To squeeze or not to squeeze? That is the question…
Gamestop (Ticker: GME) and AMC (Ticker: AMC) are going through yet another iteration of the “short squeeze.”
I’ve been watching this closely over the last several months. Before I say anything more, I will lead with this: BE CAREFUL.
“I’m gon’ get mine more than I get got, doe” - Marshawn Lynch (aka Confucius / The All-Knowing / The All-Seeing)
Everyone thinks they won’t “get got.” The only issue with this mentality … you’re not Marshawn Lynch, and you are definitely NOT Soulja Boy (put some respek on his name).
We would all like to think we are immune to being scammed, screwed over, or ending up a “bag-holder.” Once again, I’m here to tell you now: YOU. ARE. NOT. IMMUNE.
Just scroll down the r/wallstreetbets page, and you’ll see a mix of very happy winners, some indifferent losers … and many others that are down tens of thousands of dollars, or more, due to their involvement in these short squeeze trades.
With all of that said …
I have participated in the GME and AMC squeezes in January, March, and over the last few weeks. I have essentially stuck to “swing trades.” Don’t get it twisted … I don’t just throw away opportunities to make money in the market. However, I am always sure to do my due diligence whenever I enter these trades.
This means: Technical Analysis (Exponential Moving Averages, RSI, MACD) and looking at comments on message boards (Twitter, Yahoo! Finance and r/wallstreetbets) to ensure I’m aware of the likely buying activity and market sentiment (Volume and price-direction).
If you are someone that wants to participate in a short squeeze, or any trade position in the market, you need to look at setting “Stop-Losses.” This is a good way to ensure if things go south, you don’t ride the train too far down. Another thing to consider is “Stop-Limit” orders. This is a good way to ensure you take profits at a rate that you have essentially pre-determined.
Here are some links to learn more about order-types (Investopedia) :
Stop-Loss Order | Determining Where to Set Your Stop-Loss | How the Trailing Stop/Stop-Loss Combo Can Lead to Winning Trades
Stop-Limit Order | Stop-Loss vs. Stop-Limit Order: Which Order to Use?
That’s a lot of definitions, and reading! Still feel like you need to learn more? Need some help in finding your path before entering the markets? Check out our podcast!
Personally, I like to clear profits of around 20-30% on short-term options trades, and momentum and swing trades.
Could I make more? Yes. However, I could also make a lot less, or lose my entire investment.
We are in the markets to win.
We will not always win, but the ultimate goal is to “win more than we lose.” I mean … if you had an average annual return greater than 18%, you’d beat the S&P 500, handily (averaged over time, and considering taxes owed from short/long-term trades).
S & P 500 Annual Return (11.66% Year-To-Date for 2021)