SMB Morning Rundown – March 9, 2010

Today, the Market appears set to open lower. The levels we are watching in the SPY are 113.70 (sup) and 114.50 (res). Below 113.70, the next support levels are 113 and 112.75. Above 114.50, the next resistance level is 115.

Our best AM Idea for today, which we highlighted in our AM Meeting is to buy RIMM on a pullback to 73.15. Tgts: 74, 75.

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SMB on StockTwitsTV

Earlier today, Steve appeared on StockTwitsTV to discuss the Market and the stocks in play for the day. Watch the clip below and feel free to leave your comments on this blog.  SMB appears on StockTwits TV every  Monday and Wednesday at 12:30pm EST so be sure to tune in!

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Trade of the Day- RIMM

RIMM is a stock that Steve has been chirping for weeks. “If RIMM gets above 71.80 and then 72 I am going to get aggressively long,” chirped Steve. These were important technical resistance levels for RIMM to clear. Finally there was today. RIMM got above these levels and we got aggressively long. This was another Trade2Hold for SMB.

For those who did not get into this trade, I suggest you reevaluate your stock screening process. For those in this trade, now the work begins. Were you in at good prices? Did you put on enough risk for this opportunity? Were there prices to add more size?

For example 72.35 never dropped the bid after RIMM cleared these important technical levels. Did you add appropriate size here? As RIMM traded higher did you take off too much size, though the uptrend was still intact? Often developing traders tend to take off too much risk near big offers and whole numbers. Be careful to keep your risk on for such a set up and not convince yourself that you ought to lighten up without a very good reason.

As I taught last night on my StockTwits TV show, SMB University, trading is about finding the patterns that make sense to you. This is a pattern that should make sense to most traders. Now we have to find more patterns like this, and trade them with more size.

For those who crushed this trade, very well done! On our desk nice job Z$, Rosie, Danny, and Scuba.

StocktwitsTV – Live From the SMB Classroom with Bella

Yesterday, on StocktwitsTV Mike Bellafiore talked about the best way to get better as a trader. He offered tips for new traders and traders looking to take their game to the next level. You can watch the clip below, and feel free to leave your comments on this blog.

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SMB Morning Rundown – March 8, 2010

Today, the Market appears set to open slightly higher. The levels we are watching in the SPY are 113.70 (sup) and 115.10 (res). Below 113.70, the next support level is 113.25.

Our best AM Idea for today, which we highlighted in our AM Meeting is to buy HGSI above 31.90.

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Awesome Links of the Week

Must read about what it takes to become a successful trader from @thekirkreport

Fascinating post about a new focus on the rotational training of professional baseball players.

A successful trader gives some hints about his shorting system for equity traders.

A statistical expert blogger discusses the odds of health care passing.

Using stats to improve our health care delivery.

Preparation for next week from Brian Shannon, @alphatrends.

SMB Traders will be watching this free seminar from Dr. Steenbarger of TraderFeed.

An advanced technical look at where we are at in the markets.

Quote of the Week:

“It’s not enough that we do our best; sometimes we have to do what’s required.” Churchill

SMB on StockTwitsTV

Yesterday, Steve appeared on StockTwitsTV to discuss the Market and the stocks in play for the day. Watch the clip below and feel free to leave your comments on this blog. Please tune in to future broadcasts on StockTwits TV during our NEW timeslot every M, W, at 12:30pm.

Don’t forget to follow us on Twitter.

The Addition

I know of no more encouraging fact than the unquestionable ability of man to elevate his life by conscious endeavor.
Henry David Thoreau

SMB has a developing trader desperate to improve.  In a merciless 2009 he traded very well comparatively.  This quest to improve is not unlike that of an unprofitable trader hungry to just start breaking even.  This journey is no different than than the average trader desiring to become very good.  So how do you improve?

Let’s start with what doesn’t work.  So you are underperforming and you want to get better.  Too many new traders scrap almost everything they had been working on and try something completely new.  This is the worst thing you can do in most cases.  Let’s break this down logically.  So you are an inexperienced trader and have left one style of trading for a completely new system.  The reason you are most likely underperforming is your lack of skill development for a particular style. Why are you exchanging a lack of experience with some patterns for even less with others?

Those that are underperforming often think if they just learned something new.  Almost always it is- if I just learned some more technical analysis then that will make the difference.  Maybe but probably not.  Trading is about making set ups your own.  For every new play or pattern you learn you must 1) make that pattern your own and then 2) develop the skill to trade that pattern well.  It is better for the new trader to first ask: Am I in all the patterns that make sense to me and I crush ?  Or am I missing some of these set ups?  What can I do to ensure I am in more of the opportunities that are in my sweet spot?  And then how can I trade these set ups with more size?

Often traders seeking to improve should focus on the patterns that make sense to them.  What patterns are best FOR YOU?  Learn the nuances and subsets to these plays.  You will make the most progress by becoming better at these plays and patterns that make the most sense to you.

Now it is true that sometimes patterns that work one month will not the next.  And we must always be searching to add plays to our playbook.  But to do this takes time.  When you spot a new pattern that makes sense to you start trading it with small size.  It will take experience, practice, tweaking, and time to master this set up.  For this new set up there will be subsets and nuances to master.  Keep working on expanding your playbook because one market might overvalue the trading skill for this new set up.  But keep your losses small while you are learning.

Also generally it is not that a pattern that makes sense to you must be scrapped.  Often that pattern must just be tweaked. Focusing on completely new patterns often is an overreaction.

Further it may be the case that your patterns do not work anymore.  Micro-scalping in this present environment may be too difficult for most new traders.  Stepping in front of big bids and offers used to be a go-to-play at some firms and should have been deemphasized in 2004.  Rebate trading, adding liquidity and getting “paid by the market” now is only a sustainable trading style for HFTs.   If your patterns are obsolete as defined by your trading stats, then move on.

Trading is about learning what you do well and leveraging this talent.  How do you find more of these patterns that make sense to me which I crush?  This can increase your results 300 percent,  as opposed to spending an inordinate amount of time learning a new pattern that might add one percent to your P&L after you master it.  Search for these new plays but understand it’s the plays that make the most sense to you presently that will present opportunity for your biggest improvement.

Best of luck with your trading!

An A Trade or B Trade?

At SMB we distinguish from good, very good, and great set ups.  Or we make A, B, and C trades.  We use this to determine how much risk we are willing to take on a trade.  An A trade receives risk the equivalent of 33 percent of our intraday stop loss, a B trade less, a C trade even less.

Today Rosie, one of our developing traders, bought LMT above an important technical resistance level, 80.  She started a position equivalent to a B trade.  She was waiting for more confirmation above 80.30 on the tape for this set up to be an A trade for her.  LMT had not traded above 80 for 6 months.  This was a level she was watching for quite some time. But the volume was thin, she did not see a big buy order enter the market.  So she just held her B trade.

The market started an uptrend after 10AM.  SPY resistance was not till 115, or much higher levels.  So we had a very strong intraday market without resistance till 115.

Rosie grabbed me after an end-of-the-day SMB meeting and asked me whether she should have traded this set up with more size.  Can an important technical level trigger an A trade for you?  Or do you need confirmation above this important level to make this an A trade?  What would you have done with LMT above 80?  Full size for an A trade?  Or would you have waited for confirmation on the tape, or with price above 80.30?

Best of luck with your trading.

SMB Morning Rundown – March 5, 2010

Today, the Market appears set to open higher. The levels we are watching in the SPY are 113(sup) and 115.10(res). Below 113, the next support level is 112.75.

Our best AM Idea for today, which we highlighted in our AM Meeting is to buy TIVO on a pullback between 17.30-17.40. Tgts: 18.20, 19.

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