Semiconductor Bill of Materials (BOM) Swing Trading: A Deep explore Supply Chain Plays

Profit Targets\n\nOur goal is to capture a 3-5R gain on the full position. Being a key supplier to a hot new product can lead to a sustained move higher, so we want to give the trade plenty of room to run.\n

Stop Loss Placement\n\nOur initial stop loss will be placed 1% below the low of the breakout day. We will never risk more than 2% of our trading capital on a single trade.\n

Position Sizing\n\nWith a $100,000 trading account and a 2% risk per trade ($2,000), if the distance between our entry and stop loss is $6 per share, our position size would be 333 shares ($2,000 / $6).\n

Risk Management\n\nThis strategy requires a significant amount of research. We will only trade stocks of companies that we have thoroughly vetted. We will also diversify our holdings across several different supply chain plays to mitigate the risk of a single product failing to meet expectations.\n

Trade Management\n\nWe will raise our stop loss to breakeven once the trade has moved 1.5R in our favor. We will not add to a winning position in a BOM trade.\n

Psychology\n\nBOM trading requires patience and a contrarian mindset. The market may not immediately recognize the significance of a design win. It can take several weeks or even months for the story to play out. It is important to have confidence in your research and not to be shaken out by short-term price fluctuations.