it's a red trade. It not all red
trades are necessarily failures. You
could execute this strategy perfectly
and it still might not work. But for the
sake of direct language so that you
understand what I'm talking about. If it
doesn't work, if it starts to go red on
you and you're losing money, right? Your
action is simple. What do you need to do
to manage this trade? You stop out at
the loss that you'd already determined.
Period. Full stop. Literally full stop.
Full stop at your predetermined
stop-loss. You're done. The trade's
over. It didn't work. No worries. Did
you follow your rules? Good. That's a
good example of a fallen angel strategy
that just didn't work. That's okay. They happen.
happen.
If the trade succeeds, meaning you
start, it starts to go green and you're,
you know, you're seeing success on it.
What do you do? Well, remember earlier I
said you should identify levels where
you think it's going to achieve. You're
just waiting for them to come in play.
You're waiting for it to hit the levels.
Once it gets to the first target level
you'd identified, well, you take a 50%
partial at your profit target,
then you immediately move your stop loss
to break even.
Next, right, where's your next target?
It should be another one that's higher
than that. You're looking for another
50% partial at your next higher target.
Or if the stock starts to move sideways
or just starts to chop up and down, this
happens. It happens a lot. I would say
if it's still doing that in five time
periods, keep in mind this is all based
on whatever chart uh time frame you're
using. If you're using a twominut chart,
you're going to be looking at longer
time duration, right? Than if you're
looking at a one minute chart. If it's a
one minute chart, this would mean if in
five minutes it's still moving sideways,
take another partial. On a two-minute
chart, it would be 10 minutes. On a
five-minute chart, it would be about 25
minutes. Right? because the bigger the
candles, the bigger the time frame of
your chart, the longer you've got to
give it to have it sort of take, you
know, to to work.
Um, I would then you update your break
even uh stop for for the remaining
shares. You don't move it, right? You're
going to keep your stop at break even,
but being that you took a second
partial, you should update it. Now,
again, I have tools like you might have
that automatically do this. you don't
have to do anything exceptional, but if
not, you want to make sure that you're
not going to get stopped out for more
shares than you actually have, right?
So, you update your stop to break even.
And then you repeat the top two steps
twice more, right? What's the next
level? Move your stop or update your
stop number of shares if you're not
stopped out because, of course, it could
go hit your target and then go down and
uh and stop you out.
Last but not least, I'm suggesting you
exit the remaining shares at your final
target again if you're not stopped out.
So basically I'm suggesting to trade
this effectively right you're only
trading it basic four times right the
first time you take off 50% the second
time 25 the next time 12 a.5 the fourth
time you're taking off 6 and a4% that
will leave you with six and a quarter%
of your original shares there's no point
going smaller just exit now those are
rough numbers and the key the big caveat
you guys can question me I'm expecting a
lot of you know questions on this
because people always ask, do I have to
take a 50% partial? Do you recommend
that? I'm giving you rules that you
could follow. These are great beginner
rules if you're starting a strategy. As
you mature in using a strategy, you
might want to change your trade
management criteria. That's fine. That's
on you. Your first partial, you might
want to be smaller or bigger. You might
decide to go all out at that level,
right? Thor works on a strategy that
way. I like to take lower smaller shares
early and take more shares later. I'm
trying to hold more for the bigger gain.
But as a general rule of thumb, if
you're just starting on a strategy,
follow these rules. 50% every to 50% of
your remaining shares. I want to be
clear in that. So if you take a 100
shares, you're taking off 50, right? You
should have a button that does that. Or
if you're man calculating it, you know,
you've got 50 left. The next partial,
you're taking 25 shares off. You've now
got 25 left. The next partial you're
probably taking 13 shares off because
you can't take 12 and a half. So, it's
going to leave you with 12. The next
partial you're going to take six. See
what I'm getting at? Right? That's how
it works. And if you're using smaller
share sizes, don't worry about it. If
you're using larger share sizes, do the
math. Okay?
So, those are the rules. Those are the
five steps, right? It's it's that
straightforward. So, a couple of
questions here. Um, are there are we
trying to see if we can achieve at least
2 to1 win loss ratio? Yes, absolutely,
Michelle. Yeah. On this trade, the way
I've defined it and set it up, you
should not be partiallying at all until
you have at least 2 to1. That should be
your first partial range minimum. If it
doesn't get there, then you could you
may just be stopped out for a full loss.
Um, is the sheets somewhere to download?
Wolf, I'm not If you're asking about the
uh the the
sorry, the presentation,
uh I don't I don't have it available at
this point, but I could make it
available. It's not a problem. Um and
Shay, you're asking instead of stocks,
can I buy calls? Sure. You know, you
don't have to buy stocks. You you could
do that if you prefer. Um, just know,
you know, you'll be looking for the same
setup and you generally be looking for
it on the stock chart because, you know,
the you can't do it off of anyways, you
can't do it off of an options chain. Uh,
you're going to need to do it based on
the price movement of the stock.
Obviously, your your criteria is going
to be slightly different because you're
going to be looking at the price of the
calls rather than the price of the
stock, but you need that price movement
of the stock to create value in the
calls. But there's no reason why you
couldn't do that.
Right? So, so the example I I was going
to run you through because again it can
be tough, right? When you're just
looking at that to uh to know what is it
that you know what is it that I should
actually be doing and and so I thought
let's let's just take you through a very
quick example. This should just take a
couple of minutes. Um and and we'll show
you looking for right. So let's go back
to the beginning. Remember we said we're
going to look at Oracle. I've got I've
called it up. I've got it on the screen
here for you. You can see those things
we already look for, right? So, okay, so
it's got the float I mentioned. It's
already high enough. It's got the ATR.
It's $14. That's good. The short float
is 1%. Uh, it trades 20 million shares a
day. Those are some of my base criteria.
Now, on um on September 19th, it had
news. Now, I can go to the news here in
Trading Terminal and uh there's so much
news in Oracle. We got we keep seven
pages of news. Oracle is one of those
stocks like Apple and AMD and a bunch of
those where there's so much news it
scrolls off every couple of days. So,
you're not going to find it here, right?
The last news is two days ago. All
pretty much mo all news feeds sort of
stop. However, I can tell you on
September 19th, the news that Oracle had
was that it was reported they were in
talks with Meta for a multi-year cloud
computing AI infrastructure deal worth
approximately $20 billion.
That's billion with a B. So, a big deal,
right? That's great news. That's good
tradable news. That's the type of thing
I'm looking for. So, let's go into the
the replay mode here in Trading Terminal.
Terminal.
And uh we're going to we've got Oracle.
We've got it here on the screen. Let me
call it up for the day in question. So,
we're going to pretend like we were
trading this on the day and we're
talking about the 19th of September. So,
I'm just going to call up the day. And
the the way Trading Terminal, by the
way, loads this for you is it puts you
pretty much right at 9:30, right at the
market open. That's good. Nothing's
moving yet, right? We can just watch it
and see what it's going to do. Um, but
uh, you know, so let's do some of the
setup I was talking about because you
could do this anytime prior to the
market. So, I need to find levels. Where
do I think this thing would move to? By
the way, when I go to the stock, this is
the stuff I look for. The big blue line
is the VWAP. The dotted lines you see on
here are the previous day closes for
each day. You this will come into play
in a second, but what I'm looking for is
levels. So, let's start with levels. I'm
going to expand my chart. Let's look at
a 60-minute chart. And I want to see
where where did this thing, you know,
have levels over the last few days. And
if I'm looking at this, I'm like, wow.
Like this thing really, if I look down
here yesterday, look at how many times
this thing wicked down and then stopped.
That's that's crazy. I'm going to zoom
in again to the five minute chart here
in Oracle. I want to look at to see what
happened here in the previous couple of
days. And I can see that yesterday. Wow.
This this level right here. Um, so keep
in mind the gray part is after hours,
before after hours. The white is during
the trading day. Oh, sorry guys. I'm
scrolling all over the place. And I can
see yesterday, let let me try and uh I
it looks to me like this area of roughly 9750,
9750,
let's call it right right around here.
9750. Look at how many times it looks
like it sort of bounced off this like
there were. And what that tells me is a
lot of shares were traded in that area
during the market trading hours. So, I I
want to put a level there. I think
that's that could be important today
because it was important yesterday. If I
scroll back, look at the day before, it
looks like that level also had some
importance. Not as important two days
ago as it was yesterday, but it still
had some support there. All right,
that's interesting. Holy cow. Look, I go
back to the the 15th, right? The 16th,
well, it was trading above that price.
It wasn't in play. But the 15th, it also
used that same level that I just set at
97 29750.
All right. So, I've got a level now. So,
that remember the the stock right now at
this present time, right before the
market open, is trading at $299, but I'm
saying I think I now know where I'd like
it to move to, right? I've got a target
area. This is my level of support. This
is what I think I'm looking for. I don't
know what the stock's going to do, but
that's an area. Okay. So, what about the
top side? Where do I think it can go to?
Well, the high of well, if I go back
here, the high of like 3 days ago on the
16th was way up here at $320. Well, that
that's a lot. That's like $20 above the
current price. It's possible, but not
likely it'll go up there. I I think I
might want something closer into the
price action. So, if I look at
yesterday, look at yesterday's high of
day. Yesterday's high of day was about
30 301
uh 30150.
And I'm thinking, you know, that's an
area I'm going to keep an eye on for the
top side.
And uh but that's, you know, that's just
that one area I I see up here at 305.
I'm I'm liking this area at 305 because
let me set it and you'll see what I mean
here. If I try and put this at 305
pre-market, uh yesterday, it used that
level as a high and pre-market the day
before it actually used that as a low.
Interestingly, it then moved quickly
through that, traded below it, and came
back up to that level at the close. I'm
thinking that is a level where if we're
going to get resistance, we might get it
at 305. So, now I've got two target
levels uh above the active price, 30150
and 305.
All right. So, I know what I think I'm
looking to do. The stock meets my
criteria. I've got an area where I think
I want to stop. I've got areas that I
can think I can get a target to. Now,
we're right before the open. So, guys,
this is all sort of the mental
gymnastics I'm going through when I'm
watching a trade. Obviously, I'm doing
this in real time and the market's
moving, but I have multiple minutes,
right? I don't have to do it right at
9:29. I'm doing it sort of as the
morning evolves and on a couple of
stocks usually because I'm trying to
find ones one that will meet my criteria
because I can usually only pay attention
to one at the open. But what I'm
thinking right now is if I can get an
entry somewhere around this 299 level
with uh a stop at uh 190 sorry at 29750
that's about a$150
stop loss right and that would mean I
need for my 2:1 about $3. So I'd want it
to go up to 302. Well that's a little
bit above that area that I had targeted
right where I think it might get some
resistance because it had been there
before but it's well below the 305. So,
I'm in a not quite a comfortable zone. I
can get the 2:1. It's really going to
depend on my entry and what the price
action looks like. You know, it's sort
of a judgment call. Would you want to
take it based on that or not? Well, I
should be able to get my 2:1, but it
it's not as comfortable as I'd like. But
what's good is I didn't find any levels
that are in the middle here, right?
There's no levels that I really have to
worry about. Even the $300 price, which
is a big whole dollar number, the price
didn't seem to hang around there very
much, right, when I was looking at the
previous days. So, I'm not really
worried about it. All right. So, now we
can get into the trade. Let's actually
run this thing. We'll run it sort of
real time, if you will, just to take a
look. So, let's start the market. Off we
go. Right. Uh time's a ticking now. You
can see the clock up here in the in the
top right where the market's open. The
bell rings now, you know, and I want to
see the price action. Now, we're going
to have to maybe speed this up a little
bit. Let me just ex put an accelerator
on here. And oh, by the way, the one
thing I didn't mention is I'm looking to
take a $100 risk. So, if my stop is a
buck 50 and I can take a $100 risk, that
means I could probably take about 70
shares, right? 100 divided by 150. I
think it comes out to like 66. But let
let's for the sake of argument say 70
shares. So, I like to pre-populate
things or say I'm looking for 70 shares.
Now, you can also have a tool that where
if I pick my stop level, which would be
around this 29750,
I could just type that, put that in, and
then I just wait and hit the button, and
it'll automatically calculate the number
of shares. But I need to see what the
stock is going to do. And it's happily
turnurning away, right, at double time here.
here.
So, all right. So, I saw it move down a
little bit. It moved up. You know,
hasn't gone crazy yet, but it it's
moving at a range. That's okay. I, you
know, wanting to see what happens.
Again, I want to know that this thing
has pulled back. It shows me that if
there are sellers who had Remember, this
thing is gapping up compared to
yesterday's close. There could be people
that say, "Well, now that the market's
open, let me sell my shares because I'm
in a profit position." I want to know
that there's not that many of them and
that they've had a chance to get out.
Get out. Get out of my way. Right now,
if this thing takes off without me, I
might lose my opportunity because my
riskreward is not that good. Remember I
said it's already it's already a little
tend tenuous um at a 29 299 entry. I
certainly don't want it to be up at 300
or above, right? If it just goes without
me, then it goes and I don't have a
trade. But I'm just watching it and I'm
watching it do this stuff and I'm
watching it bounce around and I'm
thinking, you know what, it's come down
here. It's set these levels. It hasn't
got to the 29750, but it's tested this
level and it's showing a little bit of
higher lows. So, I think if I leave my
stop there and I can get a good entry at
around the 299. This this feels like,
you know, the type of trade that that I
want to take. So, I'm going to do my
best to to get an entry. Let me do it
right there. And I'm going to get an
entry at 2. What did I actually get
filled at? You can see it here. 29912.
So, I didn't quite hit my target, but I
got in at 29912 because I saw it holding
this level. I saw it come down and test.
It didn't go right to my level, but
that's okay. It tested a 298 area
multiple times.
All right. So, that was my pullback.
Now, I'm looking for it to move higher
and I'm willing to risk it going lower,
right? Going lower my stop because it it
might like right now. See, it's going
and it's testing that level and I'm I'm
like, "Oh, gez, you know, did I take a
bad trade?" Well, not. Remember I said
you either put your stop at the low of
day or slightly below the level because
I know my level's approximate
and and you know, like the thing is
going to go test. It tested, but look
how quickly it was down there and back
up again. That tells me I perhaps have
identified that level properly,
right? Could I have got a better entry?
Maybe. But I also might have cost myself
the opportunity for the trade. That's
always the tradeoff,
right? So, uh, Arensa, you're asking the
pre-market levels are not that
important. I prefer to there's so much
more volume that trades during the
market hours 9:30 to 4 that I will
weight that a lot more heavily. But I
will pay attention to the pre-market
trading especially if it's like this
morning's trading because um I know that
that just happened, right? And those
people have either bought and are
holding or sold shares, right? So there
so it puts them more in play than other
days aftermarket or pre-market stuff.
All right, so this stock has moved up.
I'm in a little bit of a profit
position. You can see my unrealized P&L
here is about $160 $170. Remember, I'm
looking for the 2:1. I knew that this
was a tentative area. The the the 10350.
So, look. Oh, it hit 102. Maybe I want
to take half my shares off because
that's my 2:1. Let me do that. I'm going
to take half off right there. And I got
a pretty good fill. I actually got
filled. Uh I don't know where I got
filled, but I've now got it looks like I
got filled at uh wow, pretty good. 30280
or so. So remember, so that was my first
level and it popped up through it. I
gave it a second and it gave me a little
bit more. That's great. So that's my
first partial. Now my second partial.
I've got 35 shares left. So I'm going to
take what 18, right? Slightly more than
half off at the next level. And it's the
305 that I talked about earlier. All
right, let me let me sell right there.
Right, so I'm at 305. Why do I do that?
Why do I set those levels and I take
half off? Why is it a good place to
start? Well, look at my realized P&L.
Right now, with having sold three
quarters of my shares, I still have a
quarter left to play with, but having
sold threequarters of my shares, I've
secured my 2 to1 return.
Pretty easy. It always looks easy when
you get to do it in hindsight, right?
But but notice what I did. See? And and
see, I'm And you're right. I did in this
case trade on the fifth candle. So, uh
one, two, three, four, five. Right. But
look at the candle I traded in. 9:34,
right? It's the fifth candle of the day
at 9:34. That's sort of the ta the the
the outside range of what I said my
criteria was, but it was within my
within my criteria.
So now what you do is you've got a
decision to make as a trader. Right? By
the way, after I took those partials, my
stop automatically moved to break even.
So if it came back down, right, to my
entry level stop out, that's going to be
automatic. But I I've got to decide what
I'm going to do, right? And usually what
happens when you get into a trade, this
is when things, you know, can take
longer. And you need to make a decision.
How long do you wait? You know, I I
can't like it depends on your patience.
How long you want to be in the market.
You may look and say, well, look, if now
the VWAP is actually above your average
price, which it is right now, so I'm
going to I'm going to move my stop. If
it moves down to the VWAP, I'll get out.
Or you say, well, we previously thought
that 30150 area was significance. If it
comes back and tests it and fails, I
might take my my shares off then and
just put my money in my pocket. Or you
might want to wait for a bigger move.
Remember, we had identified that $320
range. Who knows? Maybe it can get
there. But the likelihood based on how
it's moving so far, it's going to be a
while. So, you need to make a call as uh
as you want to do as as you you know as
you want based on your criteria. Rich,
you're asking uh do you ever add with
this pullback? So, I you know that's
completely based on again your trade
management rules for this to keep it
simple. No, it's a it's a very different
sort of strategy strategy add-on and
another level of complexity to add to a
trade. You need to know are you adding
in a place where it's likely to bounce?
Is it going to move higher? You know, I
I I am not I'm not a great adder to be
honest. When I add, often I do it too
soon and I cost myself the opportunity
because what it does is it moves my
average price to a level that's not
technically significant and I usually
just end up getting stopped out. So, I I
I am not great at adding to a stock. I
don't usually do it.
So, you know, look, you know, not to not
to ruin the story for you, but bottom
line, this this stock, you know, now
like we're now roughly what, almost half
an hour into the day. Um, I'm running
this at 10 times speed. But, you know,
if we jump ahead, let me just jump ahead
here about an hour.
And you can see, right? Look what
happens. This thing is moving sideways.
It's moving on that VWAP I talked about.
You may just say, "Look, enough is
enough. Let me get out of this thing.
I've made my money. it's good. I don't
want to hold on to it. That's okay.
That's a decision you're making, right?
Maybe it's just to free up mental
capacity. I don't want to worry about
it. You could also say, "Hey, it's done
nothing wrong. Hasn't broken the VWAP.
Hasn't come back to my entry. Why not,
you know, just let it go. Let's see what
it can do. It's completely up to you."
Right? I personally, because I trade all
day, I'm happy to leave it. I'll let it
run. Let's see what happens.
Right? Uh you may say, "I don't have
time for this." Right? Let me out. let
me I got things to go do. So, you know,
I I would say you got to pay attention.
You got to dynamically assess the the
trade based on what you're seeing. And
let's jump ahead another couple of
hours. Another couple of hours later,
right? If I'm looking at this, look, it
hasn't done anything. A few hours later,
Oracle still it did go below VWAP right
over here at 11:00, but it never quite
hit my entry. It came really close
though, let me tell you. right down here
in this candle. It's something it came
within like 30 cents of my entry, right?
But, you know, if you really want, you
can keep holding. What time are we at
now? We're at 1:00 in the afternoon.
Let's jump to 3:00 in the afternoon. You
know, your patience can sometimes be
rewarded because if I was to wait this
out all day,
you know, uh, sorry, it's 251. Let's
let's move ahead even more.
Um, you'll see that eventually this
thing will go up to I think the high of
the day was, you know, it was about 307.
I think it even goes higher to to 311.
But, you know, you're waiting all day on
this. But my point is this is the type
of stock you trade you can take where
you're either just in for the open and
then you're done. You could have been
done happily take your money off or you
can wait all day like this and try and
pocket a few extra dollars. Notice the
difference for me was like $40 when it
was here compared to $115 up here. So,
was it really worth waiting all day for
60 bucks, 70 bucks? Your call. You make
the decision. Let's get out of it right
now and just say, you know what? I'm
done. What a great day. Oops. Look what
I've done. I'm now short by one share.
All right, let's get out of that. See, I
didn't I didn't look at my size
properly. Uh, so here's my realized P&L,
$366. Oh, look at that. There's a
there's a pop higher. So, right before
the close, it it popped higher. I
thought it went up to 311 at some point,
but anyways. So, so there you go. On
this one trade, I just made $366,
right? Relatively straightforward, but
that's how I like my trades to be.
Simple, structured. I know what I'm
looking for. And by the way, if any of
the criteria I was looking at didn't pan
out, abort, you're out. There would have
been no trade. Look for another
opportunity. I usually only get to look
at one of these per day. So, if Oracle
hadn't worked on this day and that's
what I'd chosen to watch, I do not have
a fallen angel trade for that day. You
know, live to fight another day, look
for another opportunity.
So, that's the trade strategy. If you
want to look at another example, PRX
from today, I only put it on there
because it happened today. I'll tell you
right now, it did not meet my criteria.
Its float is too low. Its uh short float
is well, it actually does meet the
criteria, but barely. its average shares
per day is too low. I think its ATR is
too low. There's a lot of stuff that
doesn't work. So, you know, but it's
another one that sort of works when the
style even if I don't like the stock itself.
itself.
All right, so um hopefully that gives
you an idea of how you can trade this
and I appreciate you guys taking the
time being here. I'm going to stick
around and answer a few questions if you
guys still have them, but we're going to
close the recording for now. Thank you
for being part of Trading Terminal and
joining us here. It's always great to
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