 12/21/2020 Trading Without Stops ✔️ Why you should always have a trading plan — and an exit strategy. ✔️ Learn this new strategy for managing trades beyond locking in profits and using stops...  Trading is all about following rules.
If you've ever heard me talk or seen my tweets, you know that I'm a huge advocate of trading plans.
Following a trading plan is an easy way to follow the rules — and minimize potential losses.
One of the most important parts of a trading plan? The stop. That's the price where you'll exit the trade if it goes against you.
Setting a stop isn't hard ... It's sticking to it that's challenging.
If you have trouble with stops, there might be another solution…
But this isn't some shortcut. You still have to do your homework. You've got to understand the risks.
Let's start at the beginning — with your trading plan. Then we'll get into a new type of exit strategy. Sponsored Ad If you're tired of grinding your life away…
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 A Traditional Trading Plan
I say it all the time — you should have a plan for every trade.
I'm not budging on having a plan. But I am going to let you know a way to change your plan when trading a specific type of security.
Before we start changing the rules, let's talk about what a traditional trading plan includes:
A traditional trading plan should have an entry and at least two potential exits.
There should always be an exit plan. That's never going to change.
However, for a specific type of stock, you might adjust the rules slightly. You'll have a profit target as part of your exit plan … but there's another exit strategy available, too.
Let's review the next piece of the puzzle. The SPAC Difference
If you follow me, you already know that I've been trading a lot of SPACs this year. SPAC is short for special purpose acquisition company. It's also referred to as a 'blank check company' — though I take issue with that term (more on that in a minute.)
Let's start with the basics.
This process may sound a bit strange, but it's becoming quite common. Virgin Galactic Holdings, Inc. (NYSE: SPCE), DraftKings Inc. (NASDAQ: DKNG), and Nikola Corporation (NASDAQ: NKLA) all went public through the SPAC process.
If the aforementioned stocks are any indication, it's clear — the market loves SPACs. Sponsored Ad  Tim Sykes put together something special to help you get ready for 2021.
SPACs: Deal or No Deal?
Once a SPAC and a private company reach an agreement, they take it to the shareholders.
Shareholders get the chance to vote … and they're usually also offered a way out.
If the shareholders vote the deal down, then the deal is off.
All the money in escrow must be returned to the investors at the redemption value. Usually, that's the IPO price plus interest.
What about the way out? The Other Exit Plan
Like I said … there's often another way out for shareholders.
I'll use Trine Acquisition Corp. (NYSE: TRNE) as an example.
Full disclosure — I've traded this stock and still hold a partial position. I bought 35,000 shares in the $11s and sold half at $22.
This should not be taken as investment or trading advice. I'm telling you this because I alerted all of my subscribers about this stock when I was still in the $11s.
But back to the redemption. On November 30, Trine sent a message to all its shareholders.
There was a vote on the proposed deal scheduled for December 8. Shareholders who wanted to get out before the vote could. They were allowed to exchange their shares for cash at the redemption value.
I got the message through my broker. The offer was $10.17 per share. I passed.
But it was an offer — and it was above the IPO price of $10.
So with this trade, there was no need to have a stop in place. As long as I understood my downside, the risk was near $10. That was the worst-case scenario.
If the deal got voted down, or if changed my mind about the stock I could get out near $10.
As I'm writing this TRNE, is trading near $25.
I bought it in the $11s, and my risk was near $10. So I risked a little more than $1 per share and the upside has yet to be determined. I sold some at $22. Now it's at $25. That's $14 and counting*...
This was an ideal setup. The risk to reward was 14+ to 1. Sponsored Ad  After making over $6 million trading penny stocks over his career...
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Have an Exit Plan
If you're trading SPACs, you may not have to use a traditional stop. However, you may have to hold the position for up to two years waiting for the redemption offer…
It could be a long time — and your cash will be tied up all the while, unavailable for other trades.
Plus, not every SPAC has the same redemption offerings.
My advice? Do your homework. Read the filings so you understand exactly what your options are for getting out of the trade. Make sure you understand the timeframes and risks you're taking.
Always weigh all the risks and compare them to the potential reward before you take a trade.
Have an exit strategy,
Paul Scolardi Editor, Swing Trade Millionaires
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