Expecting to fail is one of the most important things to do when taking positions within the stock market. As you know, even with the best positions, the best setups, the best indications, it can still go wrong. Thus, it's important to expect to fail so that you only get in when the price action backs up your prediction. Now, it is no secret that this video is inspired by our recent flop on Sunday, but we're going to be discussing that in context later to make this into more of a learning example.

But the point of this video is that many traders spend a lot of time researching and scanning for stocks that fit their perfect criteria. That could be news. Catalyst plays oversold stocks stocks that are in correction territory. whatever.

But oftentimes this huge piece of positive news or massive overselling or whatever feature this stock has that a trader likes, it can make them sort of fall in love with the stock, or at least makes them feel, make them feel like there's no way that the stock can go in the opposite direction. So then they take a position and they get really confused and frustrated when it doesn't work out the way they wanted it to. But as we know, the stock market does not care about our feelings, it does not by any sort of stretch of the imagination, always act rationally, So that means that even in the best case scenarios, we won't always be able to predict the direction of the market or the direction of our individual stock. We simply need to have a guilty until proven innocent mentality.

We need to have in our mind that if we do not see the technical backing of our fundamental hypothesis that we're going to need to wait. So this means that yes, predictions are good. It's good to research the night before or the weekend before on what's going to be happening and do our due diligence. But because a hypothesis and a prediction is meant to be tested, we need to make sure to wait until the price action after you goes ahead and backs up our prediction.

But before we get into this, the only thing I ask of you in return for this video is that you hit that beautiful and ravishing like fun and we want everybody to have a ravishing time. Ok so to start, regardless of how you feel when you were trading, we know that the stock market is not some sort of cut-rate psychiatrist that will prescribe you profits when you were feeling down. Perhaps this is unfortunate, but it's not the case. So with this in mind, let's go ahead and get into our first example.

So on Sunday night if you were a follower of this channel, you know that I released a top Stocks video on ticker symbol CL DX and in this video presented all of the findings that led me to believe that it was likely to spike Monday morning. This was most notably due to their positive phase data release on Saturday as well as their history of spiking on previous fundamental news. But despite these findings on Monday morning, CALD X dot beat down. Put gently, it got beat down like a rabid dog.

And of course, this is the reality of making top stock videos. Some of the time they will fail. But more importantly, it's also symbolic of anyone making a prediction on any type of stock. Even if you have the best fundamental analysis and technical analysis skills, there is always a certain probability that the stock will turn against you.

But of course, there's a huge lesson behind this with CLD X If you take the mindset that CLD X is going to fail upon market Open because again, we're taking the mindset of expecting to fail guilty until proven innocent. So if you're taking this mindset, you now aren't in a rush to take a position, but rather are waiting until you see the price action back up or justify your position. And justify is the key word here. This means that if your hypothesis is wrong, you will be protecting yourself and your capital.

but if your hypothesis is right, you'll also be able to profit off of the price action. So with CLD X right at Market Open, we saw it drop. It was trading both below the long-term SMA line, which of course signals it's in an overall downward direction, but it was also trading below or blue short-term SMA line, which means that we don't have the upward price strength to justify taking a position, so our expecting it to fail mindset would have told us at this point not to take a position. you don't buy into a position when you don't see any technical backing.

But then we started to see a reversal from the original drop and this is where it gets interesting. Perhaps at this point you could have mistook the drop for a morning panic and the morning panic is where everyone unjustly sells off at Market Open. We saw the Price Action ride backed up and break both of our SMA lines, providing both our signs of trend reversal as well as our priced short-term confirmation with the first green candlestick holding above our blue as the main line. As you know, I Always say wait until confirmation and this is because if you are buying in upon confirmation, you're buying in at a price point of strength where you are actually showing signs of a continued uptrend.

This means the probability of it continuing to increase is more in your favor as compared to buying in a downtrending pattern. and if the confirmation doesn't actually end up being a long uptrend, then it will at least offer you easier exit points. He may have been fooled here into thinking that this was just simply a morning panic, and now that upon confirmation, your hypothesis that the stock is going to rally is justified and quite frankly, that hypothesis and this action would have been correct, you would be backed by that because the price action shows this. It's at this point where you have not only a confirmation, but also a upper direction over the long term SMA line.

But then let's see what happens. You have another green period and you do gain some profit. But then you start seeing price weakening and a validation exit point. So this is the point at which I'd say most folks struggle.

You need to know that buying in at confirmation backed positions is only half the battle knowing that even the best setups go wrong. It's extremely important to have a plan, not just for your entry point, but also for your exit point. When we start seeing signs of price weakness in a validation exit point, that's when we know it's time to exit the position. In this case, cutting our position at validation would have led us to breaking even or perhaps just losing a little bit if we had Commission's By the way, if you don't want Commission's we bow link in the description below Shameless plug.

But anyways, the problem comes when you buy in upon confirmation and just hold it past all the signs of a continued downtrend. So it's at this point of validation where you tell yourself, okay, well, my hypothesis is wrong now I need to sell out It's very important that you tell yourself this because this is the point where you're starting to see signs of validation. This is your exit area and when you exit, you're back on the sidelines until you see another entry point. Confirmations that happen below or long-term SML line do provide opportunities, but it's a lot less reliable because of the fact that they are in a period of an overall downward direction.

But as you may recall, price action trading below our long-term SMA line has an overall downward direction. That doesn't mean we can't make money trading downwards. It just means that if we are buying into positions in that direction that we are more likely to see a continued downtrend as compared to an uptrend. That means that we have one more factor against us, but our confirmation on CL DX was above both of our SMA lines, so this was in fact a strong comfort.

The only thing to be cautious of is that we were slightly above fair value on the RSI, which can often happen with confirmations, but in these situations you should see if the RSI has a previous pattern of recovering from fair value to overbought. If it does not, that means the conformation is not as strong. But in any case, this conformation was strong enough to justify a position when pitted with the fundamental hypothesis of a phase data price increase, and with that, you would have been justified taking a position at the original conformation, but that conformation was then rendered obsolete as we saw a validation point. So in any case, I Hope this video cleared up a little bit of our approach on fundamental news plays as well as different plays that we see.

It's always very important to have a plan or CALD X pick made a lot of sense to me at the time, but on Monday wasn't backed by price action I Wrote a few paragraphs on Zip Trader Circle which you can check out on my opinions on where my fundamental analysis could have been lacking. but at the end of the day, if the hypothesis is not backed by price action, don't take a position and of course always do your own due diligence on these. But in any case, I Hope this video is helpful if you have any questions. Feel free to comment below or reach out to us on the Zipp traders Circle Facebook group link in the description below.

We of course also have a trading tutorials playlist link in the description as well. Have a good day folks and I'll see you in the next video.