Traders are getting creamed in the market right now. Just look at this chart of Imperial Petroleum Inc. (NASDAQ: IMPP) taking a nosedive…
It’s so important right now to trade safely.
I’ve been studying how to day trade for years. Finally, I found a system that’s allowed me to profit over $1 million. And it all starts with my entry.
By doing this one thing, I keep my losses small and my potential for profits high.
Set a Risk Level
Never trade without a plan.
That means before you submit an order, you better have a planned entry and a planned exit. And make sure to plan for profits AND losses.
Anything can happen in the market. Sometimes the best setups fail. That’s just how it goes. But if I buy at the right time, I lower my risk of losses.
A lot of people think that day trading is all about making lots of money. I’m here to tell you that’s wrong.
Locking in profits is only half of the equation. It’s also 100% necessary to control your losses.
Here’s how…
Support and Resistance
If these two words are new for you, let me give a quick summary.
Stocks like to trade between imaginary lines, usually at whole- and half-dollar levels. These numbers are ‘psychologically significant.’ That means that traders find the $5 level to be more significant than something like $5.36.
Make sense?
We’ll look at some charts in a second, and you’ll see what I mean.
Any imaginary lines below the current price are ‘support’ and the lines above are ‘resistance.’
Every now and then, especially if there’s a catalyst, the price will break through an imaginary line and reach new highs or new lows. And sometimes those moves can be really volatile. That’s how day traders profit.
Here are some examples…
Imaginary Lines
Look at this chart of Camber Energy Inc. (AMEX: CEI) from March 4, 2022. See where it opened in the morning at 60 cents? That acted as resistance until the breakout at 1:30 p.m. Eastern.
And support was very clearly at 55 cents.
This chart shows Imperial Petroleum Inc. (NASDAQ: IMPP) breaking out over $2.50. I marked the level with a green horizontal line.
Then it put in a top at $2.80, used previous resistance as support, and broke out to new highs again.
These are both great examples of support and resistance lines in the market. But you’ve gotta know how to use them.
When to Buy
Remember the goal: to profit off of a stock’s price breaking through a support or resistance line.
If I’m going long, I want the stock to shoot upward through resistance. And in sketchy, volatile markets, I make sure to buy just above support.
Then, the plan is to cut it for a small loss if it falls through support OR take profits as it bounces upward.
The opposite goes for short positions … The trader wants the price to break down through support levels. The safest buy would be just under a recent resistance level.
The hot market will come back. But for now, I’ve gotta work with what the market gives me. And since it’s volatile, I’m buying as close to support as possible. That’ll save my account from destruction if things go badly.
That’s what’s kept me alive in this market. And some of my students are finding success as well…
Did you hear about the pattern that helped my student Chris save his legendary bakery business from closing after I taught him to trade stocks? It’s true. Click here to see what happened (and try not to drool over the pastries).
Every Tuesday and Thursday, I go live with all my Trading Accelerator students to show my trading process and answer questions. You should come check it out!
I’m excited to see you in chat!
We work hard,
Roland Wolf
Editor, The Wolf’s Den
