🤫YEET 30 for 30 Presents: The Lie
Special Edition examining the Myth of the Percentage-Based Stop
Hey! I’m @yourboymilt, and welcome to the Daily Newsletter! I should probably let you know...This is not financial advice!
Pt. 1: The Lie, a Meme Parable// Pt.1, Stop Loss Tutorials
🕵️ Pt. 1: The Lie
Picture for a moment, if you would…
You and I dug into cold sands of Normandy, France, ready to sprint to failure or freedom led by trigger fingers underneath a burning sky. Gulps of whiskey and coffee taste like ash then we start our dash, and as it falls so too may we die.
As we count to three a siren screams, and the sounds of war suddenly become silent:
“Men! We have lost 15% of our men storming Normandy. As such, we are going to pack up and go home—we see the path forward and things are going according to plan, but is it outside of the our risk tolerance. We have lost the Great War gg.”
Or imagine—if you would for just a moment—you’re a 6’9 forward from Akron, Ohio with the city in the palm of his hands currently sitting on his shoulders.
The speech has been given, the opponent is cocky, and the plan you’ve put into place has even J.R. Smith in a moment of quiet contemplation of the impossible. Then? The door to the locker room bursts open and midwestern winds send blue and yellow tornadoes of confetti flying into the home locker room.
“As your coach I have decided that, being we are down 3-1, we’re going to go ahead and stop out of this series. 3-1 is like 25% down guys, anything more and it’s against our risk profile.”
Yes, this is an indictment on the traditional percentage based stop out. I’ve got nothing against tight stops—especially for newer traders—but doing it based on percentages is actually just stupid. Using 3 of the YEET+ wins this week, I am going to give reasons why your FURU is wrong, and your stops should always be levels rather than percentages.
🤓Stop Loss Like a Pro: Percentages are for nerds, levels are for winners
1. Percentage-based stops mean you either don’t have a trading plan, or don’t have one that is a realistic interpretation of the Price Action variables possible between an entry and a target
✔️Example—Trade Review: 300% on SPY 501c Wednesday.
In this trade our stop level was tickled, and it was the Price Action at the level that not only determined we should stay in, but gave us updated targets for an 8 point SPY 0.00%↑ rip
YEET+ Trade Plan
Stop-Loss Analysis: Using previous levels as SL, identifying patterns, using Extended Hours trading for stop levels
2. Stop-losses as percentages are often the result of not having a market thesis, or knowing/taking the likely moves of the index into consideration.
Further, they often fail to take retests into consideration—had we not let our level fully test, GME would’ve been -35% rather than 350% and counting.
On flow trades and swings, we always let the movement of the market determine our entries and exits. The greatest thing I ever did for my flow trading was learn to analyze SPY—you’ll hold at the right times, enter at the right times, and greatly enhance your profits.
✔️Example—Trade Review, GME 412.5c 5/24 entered before the rip up 1,000,000%:
In this trade we entered based on anticipated market movement, and our stop loss level was hit and survived-had you not known about stop loss retest strategy you’d be down 40% as opposed to up 1,000.000%.
💧Part 3: Liquidity is a part of tomorrow’s YEET, and will focus on the technicals of stop loss hunting and liquidity grabs
If you don’t have the time or technical knowledge to be setting this type of stop/stop analysis for all your trades—check us out at YEET+ for 10 bucks a month where we give stop levels for all trades entered—but if that plunge is a bit much, feel free to look through some of the old YEETs and plays on my (Milt’s) twitter for some examples and free videos where I probably do it :)