PSA: Guidelines for Trading Low Float Stocks

 

Since we're in this enviornment, and today it's VLCN, there's a few very simple rules to understand. Most of them, now ingrained in my brain not from someone telling me or warning me, but by stepping in front of absolute freight trains and blowing up in the past. 

This applies to long side or short side, whichever you prefer, but especially the short side. These are NOTHING to fight with. Ever. Most will die, but you're gonna run into one eventually that doesn't stop in the 20s or 30s, it's gonna go to 50. Or 80. Or worse. It will happen. So when you're here, the only word you need to remember and focus on...is papercut. It's your best friend. It's the only way to be safe. You've gotta be okay with being wrong, likely multiple times when you get the real crazy one, before you're right. The downside of the real crazy ones? More papercuts. The upside of the real crazy ones? The "really right" last time, is really, really fucking right. 

If you're shorting into strength on these especially, second it rips $1, 2, 3 bucks past you, run. No telling where that ends. Because taking small losses over and over, is going to cancel itself out and then some once you're right. Because once the music stops, and it always stops, it comes to a screeching halt. You will get paid forever its going to feel like. But you've gotta be alive to see it and put yourself there when it matters. 

Using 1000 shares for sake of round numbers, on a name like VLCN NUWE CYCC et al. 

-1K loss. -3K loss. -1K loss. 20K win once it's time and you're right, add and be really right. That's the formula that's worked for me. Haven't needed to put it into practice yet so far these recent shitbags have been behaving like good boys, but there will be one that won't. And that's what seperates the amateurs from the real ones. Who can handle the crazy ones. 

Small wrong. Small wrong. Small wrong. Small wrong. Small wrong. BIG right. 

Never, ever put yourself in a position where you're looking up at one of these things $10+  bucks against you. That can turn into 20 or 40 or 60 before you can blink.  Be hyper-aware of this. Or don't get involved. 


- D

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