MM50 - What the Charts Are Telling You

Today I want to do something a little different from how I usually teach. I want to start training your eye to notice when something is happening that should not be happening. Once you can see it, you can do something about it. You can make an adjustment, you can lighten up a position, or you can hold off on placing a new one. And when the answer to that one simple question, should this be happening, is no, it is okay to kill a small monster.

That phrase is one you hear me say all the time. Killing a small monster means taking a small loss on purpose, early, before it ever gets the chance to grow into a big one. Small losses are part of trading. Huge losses are the thing that takes people out of the game. This whole lesson is really about that. Read the chart, ask the question, and be willing to act on the answer.

Let me start with SpaceX. We had a rally on the IPO that ran from 150 right up to 225. That is 50 percent in the first two days of trading. So I want you to ask it with me. Should that happen? No. Not really. More than half of all IPOs end up below their IPO price within the first three months. That is a real statistic. I have been doing this a long time and I know those numbers.

Does that stop me from trading? No. But it stops me from trading up here. It stops me from taking a new trade anywhere in that zone. Did I trade the IPO? I did. Did I make adjustments to lock in profits up at the highs? I did, because none of this should be happening yet.

And that exact same question, should this be happening, is what just got me out of a trade I have loved for a very long time.