During a midday lecture with our new class we discussed the trade in BA above 73.40, “a level”.  One of our new traders reasoned, “BA got above the level so I bought.”  I stood up, paced to the front of the room, and started teaching.  We don’t just buy a stock because it is above a level.  Or do we?

My first question to Trader Casey who originally raised the question of how to trade this level was, “How important of a level is 73.40 in BA?”  If 73.40 is a significant level then as soon as 73.41 offer appears I would get long.  But I hear too much of this talk:  “(xyz) is a level and (abc) is a level.”  Ok great.  How important of a level?

Not all levels are created equal.  You must develop a system to differentiate the importance of certain levels.  A 52 week high in one stock may be a buy and a 52 week high in another may be a need more information please.

I have been away from the market action for a few days.  I got engaged!  And thanks for all the well wishes from our StockTwits friends.  So I will trust Trader Casey that 73.40 was an important level.   But this was not a must buy level FOR ME.  It was for Trader Casey which is fine.  As long as you score your trading levels and know which ones are most important so that they make sense to you.

The first pass through 73.40, I observed light volume.  Initially I waited till time passed and BA remained above the level.  Check.  BA made a nice upmove near 74.  Check, check.  BA pulled back but was still above 73.40. Check, check, check.  I bought 73.66.  BA was above the level, but this was not a huge level for me so I wanted more checks in my favor.

Determine which levels are most important for you.  Differentiate your levels and adjust your trading to account for a less important level.