0:00 Basically, risk management is a system
0:01 for adjusting the amount of capital you
0:03 have exposed at any given time. It's
0:05 controlled by the number of positions
0:06 you have on, the sizes of each of those
0:08 positions, and where your stops are for
0:10 each of those positions. So, how do we
0:11 lower that risk? Say we're in uh we
0:13 start a corrective environment like a
0:15 few weeks ago. How do we lower the risk
0:17 given that those are the three factors?
0:18 Well, we can take less trades. We can
0:20 decrease the total number of positions
0:22 we have on our books. We can decrease
0:23 the starter position size that we're
0:25 taking on new positions or the overall
0:28 uh dollar invested. and we can tighten
0:29 up the stops and tighten up the sell
0:31 points, become more aggressive with
0:32 selling, you know, lock down gains, you
0:34 know, faster when we do have them. These
0:35 are all three different ways that we can
0:37 go ahead and lower risk if we would like
0:39 to. If the market environment shifts,
0:40 market feedback, maybe uh seven out of
0:42 your last 10 trades have been losers,
0:44 that's a sign that, hey, maybe I want to
0:46 go ahead and lower risk. Stop losses are
0:48 your insurance. They're basically the
0:50 cost of doing business. And a way of
0:52 thinking about it is it's your ticket to
0:54 actually buy a ticket to to actually
0:56 place a trade. you're paying your
0:57 stop-loss in order to actually enter the
1:00 trade and look to participate in a
1:02 strong trend. And the best thing about
1:04 this is and and way of thinking about it
1:06 is you get to decide exactly how much
1:08 you pay by defining your risk based on
1:09 the stop- loss as well as the position
1:11 size itself. What about gap downs? How
1:13 how do we manage risk here? Gap downs
1:15 will happen. I think the key thing here
1:16 is we we have to manage risk in real
1:18 time. a stock could just as easily gap
1:20 down and keep going and it breaks below
1:22 the base and then it breaks the 200 SMA
1:24 and then again you're an investor when
1:25 you should have been a trader. Uh you
1:27 got to take your loss when it's as small
1:28 as possible. Taking small losses is
1:30 mentally just you know an easier thing
1:32 to do. Small losses do sting but large
1:35 losses are devastating and really hurt
1:37 your confidence which is a huge part of
1:40 trading. you know, a big loss, you'll
1:42 have to take, you know, take a few days,
1:44 take a week, if it's a really big one,
1:46 take a few months off to really be right
1:48 again mentally and be ready to get back
1:51 in the game and, uh, you know, work your
1:52 way back up to where you are. So,
1:54 defining a stop loss first, when you've
1:55 got a potential setup, check your entry
1:57 point and logical, technical stop,
1:58 calculate the percent distance before
2:00 them, or ADRs if you like to think about
2:02 it in that way to account for
2:03 volatility. know the dollar amount of
2:04 your portfolio you want to invest and
2:06 then simply multiply this dollar amount
2:07 by your stop and check if you're taking
2:09 up too much additional portfolio risk to
2:11 take the trade. If the total risk is
2:12 going to be 1% of your account and you
2:14 don't want to take that on a single
2:15 trade or you don't want to add that to
2:16 your total open risk, then you either
2:18 have to not take the trade, choose a
2:20 different stop or lower the position
2:22 size. It's as clear as
2:24 [Music]
2:27 that. Well, let's go ahead and get
2:29 started. So, welcome everybody to the
2:31 next Trader Handbook webinar. Uh, this
2:33 is a series of webinars that we're doing
2:35 along with the release of our book which
2:37 will be on May 27th, the Trader
2:39 Handbook. And each chapter kind of
2:41 covers one of this these different
2:43 concepts. And to go along with the book,
2:45 we thought it'd be great to kind of talk
2:47 through each uh concept and aspect of
2:50 building a trading system and go into
2:51 more detail, give more examples. Uh, and
2:54 I think these are a great accompaniment
2:56 to the book. Uh, we're about halfway
2:58 through now. After this week, we will be
3:00 halfway through. Uh, but there's still a
3:02 lot to cover, market cycles will be a
3:04 really good one, especially considering
3:05 the current conditions. Uh, so if you
3:07 haven't yet and want to be the first to
3:09 know with all these webinars, go ahead
3:11 and register for the free interest list
3:13 and you'll be the first to know about
3:14 all the different uh, resources as well
3:17 as future upcoming
3:19 webinars. Uh, here's the QR code to join
3:22 that trader weight list, traders
3:24 handbook weight list. You can scan that
3:25 QR code just right there to join. Again,
3:27 it's 100% free. And in addition to
3:30 registering for the webinars, we'll also
3:32 be sending out different resources. Uh
3:34 tomorrow, I'll be sending out a
3:35 stop-loss setting guide. So, in addition
3:37 to today's webinar, I'll be expanding
3:39 on, you know, how I like to set stops in
3:41 a free article that I'll send by email
3:43 tomorrow. So, definitely go ahead check
3:45 this out. You'll receive all the other
3:46 previous ones once you sign up to this
3:48 Trader Handbook weight list. Uh so,
3:50 don't feel like you missed out if you uh
3:52 didn't sign up already to receive these
3:54 ones. you'll basically receive one a day
3:56 uh as soon as you sign up. So, here
3:59 again is that QR code. If you haven't
4:01 already, go ahead and register there and
4:03 I'll give it just one minute to uh allow
4:06 you guys just a little bit of time to do
4:08 that. All right. And yeah, u I see a
4:10 question actually from Miles in the
4:12 chat. You can watch all the previous
4:14 webinars um on YouTube. Uh we we created
4:17 a playlist on our channel called Traers
4:19 Handbook Webinars. You should be able to
4:20 find those there. And this one itself as
4:22 as soon as we're done with the live
4:24 stream, you'll be able to go ahead and
4:26 watch it uh back as much as many times
4:28 as you like to, but previously we've
4:30 talked of course about entry tactics,
4:32 trading foundations, edges, and setups.
4:34 Uh so if you haven't watched those
4:35 previous ones, definitely recommend
4:37 checking it out. All
4:40 right, so let's go ahead and get into
4:42 today's webinar. So welcome again uh
4:45 once again everybody. Uh today we'll be
4:47 focusing on risk management and
4:48 stop-losses. A really key chapter uh
4:51 both from a high level portfolio level
4:53 as well as setting individual stops on
4:55 different
4:56 positions. We wanted to start with uh
4:58 this quote from William O'Neal. Of
5:00 course, many of you know him, the
5:01 founder of Can Slim. Uh basically this
5:04 kind of sums everything up in terms of
5:06 why we should be saying stop losses and
5:07 focusing on risk management in the first
5:09 place. Uh he says, "Buying a stock
5:11 without knowing when or why you should
5:12 sell it is like buying a car with no
5:14 brakes or being in a boat with no life
5:16 preservers or taking flying lessons that
5:18 teach you how to take off but not how to
5:20 land. Basically, it's a key part of the
5:22 trading equation and really really
5:25 essential to allow us to trade for
5:28 decades. Here's the agenda today. We've
5:30 got a lot to cover. Uh first, we'll talk
5:32 about kind of again from a high level
5:33 what is risk management, stop- losses,
5:35 our tickets to trade, our insurance as
5:37 well. What are tight and logical stops?
5:39 What does that actually mean? Then we'll
5:41 discuss some guidelines for both swing
5:43 trading and position trading. It's a
5:44 little bit different. Um, of course,
5:46 swing trading is a little bit faster,
5:47 tighter stops, um, you know, faster sell
5:49 rules and position trading. You want to
5:51 kind of be a little bit more hands-off.
5:52 Let the position work. Uh, you'll wind
5:54 those stops a little bit to make sure
5:55 that you don't get choked off of a
5:57 trade. And these guidelines also be
5:59 really good for a lot of you folks who
6:01 probably, you know, do this part-time or
6:03 work a full-time job and again want to
6:06 be a little bit more hands-off. uh these
6:08 guidelines should help you with that. Uh
6:09 then we'll discuss position sizing uh
6:11 portfolio level risk management as I
6:13 mentioned and also I think this is
6:15 really relevant lowering and raising
6:16 risk based on market health. How you can
6:18 do that what are the three different
6:20 factors uh different gears that you can
6:22 adjust uh to do that and both lower and
6:24 raise risk in accordance to whether
6:26 we're in an uptrend or a
6:29 downtrend. So there these are a few
6:31 questions that likely you guys have
6:32 about risk management. We'll be
6:34 answering a lot of them today. um as
6:36 well as the position management ones in
6:38 the next webinar on this upcoming
6:40 Saturday. Where do I put my stop? When
6:42 should I sell? How do I manage risk?
6:44 What does risk management even mean? You
6:46 know, we hear that term, you know, you
6:48 know, shouted about a bunch of times,
6:50 but what does that actually mean? How do
6:51 we practically go about doing it? When
6:53 do I take a profit? When do I move up my
6:55 stop? All these questions uh we'll talk
6:56 about and address in today's
6:58 webinar. All right. So, first starting
7:01 from a very high level perspective, what
7:03 is risk management? Basically, risk
7:05 management is a system for adjusting the
7:07 amount of capital you have exposed at
7:09 any given time. And it's controlled by
7:11 three factors, which we'll get into in
7:13 even more detail in the upcoming slides.
7:15 Uh, it's controlled by the number of
7:16 positions you have on, the sizes of each
7:18 of those positions, and where your stops
7:20 are for each of those positions, uh,
7:22 slash where you will exit. If you have a
7:24 gain, for instance, you know, the point
7:26 where you would exit may maybe be an
7:27 undercut of the 50 SMA, the 21 EMA, the
7:30 prior week's low. uh basically it's
7:32 controlled by where your exit would be
7:34 if the stock starts pulling back and
7:37 basically you need to put on risk to
7:39 potentially profit from winning trades.
7:41 So I think that's an important part that
7:42 we do want to emphasize today. We're
7:43 talking about managing risk not
7:45 eliminating completely that's
7:46 impossible. Um and to actually profit
7:48 and make uh good trades. We have to put
7:51 on risk and we'll talk about how to
7:52 manage that risk to make sure that our
7:54 losers are smaller than our profits. And
7:58 like I say here, the key to de is to
8:00 develop a riskmanagement system that
8:01 keeps our losses small relative to your
8:03 profits over time. Again, we're always
8:05 talking about a series of 50, 100, 500,
8:08 a thousand trades that you'll make over
8:10 the course of your trading career. We're
8:11 not just focusing on one trade. Uh but
8:14 you know, the key is to think long term
8:16 and think over a series of
8:18 trades. So defining your risk, uh this
8:21 just kind of sums it up really nicely. I
8:22 think you should always be aware of your
8:24 total open risk and draw down. if all
8:26 stocks hit their stop losses. We'll show
8:28 you guys how to calculate that and uh
8:30 that will be part of the quiz. So, make
8:31 sure you guys pay attention for that.
8:33 Um, and we want to emphasize that you
8:35 are in complete control of how much your
8:36 capital is at risk at any given time.
8:38 And we'll talk about the three different
8:40 factors that you can adjust to control
8:42 how much total open risk you have. And
8:45 basically, you want to think of this
8:46 like managing a business business
8:48 because that's what trading is. We don't
8:49 want to just do this for fun or or you
8:51 know it can be fun and the process is
8:53 very fun but we want to make profit over
8:55 time. That's our goal. We want to
8:57 compound and we always want to be aware
8:59 of the total open risk and break even
9:01 line so we can sleep at night and make
9:03 sure we're uh managing our system
9:06 properly. So that gets us into our first
9:08 kind of high level highle topic total
9:10 open risk. So what is total open risk?
9:13 Total open risk is basically the
9:14 percentage of your portfolio that you
9:16 would lose if all your stocks hit your
9:18 sell points. whether that's stop losses
9:20 or again if it breaks below a moving
9:22 average and that's your sell rule, you
9:23 know, that would be your sell point. Um,
9:26 and we're going to walk through the math
9:27 here and pay pay special attention like
9:29 I said because we'll be doing a giveaway
9:31 related to be able being able to do this
9:32 math. It's pretty easy. Uh, but we'll
9:34 see uh you know who gets the the answer
9:37 uh answer right first. Uh, but basically
9:39 the process to calculate your total open
9:41 risk is first things first, per
9:43 position, multiply the dollar amount
9:46 invested by the percent distance from
9:47 your stop. So, for instance, if you have
9:49 $10,000 invested into a particular
9:52 symbol, you multiply that by a 4% stop,
9:55 and that gives you the dollar amount
9:57 that you have at risk for that position,
9:59 which in this case on a $10,000
10:01 position, a 4% stop would be $400 at
10:04 risk. Then, uh, like I said, do this for
10:07 each position. And then, you want to sum
10:09 sum up all those different individual
10:12 position risk that you have. So,
10:13 position one, if that's $400, plus
10:15 position two, $200. Position three,
10:18 $600. Position four, $700. And you know,
10:21 this the total in this example is ends
10:23 up being $1,900. And this would be your
10:26 dollar draw down if all your stocks were
10:28 stopped out or you sell all your stocks
10:30 at your predetermined uh points. Uh then
10:33 to calculate the percentage total open
10:35 risk, what you have to do is divide this
10:37 dollar draw down uh the dollar open risk
10:40 by the amount your total account is. So
10:44 in this example, we're using a 50k
10:45 account. it'd be $1,900 divide by 50K
10:48 time 100 and you basically have 3.8%
10:52 total open risk. So this is how you
10:54 calculate this and this would be your
10:55 draw down if everything was stopped out
10:58 um or sold in your
11:00 account. So to kind of put this in
11:02 perspective, we we'll put you guys to
11:03 work right away. Let's say you have an
11:05 account size of $100,000. These are
11:08 positions. You've got deep, Vue, TLDV,
11:10 and RM. These are the position sizes
11:12 right here. 25K, 15K, 10K, and 25K.
11:16 Again, these are their stops. I want you
11:18 guys in the chat right now to do a
11:19 little bit of math and calculate what is
11:21 the total open risk both in dollar
11:23 amounts and percentage. And we'll see
11:25 who gets it correctly. And I'll show the
11:27 answer and walk through this example in
11:29 just a
11:30 minute. And Ry, while we're doing this,
11:32 is there anything you want to add about
11:33 risk management, why it's important uh
11:35 while while they're uh you know, doing
11:37 some math over here?
11:39 Yeah, I I would say, you know, a lot of
11:42 traders are trading part-time and
11:44 they're trading with capital that they
11:47 are willing to lose. Um, which can be
11:51 actually, you know, it's hard to treat
11:53 it like a business when you're doing
11:54 that. And you kind of, you know, if if
11:57 the money grows, great. If it doesn't,
11:59 great. Um, in that type of situation,
12:03 you know, you learn the hard way or you
12:05 eventually just give up and and move on
12:08 because you feel like the stock market
12:11 was, you know, a slot machine that
12:13 doesn't pay you back, right? And most
12:16 slot machines don't. So that's why risk
12:18 management becomes a topic that the
12:21 great ones speak about very you know
12:25 strongly that you without this you
12:27 cannot be a consistently profitable
12:30 trader. So knowing your stops, knowing
12:33 your exit plan before you intend to buy
12:36 or placing an order to buy without
12:39 knowing where you will accept that
12:42 particular loss will result you in, you
12:46 know, almost never being successful if
12:47 you don't know your exit plan. So it's
12:50 again one of those things as we cover
12:52 the the you know the different pillars
12:55 uh throughout the the 10 and 11 10 or 11
12:58 webinars that we're doing each one of
13:00 them is a core kind of value or
13:04 initiative that you have to take up so
13:06 that you can you know make it part of
13:09 your um business plan right so it's not
13:13 that one component was more important
13:15 than the other all of them have to work
13:17 together for you to a a trading system
13:19 and it's no different for risk
13:21 management. So yeah, and risk management
13:24 I think is one of the most important
13:26 concepts to stay trading and make sure
13:28 you preserve your account over time. I
13:30 was lucky enough that Dr. Wish
13:31 emphasizes from, you know, the early
13:33 days of the class where I first learned
13:35 how to trade. Uh and part of our final
13:38 project was, you know, we had a dummy
13:40 account of 100K that we traded in a
13:42 class challenge. And for every trade
13:45 where we had a loss over $500, we had to
13:48 dissect that trade, analyze what went
13:50 right, what went wrong, and basically,
13:53 you know, come up with a system, a
13:55 reason why we will never lose again, you
13:57 know, greater than $500. So, I think
13:59 that's a great um act actually, uh, you
14:02 know, advice for everybody out there.
14:03 Uh, come up with a dollar amount that
14:06 you don't want to risk more than that or
14:07 lose more than that on a trade. And then
14:09 for every trade that you risk more than
14:10 that or lose more than that, you have to
14:13 analyze and and dissect and do a lot of
14:15 post analysis to determine what went
14:17 right, what went wrong. So I think
14:18 that's a that's a good exercise for you
14:20 folks. And it looks like we've got some
14:22 great answers in the chat. Most of you
14:24 guys already got it right, which is
14:26 great. And uh Swingman, uh you are the
14:29 winner today. So congratulations. Shoot
14:31 me a DM on Twitter and we'll go ahead
14:34 and give you a signed copy of the Trader
14:36 Handbook once we have those available.
14:38 So, congratulations. Uh, shoot me again
14:40 a DM on Twitter, um, or email me at
14:43 richardtraderline.com and we'll get you
14:45 set up. But congratulations and great
14:46 work everybody. I see a lot of people
14:48 with the right answer. We'll go ahead
14:50 and walk through the process. Uh, the
14:52 first one, you've got $2,000 uh, of risk
14:55 here because 25k time 08. Then you've
14:58 got 15K time 05750, 10K time 03300. 25K
15:04 *10 2500. And then you sum all these up
15:08 and you get a dollar risk, which would
15:10 be your dollar draw down if everything
15:12 was stopped out of
15:14 5,550. And I rounded this up to 5.6%.
15:17 But you basically do that that number
15:19 divided by your account value. And
15:22 that's how you get your total open risk
15:24 amount. So great job everybody. Most of
15:26 you guys got it got it right. And you
15:27 should be able to do this math because
15:29 this is the simple thing. This is a
15:30 simple way to basically keep your risk
15:33 in check and recognize are we in a
15:36 corrective environment under the 200 SMA
15:38 under the 21 EMA and I want to be
15:41 risking a whole lot less than this or
15:43 are we in a strong market environment
15:45 and this is an okay amount or even want
15:47 to increase my risk maybe take out up
15:49 another position and get more invested.
15:51 But this math and being able to
15:52 calculate this to to open up and risk is
15:55 really key to treating this like a
15:56 business and you know from a portfolio
15:59 management perspective being able to
16:01 actually manage risk properly. So this
16:04 is a good exercise here. Um and the
16:06 three pillars that we can
16:08 control this amount if you think about
16:11 it are these right here. How many
16:13 positions we have, the amount invested
16:15 in each position and the percentage away
16:18 our stop/ell point is from the current
16:20 price. And what's great about these
16:22 factors is that all of these are
16:24 elements that we can control and adjust
16:26 based on our goals, performance, market
16:28 conditions, market feedback, all of
16:30 that. So I think it's really important
16:32 to recognize and it should be empowering
16:33 to you that all three factors right
16:36 here, how many positions we take, if we
16:38 take a new trade or not, the amount
16:39 invested in new positions or existing
16:41 positions, the percentage of way we keep
16:43 our stop loss or how far um you know
16:46 we're willing to you know let the stock
16:48 pull back before we sell it. All of
16:50 these factors are within our control. So
16:53 we have full control at all times of how
16:55 much risk we're taking. So that's kind
16:58 of the key point we want to uh uh to
17:00 emphasize here. So how do we lower that
17:02 risk? Say we're in uh we start a
17:04 corrective environment like a few weeks
17:06 ago. How do we lower the risk given that
17:08 those are the three factors? Well, we
17:10 can take less trades. We can decrease
17:12 the total number of positions we have on
17:14 our books. we can decrease the starter
17:16 position size that we're taking on new
17:18 positions or the overall uh dollar
17:20 invested and we can tighten up the stops
17:22 and tighten up the sell points, become
17:24 more aggressive with selling, you know,
17:26 lock down gains, you know, faster when
17:27 we do have them. Um, so these are all
17:29 three different ways that we can go
17:31 ahead and lower risk if we would like
17:33 to. If the market environment shifts,
17:35 market feedback, maybe uh seven out of
17:37 your last 10 trades have been losers,
17:39 that's a sign that, hey, maybe I want to
17:40 go ahead and lower risk. And these are
17:42 all three ways that you can do that. And
17:44 let's go ahead dive a little bit deeper
17:46 into each one. So, how should you lower
17:49 risk based on decreasing the number of
17:51 positions? Uh well, one way you can do
17:53 it is by grading your positions. So,
17:55 what you want to do is sort your
17:56 existing positions by your profit or
17:58 performance over the past month and then
18:00 grade your positions from A to D. Uh
18:02 taking this into account as well as kind
18:04 of your view on the potential of each
18:06 stock going forward. So, if the stock
18:08 just broke out, it's still just pulling
18:10 back to 21 EMA. it's it's a stage one
18:12 base early in a stage two uptrend. It
18:14 might still have a lot of potential,
18:15 especially if the market environment is
18:17 still strong. Uh so you would kind of
18:19 grade that, you know, A to B, especially
18:21 if you have a nice profit in in that
18:23 stock. But if a stock, you know, hasn't
18:26 really performed much, it broke out and
18:27 then just kind of stagnated. Um and you
18:30 know, there's there's other sectors,
18:32 other groups acting well, that might be
18:33 more a C or D stock. and those would be
18:36 the first ones to sell if the market
18:38 environment shifts or you just want to
18:39 lower risk overall. Uh so again, as you
18:42 look to lower the total number of
18:44 positions, start by eliminating the D's
18:46 first and look to hold on to the A's if
18:48 possible. Uh Ry, anything you want to
18:50 add on this slide or or you know in just
18:52 in general these three uh pillars
18:56 here? I would say, you know, one of the
19:00 things is tighten stops is easier, you
19:04 know, said than done. Sometimes what
19:06 happens is you go into this feedback
19:08 loop where you tighten it too much, the
19:10 stock comes back normally and then you
19:12 you get stopped out and then it
19:14 continues to rally, right? So each of
19:16 these points that Richard's made, you
19:19 you should see it through a series of
19:21 trades. Um, and and really don't think
19:26 of it as I have to get it right the
19:28 first time, especially when it comes to
19:30 tightening stops and, you know, or
19:33 selling into profit or I sold at 5% but
19:36 then now the stock is up 30 and I don't
19:38 have a meaningful position. All of these
19:40 things you you will get better at each
19:42 trade you place, you know, every time
19:45 you sell early or you tighten up stock
19:47 too much or you decrease exposure too
19:49 fast because the market's, you know,
19:51 just coming back that one day, you know,
19:54 straight down three, three and a half%
19:56 4% and you've decreased too much and
19:58 then the next day market's acting like
20:00 nothing happened, right? So all of those
20:02 uh factors you will learn to pick up as
20:05 you place more trades and and kind of
20:07 get repetitive. Um it's just reps again,
20:11 right? Every trade you'll learn
20:13 something. You'll tweak it will build
20:14 your experience and get better at it. Um
20:16 and it's not really about you know
20:18 perfecting each of these. It's something
20:20 that you know even
20:22 now sometimes I or when I speak to Ross
20:25 you know hey I you know that day really
20:27 shook me out because you know we got too
20:31 um I would say too bearish or too um you
20:35 know we're playing defense too much
20:37 because we let external factors
20:39 influence what's part of our system and
20:41 that is still something Ross is working
20:43 on after 30 years and it get just you
20:46 know some trends you you perform really
20:48 well just like basketball players some
20:50 some games they they have 60 plus points
20:53 right and they don't have 60 plus points
20:55 every single game. So every market cycle
20:58 that comes through you'll perform good
21:02 or great. In some market cycles you're
21:04 still doing the same thing but you're
21:06 not performing that well. Right? So I
21:08 think that plays a huge factor from a
21:10 journey uh getting better building
21:12 experience perspective. You won't be
21:15 perfect every single day and you won't
21:17 analyze because there are other factors.
21:19 You have a life outside of trading.
21:20 there's internal factors of if you're,
21:23 you know, actually in the game or you're
21:25 just no matter what you're doing, you're
21:27 in a bad spot. Um, as well. So, I think
21:30 the last one there with Titan spots, a
21:32 lot of people tend to, you know, try to
21:34 get this perfect uh, you know,
21:36 scientific formula that doesn't really
21:38 exist. So, yeah, perfect. And I want to
21:41 go back to the example for just a second
21:42 because somebody pointed out you're not
21:45 completely invested here. But the key
21:47 thing here is that that doesn't matter
21:49 for calculating your total open risk. So
21:51 this account is 100K. These added up are
21:54 only 75K. But that doesn't change how
21:56 much total open risk you have because
21:58 it's not based on how much you have
22:00 invested. It's just based on how much
22:02 you have at risk compared to your
22:04 account. Your total account value, not
22:06 what you have total invested. So just
22:08 want to clarify that point there. All
22:10 right, so getting into the next pillar,
22:13 decreasing the dollar invested. This is
22:14 kind of how you can lower risk based on
22:16 this factor. Uh, one one thing you can
22:18 do is consider selling positions
22:20 portions of your positions to bring uh
22:22 sizes back down to what feels
22:24 comfortable in the moment. Uh, maybe you
22:25 have a winner that has run really fast,
22:29 looks climatic, you can always sell
22:30 half, buy it back if it sets up again.
22:32 And what you want to do is look to
22:34 preserve your stronger stocks first. But
22:35 if the market does seem to be turning
22:37 and starting a correction and a winner's
22:39 extended from a base and is showing
22:40 weakening signs, downtime reversals,
22:42 breaks below moving averages, breaks
22:44 below trend lines, you can always sell
22:46 half and look to re-enter when
22:47 conditions firm up. Maybe at the next
22:49 base, maybe at the next pullback to a
22:51 moving average. And just in general, if
22:53 you're looking to lower risk, starting
22:54 position sizes can also be adjusted
22:56 down. And this is, you know, progressive
22:58 exposure, which we'll get into later on.
23:00 uh but you know as an example if you've
23:02 got a 100k portfolio and uh in general
23:05 you'd like to use 10k 10k positions as a
23:08 starter in a strong environment when the
23:10 market is very choppy very volatile
23:12 below moving averages if you're going to
23:14 trade you could instead of using a 10k
23:16 uh position starter you could use a 5k
23:19 and then maybe in the best environments
23:21 when you're getting great market
23:22 feedback five out of the last five
23:24 stocks has really worked things are
23:26 still setting up uh really firming up
23:28 you could then use a 15k star position
23:30 position. So you can kind of adjust risk
23:32 up and down based on the market
23:33 environment and we'll get into a little
23:35 bit more of that later on in today's
23:37 webinar. So this is kind of what Ry was
23:40 getting into. Um and we'll we'll discuss
23:42 some guidelines for both swing traders
23:43 and pos position traders uh in general
23:45 in terms of initial stops. Uh but you
23:48 know uh this is kind of how to lower
23:49 risk with regards to this factor. So a
23:51 strong market is forgiving. A weak
23:53 market is the opposite. When conditions
23:55 worsen, consider tightening up your
23:56 initial stop- losses a little bit and
23:59 being quicker to raise them to your
24:00 break even level. I remember in 2021,
24:02 this is an adjustment I made uh once,
24:04 you know, a lot of breakouts were
24:05 getting stuffed um and not following
24:07 through. Uh so I would move my stop up
24:09 to break even, you know, a lot faster.
24:11 Even this past December, this is kind of
24:13 what I did as well. And if typically you
24:15 moved your stop to break even at 3R, you
24:18 can then do so at 2 R. Um and you can
24:20 also take partials faster. We'll talk
24:22 about that in the next webinar. Uh but
24:23 basically in this type of environment,
24:25 especially a very corrective
24:26 environment, each stock you buy has to
24:29 prove itself to you that is worth the
24:31 risk, worth the added total open risk.
24:33 Uh that's what's really key. And uh you
24:35 know, during corrections, you want to
24:37 be, you know, stocks are basically
24:39 guilty until proven innocent. In a
24:41 strong environment, you want to give
24:42 stuff the benefit of the doubt. and
24:44 maybe you know if you usually put your
24:46 stops uh in uh you know wait until the
24:48 end of the day if it undercuts it
24:49 slightly and recovers see if it closes
24:51 strong and then take it off if it
24:53 doesn't in a weak market you want to act
24:55 quickly and kind of shoot first and act
24:57 ask questions later so that's kind of a
24:59 little bit about how to lower risk based
25:01 on stop losses and tighten them up. Uh
25:03 then on the flip side you know when
25:05 market conditions improve you know
25:06 eventually the correction we're in will
25:08 uh get better. We'll we'll see. It might
25:10 take some time. Uh but when conditions
25:12 approve, we do want to increase risk to
25:14 make sure we're participating fully. Um
25:16 and basically you do the flip side of
25:17 everything we talked about. You can
25:18 increase the number of trades and the
25:20 number of positions you have. Uh you can
25:23 increase the dollar amount invested per
25:24 position or as a starter size and adjust
25:27 stops and sell points back to normal uh
25:29 to your normal system. So those are a
25:31 few things regard to both decreasing as
25:33 well as increasing risk. Um Ry, anything
25:36 else you want to add here just to sum
25:38 everything up? And then next we'll get
25:39 into setting stops and guidelines for
25:41 both swing traders and position traders.
25:45 We'll we'll tie a lot of this into
25:47 market cycle as well. And um number of
25:50 positions. One of the first things is
25:52 sometimes traders go crazy with 10 to 15
25:55 positions uh that they put on and then
25:57 you don't know which one's working,
25:59 what's happening. It's almost like um
26:02 you know uh you can't do 15 things at
26:05 once. So, um, highly recommend that you
26:08 guys re try to reduce that. Um, also the
26:12 number of trades that you place in a
26:13 year, right? If your trades are north of
26:16 200, 300, 400 and you're highly active
26:19 and you're still, you know, your numbers
26:21 are not improving as you increase your
26:23 frequency, that basically means if you
26:26 actually reduce the number of trades in
26:28 your decision- making and make high
26:29 quality decisions and not focus on
26:31 frequency of decisions, it will result
26:33 in better, you know, just numbers
26:35 overall.
26:37 Um we always you know want to be in
26:40 every single trend and every single
26:43 stock that's moving up and the reality
26:45 of it is you will miss nearly 80% or 90%
26:49 of market leaders and then the 10% that
26:52 you do catch are the ones that will make
26:54 any meaningful you know difference to
26:56 your accounts uh as well. So, you know,
27:00 number of positions that are open, the
27:03 more you concentrate on a few, I like to
27:06 do three to five. Five is, you know, too
27:08 much for me. I'm trying to get to three.
27:11 And then I'm focusing on making high
27:13 quality decisions and picking, you know,
27:15 companies that are market leaders um
27:18 based on technical, fundamental, and
27:21 whatever criteria that you want to
27:22 define uh for them. Um, in terms of
27:26 increasing risk, it's all also dependent
27:29 on how much, you know, open risk you can
27:32 stomach. Some traders, you know, say
27:35 that, hey, if everything stops me out, I
27:37 don't want to lose more than 2 to 3% of
27:40 my overall portfolio. Some traders say,
27:42 hey, I want to, you know, aggressively
27:45 trade and they start at 5 to seven,
27:48 let's say percent. That's a little bit
27:51 on, you know, what your goal is, what
27:54 type of stocks you're trading, if
27:55 they're high ADR or low ADR type of
27:57 stocks, and then what segment of the
28:00 market you're focused on. If you're, you
28:01 know, focused on thematic runs like AI,
28:04 cannabis, shareers and these type of
28:06 names, they're highly volatile. Um, but
28:10 they will move your account, you know,
28:11 both ways in a big way, then you will
28:14 you need you need that, you know, up
28:15 that stomach, uh, to kind of hold on
28:18 when they really really pull back.
28:20 um as well because you know a 3 to 5%
28:24 pullback or a 10 to 15% pullback after a
28:27 70% run is kind of normal for those type
28:30 of names. So all these factors we'll
28:32 speak about uh but I think the most
28:34 important here is you know don't go
28:36 crazy with the number of physicians
28:39 because then your risk management gets
28:41 offaxis and you're busy looking at the
28:45 wrong things. you're busy looking at
28:47 what's happening and you know what's
28:49 this stock doing, what's that stock
28:50 doing instead of actually managing your
28:52 risk uh in the markets. Yeah, perfect.
28:56 All right, getting more into stop
28:58 losses. Uh you know, I showed this slide
28:59 in the previous webinar, but I think
29:01 it's really worth emphasizing this way
29:03 of thinking about it. Stop losses are
29:06 your insurance. They're basically the
29:08 cost of doing business. And oh, you
29:10 know, analogy that you can a way of
29:12 thinking about it is it's your ticket to
29:15 actually buy buy a ticket to to actually
29:18 place a trade. Whether you know, uh,
29:20 you're you're buying Tesla, whatever it
29:22 is, you're paying your stop-loss in
29:25 order to actually enter the trade and
29:27 look to participate in a strong trend.
29:30 And the best thing about this is and and
29:33 way of thinking about it is you get to
29:34 decide exactly how much you pay by
29:36 defining your risk based on the stop-
29:37 loss as well as the position size
29:39 itself. And sometimes if the trade works
29:42 in your favor, you even get your ticket
29:44 back. You get a nice refund as well as
29:46 get to participate in the trade. So
29:48 don't think of stop losses as a negative
29:51 thing. Don't fear them. Thank them.
29:52 They're there to protect you if the stop
29:54 if the trade goes sour and doesn't meet
29:56 your expectations. And any experienced
29:59 trader like Ry said uh will tell you
30:00 that the number one rule to cut is to
30:02 cut losses short. And every single
30:04 person in the market wizards book talks
30:06 about risk management. Risk management
30:08 risk management. They all have different
30:09 ways of approaching it especially
30:10 depending on you know the hedge fund
30:12 managers you know manage risk in a
30:14 completely different way than we might.
30:16 Um but risk management at its core is so
30:19 so important and stop losses are key uh
30:21 for uh retail traders. Um and I think
30:24 this is really important as well. We
30:25 can't predict the outcome of a trade. We
30:27 don't know if something is going to be a
30:28 win or a loser. Uh but we can decide how
30:31 much we're going to pay to try it, how
30:32 much we're going to pay for this ticket,
30:34 pay for our stop-loss in order to have
30:36 that insurance to make sure that, you
30:38 know, we don't get completely set back
30:40 if the trade uh does fail. And you know,
30:43 last last webinar uh in the previous
30:44 ones, we talked about entry tactics that
30:46 allow us to design our our stop clearly.
30:48 You know, the low of the day, the higher
30:49 low, key level, and that is what defines
30:52 how much you're willing to risk on any
30:54 single trade. And we've got a nice
30:56 graphic here. Again, these are kind of
30:58 edgy tactics. They allow us to define
31:00 our risk within an overall setup within
31:02 an overall strong stock. You know, you
31:04 could picture this being a stage two
31:05 uptrend. This is just a base within
31:07 that. And then you've got a higher low
31:10 break above this pivot uh before the
31:12 base pivot. This is your entry tactic
31:14 buying here, setting your stop at, you
31:16 know, the low of the day, low of the
31:17 week, higher low, a moving average, what
31:20 whatever it might be. You've got a clear
31:22 technical level that says the trade
31:23 fails. Um, and this distance between
31:26 your entry point and your stop-loss is
31:28 the amount that you're risking. Um, so
31:30 here's a little bit more on on this. Uh,
31:32 what we really want to emphasize, and
31:34 this is a key concept that Ross uh
31:36 really emphasized to me, and you know, I
31:38 love hearing him talk about it. Tight
31:39 and logical stop- losses. Basically, if
31:43 your stop-loss and the amount that
31:45 you're willing to risk is not tight and
31:47 logical, you're not buying at a proper
31:50 setup, at a proper buy point. And what
31:52 we mean by this is that entry tactics
31:54 allow us to place a tight and logical
31:55 stop stop-loss. They're frameworks that
31:57 we place on the charts that allow us to
31:59 define a clear technical level to enter
32:01 and a clear technical level to exit if
32:04 the trade fails. And a logical stop-loss
32:07 means that a violation of that level
32:09 would signal that the setup/ entry
32:11 tactic has failed. If you're buying
32:12 versus a moving average, a bounce off
32:14 the 50 SMA, a lower Ballinger band, um
32:17 you know, a a clear technical level, if
32:19 it breaks back below that level, that
32:22 tells you that that setup has failed for
32:23 that time being. Maybe it'll set up
32:25 again, but there's no reason to be still
32:28 in that trade. Uh so that's what's
32:30 really important here. That's what the
32:31 logical part of this means. Uh that
32:33 level, that stop-loss level should
32:34 signal that the trade failed. So here
32:36 we've got a breakout example. We buy
32:39 through here. If it reverses back down
32:41 and closes below this higher low, that's
32:43 breaking the expectation that we are
32:45 starting a new trend and continuing on
32:47 with this higher, you know, higher time
32:49 frame trend here. The next part of this
32:51 is tight. Uh if your stop isn't tight
32:54 enough, then it's not really a a uh
32:56 proper buy point in the first place.
32:58 You're not really buying at a spot where
33:00 volatility is lessened, where we're
33:02 we're expecting this nice uh resumption
33:04 of the trend, reconfirmation. Uh so
33:07 basically what we'd like to do is the
33:08 stock will limit losses to just a few
33:10 percent. Obviously this is dependent on
33:11 the ADR of the stock as well. Uh but
33:13 just in general we'd like to keep it
33:15 within a few percent. And if you can't
33:16 place both a tight within you know
33:19 within a few percent as well as logical
33:21 meaning uh a violation at that level
33:23 would break the expectation. Then if you
33:26 can't place this type of stop then there
33:28 isn't really an entry tactic. There
33:29 isn't a real setup there. Wait and be
33:32 patient because they will set up again.
33:34 they will allow you to manage risk at
33:35 the next proper entry tactic. So this
33:38 this concept tight and logical stop-loss
33:40 is something you really want to
33:41 internalize and always be thinking about
33:43 before you make a buy decision. Always
33:46 think about, you know, am I able to
33:48 place a tight and logical stop here. If
33:50 you if you if you can't likely you're
33:52 buying extended after a stock has
33:54 already moved from a proper buy point.
33:56 Um and you just have to wait for the
33:58 next uh the next potential entry. Uh Ry,
34:00 anything you want to add on on this
34:02 concept? tight logical stops.
34:04 Yeah, the more the more that you do
34:06 this, the more success you will see. Um
34:08 the you know, one one thing that Ross
34:11 has taught us, like uh Richard said, is
34:16 if the a setup is, you know, a
34:19 culmination of a few things coming
34:21 together for you to define risk at the
34:23 end of the day. And if you can't do
34:26 that, then it's not a setup or a pattern
34:28 or anything, right?
34:30 any trading pattern or any formation on
34:35 the
34:36 charts gets a name because you can
34:39 define a stop-loss along with the entry
34:44 um uh you know the at the the pivot
34:47 point as well. So, it's super important
34:50 because we see a lot of beginner traders
34:53 just come in to the markets and traders
34:57 turn into investors when they don't have
34:59 a stop. The whole function of what
35:01 they're doing changes because a stock
35:05 that they bought at 4 40 is now at 30
35:09 and now they view it as a long-term
35:11 investment. So, be very clear that you
35:14 know if you don't have if you can't
35:15 define your stop, it doesn't matter.
35:18 I've missed many many opportunities in
35:20 the market because I can't define my
35:22 risk but I've survived long enough to
35:25 see the other end of it where it's very
35:26 beneficial uh to be trading that way
35:29 even if it means that you miss some
35:32 trades along the way right uh like I
35:34 said earlier you won't you know not
35:37 every type of setup will fit your risk
35:40 appetite or the open risk that you want
35:43 to have in the markets so not every
35:45 stock will meet the criteria or you know
35:48 u be in line with how you want to trade
35:50 the markets as well. So if a stock has a
35:53 ADR of 8 or
35:55 9%. Personally I don't want to be
35:57 trading those type that's too volatile
35:59 for me. 3 to 6% 3 to 5% is doable. I've
36:04 learned how to manage risk on those ones
36:07 and I I'm more comfortable in those.
36:09 Right? And you may be different. Um, you
36:12 know, it is all about defining, you
36:15 know, where you think the tight and
36:17 logical stop is and what kind of open
36:20 risk you can stomach and what kind of
36:22 volatility you can stomach at the end of
36:24 the day. But the the main thing that
36:26 we're trying to emphasize today is that
36:29 if you're not placing stop losses,
36:31 you're setting yourself up for failure.
36:33 as we'll show in like a chart as your
36:35 losses get bigger the percentage to get
36:38 the even gets you know
36:41 asymmetricly worse uh for you as the
36:44 longer you hold a loser. So yeah and
36:46 there's a good question from Ankit in
36:48 the chat you know and it's a good it's a
36:50 good it's something good to talk about
36:52 here. So say this is a pretty volatile
36:53 name. It's got a ADR of 5 6% you know on
36:56 the higher end of things and this right
36:58 side isn't quite tight enough for you
37:00 know a VCP. Uh you know you can't manage
37:02 risk within 3%. What you can do is then
37:05 position size smaller. So again there's
37:08 three different ways that we control
37:09 risk. And two of those are your stop
37:12 loss and the position size itself. So,
37:15 if you want to trade and enter a name
37:17 that is a little bit wider and looser or
37:19 just more more volatile in general, but
37:20 there's still a valid pivot point in
37:22 setup, uh, what you can do is just
37:24 instead of taking maybe your typical 15K
37:27 position or 10K position, you lower that
37:29 to 8K or 5K and still participate in
37:32 that move if it's set up properly. Um,
37:34 all of that. Um, so you know, it's it's
37:37 really important to remember that
37:38 there's there's different le levers that
37:40 you can pull to manage your risk on
37:42 individual individual positions as well
37:44 as uh you know, your total portfolio as
37:46 well. And this is the chart that Ry was
37:48 talking about. This is why it's so
37:50 important to keep losses small. You've
37:52 probably seen a version of this chart,
37:53 you know, quite a bit. Uh, but you know,
37:55 it's important to reemphasize that
37:56 losses work against you and the bigger
37:58 they get, the the more the tougher they
38:01 are to recover. And this is both from a
38:03 portfolio level as an individual
38:05 position level. Um, you don't want to be
38:07 a sore loser. Work the math. Manually
38:09 cement this concept psychologically. And
38:12 you always want to set a max
38:13 non-negotiable stop-loss rule today and
38:15 make sure that you don't, you know,
38:17 overcome that. Uh, and this column right
38:19 here is basically a percentage loss. And
38:21 again, this could be on a position or
38:22 your total
38:23 portfolio. Uh, and then this would be
38:26 the after you experience that loss, what
38:28 you would require to simply get back to
38:30 break even. So at 1% you barely have to
38:32 make 1% back to get back uh that 1%. 2%
38:36 again very minimal more amount that you
38:38 have to get back. Even up to 5% it's
38:41 very minimal. But then once you get
38:42 above 7% and really above 10% you can
38:45 see how the deeper the draw down on a
38:48 position or your overall portfolio the
38:50 more you have to gain more uh to to get
38:53 back to simply where you were. So, you
38:56 know, you don't want to be in this
38:57 territory right here, especially not,
38:59 you know, sitting through a 30, 40, 50,
39:02 uh, you know, 75% decline. We saw many
39:05 of the prior 2020 uh, winners in the
39:07 2022 bare market fall 60, 70, 80, 80
39:11 plus percent. You don't want to sit
39:12 through that. You want to have rules,
39:14 stop losses, sell rules that protect you
39:16 and keep you in this territory right
39:18 here. Your first loss is your best loss.
39:20 you want to keep your loss as minimal as
39:22 possible because because then you just
39:24 need one or two trades to get that back
39:26 uh just with some small winners. Uh so
39:28 this is a really important chart and
39:30 definitely if you haven't seen this
39:31 before, you know, take a screenshot of
39:33 this, think it through. Um and the key
39:35 point is is the bigger your loss gets,
39:38 the more you have to make back um by
39:41 quite a bit uh just to get back to where
39:43 you were and to get to back to break
39:46 even. All right.
39:48 And the flip side, you know, this is the
39:50 financial component to it. You have to
39:51 work a lot harder to make it back. But
39:53 also, taking small losses is mentally
39:56 just, you know, an easier thing to do.
39:59 Uh, small losses do sting. You know, I
40:01 won't say that small losses are fun. Uh,
40:03 but large losses are devastating and
40:06 really hurt your confidence, which is a
40:09 huge part of trading. Um, it, you know,
40:12 a big loss you'll have to take, you
40:14 know, take a few days, take a week. If
40:16 it's a really big one, take a month, a
40:18 few months off to really be right again
40:20 mentally and be ready to get back in the
40:22 game and uh, you know, work your way
40:24 back up to where you are. Um, and
40:26 executing well and taking a loss should
40:28 build confidence. Um, you know, losses,
40:30 you know, I I take more losses than
40:32 wins. You know, my batting average is
40:33 typically under 50%. Um, and taking
40:36 losses to me, it's just a matter of my
40:38 system. It's just part of the process.
40:40 Um, and it's actually should build
40:41 confidence because if you're taking
40:42 small losses, you're risking man you're
40:45 managing risk correctly. Um, and even
40:47 after many small losses, and this is
40:49 what's key, even just one good trade can
40:51 quickly give you back that renewed
40:53 confidence. So, if you take a 2% loss,
40:55 3% loss, then a 4% loss, even one 8%
40:58 gainer, it might not get back to you,
41:01 get back get you back exactly where you
41:02 were, but you know, you'll feel, you
41:04 know, sharp again. and you'll feel ready
41:06 to go and ready to participate in uh you
41:08 know future trades. Um and this again is
41:11 the financial capital part of it. Uh
41:13 this is kind of an example with a 40%
41:14 win rate. So again losing six out of 10
41:17 trades. Um and you can see this is just
41:19 an example of you know maybe a section
41:21 of your portfolio uh and 10 different
41:23 trades. You've got a 3% loss, 4% loss,
41:26 5% loss, then a 10% winner, then an 8%
41:29 winner, then - 7 - 3.5 - 2, a nice 23%
41:33 winner, a 6% winner. So only winning
41:36 four out of these 10 trades. And the
41:38 result is you're up 20% on that section
41:40 of your portfolio. And again, your
41:42 batting average was 40%, your average
41:44 win was 11.75%, your average loss was
41:48 4.08%, your win to loss ratio, which is
41:50 your average win divided by your average
41:52 loss, uh, was 2.88. So you can see that
41:55 even with only winning four out of 10
41:57 times, you have really strong
41:59 performance. And again, you know, this
42:01 might be uh a section of portfolio, but
42:04 the goal is to do the same thing with
42:06 your total portfolio. And over time,
42:08 over the 12 months, just have, you know,
42:11 bigger winners than losers. Keep those
42:13 losers as small as possible because, you
42:15 know, optimizing for a very high win-
42:18 loss ratio. Um, you know, a very small
42:20 average loss ratio. That will allow you
42:23 to build in failure and have your
42:24 batting average be even, you know, 30%.
42:27 And a lot of the top traders in the US
42:29 IC, the market wizards who I talked to,
42:31 their batting average is pretty low, 30
42:34 to 40%, but they get 200% returns, 300%
42:38 returns because they let the um the
42:41 outliers run, let those gains, you know,
42:43 trend for them. And uh just a few trades
42:46 can really dramatically improve their
42:48 performance over time. And the rest of
42:50 the trades are basically scratches, you
42:51 know, minus 2%, - 3%, minus 4%. And in
42:54 the long run uh their winners are much
42:56 stronger than their losers. So small
42:59 losses is almost more important than big
43:01 gains. Although big gains definitely
43:02 help. Um and this is the aspect of
43:05 trading that we can control. The small
43:06 losses. We can control this um pretty
43:09 pretty regularly versus the big gains
43:12 will just kind of happen every now and
43:13 then in the strongest market conditions
43:15 and the strongest stocks. And what's key
43:17 here is only a few good trending you
43:19 only need a few good trending winners
43:21 can make up for a lot of paper cuts. and
43:23 you just want to build in failure and
43:24 expect to lose. Uh Ry, anything you want
43:26 to add uh on on this fact, batting
43:28 average or uh you know how effective
43:31 keeping your losses small can be um over
43:33 time with your performance? Yeah, there
43:35 will be a lot of frustrating times where
43:38 even the 10 out of 10 trades type
43:40 example, you just are stringing together
43:42 losses. Now, just imagine that each of
43:44 those losses were more than 7%. You're
43:47 big digging a bigger hole that you have
43:50 to climb out out of.
43:52 Um, and it gets infinitely harder to do
43:55 that because you'll need a ginormous
43:58 winner to get you out of it all at once.
44:01 And that's the mindset that traders
44:02 start to take after they kind of acrewue
44:05 like a series of losses in a row. And
44:10 that's part of of the game. It's it's
44:13 going to happen where no matter what you
44:16 do, you're you're still not seeing a
44:20 particular profitable trade. even if
44:21 it's the same system or uh you're
44:25 trading within the market cycle and
44:28 things are just not working out for you.
44:30 And the only thing that could save you,
44:33 you know, where that 11th trade turns
44:36 the tide is if you survive for that 11th
44:40 trade. And then the only way to survive
44:42 that is to keep them below 7% because
44:45 you don't want to dig a deep hole uh to
44:49 to climb out of. Right? So a 2% loss I
44:52 would take any day of the week. a 3% you
44:55 know I get way too concerned if it's
44:58 past you know 3% for me basically it
45:01 tells me that the setup that I
45:02 anticipated to work for me is not
45:05 working for me and I need to get out
45:08 regardless of what the stock does after
45:10 I sell does not matter to me because
45:13 what I planned and how I enter the trade
45:16 the entry technique that I use allowed
45:18 me to minimize my risk and if a stock is
45:21 not working in my favor it's not working
45:22 in my favor and I have to just move on
45:25 to the next trade. Is it a good feeling
45:28 that you know you sell something and
45:30 then you see it rally um over the next
45:33 few days? It's not the best feeling. Uh
45:36 do you want to get back into that name?
45:38 Yes. Right away. Uh but that creates,
45:43 you know, a loop, a neverending loop
45:46 where you'll start buying when you're
45:48 not supposed to. You start selling when
45:50 you're not supposed to. and you're
45:52 trading off of emotions and not a
45:54 system. So what we spoke about in the
45:55 previous webinars with entry tactics,
45:57 setups, the phase you're in, open risk
46:00 and all of that, all of these components
46:02 come into play for you to be successful.
46:05 And one of the most important ones is if
46:07 you let your, you know, losers get past
46:10 7%, you're mathematically
46:13 um at a disadvantage to be successful.
46:17 So, you know, maybe in the chat you guys
46:20 can put, you know, what your max loss
46:21 is, uh, with your current entry tactics,
46:24 what kind of, you know, uh, losses
46:26 you're taking on average. If you know
46:28 your numbers, you have to know the
46:30 numbers that Richard's put up on this
46:32 slide, your batting average, your
46:34 average win loss, and the ratio of that.
46:37 If you don't know these, you should
46:39 probably not sign in, you know, take a
46:43 cash position and look at the last
46:45 couple of months and last couple of
46:47 years and calculate these numbers
46:50 because the proof is always there as to
46:53 why you are successful or why you may
46:56 not be successful. And this is the basis
46:58 for everything. Right now, you will
47:01 start thinking statistically. Some
47:02 people do that because they have an
47:04 engineering brain. Some people don't
47:06 have an engineering brain. But just
47:08 looking at the numbers will allow you to
47:09 deliberately, you know, be more patient
47:12 when you have, you know, a string of
47:14 losses or just be more patient with your
47:17 winners because you know that your
47:18 average winner, you know, when you catch
47:20 it early in a market cycle tends to be
47:22 that 10 15% range is not where you're
47:25 supposed to take profits. So there are
47:26 infinite number of benefits for you to
47:29 be tracking these five numbers. Um and
47:33 we'll tie you know the average win and
47:34 the average loss into the market cycle
47:36 webinar that we will do and it's very
47:38 beneficial and it keeps you really in
47:41 tune with is it what kind of market are
47:43 we in a choppy market a trending market
47:46 a market where you're supposed to be you
47:48 know directional is is there's no
47:50 direction up or down um as well and
47:53 we'll be using these numbers in in
47:55 future webinars as well. Yeah, and we'll
47:57 show you exactly how to calculate this
47:59 and we'll actually be building it into
48:00 the DV journal to calculate these for
48:03 you as well as the total open risk. So,
48:06 we'll make it really easy in DFW, but
48:08 until then, we'll show you how to
48:09 calculate these uh manually in Excel. It
48:11 doesn't take too long to set up. And
48:13 like Rice said, definitely worth
48:15 reviewing your last year of trading.
48:17 Keep track of your your batting average.
48:19 Has that changed during different market
48:20 environments. That can almost be a tell
48:22 for you. um as well as tracking your
48:24 average win is really critical because
48:26 uh you know sometimes there's
48:28 environments where things are just
48:29 trending and really working and then
48:31 that average win will be increasing over
48:33 time. Um and that average loss for me is
48:35 actually pretty consistent even during
48:37 those times. Uh but you know tracking
48:39 the average win and batting average
48:40 helps me keep track of the current
48:42 situation and environment. All right, so
48:45 defining a stop loss. Let's get a get a
48:47 little bit into it. These are kind of
48:48 the key steps. Uh first when you've got
48:50 a potential setup uh check your entry
48:52 point and logical technical stop.
48:53 Calculate the percent distance before
48:55 them or ADRs if you like to think about
48:57 it in that way to account for
48:58 volatility. Uh know the dollar amount of
49:00 your portfolio you want to invest and
49:02 then simply multiply this dollar amount
49:04 by your stop and check if you're taking
49:06 up too much additional portfolio risk to
49:08 take the trade. Uh if the total risk is
49:10 going to be 1% of your account and you
49:12 don't want to take that on a single
49:13 trade or you don't want to add that to
49:15 your total open risk, then you either
49:16 have to not take the trade, choose a
49:19 different stop, or lower the position
49:22 size. It's as clear as that. Uh and you
49:23 just want to investigate why it doesn't
49:25 meet your risk parameters. Um and but
49:27 these are kind of the key steps to
49:28 define a stop-loss. Um so this is an
49:31 example here. Say the entry here is
49:32 around 100. The stop is at maybe the low
49:35 of the prior day at 96.5. Uh, and you
49:38 just basically want to ask yourself this
49:39 question. Is this a proper setup? Uh,
49:42 and here if you can't manage your risk
49:43 tightly and logically, you're not
49:44 executing a setup. We just want to
49:45 reemphasize that. But doing the math
49:47 here again, your entry is 100, your
49:49 stops at 96.5, that percentage risk is
49:52 3.5%. Uh, and say you want to take a 15%
49:55 position, uh, then you're risking just
49:57 over, barely over 0.5% of your total
50:00 portfolio. Um, and that's kind of the
50:02 sweet spot for me. Everybody's a little
50:03 bit different. I like taking a slightly
50:05 smaller stops than this to get this more
50:07 to uh 20%. But again, this is dependent
50:10 on your experience, how well you can
50:11 manage risk, how well you can pick good
50:13 tight entry points. And we'll have some
50:15 guidelines on position sizes uh later on
50:18 in this webinar. Uh but you can you can
50:20 also think about it in total uh
50:22 portfolio amount that you have at risk
50:23 for any single position. But that's just
50:25 a basic example of defining your risk on
50:28 a single position on a single trade. So
50:31 here are some initial stop guidelines
50:33 both for swing trading and position
50:34 trading. For swing trading, you want to
50:36 be a little bit tighter, a little bit
50:37 faster. 1 to 3%, maybe 4%, raise stop to
50:40 break even, 1 to 2 R. Um, especially,
50:43 you know, taking in account the market
50:45 environment, maybe a little bit less
50:47 during trending environments. And this
50:49 is kind of key, and I think somebody
50:50 will probably ask this in the in the
50:51 chat. You know, 1 to 3% is pretty tight.
50:53 What about, you know, a quantum stock
50:55 that has very high ADR where it can move
50:57 that in about five minutes? Uh well, you
51:00 know, you just basically want to take
51:01 that into account and instead of, you
51:03 know, keeping it here, you can increase
51:05 your stop percentage, especially if it's
51:06 still technically valid, but just
51:08 decrease your position size because it
51:10 doesn't take much to really uh move the
51:12 needle in that type of name if it really
51:13 gets working. So, a small position size
51:15 can still uh benefit your account. Uh
51:18 so, with high ADR names, you basically
51:19 just want to adjust these parameters. uh
51:21 you know basically this is kind of 180R
51:24 and maybe for that you know you you move
51:26 it up to five 6% and then decrease your
51:28 position size from maybe 10K to 8K uh
51:31 and make that adjustment that way. For
51:33 position trading you want to keep it a
51:35 little bit um a little bit wider to give
51:37 the stock benefit of the doubt. Your
51:39 initial stop might be 3 to 5 to 6% and
51:42 you can be a little bit slower to raise
51:43 your stock uh stop to break even two to
51:45 three R. And you know here maybe your
51:47 stop is the low of the day on the day
51:49 you enter. Maybe it's the low of the
51:50 previous day. Maybe it's, you know, on
51:52 undercut and rally. Um, here it might be
51:56 the low of the week or the low of the
51:57 past two days or the moving average. You
52:00 know, Ross Roy likes to use the uh, you
52:02 know, the moving averages to as they're
52:04 curling up up the right hand side of a
52:06 base as his stop loss and that's how he
52:08 likes to position trade. Uh, so
52:10 depending on your style, swing tra
52:12 position trading, you're going to have
52:13 slightly different statistics. But, you
52:15 know, for swing trading, you're going to
52:16 be taking tighter stops. But if we go
52:18 back to the
52:19 math, your bat your average win is going
52:22 to be a little bit smaller because
52:23 you're taking profits faster. Whereas
52:25 with a position trading, you know,
52:27 approach, your average loss is going to
52:29 be a little bit bigger, but your average
52:30 winner because you're going to benefit
52:32 from those longer trends, month-long
52:33 trends is going to be higher as well.
52:35 So, both both systems, both processes
52:37 can work. Position trading is more for
52:39 people doing this part-time uh who maybe
52:41 are working another job, while swing
52:43 trading, you have to be a little bit
52:44 more active and a little bit more
52:46 aggressive as well. Um, Ry, anything
52:48 else you want to add with in terms of uh
52:50 guidelines for stops uh based on the two
52:52 different approaches, swing trading
52:54 versus position trading? I think you
52:56 covered uh that well. Cool. All
52:59 right. All right. Adjusting stops. So,
53:02 say you know the trade is successful, it
53:04 starts working, it pushes higher out of
53:06 the pivot. Um, you know, when do you
53:08 actually adjust that stop loss up? Uh,
53:10 basically, uh, like I said, you know,
53:12 guidelines raise to break even around 1
53:13 to two R for swing trading. you know,
53:15 two to three R for position trading. And
53:17 you want to kind of keep raising it as
53:20 the stock makes progress for you, but
53:21 you don't want to choke off the trade,
53:23 as as Mark Winteri likes to say. You
53:24 want to give it room to breathe, natural
53:26 fluctuations. And what I like to do is
53:29 as soon as my as soon as the cost or the
53:31 21 EMA rises through my cost, so you
53:34 know, the stock is rising, the 21 EMA is
53:35 rising. as soon as it's above my cost,
53:38 then I'll, you know, transfer over to my
53:39 longerterm sell rules, uh, you know, two
53:41 closes below the 21 EMA as my stop and
53:44 just kind of trail that, update it every
53:46 day or every few days depending on how
53:48 much profit cushion I have. Uh, but just
53:50 in general, you can tra you can tra uh
53:52 trail your stop at moving averages, um,
53:54 ATRs from the current, uh, price of the
53:57 stock, um, you know, SMAs, um, all those
54:00 are valid ways, higher lows. uh you
54:02 basically want to define for yourself
54:04 how uh the uptrend is going to continue,
54:06 when will it end, and basically put your
54:09 stop at that point where the trend would
54:11 end for your style, for your objective,
54:13 for your time frame in the
54:15 markets. Uh moving your stop to break
54:17 even, just getting a little bit more
54:18 into that. Uh again, this depends on
54:20 your style. Swing traders should be
54:21 quicker. Uh position traders can give a
54:23 little bit more room uh to wiggle. Uh
54:24 guidelines, profit uh of one to two risk
54:27 multiples, you can move adjust your stop
54:28 to break even. And again, in faster
54:30 markets, choppier markets where things
54:32 aren't following through very volatile
54:34 environments, you can be a little bit
54:35 faster with this. Uh, but you know, you
54:37 don't want to choke off the trade by
54:38 moving it up too soon. You want to give
54:40 it a little bit of room to work because
54:42 sometimes a stock might not break out
54:43 the the the first day when you expect it
54:45 to, but it might recover and, you know,
54:47 re-break out the next day and follow
54:49 through. Uh, so yeah, again, uh, in
54:52 chopping markets, just be a little bit
54:53 faster with moving up to break even. And
54:56 you'll kind of learn and gain a feel for
54:57 this when that's appropriate, when it's
54:59 not appropriate, uh, you know, by going
55:01 through different market cycles. All
55:03 right, trailing stops. Again, uh,
55:05 depends on your style. We talked about
55:07 this uh, with relevant higher lows. One
55:09 one thing that I like to do as well is
55:11 if we get a move higher, a higher low
55:13 forms, a range, maybe it pullbacks the
55:15 10 EMA, and then it rebreaks out through
55:17 that short range, I like to put my stop
55:19 at the low of that breakout day. This is
55:21 a something I learned from Oliver Kell
55:23 called an ignite bar. when there's a
55:25 massive candle that really uh puts in,
55:27 you know, a statement day, it shouldn't
55:29 break that low based on my style. So, I
55:31 like to move my stop up to just under
55:33 that higher low. And again, you can use
55:35 moving averages, um, and higher lows to
55:37 manage your risk, whatever kind of works
55:39 for you and how you view the markets.
55:41 And then one thing I think is really
55:43 worth emphasizing here, um, use alerts.
55:46 You can put alerts, you know, early
55:47 alerts as it's approaching your stop
55:49 level. You can put it above moving
55:51 averages, higher lows, so that you're
55:53 aware of everything that's going on on
55:55 the stock, excuse me, if you're working
55:59 full-time, you can still keep tabs on
56:00 charts simply by using alerts, and that
56:02 way you're not notified on your phone or
56:04 email or whatever uh when you actually
56:07 need to go ahead and look at the chart.
56:09 So, alerts are free. Definitely go ahead
56:11 and make use of them in your platforms
56:13 uh to keep tabs on price so you don't
56:15 have to be watching this the chart uh
56:16 every single hour of every single day.
56:19 All right, stops on multiple positions.
56:21 This is a question we get often. Um,
56:23 this is how I personally approach it.
56:25 Uh, Ry, I want to hear your take on this
56:26 as well, but basically, if I have an
56:28 initial position, maybe I start at 10%
56:30 or 15% position here and then it pushes
56:33 higher, pulls back to maybe a 10 EMA or
56:36 21 EMA and rebreaks out, I might add,
56:39 you know, 5% less than my initial
56:41 position here. Um, but I kind of treat
56:44 them as two different trades until it
56:47 makes significant enough progress where,
56:49 you know, maybe we're all the way up
56:50 here and, uh, it makes sense to kind of
56:52 treat everything as one position. But,
56:54 you know, if if this fails here, I don't
56:56 want to move my stop up here too quickly
56:59 and just get stopped out of here. So, I
57:01 want to kind of treat them as two
57:02 individual trades until there's
57:04 substantial enough progress um you know
57:06 from that second buy point uh to
57:08 actually combine them and and and move
57:10 my stop as one for both positions. Uh
57:13 so, this kind of depends on your style.
57:14 I think there's there's traders I've
57:16 talked to who do it both ways. But, Ry,
57:18 any thoughts on this? How do you kind of
57:19 go approach this if uh you have an
57:21 add-on buy? Um how how quickly do you
57:23 kind of treat that as the same position
57:25 and adjust your stops accordingly? You
57:27 know, altogether?
57:29 I I always uh treat it I would say
57:32 separately not not the same at all. Um
57:35 only when the the 21day moves above the
57:40 average cost once again is when I will
57:44 treat it as one position because that is
57:46 how I manage trades that are up you know
57:49 20 25% for my entry. Um but unless that
57:53 happens, these would be two separate
57:57 trades and two separate position sizes.
58:00 The position size for entry two will
58:03 always be lower than the position size
58:05 for entry one. Um just so that the math
58:08 works in my favor. Um and I always keep
58:12 them separate for the most part. So
58:14 yeah, I see a question that's pretty
58:16 good uh from Harish. Uh do you guys use
58:18 broker stops or mental stops? I put
58:20 stops in with my broker. Um I've talked
58:22 to traders USIC, you know, top
58:24 performers who do it both ways. Some do
58:26 mental stops, some have stops on their
58:28 broker. I personally just I like having
58:31 that safety net that know if you know I
58:33 lost, you know, connection or something.
58:35 I've got a uh you know a stop-loss in to
58:38 protect me. Uh but I know for instance
58:40 Oliver Kel uses alerts and and uses more
58:43 mental stops, but he's in he has that
58:45 discipline. He he knows exactly, you
58:48 know, what his was risk is and he's able
58:50 to take that. So, know yourself. Know if
58:52 you're able to use mental stops, know if
58:54 you're you're better off using hard
58:55 stops. I think probably everybody
58:57 starting off is probably better off
58:58 using um hard stops on their broker. Uh
59:01 Ry, do you actually use I actually don't
59:03 know this. Do do you use hard stops or
59:04 use mental stops? Personally, no, I I'm
59:07 actively at the desk. if if I'm going to
59:09 be away on, you know, vacation or away
59:12 from my phone, that's when I'll
59:14 configure stops because you never know
59:17 with the markets. But if I'm around, you
59:20 know, I'm always uh looking on my phone
59:24 um as to what the market's doing. Um so
59:26 for me, it's not, you know, I don't I
59:29 know that, you know, if you're working
59:30 part-time, it's always good practice
59:33 that you enter and then you place your
59:35 stop. you may be in a meeting, you may
59:37 be, you know, out for lunch, you don't
59:39 have time to access your phone while
59:41 you're talking to your boss. Um, so in
59:44 that case, uh, you know, I used to be in
59:46 that situation myself. So stop losses
59:49 were super useful, um, then and now now
59:54 it's just, you know, I'm at the desk, so
59:55 that's why I'm not placing them
59:57 explicitly. Awesome. All right. So this
60:00 is another question that we're probably
60:02 anticipating. What about gap downs? how
60:04 how do we manage risk here? Um, gap
60:06 downs will happen. I've I've had gap
60:09 downs that take out my stop and then
60:10 they recover and then they go. But I
60:12 think the key thing here is we we have
60:13 to manage risk in real time. A stock
60:15 could just as easily gap down and keep
60:17 going and it breaks below the base and
60:19 then it breaks the 200 SMA and then
60:21 again you're an investor when you should
60:23 have been a trader. Uh you got to take
60:24 your loss when it's as small as
60:26 possible. U but just in general I think
60:28 gap downs happen less often than you
60:30 think. um you know during good markets
60:32 you know during this type of environment
60:34 there it's a more volatile it's more
60:36 prone to headline risk it's going to gap
60:37 up and down but in a stronger market
60:39 environment these happen a lot less than
60:41 we think and what's important to realize
60:42 is that these are negative expectation
60:44 breakers a gap down suggests that you
60:46 know people are selling and the
60:48 short-term momentum is to the downside.
60:50 Uh so you know honor your original
60:52 stop-loss as well as you can. Um think
60:55 again in in a series of trades, 100
60:57 trades, 200 trades. Um and you know
60:59 preserve the majority of your capital
61:00 and move on. It's okay. You know you're
61:02 able to recover from a small loss.
61:05 You're not able to recover from a 50%
61:07 drop in a position where you should have
61:09 taken the stop at 5% or 6% because it
61:12 gapped down below your 3% stop loss. So,
61:15 honor your stops uh and just, you know,
61:18 take your small loss when you've got it.
61:20 Um then of course there's you like this
61:23 animation, right? Uh an even bigger uh
61:26 gap gap down. You know, we just
61:28 experienced this with um the Deepseek
61:30 news. Um there are a lot of names that
61:32 were leaders that were acting well. GEV,
61:34 Nvidia that gap down 10, 15, 20% in a
61:38 single day. These will happen, but
61:41 again, not as often as we think. uh you
61:43 know, we've got recency bias because it
61:45 it just happened. Uh but again, this is
61:47 just part of the process, part of
61:49 trading and you just got to kind of exit
61:52 and preserve your capital as best as you
61:53 can. Um you have to realize that the
61:56 money loss and the gap down is gone. Uh
61:58 this is a list of a few, you know, big
62:01 gap downs that people may have
62:02 experienced recently and over the past
62:04 few years. And think to yourself, you
62:05 know, how would a trading champion
62:07 handle the gap down? uh you know would
62:09 they take their loss and just move on or
62:11 you know would they you know hope that
62:13 it returns um and you know hope is not a
62:16 strategy. Uh we want to you know we
62:18 manage risk here and now. Um and this is
62:21 also why it's critical to use our other
62:23 lever position sizing to manage risk as
62:26 well. We don't want to take enormous
62:27 positions because a gap down could
62:29 happen. Uh you know a CEO could have a
62:31 stroke and then the next day uh the
62:33 stock could be down quite a bit. They
62:34 could miss earnings. We want to take
62:36 steps to manage our risk as best we can
62:38 both with our position sizing as well as
62:41 our stop-loss. Uh and during a gap down,
62:44 uh your stop loss isn't going to help
62:46 you. Uh but your position sizing is
62:47 going to make sure that it's not
62:49 disastrous to your account. Maybe it
62:50 sets you back a few weeks, maybe even a
62:53 whole month, month or two, but you know,
62:55 you'll a you're able to recover that.
62:56 And again, we're doing this for years
62:57 and decades. We're not trying to think,
62:59 you know, in isolation. This one trade
63:01 is all that matters. uh we want to think
63:04 long term and uh you know just take our
63:06 loss uh when we've got it. Uh Ry,
63:08 anything you you want to add here with
63:10 uh experiencing gap downs, large gap
63:13 downs, how you personally think about
63:14 going through it.
63:17 Yeah, I mean they they will happen. They
63:20 don't define your trading. Um that's why
63:23 you know wacky position sizes where you
63:26 place 80% 50% 60% of your account in a
63:30 single position especially when it's
63:33 um stocks and equity right um these
63:37 companies can report something in terms
63:39 of guidance and things overnight that a
63:41 technical chart will just not tell you
63:44 uh sometimes. So when that happens the
63:47 core of your system which is you know
63:51 don't place all your uh capital in one
63:56 name which can work uh at times but if
64:01 you you know hit one of those CRDOS's
64:03 and overnight you're losing you know 80%
64:07 of your portfolio then that's not the
64:10 best either. So there's always two parts
64:13 to the equation that yes, when you're
64:15 right, your portfolio will move up quite
64:17 a bit, but when you're wrong, are you
64:19 going to survive the next day? Right? So
64:22 that's what's most important is the
64:24 longer you survive, the greater the
64:26 chance of you having a profitable
64:29 system. And once you have a profitable
64:30 system, it becomes an income for you. Um
64:36 uh you know, the trading becomes a
64:38 source of income. So, um, we've
64:42 experienced this. I've experienced this.
64:44 The way I handle it is I sell.
64:49 Um, if you know, if if I own a stock and
64:52 it gaps down 20% tomorrow, I'm not going
64:56 to question why. I'm not really looking
64:59 at um the news to justify that it may
65:04 come back. Um, I don't tend to do any of
65:07 that kind of stuff. I don't turn into an
65:09 investor all of a sudden that now I'm
65:12 holding these and it will come back in a
65:14 couple of quarters. Um because I'm a
65:16 momentum uh swing trader. So I know
65:20 that, you know, I lost this one and I
65:23 have to take it to the chin and I have
65:25 to move on because that capital, you
65:28 know, it's not going to happen, you
65:29 know, 10 trades in a row. I'm not going
65:31 to hit a CRDO or FSLY and Nvidia or a
65:35 Deepseek type of situation. These just
65:37 don't they're rare. Uh and the most
65:39 important part is you can't you know the
65:42 position sizing of a single name can't
65:44 def you know should be so high that
65:47 tomorrow you won't survive. That's the
65:49 most important lesson that you'll learn
65:51 uh out of these situations. Yep.
65:53 Awesome. So let's get into position
65:55 sizing now. Again another one of the
65:57 levers that we use to manage risk. Uh so
66:01 first things first uh you need a system
66:03 based on your experience level. Um, it's
66:05 like I've used this analogy before, but
66:07 it's like going to the gym for the first
66:08 time. You don't come out out the gate
66:10 and put 200 lbs on the bar and expect to
66:13 not hurt yourself, right? It's the same
66:15 thing with large sizes. And this is, I
66:16 think, one of the big reasons why people
66:18 quit is they size too too big, too fast,
66:21 with no system, no risk management, and
66:25 they destroy their account and blow up
66:26 their account. Um, you have to earn the
66:29 right to size up. And part of earning
66:30 that right is learning proper
66:32 techniques, learning how to place stops,
66:34 learning the proper buy points that
66:36 allow you to place tight and logical
66:37 stops. So, you have to earn the right to
66:39 size up. You don't want to just start
66:41 off taking 50% positions, 20% positions.
66:43 You got to work yourself up to that
66:45 level and build up that technique first.
66:48 Um, more advanced traders, as we'll get
66:50 into, can adjust based on the number of
66:52 edges in play. So, if a stock is higher
66:55 potential, you want to contribute more
66:57 of your risk to that name. Um, and the
67:00 less positions, I think this is also a
67:02 way to almost manage risk, the better
67:04 you can manage them. So, it might be
67:05 counterintuitive that, you know, taking
67:07 less positions is less risky, but the
67:10 reason it's less risky is because you're
67:11 still managing risk with stops and
67:12 position sizes, but you can execute
67:15 better on your plan on those names. And
67:17 again, just want to emphasize, don't
67:18 size up too fast. You got to earn the
67:20 right over multiple market cycles that
67:22 uh you basically proved to yourself that
67:24 you've managed the risk. uh you know how
67:26 to handle gap downs, you know how to set
67:29 initial stops, you know, in your sleep,
67:31 all of that. Don't size up too fast and
67:33 set yourself, you know, back uh trying
67:36 to perform when really your goal should
67:38 be about building process. Uh first, uh
67:41 position sizing with momentum. Um again,
67:44 you want to scale up as you string
67:45 multiple wins in a row. Listen to that
67:47 market feedback. Scale down as that
67:49 market feedback turns negative. And very
67:52 importantly, and we'll get into this
67:53 really in depth in the market cycle
67:55 webinar, trade feedback is the market
67:57 communicating with you via wins and
67:59 losses about whether your style is
68:01 working in the environment. And we want
68:03 to use that as feedback and you know uh
68:07 position size accordingly using
68:08 progressive exposure. Uh so here's
68:10 getting into uh some guidelines here.
68:12 Trade your biggest when the market is
68:13 cooperative and within when within your
68:15 system. You know, think about the
68:16 periods where you've really moved your
68:19 account big in and you know strongly to
68:22 the upside. Uh was this the market above
68:24 moving averages when that happened? What
68:26 did net new highs, new lows look like?
68:28 You know, define for yourself what a
68:29 strong market period looks like. Uh and
68:31 then trade your smallest when the market
68:32 isn't cooperative to minimize loss of
68:34 capital. Thinking it back to this
68:36 current correction that we're
68:37 experiencing. We're below the 200 day.
68:40 We're below the 21 EMA and we're really
68:42 volatile. High big ranges up and down.
68:45 Is that cooperative with the system
68:47 that's trying to manage risk tightly
68:49 with losses and focusing on stocks and
68:51 uptrends? Not necessarily. So, you want
68:53 to position size accordingly to manage
68:56 your risk if you are trading. Um, and
68:58 then stacking up probabilities,
69:00 correlating the number of edges of uh
69:02 correlating the number of edges with
69:03 sizing consistently. Again, we'll get
69:05 into a whole slide on that and Ry, I
69:06 think you explained that really well.
69:08 Um, and then it takes time to experience
69:10 uh and experience the trade size. Again,
69:11 you're building that technique. You're
69:13 building that process, your system
69:14 first. It's not about, you know, in your
69:16 first three months you can suddenly uh
69:18 manage, you know, 50% positions. You
69:20 have to earn that right if you even get
69:22 to that point. Uh, you know, some people
69:24 are much just much more comfortable with
69:25 20 30% position sizes. Uh, pace so pace
69:28 yourself. Station traders can trade big
69:30 size and win big, but then give it all
69:32 back and lose big. They don't know how
69:34 to position size correctly. Uh, they
69:36 just know how to position size big.
69:37 There's a fundamental difference. And
69:39 you can have low volatility equity curve
69:41 profile and size 25 to 30% or even more
69:44 position sizes positions consistently.
69:46 It all boils down to the entry tactics
69:48 you use, how you build into that size,
69:50 and how you manage risk on the entry
69:52 area. And Ry, I definitely want to hear
69:54 your your thoughts on on this slide
69:55 because I I think you explain it really
69:56 really well.
69:58 Yeah. So with with position sizing, we
70:01 we'll tie this this concept into the
70:04 market cycle quite a bit. um and how
70:07 what we define as a cooperative market
70:09 and what isn't one. um that will become
70:13 really really clear uh for you guys and
70:16 will help you build that system in this
70:17 webinar series where you know you're
70:20 supposed to be completely out of the
70:21 market February 21st if you look at the
70:24 daily on the cues and you would have
70:26 avoided any of the you know the mess
70:28 that we're currently in because we're in
70:30 a down cycle for the past 34 to 37
70:35 sessions now. So um this one is you you
70:39 will see a lot of benefit in stacking um
70:43 up different edges. The reason for that
70:46 is that the market, you know, if there
70:49 are more positive factors at play,
70:53 they're catching different systems and
70:55 when the same stock is on radar for
70:58 different systems, there's more interest
71:00 and there's more momentum or directional
71:02 momentum to uh one you know the upside
71:06 in the markets. So the most important is
71:09 you know
71:10 um traders always ask you know what am I
71:14 position sizing because they want to
71:17 they want to completely emulate or you
71:19 know follow exactly what I'm doing um
71:24 because they want the exact same
71:26 performance and the exact same numbers.
71:29 The reality of it is that if I place a
71:32 25% position and a trader that just
71:36 started three weeks ago places a 25%
71:39 position, both of us will handle it
71:41 really differently when price moves up
71:45 or when price moves down. Right? So
71:48 that's where the phases come in. You
71:50 have to know the phase you're in. If
71:52 you're following someone on social media
71:54 or you're uh paying someone for a
71:57 subscription, look into the process of
72:00 how they're entering, you know, enter
72:01 how do they enter their names? Where do
72:03 they place the risk? How do they come up
72:06 with these names that they're looking
72:07 at? How do they build a focus list?
72:09 What's their process? But the position
72:12 sizing part of it comes down to
72:15 experience, right? If I place a 25%
72:18 position and someone else, you know,
72:20 that started a month ago places that
72:23 we'll have two different results based
72:24 on the volatility that that name is
72:27 seeing and there will be two different
72:29 outcomes purely based on experience and
72:32 nothing else. So that's a fact. You have
72:35 to deal with it. Don't try to replicate
72:38 position size. It's a huge mistake that
72:40 you know in recent years that has been
72:43 promoted that you have to start with you
72:46 know at 30%. You have to have huge skin
72:49 in the game for you to that's one way of
72:51 going about it but it's a surefire way
72:54 of reducing your success of getting to
72:57 stage three and stage four as well. The
73:01 probabilities don't align. It's almost
73:03 like you you start, you know, driving
73:08 and someone says you can only drive at
73:10 100 miles an hour to learn. Um, that's
73:13 not going to end well, right? The
73:16 probability of you being a a good driver
73:19 that you know the thresholds set and
73:22 that you can only be good, you can only
73:24 be great if you, you know, drive that
73:25 fast, it will end up in a wreck and
73:28 you'll wreck your trading career.
73:30 So definitely keep this in mind. Don't
73:33 try to, you know, emulate someone else's
73:36 size. Build it up. It will, you will get
73:39 there. And if you think that you can get
73:41 there in a year, it's really not a year.
73:44 It's 5 to seven, like we said, right? It
73:47 takes, you know, multiple market cycles.
73:51 the last five years I would say from
73:54 2020 if you started 2019 area you've
73:57 experienced everything that you possibly
74:00 can in a span of six years now that you
74:03 the market can potentially throw at
74:05 you've had the deepest corrections we've
74:07 had crashes we've had Vshaped recoveries
74:11 we've had long you know downward
74:13 trending markets for three to five
74:15 months in a row where they frustrate the
74:17 heck out of you've had a solid uptrend
74:19 in 2020 20 and last year. So, if you've
74:22 seen all of that, uh, and it's, you
74:25 know, you you've built, you know, you'll
74:27 build yourself up to this type of sizing
74:30 as well. The last thing I would say
74:34 is, you know, try to to not see
74:38 companies and trades you make as a
74:42 lottery ticket to to take you to, you
74:45 know, to to promised land. it you it
74:49 might work right a company just gaps up
74:52 overnight and it might work um but it
74:56 more often than not will won't um so
74:59 don't you know 50% I see 60% position
75:03 sizing for single names if traders are
75:07 doing that that they're playing with
75:08 money that they're willing to lose
75:10 that's a whole separate game but if
75:12 you're looking to build this as a system
75:15 as a source of consistent income you
75:18 know that you have a market cycle system
75:20 where you can aggressively make a lot of
75:22 money and then be out of the market for
75:23 a couple of months meaningful money
75:26 right meaningful dollars then stick I
75:30 would say within these thresholds being
75:32 your max above it it gets quite scary
75:35 and it's not scalable either so yep
75:38 perfect and then uh yeah you want to
75:40 take this one as well yeah so position
75:44 sizing um the first point you know is
75:47 boost lose performance if you position
75:49 size well. Uh what that means is let's
75:52 say we have two stocks. How do you gauge
75:55 potential? You gauge potential based on
75:57 the number of edges that you see on
75:58 those two particular charts. If chart A
76:01 has multiple edges and chart B doesn't,
76:03 should you be allocating more to chart A
76:05 or chart B? I would allocate more money
76:07 to chart A because the probabilities of
76:10 it, you know, having more edges means I
76:13 have more conviction, right? Um, and
76:16 this is something that I kind of, you
76:18 know, built for myself because I feel
76:21 I'm just I have an engineering type of
76:23 brain and a mathematical brain. And if
76:26 I'm seeing positive characteristics on a
76:29 particular chart and there's more on
76:31 that chart
76:32 A, you know, mathematically that chart A
76:36 should succeed and have a bigger gain
76:38 than that chart B. So that's why, you
76:40 know, you want to build that scalable
76:42 system so that chart A gets more of your
76:44 money versus chart B. Um the the fourth
76:48 one we'll cover in depth. We'll have a
76:49 whole webinar on market cycle. Uh and
76:52 then the last one I was already spoken
76:53 about. You have to tailor it to your
76:55 experience, your risk appetite, your
76:57 tolerance that you've built over
77:00 multiple market cycles. You know, you
77:02 could start at 5% position sizing. Will
77:04 it make a huge difference um in your
77:07 lifestyle and your trading in in the
77:09 first three to five years? Likely not.
77:12 But it will allow you to stomach
77:14 volatility a lot better. You'll build it
77:16 and then you'll be prepared in
77:18 corrections, you know, to be on the side
77:21 and just sit it out and then deploy
77:23 capital when it's super important um to
77:26 to do so. So all of these things play a
77:28 role. The most important thing on this
77:31 slide is, you know, you if you position
77:33 size based on the number of edges that
77:35 you see, you're it's just like that
77:37 losses chart that we put up, you'll see
77:40 the stats on the other side as well. The
77:42 more edges, the more higher your win
77:44 rate will be because that chart just has
77:47 better characteristics. So, yep. And
77:50 these are some guidelines for when we're
77:53 in a trending environment, cooperative
77:54 environment, we're above the moving
77:56 averages. Um, some general guidelines
77:58 that you can use. Stage one traders, max
78:01 stop loss about 5%. Uh number of
78:03 positions less than 10. Uh position
78:05 size, you know, 8 to 10 percent. And
78:07 again, if we're if you're just learning,
78:09 there's no shame in in trading, you
78:12 know, 10 shares, one share, even a much
78:15 smaller account that you could trade.
78:16 You know, if you've got a 100K at your
78:18 disposal and you're just starting out,
78:20 start with 1K. Start with $500 and learn
78:23 the process all of that when with much
78:26 less than your total portfolio. uh until
78:29 you prove to yourself and go through
78:30 multiple market cycles that you can
78:32 manage risk uh enter the strongest names
78:34 at the right time uh and all of that. So
78:36 this is kind of for stage one traders.
78:39 say true traders again max stop-loss
78:41 recommendations guidelines about 5%
78:44 number of positions less than 10 and
78:46 position sizing you can increase that a
78:47 little bit 12 to 15% and then stage
78:50 three and above you can get a little bit
78:52 higher but again you have to earn the
78:54 right you build up to this and you at
78:57 this point you'll kind of understand
78:58 what works for you maybe you want to
79:00 stay at 15% positions that's fine but
79:02 you'll have built the process and build
79:04 the risk management skills and system up
79:06 enough that you can handle you know this
79:08 amount amount of uh of size if you would
79:11 like to. Uh but you know uh these are
79:14 just kind of some guidelines, some
79:15 starting points, some reference points
79:16 for you guys as you go through uh your
79:18 journey. Uh progressive exposure, we've
79:20 talked about this a little bit and we'll
79:21 get a lot more into this in the market
79:23 cycle market analysis webinar. Uh
79:25 progressive exposure is basically the
79:27 act of increasing or decreasing your
79:28 total open risk and position sizing
79:31 based on trade feedback and market
79:32 analysis. uh you want to analyze the
79:34 market indexes, leadership and stock
79:36 gauges uh and recent trade feedback and
79:39 ask yourself, are you being rewarded for
79:41 taking new trades so you can look at
79:44 your past 10 trades like we did? What's
79:46 your win rate? What's the average gain
79:47 over the last 10 trades? Is that in line
79:49 with your your normal stats? Is it
79:51 better? Is it worse? And basically under
79:54 ask yourself, is the market environment
79:56 good for my style right now? Uh and then
79:59 based on that analysis, adjust your
80:01 sharp position sizing. uh you know, your
80:03 stop percentage, your activity levels if
80:04 you're even going to be taking trades.
80:06 You know, we're below the 200 SMA and 21
80:08 EMA right now. Uh probably for most
80:10 people, a lot less is more. Cash is
80:12 king, all of that. Um and also adjust
80:15 your sell rules to be a little bit
80:16 faster during more volatile corrective
80:18 conditions. Uh and then when the market
80:20 environment improves, when we've got a
80:21 follow-through day, when we break it
80:22 back above moving averages, when we
80:24 break back into a stage two uptrend, uh
80:26 we can adjust accordingly and get back
80:28 to uh more normal uh risk risk
80:31 parameters. So example uh of progressive
80:33 exposure if we have a fallrough day if
80:36 we have a break above the 21 EMA however
80:38 you define for yourself a new market
80:39 cycle you could take three 10% star
80:42 positions and if you get you know good
80:44 feedback 5% gain on each that's 1.5%
80:48 portfolio gain that then can be used to
80:50 finance new positions maybe that's uh
80:52 two new positions risking 75% of your
80:55 portfolio or three more risking 05% you
80:59 know of your portfolio The basically the
81:02 the rationale is you've got nice profit
81:05 here from these positions and you can
81:07 use that to finance um you know new
81:10 positions and new test trades. And again
81:12 we'll cover this a lot more in the
81:13 market cycle uh webinar. Ryan, anything
81:16 you want to add on progress progressive
81:17 exposure or just sizing sizing bigger
81:19 during you know strong periods and
81:21 sizing a lot less during corrections
81:23 like like the one we're in currently.
81:27 No, I I would just say, you know,
81:29 progressive
81:30 exposure allows you to get in really
81:34 effectively. Some some traders feel that
81:37 it is a little too slow and they want to
81:39 put more exposure on quicker, but it
81:44 caps your um in choppy markets, it's
81:47 super helpful in downtrends when you're
81:50 thinking that the trend is about to
81:52 reverse. um you putting on that you know
81:55 uh position seeing how it works if it's
81:58 working then you add more capital and a
82:00 second position on etc is super helpful
82:04 while you're building out a full system
82:07 right um it's almost like a it's buying
82:10 you time as you build experience and
82:14 progressive exposure as you build
82:16 experience you build this gut feeling
82:18 that the market's about to turn it
82:20 becomes a little less important But the
82:23 first 10 years of you, you know,
82:26 learning the ropes of the market and
82:29 um kind of developing a feel, it's the
82:33 best way and the best framework uh that
82:36 was put forth by Mark Miller Media,
82:38 right? Um you want to gauge and get
82:41 feedback. If you're getting positive
82:43 feedback, go and place more trades. If
82:46 you're getting still getting positive
82:48 feedback, continuously do that until the
82:50 market's telling you not to. So it's
82:53 almost like a way for you to buy time
82:55 without having uh the experience. So
82:58 that's the the framework that he came up
83:01 with there. Yeah. And then we definitely
83:03 wanted to touch on this as well and
83:05 we'll cover this more in the market
83:06 cycle webinar as well, but just thinking
83:08 about risk from a portfolio level and
83:11 talking about overall draw down. Uh over
83:13 here we've got a chart of the cues. Uh
83:15 this has been a pretty vicious
83:16 correction. Down 10% at that point, down
83:19 you know, 20 plus% at the lows. We
83:21 bounce. we're maybe breaking lower again
83:23 and probably a lot of people have
83:25 experienced maybe the biggest draw down
83:27 of you know their trading career during
83:30 this period. Uh so these are some
83:31 guidelines that you can hopefully use to
83:33 keep that draw down uh to a minimum
83:36 going forward. You know at 5% draw down
83:38 uh have starter position sizes sell your
83:41 weakest positions especially ones that
83:42 are breaking below moving averages. um
83:44 at 10% uh draw down you know this is
83:47 basically looking at your equity curve
83:49 and seeing if it dropped 5% this is the
83:51 first one 10% the second you know level
83:55 15% all the way down here and you know
83:57 as you gain experience or more stage
83:59 three stage four you can be a lot faster
84:02 than that because I definitely want to I
84:03 want to be much more you know closer to
84:05 this 10% uh possible draw down if we
84:08 enter a full correction and even less
84:10 than that uh so I can profit from the
84:12 next move higher uh But this is kind of
84:14 a good guidelines rules rules of thumb
84:16 here. So at 10% no new buys, raise stops
84:19 on existing positions and 50% you know
84:21 just go completed cash and and watch
84:23 because a 15% uh draw down in your
84:25 account it's definitely significant. It
84:27 hurts a lot uh but it's recoverable
84:30 right and the whole point for these
84:32 guidelines draw down rules is to prevent
84:34 a 20% draw down 25% draw down 30% draw
84:37 down 40% draw down. If you just watch,
84:40 you know, these growth stocks when the
84:42 market tops and enters a significant
84:43 correction, these uh these former
84:45 leaders drop 50% 60% 70%. And we don't
84:49 want to be along for the ride. We want
84:50 to participate during the uptrends and
84:52 step aside for the worst of the
84:54 declines. And these are some rules that
84:55 can help you from a portfolio level uh
84:58 you know keep those draw downs
84:59 manageable so that you can participate
85:02 and survive until the next uptrend. Uh
85:04 Ryan, anything you want to add on on
85:06 this slide or about overall draw down
85:08 and controlling controlling that when a
85:10 correction starts? Yeah, this is another
85:12 risk control mechanism, right? Because
85:14 traders tend to uh start to like
85:17 hallucinate or get these fantasies about
85:20 things will come back and then they
85:21 don't uh and then you know you put
85:24 yourself in a in a bad spot. This one I
85:26 think we picked up from Eve, right? Um
85:30 well, at least that's where, you know,
85:31 when I read something that she was doing
85:34 um from the IPO master essay, it really
85:36 clicked for me. Um you want to have
85:39 this. It's kind of like a circuit
85:41 breaker system for the markets. You know
85:43 how if the NASDAQ is down 7%, the
85:45 circuit breaker one level will trigger.
85:48 This is kind of a circuit breaker system
85:49 for your portfolio that hey, you're 5%
85:52 off the highs. Something's not right.
85:55 Maybe it's the market. So listen to what
85:58 the market's doing or trying to tell
86:00 you. At 10% it's kind of circuit breaker
86:02 too. Um I know Webster Mike Webster has
86:06 this kind of system as well uh for uh
86:10 portfolio draw downs. This should be you
86:12 know this is a top level you know
86:15 portfolio management. The folks that are
86:18 managing millions and billions are doing
86:20 this. Uh active growth money managers
86:23 are doing this. there's no reason for
86:26 you to not do the same. It's, you know,
86:29 just a simple circuit breaker system for
86:30 you to get out of the market to avoid
86:33 those deeper, you know, corrections um
86:36 as well. So, yeah, and this is this is
86:39 completely separate from the position
86:41 management rules that you should be
86:42 using for that the trades itself that
86:44 you're in. This is just from a portfolio
86:46 level. These are things you should do to
86:49 make sure you don't have too large of a
86:51 draw down. So, uh that's pretty much it
86:53 for today. Just some key steps for
86:54 managing risk. Um defi, you know, as
86:57 you're looking at a stock and a
86:58 potential trade, define if you want to
87:00 take more total open risk, define the
87:02 stop loss, the likely stop loss for that
87:04 position. Enter the stock right after
87:06 you enter, place a tight and logical
87:08 stop-loss um at a key level for for your
87:11 style. As the stock makes progress, you
87:13 can raise that to break even. As the
87:15 stock continues, you can raise that to
87:16 in the money even uh and trail your stop
87:18 at higher lows, key moving averages. Um
87:20 you can sell to strength, sell to
87:22 weakness. These are things we'll talk
87:23 about in uh this next weekend's webinar.
87:26 Uh concrete rules that you can use for
87:28 that. Uh but this is kind of the
87:29 framework that you could apply to any
87:31 trade that you take. And the the risk
87:33 management parts happen right here. Uh
87:36 and that allows you to control your
87:37 downside and um you know uh allow you to
87:41 profit from that trade if it does work
87:43 for you. Uh key takeaways today, risk
87:46 management is the key to longevity in
87:48 trading. Uh the three factors that you
87:50 can use to control open risk are the
87:51 number of positions you have, the size
87:53 of those positions, and the stop-loss
87:54 levels you set. Uh stop losses should be
87:57 tight and logical uh based on your
87:59 style. And with position sizing, you
88:02 need to earn the right to size up
88:04 positions. Uh you have to experience
88:06 multiple market cycles, go through that
88:07 process, learn to manage risk, learn
88:09 what a proper entry looks like uh before
88:12 you can, you know, size up and try to
88:14 perform. before that it's all about
88:16 building technique, building process,
88:19 building a system, uh, and, uh, you
88:21 know, learning to manage risk before
88:22 that. So, those are some key takeaways.
88:24 Let me let us know your favorite one in
88:27 the chat today.
88:28 And we'll pause here for a few
88:31 questions. And before we do that, I just
88:33 want to emphasize that if you haven't
88:34 already ordered your trader handbook,
88:37 definitely go ahead and do so. You can
88:38 scan this QR code to go ahead and grab
88:40 your copy. Um everything we talk about
88:42 in these webinars is expanded upon and
88:45 explained uh in in different ways in the
88:48 handbook itself. And the last 200 pages
88:51 of this are a full model model book that
88:53 you can use to study the greatest
88:55 winners from the past decade pretty
88:57 much. Uh so that allows you to you know
88:59 speed up your learning curve, learn what
89:01 winners look like, all of that and uh
89:03 you know place your entry tactics, study
89:05 how they would work in those winners. So
89:07 definitely recommend picking this up if
89:08 you haven't yet. And if in the in the
89:10 chat you've already placed your order,
89:12 let us know if you already picked up
89:14 your copy. Um, and let's see what these
89:17 key takeaways are. Circuit breakers.
89:18 Awesome. Uh, let's see. Uh, losers
89:22 average losers, 100%. Uh, never lower
89:25 stops, 100% agree. Never down for
89:32 sure. SoCal, uh, hey Mike, uh, he
89:34 ordered two copies. Awesome. Very nice.
89:37 Thanks, Phillip. Appreciate it. All
89:40 right, let's see. Ry, let let me know if
89:42 you see any good questions that we
89:43 should uh answer. Um, and Dr. Wish, uh,
89:46 in the chat, hey, hey, Dr. Wish. Um, he
89:48 emphasized never lower stops and never
89:50 average down. Definitely very important
89:52 concepts, uh, to to
89:55 remember. All
89:58 right. Yeah, I'm looking for questions.
90:00 I I don't see there's one about, you
90:03 know, how I manage positions and
90:05 different type of accounts. Um I just
90:10 have two accounts. Um I don't have six
90:13 but I am buying I I treat them
90:16 separately because they have different
90:17 objectives. Um you know you I tend to
90:21 treat my personal like trading account
90:24 as a pure momentum swing trading and
90:27 then you know your uh there's a tax-free
90:30 savings account in Canada that I have
90:32 which I treat a little differently. So,
90:34 it all depends on the objective of the
90:36 account, but I don't buy positions that
90:38 are meant for momentum trading for
90:39 investing, though. There's no crossover.
90:43 Uh, why not average down, Richard?
90:45 That's one of the questions. Because
90:47 you're the market's giving you feedback
90:50 that the the trade is not working. So,
90:52 why why would you add money after it's
90:56 already told you you're wrong? I would
90:58 much rather just exit if my entry tactic
91:00 fails. And then once the momentum goes
91:03 back in the way of my trade and there's
91:05 a new entry tactic, jump on on the next
91:08 point. If if you enter when if if you
91:10 try to average down, all you're doing is
91:13 hoping there there's no system. There's
91:15 no process. And that's not a
91:16 professional way to approach this and to
91:18 trade. Uh so we're again, we're thinking
91:20 in a hundred trades, 500 trades, a
91:22 thousand trades, 10,000 trades. We're
91:24 thinking in a series, a long series of
91:26 trades that we'll make over our career.
91:28 Not that this trade needs to work. and I
91:31 need to force something and make it do
91:33 something it's not doing. Um, the market
91:35 doesn't care what you think. If the if
91:37 the stock breaks below a pivot after you
91:39 entered, it's telling you that that
91:40 pivot failed and that entry tactic
91:42 failed and just step aside and and wait
91:44 for the next setup. Um, there there's no
91:46 real logical reason to average down at a
91:48 stock um for for our objectives for
91:51 swing trading for position trading. Um,
91:54 that's kind of how I approach it. And
91:55 any additional thoughts that you want to
91:56 add on that? Yeah, pretty much the same.
91:59 Uh the reason you would average down
92:02 when it comes to swing trading uh would
92:04 be purely out of ego and thinking that
92:07 you can make a stock do something that
92:09 it's not clearly not doing. Um the next
92:12 question it was how do you deal with
92:14 draw downs? So, um, dealing with draw
92:18 downs is mostly you either have to take
92:20 time off, you have to step away, um, you
92:23 you're doing something if it's part I'm
92:25 I'm a high believer in system and if you
92:29 have a system that you're executing, uh,
92:32 that system will tell you to step away
92:34 because things will not work. Some, you
92:37 know, as humans, we deviate from that
92:39 and we try to muscle the markets into
92:41 doing what we think it should be doing.
92:43 that's deviating from your system,
92:45 right? So, you learn those lessons along
92:47 the way. But the best one that I found
92:49 is if you have a series of trades that
92:51 are not working for you, you're doing
92:52 the same thing that you were doing
92:54 before. It's just the market's telling
92:55 you now is not your time. You have to
92:57 sit this game out or this market cycle
93:00 out and be, you know, ready for the next
93:02 one. Um,
93:04 yeah. How do you use shorts or hedges to
93:07 balance your long side exposure? That's
93:09 the next Yeah. Uh I think I I forget
93:12 which trader I heard this from, but they
93:15 basically said if you feel like you need
93:16 to hedge something, it's just a reason.
93:18 It's it's a sign that you should sell,
93:20 you know, sell at least some like um you
93:23 know, there there's different
93:24 objectives, right? There's people who
93:25 are looking to hold for years and they
93:28 try to they they hedge uh before
93:30 earnings. They hedge as a stock is
93:32 pulling back to the moving average.
93:34 That's not my game. My game is to step
93:36 aside when a stock starts pulling back
93:37 meaningfully. So um you know that's how
93:40 I do it. I think you know I I'm not a
93:43 professional in terms of hedging and all
93:44 that. Uh but you know when when a start
93:47 stock starts pulling back and breaking
93:49 structure and breaking trend I step
93:51 aside and either enter when it starts
93:53 going back up or just go on to the the
93:56 next one. Um I don't know. Anything you
93:58 want to add there?
94:00 um hedging at sca like at scale when
94:03 you're managing millions and um have a
94:08 really large portfolio makes a lot of
94:11 more sense. Um if you have a portfolio
94:14 that's small, it in my opinion is a
94:18 waste of time. You're just trying to
94:20 keep busy trying to approach everything
94:22 that hey I can't have a pullback. I need
94:25 to be in a winner at the same time. It's
94:27 a like just conflicting. I think
94:30 experience makes hedging a lot easier.
94:32 If you want to hold a winner with large
94:35 size over multiple earning cycle and
94:38 you're managing, you know, large amount
94:40 of capital, it's good. Um, and it's
94:43 actually kind of needed for you to sleep
94:44 at night. Um, but at small scale, I
94:48 think it's just a distraction. You
94:50 should concentrate on building a good
94:52 system. uh and be a very directional
94:56 type of trader, pick a direction um in
94:59 in the markets. So yeah, there's a
95:02 another question, really good one. Uh
95:04 can win rate be misguiding since market
95:06 conditions are such that you take trades
95:10 but losing
95:12 them? Did I read that right? Can can win
95:15 rate be misguiding since market
95:16 conditions are such that you take trades
95:19 but are losing on them?
95:22 Um I Richard you you want to make I I'm
95:26 not quite sure what he's asking. Can you
95:29 rephrase that? Yeah, no problem. Um and
95:32 one thing I want to say quickly while
95:33 while people are entering more questions
95:34 which please do guys hopefully every
95:36 every person here enters at least one
95:38 question. Um, part of risk management is
95:41 really what we'll talk about in the
95:43 market cycle webinar where keeping track
95:45 of that market cycle is kind of really
95:48 good defense and offense that allows you
95:51 to trade in tune. There's times to
95:53 trade, there's times to be completely
95:54 out of the market and there's times
95:56 where less less is more. So, um, keeping
96:00 track of the market cycle, are we above
96:01 or below moving averages on the indexes?
96:03 How are leading stocks performing? Are
96:05 there even leading stocks in the market?
96:07 All those are clues that will help you
96:09 manage risk by not trading and not
96:12 entering a market where the odds, the
96:14 probabilities aren't with you. So, you
96:16 know, currently again, we're in a
96:18 correction. We're below the 200 SMA,
96:19 back below the 21 EMA. Um, you know,
96:22 less is more in these type of
96:23 situations. And a market cycle system
96:25 will help you identify that in real time
96:28 so you can participate during the good
96:29 times and limit the damage during the
96:32 bad times. Uh, let's see here.
96:34 Um, does the handbook cover how to build
96:37 focus lists uh with good potential
96:39 winners, how to build build scans? Yes.
96:41 Um, there's there's an entire chapter on
96:43 screening and routines and we'll be
96:45 doing an entire webinar expanding on
96:47 that, sharing a lot of scans that we use
96:50 um to identify winners. Um and uh also
96:53 just talk about the process as a whole.
96:55 The process of scanning and building a
96:57 wider list, narrowing down the focus
96:59 list to a few names and then even
97:02 narrowing it further to the names we
97:03 actually want to trade because we get a
97:05 lot of questions about how to actually
97:06 build a focus list, a final focus list
97:09 and uh narrow it down because I think
97:10 that's that's something a lot of people
97:12 have an issue with. So uh definitely we
97:13 cover that in the book and we'll do an
97:15 entire webinar on that as well. Um let's
97:18 see here.
97:20 Consider current market condition which
97:21 is not conducive for breakout trades. Do
97:23 take trades when setup appears and fail
97:25 but keep trying. I think they may
97:27 improve. Uh so during during very
97:29 negative corrections, breakouts will not
97:31 work as effectively. So I try to find
97:33 earlier buy points or even pullbacks if
97:36 I am placing trades and always have a
97:38 clear spot where I can uh get out
97:40 quickly. And uh again, guilty until
97:42 proven is innocent. Um when uh when
97:46 conditions are like this. Uh Bob asks,
97:48 "What are edges?" uh go ahead and watch
97:49 our edges uh and setups webinar. We did
97:52 an entire webinar on that and cover the
97:54 edges that we look for like relative
97:56 strength um you know uh the end factor
97:59 edge all of those. So definitely watch
98:00 that webinar. Uh Ryan, any last bits you
98:03 want to
98:04 um say before we we call it today?
98:09 No, I I think uh you know the key
98:11 takeaway from today is have a max uh
98:15 stop loss. look at that chart where
98:18 after 7% things go downhill. Make that
98:21 decision and have that um know your open
98:24 risk and know the basic stats that we
98:26 spoke about and have a circuit breaker
98:28 system. Uh I think if you do do you know
98:31 one of those things from today's
98:34 webinar, I think you will be a better
98:36 trader over the next year and forever.
98:38 Uh because risk management is not
98:40 optional. You have to do it for you to
98:43 be successful for a long span of time in
98:46 the markets. Yep. Perfect. Uh well,
98:49 thank you everybody. Appreciate the
98:50 questions and your attention. Thanks for
98:52 tuning in. Uh if you enjoyed this,
98:54 please go ahead and leave a like down
98:55 below uh on the video right now on the
98:57 stream. Definitely appreciate that
98:58 immensely. Uh subscribe as well if
99:00 you're new. And if you haven't yet,
99:02 definitely go ahead and order your copy
99:04 of the Trader Handbook. It's coming out
99:06 uh pretty soon now, just in, you know,
99:08 about a month. So definitely go ahead
99:10 and grab your copy to make sure you have
99:11 it uh as soon as it comes out. And we've
99:13 got a lot of upcoming news surrounding
99:15 the release of that. You'll want to pick
99:17 up your copy to make sure you get
99:19 exclusive bonuses and uh resources as
99:21 well. Uh so definitely grab your copy if
99:24 you haven't yet. You can just scan this
99:25 or click the link in the chat or
99:27 description. But thank you guys all for
99:29 tuning in. Definitely appreciate all the
99:31 questions and uh great engagement as
99:33 well. So thank you all and we'll see you
99:35 guys in the next one this Saturday. So,
99:37 we'll stay on the lookout for an email
99:39 about how to register for that as well
99:41 as the link. So, thank you guys all very
99:43 much and uh we'll see you guys in the
99:45 next one. Cheers. Thanks everyone.
99:48 [Music]
Chrome Extension