My Approach to Trading Meme Stocks

by | Aug 25, 2022 | Trading Lessons

Howdy, traders. It’s Bryce here today.

Happy Thursday. I hope you’re trading in good spirits today. 

I’ve got some secret sauce to share with you. It’s my recipe for making the best trades when meme stonks make big moves. 

Meme stonks have proven that they’re not going away any time soon, so it’s wise to get the best meme stock trading strategy into your toolbelt now. 

Today, I’m gonna give you just that. Let’s get to the best way to trade them on the way up and on the way down…

The Long and the Short of a Meme Stock Trade

Meme stocks are exceptionally volatile and thus an extra risky sector to trade. But that can also lead to wild profits when you play them right. 

The best thing you can do is have a clear plan and stick to it. Handle these tickers gently cause sometimes they get hit left and right

As long as the momentum matches your trading plan, you shouldn’t have much to worry about. So here’s exactly what to keep your eyes on, the next time a Bed Bath & Beyond Inc. (NASDAQ: BBBY) type starts making big moves.

How to Trade Meme Stocks on the Long Side

Meme stocks generally move with a ton of volume. Retail armies from various chat rooms decide to descend on one or a handful of tickers — and there isn’t usually a catalyst or news-based reason for it.

That’s what makes them move so fast. The thing you have to do is either get in early (duh) or keep your risk to a very disciplined level. It’s easy to get lured into a fake high of day break, especially after the stock is overextended. 

How I trade these Long: I personally prefer to avoid overextended stocks (if it’s up several hundred percent in the last couple of days, it’s probably overextended). 

Instead of day-trading, I take a smaller position size than I normally would and give it more room to move in a swing trade. 

$127k in just 24 hours?! 😳

Did you catch the Shadow Trades Summit with Tim Sykes and Mark Croock?

If not, check it out now before it’s too late.

Mark pulled back the curtain on his shadow trades strategy…

Detailing step by step how he was able to make $127,000 in just 24 hours, during the middle of a market crash!

Volatile stocks need more room to run in either direction, so smaller size and a longer timeframe are necessary to keep you from getting stopped out at your risk level. 

How to Trade Meme Stocks on the Short Side

While I’m typically not a short-biased trader, when it comes to meme stocks, this can be the best way to trade them. 

But you gotta be careful! Just like there can be fake high-of-day breaks for long traders, there can also be fake low-of-day breaks for short-biased traders. And you definitely don’t want to get caught in a short squeeze. 

Here’s what to do instead…

How I trade these Short: I wait for the first red day with massive volume coming in. You want to pay attention to how much volume it previously saw during the green days and make sure it tops that. 

Once the first red day with massive volume comes in, the odds are in your favor that a short squeeze will be unlikely. For me, waiting for the top to set in and catching the “backside” of the trade is usually the best choice. 

Conclusion

Retail traders have welcomed meme stocks into the trading hall of fame. I expect these patterns to stick around for quite a while. 

And while commission-free brokers offer more traders the opportunity to get ahead, many still aren’t catching the right moves at the right time. 

If you’re one of these struggling traders, Matt and I want to help you out. Join us for just $9 a week for the first two weeks. Give the SCR chat room a try!

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