This is the transcription of the linked podcast above ^^^
In this episode, host Matt Davio and new trader Tony list out the 5 steps to create a successful / profitable trade.
MATT: [00:00:00] Hello I would like to talk to you about the One Minute Trader we are here to take the time-strapped trader and turn them into a profitable money making machine with daily ideas that give you; the trader on the go a reason to trade with risk defined and profits taken when able. Welcome to the One Minute Trader.
MATT: [00:00:54] OK. Welcome back to the One Minute Trader podcast I am your esteemed, gristly trading markets veteran Matt Davio here in Bend, Oregon. It is July and we are in the doldrums of summer. The market has interesting been up all of July. We haven’t had even a quarter to a half percent down in the major U.S. indices the entire month of July and we’ve got just the last week upon us with the Fed coming out and speaking. So today we wanted to talk a little bit about how do you find a trade put on a tree exit a trade and then try to do that in 10 minutes or less. What do you think Tony?
TONY: [00:01:48] Matt I have faith in my grizzly leader is a.
MATT: [00:01:51] Grizzled and grizzly.
TONY: [00:01:52] There you go.
MATT: [00:01:53] So the idea we had was five things that you need to do to put on and exit a trade every time. And really these things I think will apply to whatever trade whenever you trade and whatever time frame. And let’s go through them here.
TONY: [00:02:12] Just that framework. Yeah.
MATT: [00:02:14] You know something that you can always go back to and process and gauge and bench. Right? That’s the only way you can improve in anything. Henry Ford said Failure is not a big deal it’s simply an opportunity to do it better than Exxon.
TONY: [00:02:36] It’s like a pilot’s flight checklist. I mean you just go through your head and all my marks?
MATT: [00:02:41] Right and sometimes you’re going to land the plane in the Hudson River. Right? That’s not in the plan. And that’s key to know that although you have a plan there’s going to be times when you’ve got to veer away and the plan you better you try to safely land a plane in the Hudson River.
TONY: [00:03:01] Prepare for impact.
MATT: [00:03:02] Prepare for impact. Sully right?
TONY: [00:03:06] Yeah, Sully
MATT: [00:03:07] I still haven’t seen the cinematic version with Tom Hanks but I hear it’s pretty good. So the first thing is you’ve got to you’ve got to come up with a methodology, a process and how you know what types of things items do you want to trade. How much time do you have to devote to it? How involved do you want to be? You know if you can’t if you’re if you’re on the go like most of our clients and our prospects you want good ideas and you want to make some more money but you don’t really have the time. So we are here to kind of find the ideas that’s our that’s our job to help you to find those. But within that you’ve still got to establish a methodology that works for you. You know not everybody is going to want to trade sugar. Everybody’s going to want to wheat. Some may not even want to trade the S&P 500 they’re going to translate that to the SPY which is fine. Now I can we can do a whole other podcast on why I would recommend you don’t do that because it costs you more money but that’s for another podcast.
TONY: [00:04:21] Cued it up.
MATT: [00:04:22] So the methodology is important. So that’s going to take some time to do one thing well. Right. Figure it out. Figure out that a I like to trade oil regularly so that’s going to be the thing I want to try and then find that type of trade that works for you. I want to be in it for typically a day to two weeks and most of the ideas that we have here on One Minute Trader really play out anywhere from a day to a month. And so that methodology for me –
TONY: [00:04:54] So step 1: The Method.
MATT: [00:04:55] The method. Right so I’ve got to find something that’s not super fast that’s not super lever. Yet can allow you to behave and achieve based upon your risk levels.
TONY: [00:05:07] So how do you find it. Step 2.
MATT: [00:05:09] So Step 2 is The Screen. How do I then find the items that fit my process, my method. and if I’m just trading oil it’s really simple. I’m either a momentum trader I’m an anti-momentum with oil where are my opportunities? where do I want to buy and sell? right? where if I buy here where am I wrong? If I sell here where am I wrong? Am I adding to the position, knowing that before we get into the trade? or am I just entering one lot and I’m wrong here. So if you’re trading one thing the risk question is pretty simple right. Because let’s say you have a hundred thousand dollars and you’re willing to risk 2000. Then you buy one contract of oil and you know that every full dollar it moves is a thousand dollars. So if I paid forty six dollars for a contract of oil and it goes to 47. I can exit my one lot and take a thousand dollars.
MATT: [00:06:16] Right.
MATT: [00:06:18] Or I can continue to let it go and move a stop to 50 cents lower. Right? Which is about 2 percent since I bought it at 46 so I know I’ve got 2 percent locked in which is a nice gain at $460. If it comes down to that level but screening, knowing when you’ll get in, that’s really you know the next question is risk. How much do I want all this risk. It doesn’t mean you have to risk $2000 every time. It just means that’s my max. That’s like my uncle. Yeah that’s my ultimate “I’ve got to step out.”
TONY: [00:06:53] Matt is tapping the chair that’s his uncle.
MATT: [00:06:56] Uncle Matt. So that would be you know defining the risk and then once you’re in a trade. Right. How do you get in a trade. You either place limit orders limit orders or simply buy at this price sell at that price.
TONY: [00:07:14] Kind of the traditional orders.
MATT: [00:07:16] Well there’s a market order which means fill me at the market, wherever the market is. And it’s very unlikely that you will using our product the five minutes later you will ever use a market order. So you’re going to pick a spot you can pick a spot based upon where we suggested. Hopefully get close close to it which is that the videos the morning that we put them out. So they are relevant.
MATT: [00:07:42] Not going to get into the weeds too much for just real briefly on that the difference between market order and like an order place.
MATT: [00:07:50] Limit order.
TONY: [00:07:50] Limit order. What is the benefit?
MATT: [00:07:54] let’s say Chipotle is trading at $400 and I want to buy it at 300. if it ever gets there. I’ll put a standing good till cancel. So it’s in there every day for 100 shares Chipotle at $300.
TONY: [00:08:10] OK.
MATT: [00:08:11] It may never fill.
TONY: [00:08:13] Gotcha. I just want to throw it out there.
MATT: [00:08:16] It may never fill but it’s important to know. That’s the difference. Market order just goes I’ll buy it. Well Chipotle is at 400 and you want to buy that at 400 or did you want to buy that 300?
TONY: [00:08:25] You’re saying I don’t care.
MATT: [00:08:26] If you don’t care then just get you in.
TONY: [00:08:28] That’s a market order.
MATT: [00:08:29] Yeah that’s a market orders. It’s unlikely that you will use market orders. I don’t even use markers and I’m in front of a screen.
TONY: [00:08:36] Yeah.
MATT: [00:08:36] Very rarely is market.
TONY: [00:08:38] OK.
MATT: [00:08:39] Except then exits maybe in other words I’m stopping out.
TONY: [00:08:42] Yeah.
MATT: [00:08:43] So I use a stop until cancel and I would say to you the world today makes it very easy for most people to put stop orders that are going to cancel so you don’t have to put it in every day. Once you put it in and you set the trade in really you think you can walk away. You can also do something called “one cancels the other.” So you have a stop and a profit target. And once- let’s say in this scenario we bought it 46 in oil, it goes to 47. Now we moved our stop up to breakeven.
TONY: [00:09:16] OK.
MATT: [00:09:17] So and we have a sell in at 48.
TONY: [00:09:22] OK.
MATT: [00:09:22] We’ve just picked that area based on our process. And if it gets to 48 before it gets to 46 we executed 46 we make $2000 and that 46 stop gets killed. So one cancels the other.
TONY: [00:09:39] It’s a beautiful thing.
MATT: [00:09:40] It is a good thing. So even if you’re traveling you’re out of country. You know that you had those orders and there one cancel-. They’re called OCO’s and you can have multiple layers. If this happens and that kills that order and that order. I don’t want to get into that but you can literally.
TONY: [00:09:55] That’s a layered strategy for sure.
MATT: [00:09:57] Because you can literally set up like if you know if I take out half my position I’ll buy back more when it comes back down.
TONY: [00:10:04] Take note. All you excel Wizards listening right now.
MATT: [00:10:08] Well but this is this is the order entry systems that have been made available not only to professionals but even on the retail level. So that’s that’s kind of the order management. The risk definition and the exiting with profit and / or loss. And if you don’t know where you’re getting now if you don’t know why you’re taking the trade in where you’re wrong. Please don’t take the trade.
TONY: [00:10:31] Right.
MATT: [00:10:32] In other words have -.
TONY: [00:10:34] Be prudent with your money.
MATT: [00:10:35] Be prudent and have a risk parameter in your mind because you alone, trader listening, are the person that is taking the gains and the losses. Not Matt, not Tony, not anything else. Not Jim Cramer.
TONY: [00:10:57] This is a business where you’ll see your boss.
MATT: [00:10:59] You are your own boss and be responsible for it. Take credit for the gains and the losses because you’re going to have both. And if you can’t, you know-. I don’t want to be generalizing, but if you think that one plus one always equals two this probably isn’t the business for you because often most of the time it is. Many times it is not. So again be aware that this is a weird market. I always say that markets are nothing but track games.
TONY: [00:11:35] That’s what they’re designed for right?
MATT: [00:11:38] That’s why 90 percent of the people lose because they’re they get trapped at the wrong time. They’re either out in their own or capitalize they’re over levered.
TONY: [00:11:48] They don’t have a five step trading method.
MATT: [00:11:49] They don’t have a method right. They don’t know where they’re wrong. So when they get wrong they’re like a deer in the headlights. They don’t know what to do. You’ve got to slow down there’s plenty of time. I mean we gave a trade on July 3rd. We said hey we really like sugar. At 12.85 I haven’t treated sugar in years. I said I like it for a trade here because it started like some of the shorter time frames where turning.
TONY: [00:12:21] It was lining up just right.
MATT: [00:12:22] The news the news is really bad. It was you know really that good it had a fall from 26 to 12, so cut in half. And it’s been as low as five in the last few years also. But listen you know it’s not going away and we’re just talking to short term trade. But in less than two weeks. Sugar today is at 14.50. So 14-15 percent in two weeks.
TONY: [00:12:45] Some good movement.
MATT: [00:12:47] This is what Peter Lynch talked about. You know if you ever remember Peter Lynch was the value guy at Fidelity. He was like buy companies that you know that you trust that you believe in if you like Chipotle and there’s no rats in your store, you know, five years ago that was a great buy because they were new and people were you know they didn’t know about it. So by the things that that you know or research them and it’s no different in trading trading you know how do you know what moves and take the money and run. There’s nothing you know what you can make 15 percent trading anything in two weeks you will be successful in this business so that’s my job is to assist you in finding those ideas. Your job is then to come up with the methodology and the process. We can help you with that. We have a one hour consult. We have a one day consult. Check our website. ( oneminutetrader.tv ) All right. You’ve started with a five minute trader videos that you’re sure you know that’s your Latte a day that you’re giving up.
TONY: [00:13:52] That’s you doing the screening stuff.
MATT: [00:13:54] Right. I’m doing the heavy lifting so that you can buy many lattes and put your kids through private school before they go to college because you’re going to need a lot of money. I got four of them. Two of them are in college. So be prudent with your money. Be smart. Set your risk. And Tony as always. Thanks for listening to the One Minute Trader Podcast. Please like us on Stitcher, iTunes, Spotify, wherever it is we’re coming to you today. Enjoy your ride home on the train, the bus, the plane, trains, automobiles. Say hi to John Candy and Steve Martin for me. I love those guys. Love that movie. And God bless you. I’m sorry I’m not on the road with you today. So those shower rings. OK. We’ll talk to you next time the One Minute Trader Podcast.
MATT: [00:14:59] We know how difficult it can be to find entries and exits that seems to be a common problem with a five minute trader clients. If you’d like to get some assistance we offer 3 ways you can get a five minute video delivered to your e-mail box or your SMS every day. That is the most concise way to get an active and exact entry spot on where we like certain trades. So we deliver those everyday to your mailbox and we’d love to help you in that problem that you’re having.