Best Trading Strategy Revealed by 90% Win Rate Trader (Verified)

Episode Overview

• A professional trader with a 90%+ win rate introduces his highest probability trading strategy, the "Reverse Split Setup."
• The episode explains what a reverse stock split is, why it signals fundamental weakness in a company, and the inherent risks (like short squeezes) involved in trading these setups.
• The trader details his two key criteria for selecting trades—dilution history and timing—and provides a walkthrough of his research process for identifying selling pressure.
• The video includes real-world examples of both winning trades (totaling over $75,000 on one stock) and a significant losing trade ($11,000 loss) to highlight critical lessons.

Key Concepts

• Reverse Split Setup: A corporate action where a company reduces its number of outstanding shares to artificially increase its stock price. This is typically done by financially weak companies to meet exchange listing requirements (e.g., staying above $1), which fundamentally signals a bearish outlook.
• Dilution: The process where a company issues new shares (through offerings, warrants, etc.) to raise cash, which increases the total share count and often puts downward pressure on the stock price. The speaker heavily researches a company's dilution history via SEC filings to build a short-selling thesis.
• Short Squeeze Risk: A primary danger in trading reverse split stocks. Because these setups are well-known short targets, they become crowded trades. With a newly reduced (low) float, a small amount of buying pressure can force short sellers to cover their positions, causing a rapid and violent price spike.
• Importance of Timing and Selectivity: The trader stresses that you cannot short these stocks blindly. The key to success is being selective, waiting for the initial short squeeze to exhaust itself, and only entering a short position after the stock has shown clear signs of weakness and the dilutive selling pressure is likely to take over.

Quotes

• At 00:04 - "As a fundamental and statistical trader, my highest probability trading strategy is the reverse split setup." - The speaker introduces the core strategy that has contributed to his high win rate.
• At 01:31 - "Nine out of ten times, the company is still trash if it needed to perform a reverse split." - Explaining the underlying fundamental weakness that makes this a viable short-selling strategy.
• At 02:31 - "Instead, a short squeeze is very likely taking place because short sellers are competing against each other." - Highlighting the primary risk of shorting these stocks too early due to their popularity among short-sellers.
• At 04:03 - "Many small-cap stocks use dilution to raise cash, and in order to keep diluting, the company has to pump its stock first." - Describing the manipulative cycle of pumping a stock's price to facilitate offerings that create future selling pressure.

Takeaways

• Be patient and avoid shorting a reverse split stock on the first green day. The low float and high short interest make these stocks prime candidates for a short squeeze; wait for the squeeze to end and for the stock to show clear weakness before considering an entry.
• Conduct thorough due diligence by researching a company's SEC filings to understand its dilution history. Tracking the stock float, outstanding warrants, and offering history is crucial for building a fundamental thesis and anticipating future selling pressure.
• Combine fundamental analysis with technical entry points. The best entry for a short trade on a reverse split setup is often after the initial hype fades, using technical indicators like bounces off key VWAP levels to time an entry when the inherent selling pressure is likely to overwhelm buying interest.