A Trade I Didn't Take, Twice

09/22/2020 9:49 am EST

Focus: STRATEGIES

Danielle Shay

Director of Options, Simpler Trading

The focus of today’s piece? Several trades not taken, explains Danielle Shay, director of options, Simpler Trading.

Why? Because it’s important for traders to understand that they're never going to be able to touch all the water. There's going to be trades out there that you’re going to miss, or trades that you never saw in the first place. But that’s okay…you know why?

Because the most important thing to do is…

To learn a setup, watch for that setup, trade that setup over and over again, and understand that you’re not going to get every single trade that forms from that setup. That’s fine because you can still learn from those trades that you don’t take too.

Here’s one of those trades, for me.

Workhorse (WKHS)

This is one that started to come up in the past couple of weeks in the live trading room, and when I looked at the chart, I immediately knew this was a short squeeze.

Workhorse

What I’ve circled as #1 on the chart above is exactly what a short squeeze looks like.

We started to see high volume via the trend strength candles, and then as it started trading higher, it just kept going higher, and higher, and higher on a high volume move before it eventually topped out and started to pull back.

That was the first trade I didn’t take.

It was a move that lasted all the way from the beginning of June to July. A one-month move that just exploded to the upside. Had I taken this trade, it would’ve been a great short squeeze play.

And the strategy I would’ve used? Well, I talk all about it (and teach it) in my Short-Interest Secrets class.

What About Circle #2?

Now after that, it consolidated again, and we also got a squeeze. Whenever you see price consolidate and you have a squeeze, you’ll get some ready, aim, fire buy arrows. What’s that mean? A fantastic setup.

When I saw this setup forming, I wanted to get in on it. So why didn’t I? At the time I remember I saw this on a Friday, and I thought, “I really don’t want to add a trade at the close on a Friday, I've been doing really well, and it’d be nice to be flat for one weekend.”

And then boom, off it went into short squeeze #2.

The move the second time has lasted again about three weeks to a month. So, the same amount of time as the first one. In conclusion, it also would’ve been a really great short-squeeze play.

But I didn’t take either and that’s okay.

The Lessons Learned:

The reason why these short-squeeze trades are so good is because a short squeeze:

  • Helps you identify an explosive move
  • Helps you identify a move that's going to last a couple weeks, which makes for a great trading environment
  • And especially when you can identify a short squeeze on such a cheap stock (like this one, which at the start was only $5) you can get some really cheap options, which helps immensely with growing a small account.

This is most definitely one of my most successful strategies when it comes to consistently growing a small account.

To learn more about Danielle Shay, visit SimplerTrading.com.

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