Today a new trader asked me a question about getting back in. This new trader got long MS in front of a support level identified by Steve during our AM Meeting. The support level didn’t hold, this new trader exited, and then MS spiked. Sound familiar? Anyway, I was pulled aside to offer some suggestions how to get back into MS when the support did not hold. Let’s discuss.

First, I was most encouraged that this newbie understood that letting the stock trade against him was not an option. Many unprofitable traders review a trade like this and conclude that they should have held this stock longer. Wrong. Incorrect. Absolutely false. Before every trade that you make you must have an exit plan for if the stock trades against you. In this case MS traded against his exit plan. His only option was to exit MS. Anyone who disagrees with the above let me save you some time. Go find another profession because trading is not for you.

Now, this is not the end of the trade. I said he had to hit the stock. I did not say that this new trader ought to now take a nap, or go for a walk, or break his keyboard. This new trader can consider getting back in. For example, if there was buying at 21.77 getting back in would be a good trade. If you noticed a particular selling pattern during the down move to 21.80, this pattern disappeared, then you can re-enter MS. If MS was trading lower because XLF was ticking lower, XLF suddenly showed some strength, then you could re-enter.

Look, my list above is not meant to be exhaustive. If it were, then I would get exhausted putting the list together because there are many ways to get back into MS. You, as a new trader, should have a list of hypotheticals that will get you back into this trade. You should develop this list. You should visualize these scenarios in your head. You should develop a system for you that allows you to re-enter this trade. I have a list. I gave you some of my ways to get back in. But you are not me. And my list ought to be different from yours. So make your own.

21.80 was the support level discussed. This trader got long at 21.85 and hit MS below 21.80. Right after he exited MS spiked. 21.77 was not violated. When a support level such as 21.80 is violated I consider whether this leaking to 21.77 is really just a fake breakdown. I am mentally agile. MS may be breaking down or it may be a fake breakdown. I am prepared for either possibility. I will exit my stock, but I will look for ways to get back in. And if MS doesn’t trade much below 21.80, and I do not see a clear seller below 21.80, then I may re-enter.

Best of luck with your trading!