A Critical Lesson About Market Context

Because trading isn’t just about the numbers in isolation

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A Critical Lesson About Market Context   I wanted to write today and cover a recent bonus trade idea I gave in my active day and swing Trading Pit.  The stock was Builders FirstSource (BLDR), and it sparked quite a bit of curiosity among members. It’s not the stock that we should focus on here but rather the lesson, because the lesson applies to all stocks.  I received a few emails asking what to do once the stock seemed to be moving against them — it was a short position, so the stock was rising. This situation presents a perfect learning opportunity about interpreting stock movements with a keen eye on market context. Key Observations from the BLDR Trade BLDR's Average True Range (ATR) is $6.52, which is a vital metric indicating its typical volatility. The stock rose by about $4.75 that day, hurting the traders’ position — but well within its ATR. It's important to note that the broad market was hitting all-time highs at the time of this trade, which affects individual stock performances, including BLDR in this instance. Now, here’s the critical part… If the market were down significantly one day and BLDR was up $8 against a declining market, I would be concerned. However, this scenario is quite the opposite.  The market continues to reach new highs and BLDR, moving less than its daily ATR and still showing a decline of about $20 over seven previous trading sessions, still holds big potential as a short.   So if you take that context into consideration, then there’s nothing wrong with this position, and it still looks like a great short. Don’t let getting down early on a trade freak you out.  This is why you have a trading plan, and you stick to it.  This movement within its typical range during a robust market phase shouldn't alarm investors. This is why we buy options a few weeks out, which is one of my rules for day and swing trading (at least 10 days to 20 days out with a delta of 0.70). Now, if the stock started breaking higher for multiple days, or if it started showing amazing relative strength on big volume, then I would be concerned. But that wasn’t the case here.  Context Is King The takeaway here is simple yet profound in the way it can impact your trading: Always consider the context.  Trading is not just about the numbers in isolation... It's about understanding how a stock moves within the broader market dynamics. Start focusing more on the context. Because in trading, context isn't just a detail… It's the framework that dictates successful decision-making.  Always align your trading strategy with the overall market conditions — after the first 30 minutes of trading has passed and things settle down — and you'll navigate the waters much more effectively. I hope that helps!   _________________________________________________ 3 Stocks to Target Right NOW  The biggest Seasonality Window of 2024 is upon us…  It occurs during the first week of July every year, and lasts for seven days…  And I’ve got THREE epic stocks that you can target for what could be double- or even triple-digit gains…      Obviously, I cannot guarantee future profits or shield against losses but…  You can get the names of these three epic stocks right now.    Just Tap This Link for Full Details Follow along and join the conversation for real-time analysis, trade ideas, market insights and more!   • Telegram:https://t.me/+_vmfwkeP8fA5YWQ5 *This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk. Join the Conversation   Give us a follow on your social media platform of choice, and make your voice heard!

A Critical Lesson About Market Context   I wanted to write today and cover a recent bonus trade idea I gave in my active day and swing Trading Pit.    The stock was Builders FirstSource (BLDR), and it sparked quite a bit of curiosity among members. It’s not the stock that we should focus on here but rather the lesson, because the lesson applies to all stocks.    I received a few emails asking what to do once the stock seemed to be moving against them — it was a short position, so the stock was rising. This situation presents a perfect learning opportunity about interpreting stock movements with a keen eye on market context.   Key Observations from the BLDR Trade   BLDR's Average True Range (ATR) is $6.52, which is a vital metric indicating its typical volatility. The stock rose by about $4.75 that day, hurting the traders’ position — but well within its ATR.   It's important to note that the broad market was hitting all-time highs at the time of this trade, which affects individual stock performances, including BLDR in this instance.   Now, here’s the critical part…   If the market were down significantly one day and BLDR was up $8 against a declining market, I would be concerned. However, this scenario is quite the opposite.    The market continues to reach new highs and BLDR, moving less than its daily ATR and still showing a decline of about $20 over seven previous trading sessions, still holds big potential as a short.     So if you take that context into consideration, then there’s nothing wrong with this position, and it still looks like a great short. Don’t let getting down early on a trade freak you out.    This is why you have a trading plan, and you stick to it.    This movement within its typical range during a robust market phase shouldn't alarm investors. This is why we buy options a few weeks out, which is one of my rules for day and swing trading (at least 10 days to 20 days out with a delta of 0.70).   Now, if the stock started breaking higher for multiple days, or if it started showing amazing relative strength on big volume, then I would be concerned. But that wasn’t the case here.    Context Is King   The takeaway here is simple yet profound in the way it can impact your trading: Always consider the context.    Trading is not just about the numbers in isolation... It's about understanding how a stock moves within the broader market dynamics.   Start focusing more on the context. Because in trading, context isn't just a detail… It's the framework that dictates successful decision-making.    Always align your trading strategy with the overall market conditions — after the first 30 minutes of trading has passed and things settle down — and you'll navigate the waters much more effectively.   I hope that helps!   _________________________________________________ 3 Stocks to Target Right NOW   The biggest Seasonality Window of 2024 is upon us…    It occurs during the first week of July every year, and lasts for seven days…    And I’ve got THREE epic stocks that you can target for what could be double- or even triple-digit gains…    Obviously, I cannot guarantee future profits or shield against losses but…    You can get the names of these three epic stocks right now.    Just Tap This Link for Full Details Follow along and join the conversation for real-time analysis, trade ideas, market insights and more!   Telegram:https://t.me/+_vmfwkeP8fA5YWQ5   *This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk. Join the Conversation   Give us a follow on your social media platform of choice, and make your voice heard!

ABOUT US:  We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. The TradingPub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from The TradingPub are for your informational purposes only. Neither The TradingPub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. The TradingPub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.  Please visit https://thetradingpub.com/terms-of-service/  for our full Terms and Conditions. Unsubscribe This email was sent to edwardlorilla1986.paxforex@blogger.com by The TradingPub 101 Marketside Ave, Suite 404 PMB 318 Ponte Vedra, Florida 32081, United States Roger Scott

ABOUT US:  We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. The TradingPub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from The TradingPub are for your informational purposes only. Neither The TradingPub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. The TradingPub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.  Please visit https://thetradingpub.com/terms-of-service/  for our full Terms and Conditions. Unsubscribe This email was sent to edwardlorilla1986.paxforex@blogger.com by The TradingPub 101 Marketside Ave, Suite 404 PMB 318 Ponte Vedra, Florida 32081, United States Roger Scott