How to manage a SQUAT?
Market condition guides your situational awareness
"A perfect entry solves 99.99% of all your trading problems" ~ Homma
A few weeks ago, I discussed why a squat might not be the end of the world: Infact, the opposite.
A squat could just mean that the true breakout is around the corner, and we must be on high alert.
But squats are painful, to say the least.
So what do you do when your entry squats?
Having a system of managing the squat will take this pain away, one squat at a time.
Today, I will discuss that system with you.
A simplified Trading system:
On the day you enter a trade, there are 3 possible outcomes.
Loss: Your stoploss gets hit.
Profit: Price follows through and your trade is at a profit.
Squat: Price falls below the buy price but doesn’t hit the stoploss yet.
if it squats, you can take 3 possible actions:
Do nothing: Follow the original plan. Trust your stoploss to limit your loss (and pray that it doesn’t hit).
Sell Partials: You sell a portion of your size (I like to sell 50%) and reduce your open risk. Leave the rest, in case you have a follow-through later.
Sell Full: Dont take a chance. Take the small loss and come again another day.
But what dictates, which one of these above 3 actions should you take?
“SITUATIONAL AWARENESS”
SITUATIONAL AWARENESS:
In a raging bull market, you do nothing. You trust the market to push the stock higher.
In a dicey market, one where the momentum is decreasing every day, but we are not outrightly bearish. you might decide to sell partials.
If the market’s feedback on your recent trades has been negative, you don’t take more risk. you sell the full position and wait for the market conditions to improve.
What would you do if the market is bearish?
You go fishing. And don’t trade in the first place.
To know my thoughts on the current market conditions, watch this video on my YouTube channel.
I discuss:
markets breadth indicators.
The bearish divergence that is yet to resolve.
Breath confirmation I will be seeking when the markets turn bullish.
My Top stocks to hunt for longs.
That's all for today.
Nobody can predict what the markets are going to do.
But we can always react to them. But to react faster, we should be able to anticipate all possible moves of the market.
A deeper fundamental understanding helps you to do exactly that.
If you want to take your trading to that level, Sakatas Homma can help you in 2 ways below:
The Sakatas Homma TA masterclass for beginners:
A monster course 8-10 hours. Hourly sessions on weekends. Twice a year.
Please register for the next batch using the link below.
https://docs.google.com/forms/d/e/1FAIpQLScfnQA1w9WDTtTAPEHIqzkS9jhRSZFA1BZXuWRZ5JPZ3Qfu8g/viewform
Watch my 1st session of the Autumn 2023 batch.
Homma Private Access membership:
HPA is a subscription-based educational service (on WhatsApp). Benefits include:
Daily Market Breadth, Momentum, Sector Rotation, and Relative Strength Update.
Access to all my scanners including the BBB (buy before breakouts) scanner.
Access to my breadth-Momentum-Relative Strength & Sector Rotation dashboards.
Access to my Trading view indicators: Homma Khela Hobe, Buy before Breakouts (BBB), Homma Endgame
Access to live Telegram alerts to Homma Khela Hobe signal.
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Live updates on my portfolio and the trading setup rationale.
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Yours
Sakatas “squat manager” Homma.