STOCK IN PLAY IN THE MIDST OF RUSSIA-UKRAINE WAR
Feb 25, 2022With the ongoing war, long term investors are mostly getting the beating out of this market's volatility while intraday traders are quietly celebrating this market's volatility. Though both parties might have a different love and hate relationship with current market's situation. The common question that everyone has is should I buy or should I short a stock. One of the advantages of being a day trader is having a strategy that is more inclined to the technical side of the stocks. Imagine, if you are relying so heavily on the fundamentals of a stock and with the ongoing war with Russia and Ukraine, being fundamentally biased is just not enough. Your portfolio will be brutally affected with the changing news and with the uncertainty that our economy, ongoing war and COVID brings.
It is not enough to focus solely on the company's fundamentals, or in the economy's situation alone. It is also very important to become so picky with the stocks that you trade and make the most of the technical setup a stock is throwing at you. I was watching 16 stocks today, my usual number of stocks that I am monitoring daily.
Out of these 16 stocks. I will only have a handful of stocks that I will pick and be lasered focused on. Today, I only have 5 stocks that I made a game plan with at the pre-market although I had my pre-market levels set on all those 16 stocks. I wrote down in my sticky note during pre-market about my game plan with the detailed reason. I wrote the stocks reason for moving, for instance its catalyst for the day, it could be due to beating its earnings, large volume that had gapped up at premarket, 2nd day play, etc. I will also write my bias on these stocks and my strategies.
If this stock gives me my setup, then I will enter this trade only if certain criteria are met. I will write my entry, stop loss and target price. Now, it is important to know that a trader needs to be flexible to the strategies that they are executing. For me, this flexibility means, I will write down the price of where I will be interested with the stock but if the level 2 and the tape give me the signal to enter the trade, confirming my bias then I will take the trade.
The price does not need to be right at the penny of my premarket planned price. But this is a region of price that I will be interested in. What is important for me is the price action and the direction of the stocks that I will consider based on my playbook (long, short, reversal). I will do a reversal trade on this stock when I see the price action in level 2 and with confirmation in the tape that the direction is reversing. But this reversal trade will only be a scalp trade.
Reversal trade is an advance strategy, since this strategy includes entering a trade against the trend. This is the reason why a lot of traders has the tendency to give back their profit if they do not stop trading in the morning since some traders will pick a reverse trade prematurely. For example, shorting a stock that went at the all-time high hoping for a reverse trade. This trade can either work or end up squeezing the poor trader to the upside. One of the reasons why having a play book is important. If reversal trade is not in your play book, then do not trade reversal trade. Stick with your bread-and-butter setup then rinse and repeat this strategy to attain consistency in trading.
Reversal trade is like surfing against the current. It will be harder to stay afloat but from time to time, it can give you a good wave that you will be able to ride briefly with confidence. I say briefly since reversal trade for me is a scalp trade since this strategy is based mostly from market participants seen in level 2 and confirmed in the tape. The reason why level 2 and tape reading are a skill that needs to be mastered to thrive in this trading business. Those minute movement from the leading indicator, which is the tape and level 2, does not always give a follow-through but will give someone a chance for a quick scalp. Unless it is in my premarket game plan to do a reversal play. All of the reversal play for me are "run away with your profit quick and never look back trade".
These are the trades that I took with the following game plan for the day and resulted to 9/9 green trades.
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