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How to Trade IPOs: A 3-Step Strategy for Beginners - YouTube
Channel: StocksToTrade
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- IPO's are hot right now,
Initial Public Offerings.
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Maybe hotter even than the Dot Com Boom.
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Now a lot of people make a lot of mistakes
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by rushing into these
hotly anticipated IPO's.
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Today, I'm gonna give you
the number one strategy
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to trade these IPO's,
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initial public offerings, successfully.
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(upbeat music)
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Hey everyone, before we get started,
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be sure to like, share, subscribe,
and if you're on YouTube,
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ring that bell to be notified
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as soon as we drop a new video.
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We're still expanding the channel,
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new podcasts, new how-to videos,
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going live every single day,
ring that bell to be notified.
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All right, let's get started.
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I'm Lead Trainer with
StocksToTrade, Tim Bohen.
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We're gonna be talking
about IPO's, you know,
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depending on when you watch this video,
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one of the biggest ones
out there, Robin Hood,
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we're actually gonna be
talking about that today
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and why this strategy applied
and keep in mind, you know,
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I know a lot in social media
and particularly social media
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in the finance circles, lot
of cherry picking out there.
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So the reason I bring that up
is I'm talking about how this
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strategy worked almost perfectly
with Robin Hood, H O O D,
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but here's the deal you can go
back to probably two or three
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years ago when we first really
got active on the channel.
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And if you look for videos
that I've done about IPO's,
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it's very similar to the strategy, okay?
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Now I still want you to watch the video.
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Still want you to learn, but my point is,
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I'm not just cherry picking
Robin Hood or Traeger Grills
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because they're, the IPO's du jour.
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The point is I'm giving you
recent examples of why this
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strategy works and how to employ it.
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All right, that being
said, let's get to work.
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So keep in mind,
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I want you looking at the
hottest, hotly anticipated IPO's.
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Now there's many
different ways to do that.
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Probably the worst way to
do it is to Google IPO's.
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Yeah, I talked about
this in a recent video.
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It just really bums me out how
finance, especially trading,
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especially as we've gone
into this post 2020 world
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with the explosion of
everyone being a day trader,
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but the quality of information,
especially on Google.
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I mean so many people are
just gaming the results
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with these. I think it's at some point,
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I think it's like AI writing
some of these articles
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'cause it's like, they're all the same,
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but they add in the SEO term.
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So that being said, you
can Google upcoming IPO's.
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But jeez, good luck with that.
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You can, if you work hard
enough, you can probably find it.
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Now, I think the best way is
to have breaking news chat
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with StocksToTrade.
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You know what breaking news is,
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two guys that have have over
25 years of experience tracking
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the news each 25 years each, okay.
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It's basically 50 years combined.
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And what they're doing,
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you know, they're monitoring
the Bloomberg terminals,
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they're monitoring every
single news feed out there.
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And then they curate that
news and they give you a good,
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actionable list of IPO's in play.
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Another great way, check out
pre-market prep every day,
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8:30 Eastern, I'm live.
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If there's a hot IPO that day,
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we're gonna be talking about it.
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Now, I'd like you to be a
little more ready than day one.
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That's where breaking news comes in handy.
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But again, if you're on pre-market prep,
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the day of the Robin Hood
came out, we talked about it.
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We talked about this approach, okay?
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So I want you caring about
the hotly anticipated ones,
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because understand we're
looking for emotion.
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We're looking for irrational
exuberance, as they say.
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we want these stocks to
trade ridiculous volume,
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to breakthrough key levels,
to do red to greens,
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to do dip and rips,
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to do V whap holds all of
these patterns we look for.
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So the more buyers we have,
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the more anticipated they are,
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the better the chance for that, okay?
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Then what we're gonna do, day one
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and this is the most
unpopular apart of this video.
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Probably like half of you are gonna
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close the video right now,
but day one of any IPO.
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I don't care what it is.
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I don't care if it's Robin Hood.
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I don't care if it's Apple.
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I don't care if it's
a Space X Neural Link.
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I don't care what it is.
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Day one, in my opinion,
for you, the newer trader.
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That's why you're here.
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They're all ignores because day one,
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you're playing guessing
games and you're better off.
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I mean, and I honestly mean this,
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if you're gonna trade a day one IPO,
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you're better off going to the casino.
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'Cause at least at the casino,
you have 50/50 odds, okay?
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You can go to the, you know, you can go
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and put money down on a coin flip
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or whatever your game of choice is.
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You get a free drink.
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Maybe you take the wife or
the husband for a nice dinner
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and you have a good time.
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Maybe you win money.
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Maybe you lose money, but at
least you have a good time.
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If you're trading day one IPO's,
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I think the odds are like 80/20
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you're gonna make money.
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Now you might make money,
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but it's not a consistently
repeatable strategy
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and you're not finding an edge.
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And if anything, you, even if
you do make money on day one,
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I think it rewards bad behavior.
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And any of those profits you make,
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you'll give back on the next IPO,
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because you think you now have a strategy.
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So there you go.
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There's your disclaimer.
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Go to the casino instead of day one.
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What I want you to do
is let the stock set up
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over a two to three day period.
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Now that number's a little flexible.
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I look for a minimum of three days,
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because what typically what
happens a lot like Robin Hood,
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you have day one where it's just
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all over the place, up,
down, all over the place.
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Then day two, typically a red day,
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because what a, why is day
two typically a red day?
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Because it's never good enough, okay?
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The culture we live in,
the society we live in,
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it wouldn't have mattered.
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You know, Robin Hood
initially opened at 38.
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I can tell you, even if
it went to 100 on day one,
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like tripled in value, people
still wouldn't be satisfied.
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It still wouldn't be good enough.
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So day two, typically there's a sell off.
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There's profit taking when
the stock doesn't continue
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to gap up to 200 or something.
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You'll so many people just have
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unrealistic expectations
in the stock market.
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That's why so many lose.
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So much like Robin Hood,
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we had that big red day
and then what I love,
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and this is why I just begged, begged,
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begged you to avoid the
mainstream financial media.
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You know, it's just, there's
so much bad information.
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Like the day before the
IPO, everyone loves it.
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Every talking head is oh
it's the greatest thing ever.
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Then the IPO closes on the low of the day.
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Then the day after the
IPO, everyone hates it.
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Worst, worst IPO in history.
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I mean, and you can Google the headlines.
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I mean the second day
there were headlines,
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you know, worst IPO in
history with Robin Hood.
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Okay, and so the more you can
avoid that bad information.
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'cause I mean, we talk about
this a lot on the channel.
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I mean, the bummer is the
reason I do this channel.
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The reason I do the podcast,
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the reason I do pre-market prep,
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the downside of the world we live in
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is it's a click-based culture.
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And they're trying to hype
you up before the IPO.
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They're trying to scare you after the IPO
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because they want your clicks
so they can sell you more ads.
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So you can be brainless
and make them more money.
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Or you can check out our resources
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and actually learn how to trade.
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So that being said, day two,
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we allow the stock to set a
trend, typically a red day.
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Then day three, what we're looking for
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is a break of the IPO opening price.
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Again, Robin Hood's
perspective, that was 38.
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That's that area we're looking to enter.
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And why is that significant?
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'Cause understand a lot of insiders,
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especially in this day and age,
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if you understand how a lot
of these technology companies
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work, a lot of them, not all of them,
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but particularly in the technology sector,
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a lot of employees, management
they're given shares in lieu
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of compensation or in lieu or
in addition to compensation.
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So maybe, you know, maybe
you're making below market rates
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as a programmer at Robin Hood,
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but they keep throwing shares at you.
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And they're like, hey,
we're going public soon.
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So you keep working below market rates
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or maybe below your market rates.
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Maybe you're like a rockstar programmer.
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And you're like, okay,
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I'll keep working this crappy wage,
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but they keep throwing shares at me.
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So what happens when the
stock goes above the IPO price
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is that emotional swing.
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Everyone's excited again.
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All the insiders are excited.
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Everyone that bought on day one, okay.
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The people that didn't listen
me and got bagged on day one
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and then day two, hated their lives.
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'Cause the stock tanked again.
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Everyone's great.
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That's the greatest thing about
breaking of the IPO price.
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You can not,
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it's literally impossible for
you to be read at that point.
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The stocks trading at its highest price,
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just like we look for 52
week breakouts, et cetera.
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So you can see day three.
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It didn't break, now understand,
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I know this is the three-day
IPO trade trading strategy
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video, but understand it's
around three days, you know,
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it was like three days to the
first couple of trading weeks
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is what we look for day three it tested.
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Tested 38, didn't break.
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Day four, which was a Monday by the way,
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which is not surprising,
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we come in on Monday, money Monday,
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as we say so day four
stock explodes higher,
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breaks through 38.
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You can see skips up to as high as 48
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on the day before closing at 46.
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Next day, huge gap up into the fifties,
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ran as high as 85, okay.
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And look at that.
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I mean, I know it's only a four day chart,
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but you can kind of see
that cup and handle, okay.
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You can see that dip and rip
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for lack of a better perspective.
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You know, I know that I always talk about
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the dip and rep being more
of a day trading strategy.
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But if you understand the chart
pattern for a dip and rip,
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it's there, big first move,
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pull back and then a reclaim of the highs.
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You can't deny that that's there.
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Then also cook a very simple, you know,
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this was another hotly anticipated IPO.
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Traeger Grills, love
my Traeger, by the way.
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But you know, again, day
one, you can see the stock
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had a big run, but then
look at that doji candle.
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You can see day one of the candle.
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You know, when we talk about
a doji candle, that's a stock,
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that's a candle where the
stock runs has big wicks,
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but basically ends unchanged.
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And you can see where this
thing basically ended unchanged
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at 22, no other doji candle
on, or I'm sorry, day one,
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the doji candle, then another
doji candle on day two.
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Then you get that big
breakout on day three
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at 24 goes as high as 25 50 that day.
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Gaps up day two goes as high as 30,
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little bit of a shaky day yesterday,
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but then today, 30 plus again,
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notice that big initial spike, pull back,
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reclaim dip and rip just on a daily chart.
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Now again, that dip and rip is more of
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an intraday pattern I've got,
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there's probably like 150
videos on the channel talking
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about that.
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But again, I always do that hand motion
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and you can see what this happened,
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what happens when this
breaks out to all time highs.
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'Cause again, not to beat it to death.
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Everyone's green, you know,
institutional investors,
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pension funds, again, insiders,
employees, retail investors.
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Everyone's green, the
punches flowing as they say,
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and everyone thinks the
stock is going to the moon,
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but you're a day trader, you're agile.
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You don't get greedy.
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Then what we do
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is use the three to one
risk reward methodology
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that I talk about in
tons and tons of webinars
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and tons of YouTube.
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So that being said, keep in
mind, really three-step process.
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Okay, locate the hottest IPO's out there.
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Again, my opinion is the
best way to do that is
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with breaking news.
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Step two, watch it on day one,
make sure the mania stays.
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I mean, that's the biggest
reason I want you to watching it.
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Paying attention is to watch
the zeitgeists as they say.
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And I mean, day one on Robin Hood,
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everyone, everyone, every website,
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everyone was talking about
it the day one volume.
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What was it?
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I can't remember off the top of my head.
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Yeah, a hundred million shares on day one.
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You know, that tells you that, okay,
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now this thing's in play.
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Then step three.
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You're just gonna set that
alert for that breakout level.
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Maybe it comes in three days.
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Maybe it comes in four days.
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Maybe it comes in seven days.
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Maybe it comes in 10 days.
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Then when that high breaks,
your alert goes off,
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you enter the trade, you set
your risk and reward obviously.
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Okay, you never, I mean,
these are volatile,
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fast moving stocks.
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You have to have a stop.
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You never enter a trade without a stop,
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but you buy that break.
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You risk what you're willing to lose.
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Maybe it's depending on your risk profile,
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maybe it's maybe you got a hundred shares
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and your risking a buck a
share for a hundred bucks.
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Maybe you got a bigger account.
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You're risking five grand to make 50,
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but use that three to
one risk to reward based
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on the breakout level.
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And then always, if your goal is hit,
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take your profits because listen,
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depending on when you watch this video,
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especially Robin Hood, I mean,
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Robin Hood went full vertical.
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It would not surprise me to see this
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give back a considerable
amount of its gains.
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I mean, here we are at $60
the day we're recording this.
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Depending on when you see this,
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my opinion we'll see it
is 2020-2021, by the way,
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wildest stock market in
history, in my opinion.
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But I expect Robin Hood to
give back a lot of its gains.
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But if you were trading it
on day four with a good plan
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and not getting greedy,
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not thinking it was going to a thousand,
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like somebody on Reddit or something,
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you could have made 2,
4, 5, 10, $20 a share,
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which is how you grow your account.
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So, all right everyone drop me a comment.
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Have you traded IPO's on day one?
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How have you done?
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I mean, listen, you got a 50/50 chance.
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Maybe you made money.
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Maybe you didn't.
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So drop me a comment.
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Let me know.
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And then I hope instead of
just jumping in on day one,
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you get, you have a process,
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you approach these methodically
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and you don't treat it like the casino.
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The reason so many fail
in short-term trading
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is so many treat it like a casino,
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treat it like an
entrepreneurial endeavor, okay.
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You're risking your
money to grow your money.
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And you're doing that with the
markets instead of opening up
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landscaping company or a restaurant
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or a real estate company,
approach it like that,
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have a good process and you
can make a lot of money trading
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IPOs if you're patient.
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All right, everyone drop me a comment
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and we'll see on the next video.
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