How I Made $3+ Million From Trading AMC (3 Lessons Learned)

How I Made $3+ Million From Trading AMC (3 Lessons Learned)

How I Made $3+ Million From Trading AMC (3 Lessons Learned) 1024 576 Steven Dux

Sometimes one trade can take your profits to the moon… I had one of these trades recently:  my AMC trade that made me over $3+ Million!

Yep, you read that right.

Strange for me to type, too.

Well, in today’s article I’ll discuss this trade and the lessons I learned from it…

One of the best and most significant steps to make profits while stock trading, is to pick the right type of stock and capitalize on it.

Over the years, stock selection has taught me a lot and also given me the opportunities to work on my strategies for different situations, adjust to various environments, and perfect my skills for the future.

The more you practice your selection the better it gets.

Sometimes stock selection works, sometimes it doesn’t.

And when it does work, it can be one of the most significant moments of your year.

A lot of the time, these can focus on stocks that have become popular on social media. Whether you select them to trade or not will depend on your style of trading, your goals, your strategies, and the size of your account.

A stock that made a lot of headlines was AMC Entertainment (AMC), and it had a huge impact on my career (and some of my students inside The Freedom Challenge).

What is AMC And How Did it Blow Up

AMC is the stock of AMC Entertainment, a company that has captured the attention of Wall Street in recent times. AMC is the largest movie theater chain in the world.

As the pandemic is still on and theaters have been closed, AMC could not manage to find a financial footing and revive. Despite this, their stock spiked more than 300% recently with its shares trading as high as $20.36 a share.

The shares were trading at $2.01 only a few weeks before that.

In recent times, AMC had become the favorite of the very popular Reddit forum called WallStreetBets, and it knocked GameStop off its pedestal.

Quick backstory…. before AMC, GameStop was the favorite stock of numerous traders of this forum and they pushed its price up by buying it in huge numbers. To understand why they did this, go through this article where I explain what happened.

This rise in GME stock prices took a life of its own. Word soon spread all over social media and everyone started buying GME stock. This pushed the demand higher and higher.

AMC caught the interest of the r/wallstreetbets community on Reddit, which started claiming that the company was a potential investment opportunity like GameStop.

Just like they did with GameStop, they began to push up the price of AMC.

In early June, its stock went up by double digits.

It was a result of speculative trading from retail traders.

AMC has been a very well-known stock lately and a lot of traders have been trading it.

And for good reason. It has worked out well for me.

Since I always say that day trading is based on statistics, I followed the statistics and could predict early on that this had the potential to be a successful trade.

So in this case, my stock selection was purely based on statistics, which always works well.

How I Traded AMC

AMC being a pretty popular stock lately was naturally on my radar.

The methodology I used for trading AMC was a short sell . As we have discussed before, short selling is when one makes a prediction that a stock is going to fall. Then the stock is borrowed, sold at the higher price, and bought back at the lower price.

That’s how you make a profit while short selling.

With AMC, I shorted it at $62 and covered it at $39.

I had invested about $5-6 million and got a 50% return on it, making my profit about $3 million.

The strategy I used was a momentum shift, which is something I discuss in my program.

Momentum trading is buying what’s going up and selling what’s going down.

Momentum investing aims to take the benefit of market volatility. This is done by taking short-term positions in stocks going up and selling them as soon as they show signs of going down. This is one of the strategies I go through in detail in my course because it’s not without risk and beginners need guidance on it.

Highlights of the trade:

  • Trade Dates: June 3, 2021
  • Shorted at: $62
  • Covered at $39
  • Gain: 50%
  • Earned: $3 million

I made profits from this situation, and also learned some lessons. The AMC saga is going to continue because people will carry on hyping the stock. And it won’t be the last one, either!

Lessons From AMC Trading

Lessons that we learn during such tumultuous situations are significant. Such times test our skill and patience, and if we emerge wiser, we can say the trade was successful.

Every trade is a learning opportunity but even more so during hypes like this.

1: Risk Management

Even though sometimes the rise and fall of stocks seem haphazard, day trading is not random.

In fact, it’s nothing like gambling and you must never perceive it to be.

Take it seriously and keep your risk management intact.

Without proper risk management , your losses can spiral out of control. As a trader, you must look at the bigger picture and never lose focus. And for that, you need strong risk management practices to guide — They’ll keep you on track.

At the beginning of your career, you need to build a customized risk management plan around your trading style and abilities.

2: Stay Logical

Don’t be reckless with your trades. Instead, operate from a place of logic.

You may win or lose individual stocks but you must never let these affect you emotionally.

There’s no room for gut feeling or emotions in trading. Of course, you can rely on your emotions to stay driven and passionate, not to make your decisions.

Incidents like the AMC and GameStop  saga are a blip on the radar and you as a trader need to look at the bigger picture. So do not let them get to you. Stay calm and logical.

Getting swayed by such events is the worst thing you can do as a trader.

3: This Will Happen Again

Due to human nature, a trade like this will occur again.

The more buzz that something generates, the more it stays in public memory and that’s what’s going to happen with AMC.

The landscape of trading has changed in the last few years and social media plays a big role now. It’s also a landscape that’s evolving all the time. Social media can drive the value of stocks and bring them down almost overnight.

The chart of AMC will be cyclic for at least some more time owing to these reasons.

As they say, history does repeat itself.

Your Next Steps…

Hype like this is something that happens often. AMC isn’t the first and it won’t be the last.

What is most important for you right now is to prepare yourself, so you don’t miss out on opportunities like these in the future. You do not want to lose your savings, after all.

Prepare yourself for trading in every possible way.

I’ve always been of the opinion that if you know what you’re doing, build on your knowledge and work with the right mentor, you will be able to create financial freedom through your trading.

Be sure to check out the previous articles in this Investing for Beginners series and combine them with this knowledge to get a better understanding of trading.

In addition, there are a few other steps you can take today:

  1. Subscribe To My Youtube Channel: This is where I share practical training on how to trade, as well as behind-the-scenes insights into the trades I make.
  2. Join My Newsletter: I write these emails for people who want to learn the basics of Day Trading and the practical steps they should take to get started.
  3. Join The Freedom Challenge: This is my flagship program for traders who want to level up and learn about the techniques I use, how to use them, and what to do to turn Day Trading into their primary income stream.
1 comment
  • Manuel Madriaga August 6, 2022 at 3:57 am

    Steven, I am a day trader who use momemtum trading to make money. I have watched a number of your videos that resulted in big returns, and these are mostly shorting overbought stocks like AMC or $3 to 10 stocks that also shorted after you came to the conclusion that these stocks are worth close to nothing. I basically average gains about $7K to $10k on up days and $4k to $5k on down days. I go long 90% of the time go short 1% and the balance I decide not to trade due unpredictable volatility.

    My current rate last month is 68% gain vs 32% loss. I agree that if the selection of stocks to trade is well done, my win rate will improve. I am interested in joining your group. I currently have an account with intraday trading amount exceeding $3 million. Let me know what I need to do.

    Manuel

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