Day Trading Setups — What’s Working Now (For Me)
Dear Penny Stock Millionaire,
Most people can learn the day trading setups I teach within a couple of years. But what many newbies don’t know is that the stock market is a moving target. Which means the setups sometimes shift. Things change a little.
I was lucky enough to experience it during the dot-com boom back in 1999 and 2000. The shift was subtle at first. But it taught me one of the most important lessons any trader needs to know…
You MUST adapt to the market.
That’s exactly what my students featured in this recent New York Post article do. They’ve learned to modulate everything from position size to trading setups. Please be sure to read the NY Post article and share it.
Trading Questions From Students
This week’s questions focus on trading setups that are working now. Before I answer the questions, you need to understand something.
Trading is like a moving target. Keep reading and it will make sense.
“The market seems to be shifting. You’ve had small wins and losses, but you’re also testing. What day trading setups are working best for you right now?”
As I’ve said in recent video lessons, some trading setups are shifting a little. The OTC first green day trading setup is normally fantastic to hold overnight and sell into the morning gap up. Technically it’s a swing trading strategy.
Quick note about day trading versus swing trading…
I do both. But I tend to be impatient, so I lean toward day trading setups. I’ll include the first green day setup here because it’s one of my favorites. And it’s working a little different right now.
Back to the setup…
Buying late in the day on a first green day has shifted. It’s a little better selling into the close. Not all the time, but a lot of the time. I think it’s because so many traders are doing it.
It happened back in 99 and 2000, too. First I was buying with five minutes to go before the close and selling the next morning. Then it was 10 minutes, 20 minutes, or longer. Toward the end, I wasn’t even holding overnight. As more and more traders started to see the pattern, you had to be earlier and earlier.
The lesson here is…
Trading Is More Than Memorizing Patterns
Trading has never been just about memorizing patterns. It’s understanding why the patterns are working, then adapting.
You have to adapt constantly. Even as I’m saying first green days aren’t working well as overnight holds…
TPT Global Tech, Inc (OTCQB: TPTW)
My trade is a classic example of recognizing informational inefficiencies in penny stocks.
The company started delivering its QuikLab mobile COVID-19 testing stations in June. On July 16 at 3:35 p.m. Eastern, the company issued a press release. The stock started spiking, so I bought it for the first green day setup.
Remember, trading is a moving target. So while the first green day trading setup hasn’t been working the same most of the time…
In this case, I was willing to give it a shot. It had the following going for it:
- The press release was late in the day so a lot of traders wouldn’t have seen it.
- It was a recent runner still off its highs that also went red to green on the day during the spike. That’s a very good sign.
- It wasn’t overextended — which made it worth the risk for me.
Check out the TPTW chart from July 12–17:
TPTW chart: July 12–17, first green day trading setup — courtesy of StocksToTrade.com
As you can see it had a nice gap up. I was able to sell at the open on July 17 for a 20.37% win and $2,123 in profit.
Again, most of the time I won’t hold OTC stocks overnight right now. With TPTW everything lined up so it was worth it for me.
“How do you overcome the frustration of a lot of plays but not the best plays for you?”
First, you have to know which plays are best for you. Most newbies have no idea. So most newbies should try a bunch of day trading setups.
- Test overnight hold trades. See how it works for you.
- Try NOT holding overnight.
- Try dip-buying morning panics. (This is my favorite pattern. But as you’ll see, this day trading setup has shifted, too.)
More experienced traders can try shorting first red days. (I don’t recommend shorting for newbies or small accounts.)
This doesn’t mean you should just randomly buy and sell stocks. If anything, THIS is the reason why trading is difficult at first. You need to study each of these trading setups to understand how they work. It’s the only way to go into every trade with a trading plan while you test.
To really know what works you need a sample set of at least 100 trades. Too many people make 20 trades and then say, “Oh, this is my favorite.”
You don’t have enough trades under your belt. Try a whole bunch of trading setups. Look at your results. Track them in your trading journal. Find what you’re most comfortable with and what works best for you statistically.
Many of my top students and I use Profit.ly to journal trades.
Hone in on Your Best Trading Setups Without Getting Stubborn
When you know what’s working best for you, try to hone in on that. If you’re doing well on a bunch of plays or a bunch of trading setups, try taking bigger position sizes.
If you’re not doing well, then you should take smaller position sizes. I haven’t been doing that well in the last week, so I’ve sized down. Now I’m getting better at trading smaller. I’m adapting to the market.
So far in July, I’m averaging roughly $3,477 in profits per trading day. Whereas in June I averaged $13,527. There were days where I made $20,000 or even $30,000 in June. So my dollar gains have come down. Why? Because I’m not as confident in a lot of these plays.
That’s OK. Rule #1 is to cut losses quickly. That helps me to protect my capital so I can stay in the game. Adapting your day trading setups to the moving target is a good thing. Stubborn traders blow up accounts.
“How do you balance being patient with not overstaying your welcome in a trade?”
This brings up another variation we’re seeing the past week or so. My all-time favorite pattern is to dip buy morning panics. Until recently, with bounce plays we were seeing a big bounce in under an hour. You might see 20%–50% in 10, 20, or 30 minutes.
Now the bounces are taking days…
Like American Lithium Corporation (OTCQB: LIACF). Recently it had a big panic. It bounced 70%, but it took three days. Check out the chart…
LIACF chart: July 12-16, 70% bounce — courtesy of StocksToTrade.com
So my favorite day trading setup has almost become a swing setup. For now.
None of this is an exact science. You have to learn from every example and try to adapt. Always look for the classic version of these patterns. But also notice what’s working.
You have to balance it with yourself, too. It’s kinda like there are two moving targets…
The market is moving, and you have to find what you’re best at, too.
Trading Is Like Dogfighting in Jets
A good example is a dogfight in a movie where the pilot is in a moving jet and the other jet is also moving. She’s trying to get the other jet in the bullseye. It’s not easy. That’s trading.
In a perfect world you line up in harmony with the market and then everything is easier. But the world isn’t perfect. That’s why I trade with these rules and try to take the meat of the move.
Millionaire Mentor Market Wrap
That’s another edition in the books. Stay safe out there. Not only in trading but out in the world. We have a ways to go before the pandemic is over.
As for what’s working now…
With OTC first green days, you have to sell sooner and/or not hold overnight. With bounce plays, you have to be more patient. The day trading setups my top students and I teach aren’t overly complicated. But because the market is a moving target, it requires study and experience.
Talk to you tomorrow,
Editor, Penny Stock Millionaires