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Alex Temiz is a successful day trader and co-founder of My Investing Club (MIC). He is known for his expertise in short-selling small-cap stocks.Temiz emphasizes the importance of position sizing and maximizing profits through effective trade management.
He shares insights on these topics in various educational materials, including videos and courses.
For a more in-depth understanding of his trading strategies, you can explore his YouTube channel, “Alex Temiz – My Investing Club,” which offers a range of videos discussing his methods and experiences.
Steps for Navigating Stock Market Rebounds Strategy (Alex’s Approach)
Before we analyze steps, see whole video from Words of Rizdom podcast:
Alex’s strategy is based on observing market behavior, identifying shifts in stock personality, and capitalizing on rebound failures. Below is a structured breakdown of his process:
1. Understand the Initial Narrative
- Context Building: Begin by analyzing past stock behavior. For example, Alex observed a stock that repeatedly bounced back after testing the VWAP (Volume-Weighted Average Price) or breaking the day’s low.
- Market Sentiment: Gauge how short sellers and long-biased traders are positioned. If a sudden rebound traps short sellers, their covering might fuel a price rise, creating opportunities.
2. Observe the First Significant Shift
- V-Shaped Recovery: When the stock tanks and quickly rebounds (a V-shaped recovery), it creates the illusion of strength, trapping both short sellers and long buyers.
- Day After Behavior: Pay attention to the day following this recovery:
- A gap down and failure to break new highs indicates a change in stock personality.
- The inability to reclaim VWAP or surpass prior high levels suggests weakening momentum.
3. Formulate a Plan Based on Behavioral Changes
- Market Reaction Anticipation:
- Recognize that traders expect repeat behavior (e.g., another successful rebound). When this fails, it signals a potential reversal.
- Plan the Trade:
- Short the stock on a gap-down day after it shows failure to reclaim VWAP or set new highs.
- Use the red-to-green mark (opening price) as a stop-loss.
4. Confirm the Personality Change
- Testing Key Levels:
- Watch for failure to reclaim VWAP or low-of-day support levels.
- Monitor if the stock fails to create new highs.
- Behavior Confirmation:
- If the stock breaks low of the day and fails to rebound, this confirms a bearish shift.
5. Execute the Trade
- Short Entry: Enter short positions once the rebound attempt fails, supported by confirmation of the change in stock behavior.
- Risk Management:
- Use stop-loss at critical levels (e.g., red-to-green mark).
- Monitor VWAP and other key technical levels closely.
- Position Sizing: Adjust size based on confidence in the setup.
6. Capitalize on the Trend
- Riding the Downtrend:
- Once the stock confirms its bearish Trend, scale into the position if conditions remain favorable.
- Exit Strategy:
- Exit at significant support levels or when the stock shows signs of stabilization.
7. Learn from the Broader Market Context
- Narrative Building:
- Track the progression of buyer and seller psychology across days to understand broader market sentiment.
- Evaluate Repeat Opportunities:
- Look for similar setups in related stocks or sectors showing correlated behavior.
8. Diversify Risk and Secure Profits
- Wire Out Earnings:
- After significant gains, withdraw profits to avoid overexposure and maintain discipline.
- Diversify Investments:
- Reallocate earnings into other asset classes or savings for long-term security.
9. Maintain Discipline During Market Lulls
- Avoid boring trades during slow periods. Instead, rely on profits set aside for financial security.
Key Takeaways
- Focus on Market Psychology: Understand the expectations and reactions of different trader groups.
- Adapt to Personality Shifts: Recognize when a stock deviates from its usual behavior.
- Prioritize Risk Management: Keep positions nimble and avoid overleveraging.
- Stay Humble and Disciplined: Consistently withdraw profits to protect against emotional or impulsive trades.
By integrating these steps, Alex effectively navigates rebounds and takes advantage of shifts in market behavior.
Alex adapts his trading strategy by focusing on understanding and aligning with the cyclical nature of the stock market. Here’s a breakdown of how he approaches strategic changes:
Understanding Market Cycles
Alex emphasizes the importance of recognizing the market’s current cycle:
- Bullish Cycles: When stocks are overly bullish, it’s crucial to ride the trend but remain vigilant for signs of reversal.
- Bearish Cycles: In bearish cycles, patience and caution are key, avoiding premature entries.
- Pop-and-Drop Cycles: These cycles demand agility, as stocks may exhibit sharp upward movements followed by rapid drops.
- Grinding Cycles: During periods of gradual recovery, staying in tune with slow-moving trends is essential.
The Key Question: What Is Happening This Week?
Alex stresses staying informed about the market’s immediate context:
- Identify catalysts (e.g., earnings reports, Federal Reserve announcements, geopolitical events).
- Analyze market behavior on a weekly basis to adapt effectively to shifting conditions.
Timing Adjustments
Rather than predicting market shifts prematurely, Alex advocates:
- Waiting for Confirmation: Avoid reacting based solely on assumptions. Look for clear signals indicating a shift in cycle, such as notable events or news.
- Reacting to Catalysts: For instance, the resignation of a CEO could act as a strong indicator for stock movement.
Avoiding the Trap of Past Success
Alex highlights a common pitfall:
- Traders often cling to strategies that worked in the past without accounting for market evolution.
- Example: “I made $100,000 in January 2020 using this strategy” may no longer apply in 2024 due to vastly different conditions.
Core Principles
- Adaptation Is Essential: Success in trading demands continual adjustment and fine-tuning of strategies.
- Avoid Overconfidence: Trading based on past wins or rigid rules (e.g., “never trade on Mondays”) without considering current market dynamics can lead to failure.
- Trend Is Your Friend: Simple yet effective, aligning with the prevailing trend is often more rewarding than fighting it.
Alex’s approach serves as a reminder that trading is as much about flexibility and awareness as it is about skill. By observing market signals and adapting strategies accordingly, traders can navigate even the most turbulent market environments effectively.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
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