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The Nasty Results of Breaking Rules

Having a legitimate game plan and strategy is the first step to having any success in the stock market, or any market you are trading. The second part is just as important: following the rules of the strategy. Now, if your strategy does not actually make sense or is flawed to begin with (which I see all the time from new traders), none of this matters; however, if you do have an actual strategy and then don’t follow the rules… as you’ll see in this scenario, “rule breaks” can be nasty.

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Transcript:

Hey, it's Clay at ClayTrader.com.This'll be the weekly review ofthe Power Profit Scan newsletter,which is a part of my Inner Circle subscription service.The other part being the live chatroom.Before I go any further with this video, though,on the review, couple quick disclaimers.First off, am I trying to portray or implythat every single alert that is sent outis some sort of money-making, brilliant masterpiece?Absolutely not.Nobody is perfect, no scan is perfect.There are no guarantees in the market, losses happen,which segues into the next point.But that's why risk management, risk analysis,risk control needs to be the focal point,because losses are gonna happen.No matter what other people may try to tell you,no matter what other people may try to portray,losses happen to everybody,so you have to be able to manage thatvery closely and very wisely.But, on the flip side of that coin, wins also happen.When those wins do happen,that's why the managing risk is so important,because you want to make sure your accountis still in a proper spot where it can growand let the wins, well, win,and therefore wipe away those lossesand keep your overall accountgoing in the upwards direction.Second, we are gonna be going back tothe week of February 25th.Why are you going so far back in history?Fair question, two reasons.First, it's just giving the chart enough time to play out,so we can see what has actually happened with it.Second, a matter of being fair.The last thing I would want is for you to pay for something,and then all of a sudden you see that stuffthat you paid for out there for free.That, I could see you feeling kind of ripped off by meif I were to make you pay for somethingand all of a sudden I'm giving it away for free.That is why we're just giving the chartplenty of time to play out,and a matter of being free to paying members.And to offer up a little bit more context here,here we are at bankrate.com,and I had some messages from people just commenting on this,so that's kind of neat to knowthat this is striking a nerve with peopleand helping to build perspective and build a context,but we're looking at CD rates here,and I mean this stuff is absolutely crazy.And this is up to date right now, so for April 2019,which is when this video is being released,but I mean, look at these numbers.Two years, two years, two years.2.95, 2.98, oh hey, there we go, we finally got to three.But for how long do you have to hold?Two years for 3%, so just keep these numbers in mind.First chart wanna look at that was sent out was for AMRS.And just kinda throw out the question,is it consolidation ending?Big move up, pulled back, started to go sideways,and showed some signs of strength,but wasn't quite any sort of breakout or anything like that,hence the red line right there.But at least throwing out there,hey, is this consolidation finally ending?Let's see how this played out.Before I go any further,I should have brought this up earlier,but first off, one of the big questions I get,"Clay, what prices do you alert?"I alert whatever I think hasa higher probability of success,or I should say the highest probabilities of success.If that means it's a $300 stock,or if that means it's a sub-penny stock,I will alert it assuming there are certain characteristicsthat I think give it a high probability of success.Second, "When is all this sent out?"This is sent out every weekend, usually on Saturdays,that way you have as much time as possibleto put together some sort of thought process around it.The last thing I would want is to email you outor something where, all right,I gotta make a decision in 2.7 secondsand then bad things happen.But with this, it's sent out over the weekend,you have all weekend long until Monday morningcomes along and the market opens up,so that's how the newsletter works as a whole.You can check your email or just access it throughthe site itself, and what we were looking atat the first screen was just the behind the scenesof that newsletter section of the Inner Circle itself.Here was the chart going into the weekend.And as far as how this all played out, I'm gonna ...This was a no play, meaning, I'll show what I mean.Like I said, there was never any breakof that resistance line suggesting thatmaybe this consolidation would be over.But let's just say for a hypotheticaland so what we can kind of make a larger example,let's just say that you decided to buy.Again, as far as the alert was concerned,that line was never broken,which suggested the consolidationwas never ending or anything like that,but let's just say you bought anyways.And then that happened, and you're thinking okay, well ...There we go, got the bounce back upwards,and then that happened and it fell.And you're like, you know what, but it'll come back,it'll come back, it'll come back.In other words, you're being undisciplined.Look at how nasty it got.When, like I said, you could have been outsomewhere up around here for a nice controlled loss.And that move there was 61.4%.Granted, it's bouncing a little bit now,but do you get there idea here that I'm trying to conveyis by being undisciplined, by not following rules,who knows, by not having rules,by not avoiding a certain situation,I mean, this was just a nasty, nasty move to the down side.But like I said, always importantto kind of keep an eye on what's going on.And is this consolidation ending?No, it was not even really a true consolidation,'cause it totally cratered out of there.But let's just say like I said, that you got undisciplined.You don't take a 60% loss, but, I don't know,let's just say you took a 40% loss.Next alert to look out that was sent out for CLVS.And as you see just is the trendline break coming?We had this trendline right there.You can see that these were some higher lows being built.Kind of just a question of, hey, is the pricefinally gonna get some sort of breakout of this trendline?Let's see how this played out.Here's the chart going into thatfirst day of the trading week.You can see right up there the power of chartsrejected right down by that trendline.The next day, actually pulled back.I'll be honest, I really wanted to do the calculationsfrom down here, like, oh yeah,and then you bought it off that sport,which is not unreasonable at all.I mean, it's bounced off there before,so I mean to then say you got in right there,but I didn't, I didn't base the calculations off that.I still base it off of behind the trendline break.And you can see from there, very nice follow through.And then started to pull back.But that move right there equated to 23.7%.And let's see, one, two, three, three days.And let's say you didn't play it right,let's say you screwed up half the trade,so you're sitting at about 11%.Okay, three days and 11%.What was that other one?Three years for, what was it,like 2% or something ridiculous?No, 3% for three years, right?Three days, 11%, or who knows, maybe you played it better,maybe you did get 20% out of it.Three days for 20%, or three years for 3%.Okay, that didn't sound right, I thought I was lying.Not three years, two years, two years for 3%.Regardless, three daysfor 11, 15, 20%, or two years for 3%.Hopefully you can see my goal here.Let's keep things in perspective.The next one to look at here, MNKD, and I just kinda ...Steady rise, it's just been steadily risingup and up and up, and then I point outhow the key breakpoint was right up here,right around the $1.60 mark,so let's see how this played out.Here's a chart over the weekend.First day of the trading week you can seegot up around there, didn't quite break out.But right there, got the high-volume breakoutof that $1.60ish area.Pulled back a little bit, went through a consolidation,very healthy consolidation.And then right there, just absolutely continued to take off.And went up that high fora profit potential window of 46.4%.All of this in, let's just call it three weeks.And again, we'll say you screwed up half the trade,so you only got 23% out of it.23% in three weeks, or two years for 3%.I'd say this was pretty good.Was it a three-digit percent like others doand like I've done in the past?I'm not saying that three-digit gains can't happen,I'm just saying if you're looking at something sayingI only made 23% in three weeks, that is terrible,walk into your local bank or go findwhat the current bank CD rates are.I mean, c'mon, two years (laughs) for 3%,or three weeks and at 20%, 23%?I mean, to me, I think that does a great jobof keeping all this in perspective.And then finally, with the feedback,a lot of you enjoy seeing how this shorting thing works.A lot of people are not aware of shorting,but in a nutshell, shorting means that when prices go downyour profits, your account value goes up.I'll say that again.When prices go down, your account value goes up.I have lots of other videos about how exactly that works,but that's what shorting is.And this is another part of the newsletter that is sent out.But there's no charts or anything, because this isfor people that have gone through the course,they know, they have the knowledge,they know the setups, they've been taughtexactly what they need to be looking for,so I don't really need to point anything out,'cause I'm just kinda throwing 'em,and hey, there might be some fish over there,but they know how to get over thereand then catch the fish themselves,so this is more so just like a fishing alert,where things may be.We're gonna look here at TMHC.If you're wondering,that one would have been a good solid win.Also on the week, that one would have been a loss,and I'm assuming just a good disciplined loss.Let's see what happened with TMHC.Here's the chart before the first trading day of the week.And again, if you see the price start to go down,that is actually a good thingfor anybody that is going short,and which gives full flexibility to us as traderswhen you can make money whether prices are going up or down.You can see right there, nice start to the week,and things just got that much nastier.And they just got that much nastier.And that move down there was good for 11.9%.11.9% on the short side, not too bad at all,especially when you think back to those bank rate CDs.Now to wrap things up here, think back to,you know, that was a good, solid week.Nothing massive, nothing gigantic, but good solid gains.But what happens, what if,what if you had done and taken that 40% loss?You may actually still have been ableto dig out of that hole with these other alertsthat we went over, but that's a big maybe.And even if you did, it woulda just beena small, little gain on the week.The point being, that's why you need to understand risk,that's why you need to understand when to avoid something,because there is profit in avoiding.If you avoid a situation that you should be avoidingand then you never take a loss in the first place,a penny saved is a penny earned.That is why always understanding,having a game plan and knowledge is so important,and why just even if you do have a game plan,you need to follow the game plan,because on AMRS not following the game plancould have resulted, as you saw, in a very nasty situation.And although you could have capitalizedon a lot of those other winners,it's really hard if you allow that hole to get too deep.Just keep that in mind.And like I said, as far as the alert was concerned,no, that consolidation never ended,it never broke the resistance,but hypothetically, I think there isa good underlying example there of whyunderstanding and following your game plan,assuming your game plan even makes sensein the first place, is so important.But to wrap this all up, final few things here.If you're interested in learning more or joining,we just talked about the Power Profit Scans.Like I said, there's also the live trading chat room,and there's a bunch of these other things.There's a mobile app that comes with it,and that is available at no additional cost,so it's not like to have to stay chainedto your computer or anything like that.As of now, the price is $99 per year.I say as of now, because prices will probably be going up,I don't know exactly when,and that'll probably be changing to $197 per year,which is still dirt cheap,but as of now, yes, it is still $99 a year,which if you break down the mathgoes to $8.25 per month, or $1.90 per week,whereas $197 breaks down to $3.85 per week.It's one of those things where it's like,yeah, if you can't afford somethingthat costs $3.85 per week,not quite sure the markets are for you at this time.You probably have some other thingsin your personal finances to tackle.But regardless, as of now, yeah, $99 for one year.And as I tell everybody and say every week in this,over the time span of 12 months,I'm more than confident you're gonna getat least $99 worth of value.And I realize that bar is not set too high,but that price level keeps out the pumpers,it keeps out the bashers, it keeps out the trollsand it allow for a very constructive environment,and that's what I'm looking for as a trader.You can go to ClayTrader.com/innercircle to sign up.Let me know if you have any questions.But if no questions or anything,then yeah, get signed up, and I'll see you on the inside.

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