One of the biggest lessons I have learned about trading is that when you see profits laying there on the table, it’s best to pick them up. Why? Because it may just be your last chance for a good long while. As Trader Scott says over and over again, “this is a business about probabilities, not certainty“. So when you see a stock is rallying, whether it be in a pre-market session or during the regular trading day, there is a 100% probability that you will make money – if and only if you sell it. To repeat and make this clear. When you sell a stock (exit) for a profit, that is the only time there is 100% probability that you will make money on any individual trade. The only time. It is only probabilities, and when you’re in, you are at the mercy of probabilities. Scott has really cemented that perspective about what markets truly are about, and it has helped me tremendously to focus on letting things go into strength. And isn’t making money what this business is all about?
So why do many traders pass up these golden opportunities for pocketing profits? The reasons are plenty and believe me, I’ve been through most of them myself.
Say a stock you’re holding comes out with good news and starts rallying pre-market. It’s up 38% from yesterday’s close and you choose not to sell. You tell yourself, that if it’s up that high in the pre-market session, it’ll surely go higher when the market opens. Then there’s the,”why should I sell at 38% when this thing will double in the next week with news like this?” Will it double? How do you know?
The only certainty that exists is that it’s now more valuable to you than it was when you entered. Do you want to make money or don’t you? It’s a fairly simple question. Now I’m not saying you won’t make money on it if you sit on it for another week, month, or year, but why are you waiting? There’s profit, right there, right now for the taking.
I was presented with an opportunity like this on Friday morning (11/24/17) with CLSN. I took a position at 3.16 on Thursday because I liked what I saw with the trend and was fully prepared to hold onto it for a couple of days. In short, this was not intended to be a day trade for me.
Friday morning’s rally came as quite a surprise as it was rallying pre-market on no news. I watched the orders and started getting interested when it hit the 3.60 area. It hit 3.75 and I entered an order , but it didn’t get filled. I entered a few different prices and finally got filled at 3.68 for a .52/share profit. I’ll take it. Why was 3.75 a high-probability area to believe a turn would be likely. It was the previous failing secondary rally resistance area.
In the meantime, as I was making money, many folks on Stocktwits were talking each other out of selling, holding themselves and each other back from making money. Why? Because they’re taking advice from people who know nothing about trading. They’re not learning as much as they can about markets and trading; they just pull at straws hoping for a big win.
Let’s take a look below at what was being said on Stocktwits. I’ve added my own sarcastic responses because, well, it’s exactly what I was thinking at the time – gauging sentiment, learn this please:
$CLSN 3.75 was a hint, breaking $4 today
“Seriously dude, how do you know this? You’re not a fortune teller.”
$CLSN are we holding or dumping ?
“Why in the world would you ask a bunch of people who know nothing about trading what we are doing? Why are you being a follower? Why not just learn how to trade and not be dependent upon someone else telling you what to do?”
$CLSN Going well over $4 today.
“Yup, another fortune teller. Puh-leeze.”
$CLSN 4 dollars easy today!
“There we go, third one’s a charm.”
$CLSN lets all stop selling till we reach 10. We all will be happy
“Okay, now there’s a bright idea. When’s it reaching 10? In a day, a month, a year, 10 years?”
$CLSN this is literally going to the moon today
“Hah, that moon is closer than you think buddy.”
$CLSN you want 17% profit sell at open you want to double or triple hold till Monday. Your choice always! I’m holding mine. Good Luck to all
“17% profit sounds good to me because when it pulls back, there’s always an opportunity to get back in adding to your position.”
$CLSN don’t understand the surprise? Wednesday was the day to get in very cheap. Expecting 5$ close
“Where in the world did that expectation come from? That’s like saying, ‘I expect to wake up to having 10 times the balance in my checking account. What?‘”
So what did CLSN do for the day? It opened at 3.20 and hit a high within the first minute of trading of 3.40 before it quickly plunged back to 3.21 by 9:31a.m. It had a nice bounce and climbed to 3.47 by 10:06 before closing at 3.26 by the end of the trading day. So let’s look at a couple of scenarios:
#1 Joe Stocktwitter bought 1000 shares of CLSN at 3.81 on Tuesday when it gapped up. He was convinced it was going to the moon that day so he sat through the sell off. He also sat through the premarket rally on Friday missing the chance to sell his shares for 3.70 for an .11/share loss which would have put him out 110.00. It’s too bad because he could have taken the loss, bought back his shares at 3.21 and then sold them at 3.45 for a 240.00 profit. Then minus his loss from the premarket sale, he’d still be up 130.00 on this trade. Too bad poor Joe doesn’t understand trading.
#2 Lisa Stocktwitter was a little smarter. At least she found a better entry point than her buddy Joe. She bought 1000 shares at 2.85. Unfortunately, she also sat tight through Friday’s premarket rally. She could have pocketed 900.00 in profits. She’s only working with a $5000.00 account after all. That would have been quite a boost to her balance.
#3 Marvin Stocktwitter has a huge trading account and can afford to sit on a stock while it slowly trends upwards. He also bought 1000 shares, but at 1.75/share because the position only represents 1% of his account. He’s up almost 100% already and is content to hold because he believes in the growth and he’s trading in and out of other stocks thus growing his account.
The point is that this stock could very well soar tomorrow OR it could take another 2 weeks or 2 months to go near what is was selling at in premarket. Is sitting there waiting and hoping and wasting time worth it? These are the questions new traders trying to build their accounts need to ask themselves. I doubt very seriously that if you were walking down the street and came across a $50 bill, you wouldn’t pick it up. It’s the same thing. Take profits folks, even partial profits. Take them and build your account. Small wins are a real confidence booster too.
And more importantly, don’t fall into the trap of listening to chatter on the social networks. Most of the folks on there contributing their ideas have no idea what they’re talking about. There are a few bright ones, but they’re hard to spot. Of course, we encourage you to read and to learn from our posts, and if you have the work ethic, you may even decide to become a subscriber. Of course that invitation comes with a warning – we don’t sugar coat this business and we won’t entice you into folly by flaunting a lavish lifestyle, cars, and exotic vacations. Yes, yes all of those things can be obtained through trading, but no one can make you a great trader but YOU. We can share our secrets and cut out a lot of learning time, that’s why we created this website, but the hard work of learning is up to you.