Lessons Learned From May's Multiple Personality Market

May is simply turning out to be a multiple personality month. After a strong start that helped me surpass my monthly benchmark in a week, momentum suddenly stalled and I was struggling to even meet my $2,000 daily goal.

Now, in the closing days of May, momentum has suddenly returned in force, and with it has come some beautiful multi-day moves that have helped me net an additional $22,000 in just three days! I’m now up more than twice my monthly goal in May.

However, over-reliance on momentum has recently been a risky approach to this market. Even in the midst of several strong winning trades in Soliton Inc. SOLY and Eltek Ltd. ELTK, I sustained a more than $4k loss in Puyi Inc. PUYI thanks to a seller unloading a huge position after the initial spike. While I still plan on pressing for another strong trading day to end the month—I’ve built up a large enough cushion in the month to do that—I’m also going to keep recent history in mind by avoiding mediocre setups and managing my risk in the positions I do undertake.

These large and small considerations all come into play whenever I start my trading day, and they are all a part of risk management. Everything from which stocks I choose to trade, to my watchlist, to my opening bid and position size to how I scale out are all informed by factors like my monthly or weekly profit/loss ratio, my overall win rate, and even the types of stocks I traded in the previous session.

For a lot of new traders, however, these aspects can be hard to reckon in the moment, especially when your account doesn’t allow for much leverage. The kind of stocks I focus on, and encourage my students to focus on, often require a larger position size to make a meaningful profit. That means more risk for loss, lower margin of error, and more reason to remain cautious even as momentum is seemingly growing more favorable.

My intent while filming my trading recaps and hot stocks videos, and writing these weekly articles, is to help traders develop their sense for when and why they should be more or less aggressive and eventually grow their accounts to be able to trade at scale.

However, my greatest hope for Warrior Trading Students is to learn independently from my strategies and pursue stocks and chart patterns that they recognize as being homerun setups.

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