Ep 101: Catching Missed Trading Opportunities and Fast Moves
★ SUMMARY ★
Catching Missed Trading Opportunities and Fast Moves
When you have stocks that have already moved further either to the upside or the downside, and sometimes they move a little too far, too fast, it’s common to feel uncomfortable about getting in those positions at those price levels.
The big thing when it comes to chasing fast moves and missed opportunities is really the fear of missing out. That’s probably the biggest problem that I see with most traders, and this is a huge problem, especially if you’re new.
One of the reasons is that new traders, they really want to make money from this new skill they just learned, which is stock trading, they want to jump into it and say “hey I’m missing out, I should be making more money”, but in reality, you’re still new, you need to learn to walk before you can run.
They try to rush the process, so they try to jump into stocks that are moving a little bit too quick, or already exploded to the upside because they just assume it’s a good idea to get into the position after they’ve missed the move.
What do I personally do in these situations?
Typically for me, the way that I proceed or approach this concept is, if a stock is over extended, if it is beyond its normal range, I do not chase it.
The reason is because I am in a dangerous spot, in this kind of situations the risk is against you because it is very possible that the stock will have an even more massive pullback.
That’s the main problem with these kinds of moves and stocks that are a little bit over extended, because stocks don’t go up forever. They have pullbacks, they come back into other support and resistance levels and the bigger the move to the upside, the bigger the pullback, it’s just a normal cause and effect relationship.
So you want to be very cautious when you’re trading stocks that are moving to the upside and are over extended.
What can you do as a trader to manage the situation?
You have a few options. First, you could wait for a pullback, it will come most of the time. The pullback is going to be relative to the stock price, but basically, most of the time a pullback will happen. So you could wait for that pull back, and then get in at the pullback range.
The other option that you have is to average into your positions slowly. So you could buy a few shares at one price, and then if the stock continues to power higher, you could get in again, and then again, as it moves up a few more points, and then you could take some shares off.
Personally, I’d rather average in as stocks go up, rather than when stocks go down, and that is because a stock that goes down, could go down much lower.
And finally, the other thing you can do is to sell a put option at a price you want to pay. This is a little bit more advanced and difficult if you don’t know much about options trading.
Of course, this has to be done on stocks that sell option contracts. You can’t just do it on any stock; so this is something you need to plan out ahead of time.
Those are the best ways to manage the risk in the market if you missed a trading opportunity or move and the stock is over extended.
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