Lockdown The coronavirus lockdown means more people are staying home … and trading. Sheltering in place is a good thing. We all need to do our part to keep this virus from spreading.
I’m getting a lot of messages about the coronavirus lockdown and the market … It’s kinda overwhelming. The recent market crash is getting more people interested in the market and trading than ever.
I think it’s great that people are more interested in their financial future. So I want to help by giving you five tips for trading in the coronavirus lockdown.
Now let’s get to my number-one tip for trading in coronavirus lockdown…
#1) Avoid Overtrading
If you’re stuck at home, it’s easy to get in the habit of boredom trading. The world is strange these days — we’re all looking for distractions. And with more free time, it can be easy to start trading just for the sake of it.
Don’t overtrade. Boredom trading can lead to losses.
There won’t be perfect setups every day. If you’re trading because you’re bored … if you’re forcing trades to make up losses or to make money fast … you’re overtrading. This is why discipline is crucial. Boredom is no excuse. If you can’t control yourself, step away from the computer.
I know a lot of traders who walk away midday so they don’t overtrade. If you struggle with overtrading, find something you can do when there are no ideal setups. Go for a walk, go work out, or take a nap — whatever it takes.
#2) Focus on Big Percent Gainers
How can you find potential trades? You gotta watch for those big percent gainers. I can’t tell you how many times a day people ask me how I find the stocks I trade. I always look for big percent gainers … It’s not rocket science.
#3) Don’t Try to Predict the Market
When you try to predict what a stock or the market will do, you’re guessing. My students and I don’t guess. I wait for stocks to prove themselves to me. Look for stocks spiking on news or breaking out to new highs.
No one can predict the market — and the market is always right. That’s why rule #1 is to cut losses quickly. You will be wrong sometimes. You have to protect your account by sticking to rule #1 and minimizing losses.When you try to beat the market or fight a stock, you’ll always lose. If you’re down on a position, never try to fight it or add to a loser. Cut your losses and move on. It hurts less in the long run…
With experience, you’ll learn the nuances of trading and why stocks move the way they do. You’ll start seeing patterns and know which setups fit your strategy.
#4) Use FinTwit
Don’t use your time at home mindlessly scrolling through social media. Learn how to use social media to your advantage by searching financial Twitter, aka FinTwit.
It’s a wealth of info that uses cashtags instead of hashtags. A cashtag is like a hashtag … it’s a dollar sign with a stock ticker, like $FB or $TWTR. You can search for cashtags to see what people are tweeting about them.
Don’t ever blindly follow picks or trades. But you can use FinTwit as a useful tool to get ideas for possible stocks to trade. There are some Twitter accounts that can tweet about a stock and move it in real time — up or down.
#5) Know Key Trading Patterns
I have my favorite patterns, and they’re working well for me lately. You don’t need to reinvent the wheel — but you have to study and prepare.
Dip buying recent runners on support after a morning panic is one of my favorite patterns right now. After a stock has a run-up for a few days, there will be traders taking profits… There will also be short sellers trying to drive the price back down. After the mass sell-off, shorts have to buy to cover their positions, and traders who missed the move want to dip buy…
That creates a bounce, and the stock goes back up toward the high of the day. I don’t dip buy thinking these stocks will hit those highs again. Most never will. I try to catch the meat of the move and move on.
Keep former runners on your watchlist. They can offer trading opportunities for longs and shorts.