Rules for high conviction trades

BellaGeneral Comments

During a daily review a developing trader tackled his system for re-entry with high conviction trades.

In his words on his high conviction IBB breakout trade, expressed with LABD:

(LABD) Was one of my larger picture ideas for the day. Was using this 3X leverage ETF to play the IBB breakout. IBB looked positioned for a breakout on the daily chart and have had experience trading this ETF in the past. Cheaper priced ETF so feel more comfortable sizing larger without the fear of being slipped. Goof liquidity and .01 cent spread. Was looking to swing this as long as IBB looked strong.

How was my execution?

Ended up flat on the idea after the IBB failed to hold above VWAP and looked weak around noon. The mistake I made here was not coming back to the idea after it reclaimed VWAP and ran into close. Initial entry was good and covered half into first move to pay for the trade.


With high conviction trades you may want to give them more room.  You see the upside potential in the trade, thus more downside is warranted.

You do want to re-enter a LABD more often after exit or being stopped out.  Since your conviction level is high, this idea is worth more risk.

And you do want to give the trade more tries than other setups.  For a high conviction trade you might give the idea 3-5 tries as compared to a few with other opportunities.

I particularly like developing rules and setting alerts for re-enter.  Here Trader after exiting ought to set an alert for if LABD reclaims VWAP.  Trader ought to have a trading rule with his high conviction trades to re-enter if LABD reclaims VWAP.

We miss these trades mostly because we do not develop re-enter rules and set alerts.  Rules and alerts are our solutions to improve on re-entry for high conviction trades.

As always, your feedback/questions/comments are welcome at [email protected].

*no relevant positions