We look at a students trade plan and determine if it makes sense. With the use of the 50 and 200 simple moving averages we see that it is possible he could get cheap shotted out of his position based on his stop loss location.

Today we wanted to try something new. We bring on h00ch and what we are going to do is show him a chart and have him walk through how he would approach it and formulate a trade plan. We look at an alert he made on the SPY 5 minute and discusses why he is looking for a short position. This is a great example of how to properly scale out as a position goes in your favor and reduce your risk at the same time. Even when a hammer candle formed on the 5 minute chart, the trade was still valid according to his trailing stop (which was the 2 min 8 sma). The trade goes further in his favor before eventually stopping him out. He managed it mechanically and stuck to the plan which led to a nice gain.

The next chart we pull up is CMI on the 5 minute chart. We have hooch walk us through what he would do just seeing this chart for the first time. With only 20 minutes of data on the 2 minute, h00ch establishes where his stop loss location would reside. The 3:1 RvR was not met to start with his initial plan so he adjusted his entry to have a smaller risk box. His entry is filled and he just barely keeps from stopping out but the trade plays out to target within 4 minutes of his entry. This is another shining example of why we trail our stop on our final shares to maximizes our winners and minimize our losers.

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