Sell GME for a 5% loss. Remember, cut your losers short and let your winners ride.
Why is GME a sell after only 4 trading days? Because our profit thesis is ALWAYS hit and run, in and out quickly for a 5% gain or better. 70% of your winners will rise above your cost basis within the first 2 to 3 days. If they do not, the odds of these stocks turning around and ultimately being winners greatly decreases.
I hate taking a loss in this stock more than anyone. But, you have to follow the math. If you are going for a 5% upward move, then you should not risk more than 5% on the downside. One of the biggest mistakes that new traders make is that they go for a 5% pop on the upside, but then set a 20% stop loss.
To prove the math, I have an experiment I teach my students. Get 10 one dollar bills. Get lots of quarters. Get standard dice (6 sided), you will need only one die.
Rules: If the die roll is 1 to 3 take a quarter from the house. If the dice roll is 4 – 6, give the house $2
Game play: Put $2 in the middle of the table. Roll one 6 sided die. If the number rolled is 1 to 3, you win. Take $0.50 cents from the house and add it to your roll of one dollar bills. If the number rolled is 4 to 6, you lose. Take $2 from your roll and give it to the house. Take your $2 off the table. Now repeat.
Lesson learned: You eventually go broke and the house ends up with all your money. Why? Because you are risking more than the reward. You should never risk more than what the estimated payout is. If your profit thesis is to go for a 5% upward move, then you should risk no more than 5% if the stock goes against you.
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