The Micro Pullback Trading Strategy (Small Account Challenge)

What's up everyone? Welcome to today's class. In this session, I'm going to teach you how to trade the micro pullback. Micro pullbacks are a relatively new setup in my arsenal of day trading strategies. I've only been trading it for about 5 years, but during the last 5 years, it has been phenomenally profitable. And I'll tell you why. About 5 years ago, we had the pandemic and we saw a surge of volume and traders come into the market. And the result was with all this new volume, we saw huge volatility. But sometimes, we would see stocks that would basically go straight up from $2 to 5, 10, 15, even to $20 without giving us what we would typically consider a proper pullback. So, the typical pullback strategies that I have been using for all those years prior to the pandemic were leaving me sitting on the sidelines missing the move, which is infuriating. And that's when I discovered the micro pullback. So, I'm going to teach you today how to trade the micro pullback, how to make sure you're trading it on the right stuff. Now, I'll tell you, it doesn't matter whether you're trading forex, futures, stocks like I am, or you're trading cryptocurrency or anything else. You can trade the micro pullback on any security as long as it meets five pillars including high volume and rate of change. I'm going to walk you through those as we get into today's class. I'm also going to teach you about risk management. As you know, trading is risky. My results, of course, are not typical. And so, you got to make sure that when you're looking at considering one of these setups, that you're asking yourself how much am I risking versus how much do I stand to gain. And I'm going to walk you through the rules of thumb that I use. So, let's go ahead and jump into today's class. Now, I will tell you that this is a case study from my trade just this morning. $56,110.94 in 1 day. Now, when I first started trading, my daily goal was 200 a day. $200 a day. That for me, living in Vermont in those days, was more than enough for me to get by and consider trading to be my full-time job. So, 200 a day is $50,000 a year. To make $56,000 in 1 day, I haven't lost sight of how far I've come, and I'm grateful for it. And what I will tell you is that learning to trade, if you can get good at it, and if you can commit yourself to having the discipline to follow the rules, it's a skill that continues to pay dividends. And every single day that I show up in the market, I continue to improve on this skill. I'm refining it, my intuition is getting better, and so there's there's a real reward the more weeks and months and years that you spend in the market of all this accumulated knowledge that you're able to benefit from. So, this is the trade from today that we'll use as a case study, and this is a perfect example, case in point, of a stock that went from $5 a share down here all the way up to over $14 a share, and guess what? There was no micro pullback Sorry, there was no proper pullback. We had micro pullbacks. There was no proper pullback. This stock just basically went straight up here from 5 to 14 without pulling back even for a moment. Now, before we jump into this case study and the micro pullback strategy, I want to share some exciting news. I'm about to start a brand new small account challenge. Many of you guys have been tuning into these challenges I've been doing over the years. I'm probably best known for turning an account with less than $600 into what is now more than $20 million of gross profit. And so, periodically, I reset my account back down to $500, $1,000, $2,000, whatever the case may be, and I demonstrate these strategies in a small account just to show you guys that I I haven't lost my touch. I still know how to trade with a small account. So, I would love for you guys to comment below with the broker that you'd like me to use for this upcoming challenge because I have not yet decided. But, what I can tell you is that all of the profits will get donated to charity as I have done with these last challenges. And I'm going to give you guys the opportunity to help me double the amount that we're donating to charity. So, the way it's going to work is every time you guys hit a thumbs up the thumbs up in episodes in this small account series, I'll add an extra dollar to how much I'm going to donate. So, if I make a 100 grand and you guys hit the thumbs up 100,000 times over all the episodes in this series, I'll donate $200,000. So, so far already, we've raised and donated over $200,000 and we've got a long ways to go because this is really important to me. We are currently at about 1.7 million in uh total donations that I've made over the past 5 years and I'd like to get that to 2 million. So, $300,000 to go. This small account challenge is going to certainly help get us there. And these are some of the charities that I've been donating to. Um mostly children's hospitals, food pantries, and um humane societies for dogs. All right. So, let's start with step three. I'm going to work backwards in this episode. This is a three-step process for trading the micro pullback and we're going to start with step three, which is the entry point. This is the exciting stuff, so I want to lead with this and let's see how this works teaching this a little bit in reverse. So, step three is your entry. So, the way the micro pullback works is we see a stock surging up. It's moving very, very quickly and we initially probably feel some degree of FOMO, the fear of missing out. I can't believe this thing's moving so quickly and that's exactly what happened this morning with the stock that I ended up trading. It moves very quickly from it was about, let's see, $2 to $3 to $4 to $5 to $6 to $7. And I noticed that um it was just not stopping. And so, what we look for is this rapid move up and then we look for a couple of red candles as you can see forming right here. So, we've got these three red candles to form. Now, in a traditional pullback pattern, I'm going to be using a 1-minute timeframe, which means this is a 1-minute chart and I'm waiting for three 1-minute candles to go red, which is fine. But, here's the problem. When you're trading something that's moving really quickly, you don't have 3 minutes that it slows down. This is a stock that I traded this morning that had breaking news. It's a computer processing AI company. They had a headline of securing something like 230 or 260 million dollars of Nvidia processors. And so, this is a big deal for this company. They're going to secure them. They're going to deploy them. It's going to help them make more money as you would imagine. And because this is tied into a theme right now that's really hot, as soon as that headline came out, the stock starts ripping. It didn't even pause for a moment. And so, if I had waited for a proper 1-minute setup, I simply would have been on the sidelines the whole time. So, I had to get dialed in to trade a little bit faster. So, first we get this squeeze up here, which in this example is two green candles, and then three red candles. What is important is just like a proper pullback pattern, I do not want it to retrace more than 50% of the move. So, it's got to hold that 50% retracement right here. If it comes all the way down here, then to me, that's clearly communicating weakness. So, we look for that first leg up and then the pullback and it cannot be more than 50% of the of the initial move higher. I'll give you an example of what this looks like. So, boom. All of a sudden, typically the way this works is the stock comes out with breaking news and immediately starts squeezing up. So, it starts surging up the instant the news comes out. There's high-frequency trading algorithms and some traders who have automated their trading to respond to breaking news. So, the second the news hits the the news wire, orders are are responding. So, that creates that initial spike. Now, once a stock starts spiking up, it's going to start hitting scanners, which we'll talk about in a moment. So, now all of a sudden, you know, beep beep beep beep beep, we're hitting essentially the software that traders like myself use, which are the tools that are scanning the market in real time for volatility. So, now that it's got volatility, more people are noticing and some traders are going to start jumping in right away. Now, some traders are also going to start shorting it right away thinking, oh, maybe this is just a quick little anomaly blip and it's going to come back down. Well, in the case of today's trade, those short sellers would get forced to cover for a loss very quickly as the stock kept surging higher. So, it initially moves up, moves a little higher, and in this area, it's very hard to take a trade. Because if you take a trade, you're basically just buying it sort of at the high of day and you can't manage your risk. So, we need that momentary pullback right here. And I am saying momentary because these pullbacks can be very brief, even just for a few seconds. Here's the deal. We get the big move up, we get the pullback, and when it pulls back here, we don't know if it's going to go all the way back down and become what we would call a full round trip or if it's going to base out. So, I always like to give it a chance to fail. Let it pull back. And when it stops going down and it starts moving back up, that's when I get in. And that represents the micro pullback. And then my target is a retest of the highs and a continuation higher, typically to the next half dollar or whole dollar. And that's exactly what we got here on AGPU. So, here we have the initial move up. This is our 10-second chart. So, on the 10-second chart, you can see the initial move up right here as it goes from $5 up to 550, up to 6, up to 650, up to 7, up to 750, up to 8, up to $8.50. And I'm not going to lie, I had a little FOMO. I was like, "My gosh, look at that move, $3 a share, and I missed the entire thing." It's true. I missed this whole move. But, it was the right decision to sit on the sidelines because there was no way that I could really manage risk getting in in the middle of this. And for those of you guys who've been trading for a while, you've seen enough times where we've had a stock that squeezes up like this and then goes all the way back down in a huge red candle. And it happens so quickly that you feel like I mean, there was just no way to manage your risk on it. It's just It's like in an instant, it's tanking. And so, you realize, you know, if you're not if you're not quick on these to get out, you could end up getting smoked. So, it makes a lot more sense rather than jumping in on that first candle to give it a second to see whether or not it can hold. Now, this is the 1-minute chart right here. So, the 1-minute chart on the left and the 10-second chart on the right. So, each um of course 10-second candle um so, you've got six 10-second candles in one 1-minute candle, right? So, 60 seconds in 1 minute. So, this was the first 1-minute candle right here, which was comprised of 1 2 3 4 5 6 candles. Has this little teeny top right there and then starts to pull back. So, now this little dip right here was the micro pullback where I took my first position. You can barely see it on the 1-minute chart. You see the little topping tail and then the little bottoming tail and then just continues higher. And then another topping tail and bottoming tail here and then it continues higher, topping tail bottoming tail. So, that right there was my first entry. So, let me show you that that position. I bought 10,000 shares, two orders of 5,000 shares. So, I got in at 8:33 and 8:50. And what I was looking for right here was the re- was the break of this high, which was 8:50, and I was immediately looking for a move up to nine. We got it. In fact, we got a lot more. It goes to nine, it goes to 9:50, and in less than 10 seconds, I'm up over $10,000. It then hits a high of 10:50. It dips for a second, then it pops up to 11, and then it dips again, right right here. And so, what do I do? I add more shares, right here. Because this is the second pullback. So, first micro pullback, second micro pullback. Now, as it squeezed into this high right here, I took some profit off the table, and then I added back right here. And so, as I'm adding back, I took a larger position. Why? Because now I've got a cushion on the day. So, whenever I'm breaking the ice with my first trade of the day, that that's where I have the highest risk of going red. So, I like to start with an icebreaker. Now, 10,000 shares might seem like a huge position, but for me, it's a more moderate position. So, getting in, breaking the ice, getting green, now I've got a cushion, I go back in for that second trade. So, I'm adding right here for the break of 10:50, and we get this squeeze all the way up to 11:50, a dollar share, 12:50, two dollars a share, all the way up to just under $13.50. We dip down, and right here, we have a little bit of a false breakout. We double top uh uh sort of uh it's like a retest of the high, and it fails. And actually, at this point, I was scaling out, because I already had a really nice first pullback and a really nice second pullback, and I wanted at this point, after the first and second pullback, to give it a chance to kind of rest for a second, and I was thinking maybe this needed a proper 1-minute pullback. So, it dips down for a second, and then it starts to curl back up. And what I ended up doing was getting in just really quickly here for the break through the high. I got in and I got back out and this is a smaller trade for me because I knew the risk was a little bit higher here having just had this rejection and having this pulled back a little bit longer. But nonetheless, it still worked from a break of about 1350 all the way up to just under just about $14.50 before dipping back down. So, my approach on this is to let the stock squeeze and to give it a chance to fail. And if it doesn't fail, if it holds, then that's where I get in. So, how long do I wait? Well, in this case, it popped up to a high as you could see right here of about 850 and then it dipped down to just below 8. And then what I noticed was right at $8, which is a psychological level of support. Typically, we see buyers buying dips around half dollars and whole dollars. So, what I noticed was right at $8, there was a stack of buyers. And that stack of buyers, which was uh visible on the level two, communicated to me that there were other people that were bidding on this stock, that wanted to buy the stock. Moments later, I see some orders in green going through the time and sales and this is using market data. So, now I'm seeing there's buyers in the market right now and I said, "You know what? I'm going to go ahead and punch it." So, if I pull up the level two right here, you could see what it looks like. So, this is our level two window and this next to it is the time and sales window. So, currently the stock's up about 92%. It's pulled back a little bit off those highs and what I look at in this case here, down here, was when it came down to the whole dollar. I was looking at the bid, which is on the left, and I was looking at the buyers that were stacked there at 8. So, right now, I don't see any big buyers. I also don't really see any big sellers. It's sort of in the middle of the range at the moment, which is fine. You can see there's a few more sellers on the ask side there uh for a moment at 40, but um but but nothing really substantial. However, at the very beginning of the move, that's when it's really important to be closely watching the market data because that's when you can see that subtle hint that oh, there's a big buyer. This is bullish or oh, there's a big seller. Someone's already wanting to take profit. And sometimes there are insiders who are selling as soon as the company has news. This is especially true with foreign listed securities where they don't always follow the rules around insider trading, unfortunately. So, with US companies, I don't worry about it as much, but it can still happen. So, I want to give the stock a chance to fail. And if it holds up, then that becomes the new level of support, which means that is my max loss. So, if I'm getting in right here at about 825, 835, whatever the case is, then my max loss is just below eight. So, in this case, I was risking on the first trade about 10,000 uh sorry, on 10,000 shares, I was risking about three thousand five hundred dollars, about four thousand dollars, which was an acceptable level of risk for me. I was comfortable with that. So, my entry was at about 840 average, and my max loss was just below eight dollars. And within an instant of getting in, the trade worked. Now, I focus on trading a technique where the resolution is almost instantaneous. I'm so dialed in with these entries. Now, one of the things with trading with a small account, which I'm about to do for this next small account challenge, is that when you're trading a small account, you've got really no margin for error. You cannot afford to make mistakes. And if you're using leverage, which I historically have always done when I've been trading in small accounts, you're trading literally with borrowed money. There's a huge amount of risk, and this is not something that beginner traders should do. And you certainly shouldn't take trading with leverage and margin lightly. But something that I've done in the past. And so, because I knew I I using borrowed money, the way I kind of felt about it was that I would borrow this money, but I'd only borrow it for like 5 minutes. Now, that maybe was a way for me to justify or rationalize taking that risk, but it worked for me. Rather than buying something on margin and leverage and holding it for hours and hours and exposing myself to all of this time risk, I'm just getting in and getting out very quickly. And so, in a setup like this, I essentially have gotten myself dialed in to the point where within seconds of getting in, if I've timed it right, it will work. And so, this setup was really going to do one of two things. It was either going to immediately resolve back through the high or it wasn't. And the second it failed to break through the high, I would exit, whether it's at break even or at a loss, because the intention was that the second this first candle makes a new high, it's going to break through high of day and it's going to squeeze higher. That was my hypothesis, that was my expectation. So, if it does anything other than that, I have to get out. So, I call that technique breakout or bailout. It either works right away or it doesn't. And that's the same with the second setup right here, and it'd be the same with the third setup right here, which reject which did fail. And that'd be fine. So, I get in and get out. I wouldn't be holding to the bottom of the pullback. I get in and I get out in an instant. So, as I'm trading these micro pullbacks, getting in, taking some profit, getting So, getting out, then getting back in, taking some profit, then getting back in, adding, taking some profit. I'm just actively trading it. I don't do one entry, you know, one exit. You can never get the best entry, you can never get the best exit. So, I just keep looking for these micro pullbacks, and on a really strong stock, I'll sometimes get five, six, maybe even 10 of them as it continues to surge higher. We've certainly seen examples where stocks go, you know, from $2 to 5, 10, 15, 20, 30, 40, 50. We've I mean, gosh, we've seen stocks that have gone to over $100 a share in a matter of 15 or 20 minutes. You think it's unbelievable when it's happening. It's just such a high level of momentum. So, how is something like that even able to happen? It's the result of an imbalance between supply and demand that comes when a company has breaking news. Let me show you a couple additional examples here. Here's another stock that made a big move from about 650 up to 11. So, a similar size move, quick rally up right here, little micro pullback there, little micro pullback there. Nice volume profile and the MACD is positive. These are a couple other things that I check while I'm trading. Next example, we've got a nice rally here. Look at this from four all the way up here to a high of seven. Micro pullback, goes up to eight, flushes down. This is called an inverted head and shoulders pattern. And you get the break of 840 and a squeeze higher. That is one of the more advanced setups, the inverted head and shoulders. Not one that I'd probably use during the first couple weeks of a small account challenge, but a setup that I would be comfortable trading with my larger account. Here's another one. So, pop up, dip down, micro pullback, micro pullback, micro pullback right there. Look at the volume profile. Look at the MACD. We're trading a stock that is the leading gainer in the entire market here. It's on our scanners moving higher. That's how it comes to our attention. This one pops up, micro pullback, pushes higher slowly, micro pullback a little higher, small little pullback, little higher, micro pullback, pops up, then a flat top breakout at 450 that goes all the way to $9 a share. Unbelievable. That is huge and the volume profile is beautiful. This is on the 10-second chart. So, if you'd waited for 1-minute pullbacks on these, you wouldn't have gotten it. From $11 a share here to $35 a share. These These big numbers. So, I'll remind you again, my results aren't typical. I've been trading for a long time. For those of you guys perhaps tuning in for the first time, I'll briefly introduce myself. My name's Ross Cameron. I'm a full-time trader and I funded my first account in 2001. Look at that setup right there. Now, it wasn't until just the last 5-6 years I started trading these micro pullbacks because in the first years of my career, we didn't have the level of volatility that we have today. Stocks going up 1,000% in a day. I mean, we've literally seen that more than once in the last year. These moves are just unprecedented. This is a beautiful one here from a low of $2, micro pullback at six, all the way up to $9 a share. So, a trade like this jumping in with 10,000 shares there at 620, max loss is the low of the pullback. Within an instant, I'm up $10,000 on 10,000 shares. I'm scaling out and, you know, these are huge winners. That would just be with 10,000 shares. You take that same trade with 20,000 shares or with 30, 40,000 shares, all of a sudden you're looking at $60,000 of profit. So, I don't want to make it sound like trading is easy. It takes a lot of time to develop this skill, but I will say that a lot of traders overcomplicate it. They're taking too many trades, they're lowering the quality standard, and I focus on trading the best and leaving the rest. Quality over quantity. So, even if I don't trade every day, even if I maybe only take one trade a day, today I only trade one stock, if I'm focusing on these setups, I have the conviction to take bigger positions and when of course I take bigger positions, I'll be able to produce more profit. So, sometimes a beginner trader thinks that because they've got a small account, they have to trade differently from how someone uh with a big account might trade. And I completely disagree with that. I think that if you have a small account, you should be still consistently focusing on maximizing each opportunity, being aggressive on the one or two really good setups each day, and leaving it at that. Okay, so you got $2,000 account, you might only be able to make $200 in one day. Yeah, that's giving up a lot of potential profit for someone with a you know $200,000 account, but you got to trade where you're at. Changing your your technique to be something different than what's working for other people is not a good idea. You want to keep it simple. You want to have the discipline to follow the rules. Another pop there, micro pullback. Again, the stock lighting up the scanner as it's moving higher. So, let's now talk about step two. Step two is stock selection. So, at the beginning of this class, I mentioned that it doesn't matter if you trade forex, futures, cryptocurrency, or you're trading stock like I am. What you need, however, is volatility, and this is true. So, what I'm looking for when I'm trading stock is for the price to already be up at a minimum of 10% on the day. This tells me the stock is breaking the standard deviation. It's doing something special. There's only a small handful of stocks each day in the equities market that go up more than 10%. So, 10% is a minimum threshold, and generally, I like to focus on the number one leading gainer in the entire market. This is going to be a stock that is obvious. When you trade stocks are obvious, you get better follow-through. If the stock is obvious, there's simply going to be more traders who are interested in trading it. So, you get bigger moves with more volume. So, number one, the stock should be up 10% on the day. Number two, it should have five times above average volume, which is called five times relative volume, ver- and that's relative to the 50-day average. So, the volume today should be five times higher than the 50-day average. Number three, there should be a news catalyst which is moving the stock higher. Number four, you'll see higher demand on stocks between two and 20 because it's uh that's a price range where most retail traders can afford it. And you need a float, which is the total number of shares available trade of less, ideally, than 10 million shares. Less than 20 for sure. Less than 10 is preferable. This is the supply. So, what we have here is the equation to create an imbalance between supply and demand. So, you have the high demand here. The demand is initially the result of the breaking news. It's the breaking news that brings in that volume. It's the breaking news that sends the stock up 10%. It's the price being between 2 and 20 that makes the stock more appealing, which helps bring in the volume and push the stock higher. But, if the float was high, the stock, even with news, would never be able to make that big move in the first place. I'll give you an example. Let's look for just for for example at Ford Motor Company. So, Ford Motor Company has a float of nearly 4-billion shares. 4-billion shares. And let's just check the daily chart and see see how much it's up today. So, or on how much volume. So, today, we'll use yesterday. So, yesterday it traded on 32-million shares of volume. 32-million shares. But, the float is the float is 4-billion. So, if we jump on the whiteboard for a second, just to give you sort of a sense of of that. This This was the volume yesterday of 30-million shares, and the float is way up here. Probably not even to scale. This is the total number of shares available. So, let's say for instance, the stock started to squeeze up. It goes up 5%, 6%, 7%, 8%. How many of these 4-billion shares out there, how many of the shareholders would say, "You know what? The stock's up 10%. I want to take my profit off the table." Let's just say 10% of them want to take their profit off when the stock is up 10%. Let's just say for the sake of argument. Well, that's 400-million shares of volume. There's not enough volume to support all of that selling. Which means in reality, the stock never could even go up 10% in one day. Because as soon as it's up 4% or 5%, the volume on the sell side will start pushing it back down. And so, this is a stock that could never experience an imbalance of supply and demand that could result in the stock going up, for instance, 100%. So, now let's look, for instance, at um AGPU today. So, it hit about 100% um it was up it was up more than that, but let's say 100% for the sake of argument. And it did that on uh probably 10 million shares of volume at that point. So, 100% on 10 million shares of volume and the float on this one um I believe it was 6 million shares, but let's just double-check that. AGPU. So, the float on this was actually 5 million shares. So, that was the supply, this is the demand, and then this is the percentage change. So, what if we change these equations or change some of these numbers for a second? What if we change the demand from 10 million shares? What if we just change it for the sake of argument to 100 million shares? With the same 5 million shares supply, would we expect that it would have gone up 1,000%? And I would argue that I would expect that. What if instead we had um 10 million shares, but we had a 50 million share float? Well, I would say it might not have even gone up 10% because the float, the supply, was five times uh or sorry, it was 10 times as much. So, you get 1/10 the move. So, then let's say you've got um 5 million shares with a 5 million share float, half the half the demand, and then half the move. So, I often think about this. Now, when we have in the example Ford, you've got a float of 4 billion shares. So, you've got 30 million shares of volume and currently today it's up, you know, 1% maybe not even, right? So, in order for the stock to go up, you you say, "Oh, I want it to go up 10%." You need to go up 10%. So, this times 10 you need 300 million shares of volume, just in theory. When was the last time Ford had 300 million shares of volume in one day. So, we're just going to scroll back on this for a second. And I would argue that it's possible that Ford uh oops, sorry. Let me switch to my other monitor. It's possible that Ford has never had a day where it actually had that much volume. I think I got disconnected from the internet here for a second. It's okay. So, anyways, you get the idea. I don't but So, the issue here is that Ford, Bank of America, Tesla, Nvidia, these companies are so large that even if they do have a surge of volume, there are so many shareholders that are going to want to take profit, the stock is unable to sustain those moves. So, we need the imbalance between supply and demand to get the big move. And what I look at is my high of day momentum scanner. So, this scanner right here is searching the market in real time for stocks that meet my five pillars of stock selection based on what we we just were reviewing. So, AGPU hits the scanner. As it first hits the scanner, it starts popping up and I notice it's got this headline here, which is that they secured a $260 million 3-year enterprise contract for these Nvidia GPUs. This is a big headline. You know, you've got an AI um company or company in the AI computing space. They've got this contract. It's a big deal and the stock instantly starts surging up. You've got 5 million share float and ding ding ding ding ding. This is six four alerts in six seconds. Seven alerts in 11 seconds. 10 in 15 seconds. So, it's just hitting these alerts back to back to back to back. This is good. This is what we like to see. Now, within almost an instant, the stock becomes the leading gainer in the entire market. And that is a good thing. The stock becomes the leading gainer, that means it's the most obvious stock. So, anyone who's sitting down is going to look at these scans and be asking themselves, "What is obvious today? What's moving?" And it's AGPU. A lot of traders don't use these more sophisticated high of day momentum scanners that I'm using, but most traders will at least see a top gainer scanner. In fact, if you think about it, brokers, um you know, Robinhood, WeBull, Charles Schwab, they make money when their clients are actively trading. So, they want to encourage people to trade the markets. That's their business model. And so, what they're going to do is they're going to publish these top gainer scanners so people can see what's moving. What's moving today? Some of them even put out newsletters about what's moving today, what's happening in the market. So, they're kind of always trying to drum up interest. The more interest, the more likely the higher the likelihood that you're going to actively trade, the more you trade, the more money they make, right? So on and so forth. So, these types of simple scanners of just showing you the leading gainers are readily available. So, now people pull up these scanners and they could see, "Oh, AGPU is the leading gainer." And they pull up the chart and they see, "All right, this is something that maybe I should be paying attention to. Maybe I should be looking at this for the first pullback, the second pullback, the third pullback." And so, traders gravitate towards what's moving. Logically so. We don't make money buying and selling something at $5. We buy something at five and want to sell it at six, seven, or eight. And so, in order for those stocks to make these kinds of moves, ultimately, they need to have an underlying catalyst. So, this has a news headline. That's what this flame is referencing here, that there's breaking news. And that was what pushed the stock uh all the way up the scanner. Now, step one is understanding risk. As I've al- already said and will say a million times, I'm sure, in my career, trading is risky. And so, when you're contemplating trading and you're looking at taking a position, you always have to ask yourself, "What am I risking versus what do I stand to gain? And so I have this table here that compares risk and reward and then gives you the break even rate that you would be required if you are trading with that risk to reward ratio. So, I'll give you this example. So, if you risk a dollar to make a dollar, you only need to be right 50% of the time in order to break even. So, if you risk a dollar to make a dollar and you're right 50 55% of time, you'll be profitable. You probably won't make a ton of money, but you'll be profitable. On the other hand, if you risk $2 to make only $1, you have a negative risk to reward ratio. And you would need to be right 67% of the time just to break even. Just to break even. Whereas on the flip side, if you risk $1 to make $2, you only need to be right 33% of the time in order to break even. So, if you've ever gone to the casino, you know that pretty much all of the games are statistically stacked against you. You simply can't get good enough risk reward and have a probability of a high rate of success. Yes, there games where you can get a phenomenal risk to reward, but the odds of you winning are so low that it eliminates the profitability. So, you don't make money unless you have sheer luck. Trading is not a career of luck, which is what separates it from gambling. Trading is when you carefully analyze the risk that you're taking versus the reward you stand to gain. And so, the way I trade is I never want to take a position that I don't have the potential to double whatever I'm risking. So, on that first trade today where I was risking $4,000, I got in it about 8:40 with a stop, max loss at eight, and my profit target initially was a squeeze through nine. We got the first profit target, I didn't take anything off the table. That was one to one. We had had potential for a move higher because there was no resistance on the daily chart. As it squeezed up to 950, up to 10, and up to 1025, I didn't take that first profit off the table until we broke over $10 a share, which means on that very first trade, and I'll show you this is my order window here. On that very first trade in at 8:50, 8:33, I wasn't taking profit off the table until I was up almost $2 a share. And there I was taking all of it off the table right up there. It which is, you know, this is the type of thing where that's a phenomenal profit to loss ratio. Risking 40 cents to make in that case what was $2 a share, nearly $2 a share, is terrific. Now, I'll tell you as a beginner trader, you want to know what my metrics look like? I was risking $2 on average. I was making only a dollar, and in my first first years of trading, my accuracy struggling to even maintain 50%. So, I was losing money. I had some periods of success, and then I would give it back. In the last, oops, let me just back this up. So, in the last year, right here, this has been the last year, last 12 months, I've been averaging about 70% accuracy. With a profit to loss ratio of 1.65 to 1. I would like to be a 2 to 1, but I haven't been able to quite maintain that. That's okay. $4,400 average winners, $2,600 average losers, and my daily gain average has been $26,000 per day, which means today's profits of $56,000 are a little more than double my daily average. It's a good day. It's not a great day. I'm not going to retire today. It's It doesn't I'm not going to take the rest of the month off. It doesn't really change anything. It's just a It's a decent day. Now, I've created this this table, which I call the profit trifecta, and it compares your three core components of profitability. You have the relationship of your profit to loss ratio and your accuracy, of course, and then you have, at the end of the day, your consistency. How many weeks are you able to be green? And I I strive, looking back over the last 6 weeks, to be green 6 over 6. Now, as I sit right now today, as you guys know, I was red uh I I had a red week. I had two red weeks in a row um about 3 weeks ago. And that was that was very disappointing. So, over the last 6 weeks right now, I'm green uh four out of the last 6 weeks, which is consistent relatively, but not as good as I'd like. In terms of my accuracy, about 70% right now over the last 6 weeks, and my profit loss ratio came down a little bit because I had some bigger losses in those 2 weeks where I was red. So, this is where I currently sit on these three core components of profitability. Profit loss ratio declined, accuracy stayed pretty good, but you know, I did have some bigger losses unfortunately because I was just mismanaging my risk. And the result was that I had two red weeks out of the last six. This is a table that you can use in your own trading. You can grab a screenshot and print it out if you want. And you can use this to help you understand essentially your benchmark of where you're at. And what we strive to do is to be right here in the middle, where we're pretty much at all six for each of these three core components, getting one point for each tier. So, I want to talk about the experience that most beginner traders have. Most beginner traders come into the market and lose money. You jump in with real money, you're excited, you want to make money, but you don't really know what you're doing. You don't have a strategy, you don't have a technique. You haven't dialed it down, you don't have a system and a set of rules. And so, you end up losing money. And when you take that first loss, immediately you feel, as you would imagine, a sense of disappointment, frustration, and anger. And you're thinking, "I'm upset." And this little cloud of thought is, "Because I lost money." So, how do I make myself happy? So, you have another cloud of thought, and you think, "Well, if I make money, then I will be happy, right?" And so, you think, "Well, how do I make money? I take more trades." Unfortunately, because you don't yet have a strategy, a system, a set of rules, the result is in fact you lose more money. And then you're even more upset. And this happens and you spiral. How many of you guys have already gone through that? I've been through this. I know exactly how it feels. So, how do we stop this negative feedback loop, which creates increasingly emotionally impulsive trading behaviors? Do we begin with just being more consistent? Do we begin with just improving our profit loss ratio? Those are nice ideas, but the real place to start is by focusing on accuracy, trading the highest quality setups. Because by trading higher quality setups, even if you're trading less, with higher accuracy, you'll subject yourself to fewer losses. Invariably, you'll be eliminating some of the big outlier losses that are drawing down your profit to loss ratio. So, by increasing accuracy, your profit loss ratio will also follow. That then in turn feeds higher levels of consistency. When you've got higher levels of consistency, you've got greater levels of self-confidence. So, now you've got confidence. You're feeling more aggressive. You're taking bigger positions. And with bigger share size, even just trading the same number of trades each day, but with more risk on each of them, you're increasing your profitability. This is a positive feedback loop. I will tell you that I've spent a lot of my career struggling and oscillating between being in a negative feedback loop of downward spiral and then being in a positive feedback loop. And the result is that I spent a number of years of my career on a roller coaster, having periods of big gains and then big losses, big gains and then big losses. Sometimes I wasn't making any money. I was, you know, finding myself over the course of 6 months or even a year having not produced hardly anything. And then of course other stretches I've done quite well. And so I asked myself at a certain point, is there a way that I can flatten this out? What if I could take away these steep drawdowns? If I could do that, what would this look like? Well, instead of going like that, I would go like this. And then instead of that, I would just go like this. And the net result would be that I would obviously have more money in my pocket versus where I'd be otherwise. And I'll tell you a secret that made a huge difference in my career. I start each day with what I call an icebreaker. So, my very first trade of the day, that very first trade, is where I'm taking the most risk. Because when I'm coming into the day, I'm starting at zero. And so if on that very first trade, I end up losing 15 or 20,000 dollars, I'm deep in the red, and what am I going to feel going into trade number two? I'm going to be thinking to myself, well jeez, I just lost so much. The only way to make that back is to take an even bigger position on trade number two. Now, that's what your mind is saying. But taking a bigger position on a day when you've already tripped out of the starting gates is not a good idea. So, regard disregard that, you go ahead and follow your instinct, you take a doubly big position. So, you're down 20K on the first trade, on the second trade, you're down 40K. And maybe these are big numbers, so we'll just bring it down. Let's say you lose 200 on the first trade, then you double down, you lose 400 on the second trade, and now you're down 600 on the day, right? Net. And you're totally livid. So, now what typically happens is you take an even bigger trade, and now you're down 1,200 on that, you're down 1,800 on the day, it's the biggest red day you've ever had. How did this happen? Somewhere in here you became emotionally hijacked. And so I'm going to present an alternative. If your daily max loss is $200, you don't want to lose it on the first trade. And so you shouldn't be taking $200 of risk on your first trade. In fact, you should be taking about a quarter of that. So even if you lose on the first trade, you're only down $50. No big deal. You lose on the second trade, you lose another 50. You didn't get emotionally activated cuz you didn't lose enough for it to really be a big deal. You lose another 50 and I always say three strikes, you're out. So just call it quits, try again tomorrow. But let's say it goes the other way. On the first trade you make 50. Now you've got a little bit of a cushion. So now you increase your size on the next trade to about half size. And now on that next trade you make 100. Then you got another trade, you go up to full size. So you're increasing your share size as the day goes on. And now you've got a $350 green day. But your max loss red day was only red 150, right? A quarter size times three. This creates a positive daily profit to loss ratio. Where average days are bigger green than your average red days are red. So if you trade like this, you'd only need to be right 33% of the time in order to be green in terms of days. You could be wrong seven out of every 10 days and still make money. So now what have you done? You've set the bar really low, which makes it easier for you to be profitable. Setting the bar low is really important. You could do it statistically by understanding your profit loss ratio and you can do it by approaching each each day with an icebreaker trade. Now I'll tell you that when the market is really hot and I'm doing really well and I'm having back-to-back $56,000 days, my icebreaker trades are going to be bigger than they would be in a cold market. But I'm still not going full throttle all in until I've built a little bit of a cushion on the day. Because what I know is if I go full throttle on that first trade and I get smoked, I become emotionally compromised. So this is so important. I'll tell you and this is something that's hard for a lot of beginner traders to understand. Trading doesn't have to be complicated. It just requires you to have discipline in following the rules. And for you guys who are certainly tuning in on YouTube, I really try to put it all on the table for you. So, what I'm going to do is I'm actually going to put a link, it's going to be pinned at the top of the comments and in the description, where you guys who want to continue learning can check out a 2-week trial. During that trial, you can actually watch over my shoulder while I'm trading. You'll see my positions window. You'll see me getting in, you'll see me getting out, you'll hear my market commentary. You'll be able to use the same software that I'm using every single day for charting, for scanning, for breaking news. And you can see what it's actually like to immerse yourself in a community of traders and to be around a trader like myself who has all of these years of educated intuition. So, you get to benefit from everything that I've learned and picked up during my time in the markets. So, if you're ready to take the leap, we'd love to have you. As a reminder, every time you guys hit the thumbs up in the episodes in this series, I'm adding an extra dollar to charity. So, I hope you guys do hit that thumbs up. I appreciate you tuning in today. I'll remind you again, trading is risky, my results aren't typical, and there's no guarantee that you will find success whether you trade with me or you learn on your own. So, you're better off managing your risk and always practicing in a simulator before you ever put real money on the line. So, if you're ready to take the leap and check out our 2-week trial, dive right in. If you want to instead watch more episodes I've uploaded right here on YouTube, I'll put links to them right here and right here. I strive to put forth some of the best content right here on YouTube to give you guys insight into the way I teach and the way I trade. I hope you guys enjoy it and I'll see you for the next episode real soon.