Mastering Smart Investor Strategies

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Show Notes

Introduction

Podcast Setup: Drink, Smoke, Stock Podcast begins with anticipation for questions.
Drinks of Choice:
Antonio: Drinking coffee.
Otis: Drinking water.
Deaunna: Drinking vanilla Coke.
Topic: The focus is on trading, particularly day trading (getting in and out of positions once certain levels are hit).

Otis’ Question to Grace and Deanna

Otis' Query: What is your thought process before you enter a stock position?
Specifics: Interested in knowing if they rely on charts or feelings when deciding to purchase stocks.
Focus on Entry: What criteria do they use before hitting “buy”?

Deaunna’s Response

AI Assistance:
Deaunna mentioned using an AI (ChatGPT) to create a list of stock suggestions.
She asked the AI for stocks under $100 and has been following its recommendations.
Thought Process:
Her thought process before picking a stock is based on daily spending habits. If she spends money on a product or service daily, she considers its stock.
She hasn’t actively started trading yet due to school finals.
Paper Trading:
Deanna has experience with paper trading from almost 10 years ago.
She mentioned needing to retrain her brain after revisiting trading concepts such as candle charts.
Recognizes that she needs to unlearn old habits and relearn new ones to avoid past emotional responses.

Otis’ Follow-up on Trading Mindset

Otis' Inquiry:
He wanted to understand what goes through Deanna’s mind when choosing stocks.
He emphasized the importance of understanding the market trends (highs/lows of the day/week) before deciding to buy.
Otis’ Trading Process:
Stocks have cyclical patterns (up and down).
To make a profit, you should buy low and sell high.
Stock Selection: Choose stocks that have room to grow, meaning they need to be positioned for upward movement.
Timeframes for Analysis:
Start with a 4-hour chart.
Then move to 1-hour, 30-minutes, and finally make the entry based on a 5-minute chart.
Volume Monitoring: He checks the volume to see how much money is flowing in and out of the stock. The more money flowing in, the better.

Stop Loss Strategy

Setting Stop Loss:
Otis always moves his stop loss above the entry point to ensure he stays in profit, even if the stock goes sideways and stops him out.
Outcome: Even when the market stops him out, he still makes a profit by moving his stop loss.

Antonio’s Question: Room for Stock Growth

Antonio’s Inquiry:
Asked Otis how to recognize if a stock has room to grow.
He emphasized the need to identify this before entering a position.

Otis' Technical Response on Stock Growth

Stock Growth Identification:
Look at the stock’s chart to ensure it’s not at its peak.
Analyze the market using timeframes and volume data to see if there is room for the stock to move upwards.
Method:
Use the 52-week high as a benchmark.
Track stock movement on different timeframes (4-hour, 1-hour, 5-minute) to identify growth potential.
Observe volume to ensure strong momentum.

Deaunna’s Candid Comment

Deaunna’s Reaction:
Expressed that she only knows she’s losing money at the moment.
This lighthearted comment shows her ongoing learning process in trading.
Key Takeaways:
Antonio and Otis highlighted the importance of understanding stock trends and volume before entering positions.
The conversation blended practical trading strategies with candid experiences from Grace and Deanna as they navigate their trading journeys.

Narrating the Trading Screen

Account Balance: $99,965.90.
Equity: Less than the account balance, unclear.
P&L (Profit & Loss): Negative $34.10, indicating a small loss.
Reaction: Grace mentions not understanding much, but she knows the loss is not good.
Emotional Response: Grace feels unsettled by the loss, despite the small amount.

Antonio’s Response to the Loss

Lighthearted Comment: Antonio finds it amusing that Grace is upset over a $34 loss.
Perspective:
Losing any amount can feel unsettling, no matter the total account balance.
Antonio initially thought Grace was dealing with a much larger loss based on how she described it.

Grace’s Expectation

Desire for Perfection: Grace wants to win 100% of the time, even though she knows it's not realistic.
Discomfort with Red:
She dislikes seeing red (negative) numbers in her account.
She expresses confusion about understanding certain stocks.

Transition to Tesla Stock

Grace’s Stock Choices: Grace is exploring different stocks, including Ford and Tesla.
Trading with Otis' Guidance:
Grace followed Otis’ advice, looking at the 1-minute chart for Tesla.
Tesla was in the green (positive) at the time, and the stock price was fluctuating.

Antonio’s Trading Insight

Missed Opportunity: Antonio points out that if Grace had bought Tesla at 8:34 AM, she would have seen a significant price jump.
Volume Indicator:
Antonio explains that the long green volume bar indicates heavy buying, signaling a lot of market activity.
Tesla's positive movement was linked to strong buying activity, likely driven by news or other factors.

Otis' Technical Analysis on Tesla

Tesla Earnings Report:
Tesla reported quarterly earnings 15% above expectations.
This positive news likely fueled the recent price movement in the stock.
Market Direction:
Tesla's stock movement was trending down in the 4-hour timeframe.
Otis emphasizes that Tesla is not suitable for a long position at the moment.
Head and Shoulders Pattern: Otis identifies this classic technical pattern in Tesla’s chart, suggesting a potential price reversal.

Explaining Stock Trends and Movements

Past Highs and Current Lows:
Otis explains that investors who bought Tesla stock low and sold high are exiting their positions.
As a result, Tesla’s price is dropping after a peak in early October.
Stop Loss Strategy:
Successful traders likely moved their stop losses up, protecting profits as the stock fell.
Despite the drop, the stock’s earnings report created a temporary spike in the price.

Gap Analysis

Gap Formation:
Otis explains the concept of price gaps, which occur when stocks jump significantly without trading in between.
He predicts that the gap in Tesla's price will eventually fill, meaning the stock will likely come back down before resuming its upward trend.

Grace Navigating the Trading View Platform

Progress in Learning:
Grace has become more comfortable navigating trading charts.
While she’s still learning how to interpret the data, she has made strides in using TradingView and analyzing charts.

Volume and News Consideration

Volume Indicators:
Otis emphasizes the importance of volume when trading, as it reflects the flow of money into or out of a stock.
Grace mentions that certain interface elements (news and updates) are obstructing her view of the volume, making it harder to analyze.
News vs. Technical Analysis:
Antonio prefers to avoid relying heavily on news, focusing more on technical analysis and market patterns.
Focus on Technicals: The group discussed the importance of understanding technical patterns like volume, stop losses, and trends.
Learning and Development: Grace is still in the learning phase, but her ability to navigate charts shows progress.

Discussion on Missed Trading Opportunities

Wishing for Prior Knowledge:
Participants express regret for not acting sooner on the trading opportunity.
Earnings Reports:
Earnings reports are unpredictable, often leading to significant price movements.
Caution is advised because trades based on earnings can quickly go agains...