Here is a video of the trades we are currently in: $MARA, $MSTR and $RIOT – July 13, 2023
Dan Fitzpatrick at StockMarketMentor.com, here’s your Fitz in Five video today. Now, I am looking at Riot ( NASDAQ: RIOT ).
We’ve got a few different real screaming trades on right now. Riot ( NASDAQ: RIOT ), a lot of guys got in here when it first broke out above 13.00, and so now this thing is up over 60 percent.
There is a similar thing here in MARA ( NASDAQ: MARA ), right in here. We jumped in at 11.06 and the stock just continues to run. Another one is MicroStrategy ( NASDAQ: MSTR ), the same kind of deal, we are in it at 328.00-ish, something like that. And now this stock is up 33 percent and over $100.00.
So these are 3 monster trades. Here’s the thing though, at this point, the difficulty that a trader has is to stay in trades like this. Because you are looking at this and you are going, Oh my gosh, I can’t believe it. I have got to take profits, I have got to close this position out, it’s about to reverse, and all of that.
My suggestion is, that you look at it this way. I inserted an 8-day exponential moving average here. This has tended to work pretty well. It is not an uncommon way to look at this. You see where this is in relation to the price, here, and here as well.
So the price is well above the 8-day moving average, so Riot ( NASDAQ: RIOT ) is really looking like it is accelerating. But if you look at it on the weekly chart, how far is the thing going to go? At this point, you have to, just kind of, look at this as blue sky, really. My suspicion is, at some point, it will be up to $30.00.
But that is not the kind of call I can make, I don’t know. I have no idea whether it is going to move like that. And if does, maybe it comes down here first and then runs up. So this, to me, is just about risk management. It’s trade risk management. It is profit risk management. And the best way that I have learned to do this is to be using partial stops.
But also, if you are going to use this 8-day moving average, frankly, this is how you do it. You say, Alright, the stock is up here at $20.00 now. The 8-period moving average is down here at 16.50, essentially. So let me assume that my stock right now, wherever I bought this from, let me assume that it is at 16.50, as opposed to up here.
So how much have I made or lost between when I entered, and, here, where it is right now, theoretically at 16.50? That would be the maximum drawdown that you would be willing to take, and that is about 20 percent. That’s a massive drawdown, but at least it is a way for you to say, Alright, let me get real about my risk here because I want to ride this as much as I possibly can.
This has been a clear support for the stock if you are looking at it on a daily chart. Now, keep in mind, this isn’t an 8-day moving average, it’s an 8-period moving average. If we go down to an hour, suddenly it’s a little bit better because it is not down to 16.50, it is at $19.00. And so now you can be trading on this timeframe.
And you look and see, if the stock pulls back and closes below the 8-period moving average on a 1-hour chart. Then I am only risking 6.7 percent, which works. And on a stock like this, it actually works better because when the stock is ramping so much you really want to ride the lightening and stay with that stock without risking giving 20 percent back.
So in a similar vein here ( NASDAQ: MARA ), you are risking 5.75 percent, from where it is here if you use the 8-period moving average as a reference for your stop. And it is the same thing here for MicroStrategy ( NASDAQ: MSTR ).
So this is one way you can be managing your risk. You want to be controlling your risk, and that is the risk of giving back a lot of your profits, versus, the risk of missing out on everything. If you are managing your risk in this way, you are going to find out that you can stick with your trades for a longer period of time. And that is really what you want to be doing.
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