It’s time to move on, time to get going
What lies ahead, I have no way of knowing
But under my feet, baby, grass is growing
It’s time to move on, it’s time to get going

Tom Petty

Bella,

Yesterday I got absolutely chopped up in JPM. I could not believe how much I lost in such a short amount of time getting whippedand shaken out of my position. My important level was 36, my gameplan was to get short under if it was holding for a move to next major support of 34.50-60 area. This was a trade to hold for me. Important level holding under with major news and a market that was under an important level and trending down on the open. If JPM was to sell off I was not going to wuss out and I was planning on taking off a lot around 75c to cover the trade and then let the rest run.

I got short 1 lot when it held under 36 and the level got tested I waited for it to get tested again and I added another lot. When it was tested again I added another and tightened my stop on all three lots to .02c. 36 lifted and I was stopped out and once it held above 36 I scalped to 23c and was planning on buying more on the pullback to 36. JPM came back to 36 and I had bids in in front of the whole where I was hit and then stopped out immediately. When JPM held under 36 for the second time I got back short thinking that I was in the shakeout and it was ready to go. There was a battle at 36 and 95c and I was short at 36 and was going to add if 95c dropped. 36 lifted again stopped me out and immediantely came back under the level and once it got under 95c I got short and then was stopped out when it got back above 36. That was my last trade and I figured that it was going to be too difficult to make money in so I moved on to CHK and AVP.

I had no clue how much money in JPM as I dont really look at my PnL bc I am trying to make good trades and not focus on how money money was made/lost. I made a couple trades in AVP when it was under 21.00 and could not put any more orders in bc I was stopped out for the day. yesterday was my first day to be stopped out and It wasn’t the best feeling. I wasn’t so pissed that I lost so much money but that I was done for the day by 10:45 and couldn’t trade anymore. I made a couple poor trades in AVP and DE after JPM and that is what really pissed me off. I should have waited for better setups after I took so many small losses and tried to grind my day back one trade at a time.

My question is even though I followed my plan in JPM about where I was getting short/adding to my position, when do you say enough is enough and move on to a better stock where there is easier money? I think I was so stuck on JPM bc yesterday AVP held under my 21 level and I was not in it. It had a huge opening drive down to 20 and I could not stop thinking about why I didnt get short that morning when it held under that big IP with a seller and I had it on my screen.

Even though I couldn’t trade for the remainder of the afternoon and lost more money than I have so far, I learned that you can lose more than you think by taking a lot of small rips and I will notice myself doing that from here on out. On a positive note, JPM had the exact same pattern going into the close that it had on Friday and I was able to chop it up on the DEMO. Would have made back everything if I had still been in the game….

BELLA

Good question.  One that many of us struggle with.  I too got chopped up in JPM yesterday.  I ended up stopping myself out and retreating to my office for the rest of the trading day.

After trading a set up like JPM I first ask if it was In Play.  At one point during the open GMan squawked over SMB Real-Time that JPM was in fact not In Play.  And that it was a waste of time.  I guess he was correct.   But after my self-imposed stop out I considered whether I chose a Stock In Play.  My sense after my review was that it was worth watching after the 2B loss, Friday reaction  and the incessant weekend cable coverage of JPM, including Jamie Dimon on Meet the Press.

So next I ask whether the tape offered opportunities for me to protect my risk.  It did.  You mentioned a bunch of longs and shorts around the 36 level.  I made many of those trades myself.  But I was able to exit with small and definable losses.  That is what we want when we take losses.

Next I ask like you whether I overtraded JPM.  There does come a point where if the stock is not working you ought to move on, or wait for the stock to move away from the battle price of 36.  Look I got chopped up in JPM.  I had size on a bunch of plays short and long.  And they didn’t work.  Most of the trades offered an excellent risk/reward.  On the shorts we were looking for a continuation trend.  And on the longs we thought above 37 was a likely target.  2c and 3c and 6c of risk were worth those gains.

There is a trading clock that goes off in my head that says enough.  GMan usually says. “stop trading JPM and just take a position.”  That clock didn’t go off in my head until a bunch of losses.  If you have not developed that trading clock yet then try the number four.  Four losing trades in a stock and then move on.

But hey the stock didn’t behave like we thought.  It happens.  But I thought given all the news in JPM and the perceived ability for it to move away from 36 that we made a bunch of good trades.

So no worries on the JPM trading.  There will be easier stocks to trade, like and HD today.

Bella

One Good Trade

no relevant positions

Sent to me from an SMB Trader after the close.

Hi Bella,

A truly significant day for me, in terms of personal achievements.

1) I was never as big as I played today
Last night I was very pissed off about myself. I saw so many occasions where I should have been much bigger but I didn’t. I was being a wuss. I changed that today. I prevented myself from using “1″ and “2″ on the keypad. On the open I only pay or hit 300 shares / lot. On my best trades, I tier 400 shares / lot into the trade. Like I mentioned yesterday, there were many fellow traders I have to learn from. Sammy is capable of taking on huge risks hand hold longer. I need to do that. The first thing I did last night before I go to bed was writing a post-it says “Don’t Be A (expletive deleted) Wuss!!!”. I posted that on my monitor. Everything I see a great setup, I must go for 400 shares / lot. I did that today. At one point I couldn’t hit more because I realized I already hit my max size.

2) Biggest comeback of all time
On the open I was extremely big in AKAM. I got up to 800 shares around 30c-40c against 41c and 51c. I sprayed the book and took a humongous rip. My PnL dove down to -$$$. I kept at it and stayed in the game. I continued to trade with size aggressively and responsibly. I came back $$$ from the bottom and close the day around +$$$. The biggest comeback I ever had. Such a relief.

3) Most volume traded
I have not traded over 40 tickets in 8 months. Today I went well over it. There were so many intraday opportunities throughout the day. I had to be on my desk all the time. I can’t miss the next money making opportunities. I delayed my lunch and glued to the screen. At 4pm I was exhausted. I felt my eyes were about to pop out.

After the close one day this week I encouraged our traders to CALL OUT awesome potential trading opportunities.  Shark called out SXCI into one close and the firm and individual traders caught a very profitable trade.  I got our Floor Manager into ILMN for an opening drive play at the start of the week.  He sent me an email of thanks.  The trader to my right got me into GILD on Thursday for a solid trending short trade.  Of course then there was GMan who got us all into HGSI.  Ripper

The highlights of my talk went like this:

• If you are shy, don’t be
• If you talk in a low voice, speak up
• Don’t be scared to call something out and be wrong
• Call outs make us all more money

Back in the day if you had an awesome position and you didn’t call it out, good luck to you.  No seriously, you would get a good talking to by other guys on the floor.

“WTH did you not call that out?”

The younger generation of traders loves to chat (share ideas via a chat) but not call out their ideas.   Most trading floors sound like a church. Yeah so stop with this.  You see something of note, call it out so other around you can monetize the opportunity.  They will reciprocate, and if you can trade, will improve your PnL.

I was on a call talking behavior that a prop firm should reward.  Call outs is one such behavior.  Perhaps a firm should reward a trader for the best call out of the day with a bonus?

The single most important behavior a firm must encourage is the mindset of daily improvement.  But there is other behavior that improves firm PnL.  An experienced trader chatting with a Newb during lunch for example.  An experienced trader offering market guidance.  @sspencer_smb is wonderful at calling out market levels for traders to respect.

So I ask you: What behavior should a prop firm encourage to improve firm PnL?

Bella

One Good Trade

no relevant positions

Here are two comments made from two SMB traders in their daily review sent to me after the close.  Both harm their results by trying too hard.  Do you do this?

I am slowly becoming less and less content with just making $$$$ (note: SMB cannot talk our PnL because of compliance reasons) and calling it a decent day. I need to really push harder so those $$$$ days become $$$$ days. But in the last week, when i started to push harder after im already up $$$$ i always end up giving a lot back

and then……..

Now the problem today was that I wanted to push the close too hard and I really overtraded a

lot… it seems whenever I get up $$$$ im thinking over $$$$ and I start trying to force it… next

week I will try to be more cognizant of this

Bella

One Good Trade

Below is an argument from a trader on our desk not to hold stocks during this earnings season.  The trader suggests to get in and out and not expect much follow through with stocks to the upside.

Kind of a frustrating market day because the market is slowly grinding higher throughout the day but individual stocks don’t really make hods. It’s a narrow market. Nothing seems to hold higher after the first leg.

I’m not seeing any plays to hold all day…. unless it’s AAPL… All I see in one trade at a time. If a stock’s a long, you go long, sell into pop, then start all over by waiting for another entry later. If you hold too long, it seems like you always have to face a difficult fork in the road… roll the dice on 40c profit and risk 30-50% of it on a trailed stop that isn’t really that great, or let the stock breathe and prove it’s no longer strong/weak and risk the entire PnL

The stuff that’s really worth holding has that “oomph” factor where it can speed up… either a momentum stock, game changing news, high short float, or very emotional psychology. Last earnings quarter, that stuff was really good. You had GMCR, NFLX, FSLR, DNDN, DMND, SINA with nice moves.

I just tried to “move on quickly” today. I take my trade, I move on. Don’t care if it trades higher. If a stock has too much BS at a level, I don’t get obsessed about trying to get back in asap. The upside on stocks like KO, FRX, EDU, STT, etc — just not that great. They traded like common relative strength plays. None of them had the pre-market order flow to trade momentum. Not a single one of them is on the top-20 strong today. The volume multiple isn’t there, the gap % isn’t there, the daily chart isn’t there, and the fundamental stories aren’t there to get anyone excited.

FSLR was the play today, it just pulled in too much on the open and convinced me it was likely another gap-and-crap or let down day. The 1-minute and ticks looked unusually good at 10:15 am though.

I am probably trading too small lately. I guess I am just not in the mood to lose a lot in this market. Most of my plays today were taking the callouts of others and hoping they work. It’s times like this where  I wonder if I am relying too much on my opinion on whether something will be a good play. Should I get bigger because I believe in the play and it’s my idea, or get bigger just because I can, because .61 bought a little or .77 sold a little…even if it’s just a random play.

Do you agree with this trader that this market is not rewarding holding trading positions?

Bella

One Good Trade

no relevant positions

After the close SMB met in its training room for a talk led by me.  I haven’t given many talks of late but I thought the desk was due for one after my observations of their trading.  It is earnings season.  There are tricks to scoring.  And there are things traders do to harm their results.

Trying to hard is a common thief of the ambitious earnings season trader.  Then there is Mr. Spread-too-thin.  Followed by Miss-I-am- too-small in my best set ups.  Let’s not forget Chief-I-am-too-hard-on-myself.  Do you want to make more this earnings season?  Try this.  Just be bigger in the stocks that have picked a clear and clean direction intraday and follow the trend with size.

Of course there are other set ups to master that will help you make bank.  But let’s add some reality to your trading please.  Master what is easy first and then climb higher.  Make sense?

After our discussion and the close a bright new trader sent me his review (below).  See how he reviews his work.  Notice how he focuses on how to get bigger in the easiest of plays.  This is firstly how you make more money during earnings season.

Decent start for the Q2 earning season. Sized up in good risk/reward entries and plays that made sense to me. However, I could have been even bigger in several occasions next time.

1) BAX, 55 at 9:48am.

This was a great place to get up like 500-800 shares and keep some really tight against 55.02. BAX held 55 offer, stock was beaten down and gap down. I only shorted 300 shares. A place to get really big and make a lot more. I was thinking to add later, but this was the best place to get really big aggressively and responsibly.

2) HALO, 9 at 9:39am.

This was an excellent entry to get pretty big. I missed this entry in HALO when I was focused on trading C at 25c level. I checked back with HALO later on, seller stepped down to 8.70 and pressed the bids. This was the place to get pretty big. I only got up to 400 shares because I had missed the first best entry at 9 and I want to keep it a little bit cautiously down at 8.70. This was the same trade from 9. Should be as big as 800 shares and keep some tight stops against 8.71.

3) MAT, 31 at 1:49pm.

I was slipped on the open in MAT. I got up to 300 shares against 31.85 buyer looking for a drive to 32.40. Liquidity was extremely poor and I printed 25c below 85c in MAT and really got hurt. Therefore, I became really cautious trading MAT later. However, I must notice that MAT was much more stabilized at 31 and very controlled and stabilized. risks was 6-10c. I could have gotten at least 400-500 shares instead of 200 shares I shorted with 30.92 average against 31.06.

Good thing I was bigger in several plays I liked today. I need to think about getting even big, and if risk/reward is great and trade is clean, I need to think about getting up to 800-1200 shares while controlling my risks.

Several stocks I will be paying attention tomorrow:

1) GS: Look to establish positions against good levels after 10:45am. Stay smaller.
2) JNJ: Market stock sort of. Want to be positioning myself more than tick trading.
3) STT: Had really good drive in Q1 earning season. Will see if that repeats again.
4) KO: Nice drive in Q1 as well. Orders can be bigger, so want to see how levels were respected first.

Current theme in the market:
1) choppy open (longer price discovery) and trend later in the day when stabilized
2) profit taking in SPY
3) seeing several profit taking, sell the news moves (ex: JPM, WFC)

Bella

One Good Trade

no relevant positions

A few weeks ago a developing trader on our desk sent me his trading review for the day.  He had traded at least 15 stocks and was negative in nearly all of them.  I responded:

There is no reason for you to trade more than 8 stocks.
Set that as a rule.
You have to see the big picture and starting concentrating on where the real money can come from.
Just trading 15 stocks and hoping something works is not a good process
You have to learn what is more likely to work.

That trader responded:

Understood

So today that same trader sent me his daily trading review.  Again almost 15 stocks.  Again almost negative in all of them.  Here was our exchange.

Bella:

What do u want me to say here? I told u last week not more than a certain number of stocks. WTH is this? For the rest of earnings season u can trade four stocks a day at max. This will not be lifted until u are positive for two weeks. Tomorrow u r on the demo for violating your stocks per day rule.

Trader:

bella, i honestly do not think this is too many stocks, JPM and C are the same concept play, SWN, MPC and COG are the same natural gas short, BAX, MAT, GCI in play earnings stocks with good relative volume, and the other trades were all just feelers to see if they would work, QCOM, INFY CSC, NCR, these were plays that showed potential and were worth a feeler, i think it is a little harsh to put me on the demo on the first real day of earnings, i will gladly trade 4 stocks until i am positive for two weeks, i understand that, but to put me on the demo on the first real day of earnings seems a unfair, i was doing the right things today and i stand by the majority of my trades, i lost money today because i got chewed up in BAX, C and slipped in MAT on the open, not because i put feelers on in a handful of other stocks

Bella:

you told me recently you would keep it to 8 stocks

u didnt today

your results last week and to end the month are irresponsible and cause for a time out

you cannot lose money that consistently being an intraday trader without making changes that lead to making some money and stopping the losses

you had no idea on the open today that we had been very week the past few sessions and wasnt even ready to consider that into your trading on the open until i brought it up

this is a lack of preparation both mentally and work wise

why are you trading feelers when you arent making money in stocks you are watching more closely?

the way you go from losing to positive is to watch a smaller number of stocks more closely and find the very best entries for those stocks

like the MAT into the close that you mentioned

i am harming your progress if i dont bench you tomorrow

you have to follow rules to progress

you have to cut bad streaks

you have to make changes when you are going badly so that under no circumstances are you not positive the next few trading sessions.

Bella

no relevant positions

I received this trading recap from an SMB Trader:

I love these types of days where I can keep my tickets really low and keep 95% of what i gross. For some reason when I trade from home, i don’t over trade and am able to keep my tickets really low. maybe because i have other responsibilities when i stay home like taking care of both dogs when my brothers not around.. maybe subconsciously i think that being in the office means i need to be trading all the time. i also don’t get involved with the higher priced/in play stocks as much as i do when im on the desk. i just do my thing trading the small caps.i only wait for the A+ setups in higher priced stocks.  need to figure out how to have these types of days when im in the office, and learn to keep my tickets low and be more selective. definitely sitting next to shark is going to make me more money 90% of the time, but he also is in 15 stocks a day but he’s making so much more in his winners that it works. maybe i get involved in too many of his trades sometimes, but i trust him more than anyone on the desk and we work well as a team and push each other to do better.

Today the theme was low floats. multiple low floaters are up huge like CLNT up 300% and HEAT up 300%. when u see that type of mania in the low floaters they always try to find the next one. i happened to find 1 before everyone else did and I was able to really capitalize on it. and whats interesting is that i traded with very small size in HIHO because the volume was so low(at the time). but i held it for a big move because i was never so big that it becomes uncomfortable to sit in for awhile. bought HIHO at 2.43 and sold some in the 2.70’s, bought it back on dips to 2.55 and sold again in the high 2.60’s and 2.70’s..bought a half tier back at 2.65 and sold in mid 2.70’s..so i was able to extract alot of money out of this stock on very small size(1000-2000 shares which is not much in a 2$ stock). i think it goes to 3 tomorrrow so im trying to hold a feeler overnight. i made the same trade in znga that i did yesterday at multi day support level. HAUP was another low

I was walking with a new trader the other day who expressed confusion on how to use the “noise” on the desk around him.  Let’s define “noise” as the information shared by other traders on the desk.  He felt these ideas were hurting him.  The bad ideas for his trading certainly will.  I was clear to guide the correct expectation of this “noise” and his responsibility to make sense of it for his trading.

Above you may notice a turn towards “noise” negatively impacting the trader above.  But more importantly notice how this trader takes responsibility quickly for using this information flow.

On those useless, value-taken forums that I no longer visit, the theme of others affecting their trading destiny flows like water in the ocean.   The thought that someone or something outside of you is the reason for your lack of success as a trader is the very reason why you will fail as a trader.

So let me be clear about the information you receive as a trader.

1) You need it.

Why do you think StockTwits is so popular?  Why do you think there are things like trading firms?

2) You must learn which information is most helpful to you.

Not all information is created equal for you.

3) It is on you to use this information to add value to your trading.

Take responsibility for everything that happens in your trading career.  If you use trading information poorly than that is your fault!

4) The act of complaining about information is the reason why you will fail as a trader.

It is not the bad information.  It is you with the mindset that things like that are actually harming you.  It is like those athletes who blame the refs.

no relevant positions

I was in my office today working on my next book The PlayBook when I got pinged with this from the trading community:

Mike,  what do you do when you’re a practicing trader, working, saving, and studying to begin trading live, and you feel your motivation begin to peter-out.  You have this goal but the road there seems like it will out last you.

It reminded me of how I needed to talk to one of our better traders about these comments in his monthly review:

Last 1 & 1/2 weeks — production started to drop off — lacked energy, admittedly start to dog it on my overnight preparation, didn’t research and attack health care sector plays as voraciously as I could (i usually do a lot of work on sector plays — solar, social media, nat gas, coal to name a few), didn’t want to get out of my comfort zone to trade high beta’s and thin momo stocks, didn’t respect loss as much and would load up on random plays on a whim (taking shots)

Traders are often wired to grab on too tightly.  They are wildly ambitious.  Some even irresponsibly driven.  Failure is not something they can tolerate.  If they could they might not have ever tried this silly sport of trading, with more potential rejection than a NYC bar.   The traders above strike me as holding on too tightly.

I see this with GMan at times.  I saw this with Dr. Momentum from One Good Trade.  I see this with that developing trader from our desk above.

What is progress?  What is failure for the new and developing trader? Is it a month where you did not exceed last month’s PnL?  Not necessarily.  Is it not making money in your first 6 months of trading?  Maybe not.  Framing your progress incorrectly breeds unnecessary stress and regret.

Everyday that you trade you get better.  Everyday where you gain screen time you improve as a trader.  Often when reading the new regrets of a developing trader I think of that great Dave Matthews line, “Where are you going?”

I have found five suggestions to be very helpful to me as a trader, which relate to the comments from the developing traders above and their inability to sustain their energy.

1) Make sure you take some time off.

2) Do things outside of work so that you do not value yourself from your trading.  Trading is the game we play.  It is not who we are.

3) Be grateful for the privilege of trading.  It really is so cool that we get to do this for a living.  Be thankful for this opportunity, no matter how short or long.

4) Stop judging your trading by your PnL.  For example that trader on our desk had a better month than the prior though he did not make more money.  He worked on his sizing.  There was less opportunity this month than the prior so comparable results are an improvement.  He gained another month of experience.

5) It is ok to fail.  How is Oprah doing with OWN?  Remember that Michael Jordon commercial about all his failures before triumph.  Oh man if you only knew how many stupid mistakes I make every week as a trader.  Failure is a blessing to learn.

They say an artist is the only one who can truly judge their work.  You know what you need to work on as a trader.  Are you doing it?  If so, then isn’t that so much more important than your PnL?  And if you are doing all you can then why are you so concerned about your results?

Bella

One Good Trade

A trader on our desk shared this email sent to him by another trader on our desk.  It offers a great lesson to the new and developing trader based on the work of Dr. Steenbarger and a trader’s individual experience.

I was reading the first chapter of Enhancing Trader Performance by Dr Steenbarger today and I realized that I was going about my trading completely wrong. He describes that to get to a level of elite performance you have to go through three stages:

1) Early phase- having fun with the new style of trading and exploring it to find if it truly speaks to you. Learning about trading in this timeframe and being minimally involved bc you are in an introduction phase

2) Middle phase- emphasize in skill development, where you acquire basic knowledge and work on skill building and now put effort to learn specific techniques to this performance field

3) Late phase- mastery of the performance activity that becomes a life focus and is met with intense mentoring, journaling, and self observation to push you toward being an elite performer in your field

These made sense to me but a couple lines really caught my attention

“working our way through the earlier steps in the developmental process is necessary for moving on to the later phases”

“achievement of elite performance cannot begin with the hard core pursuit of mastery, yet that is what so many traders try to do”

“the implications are profound: to develop expertise as a trader, the imposition of discipline and deliberate practice is NOT the first step to be taken- the first and often the one so often forgotten by new traders- is to simply have fun”

This really got me thinking about how I have been approaching trading lately, basically I went from trying to get better every day in the training program to having this mindset that I have to make money or else I am not successful when I started trading live. Essentially, I am trying to be at step 3 instead of working my way through step 1 and 2. After work, if I made money that day I start thinking how awesome I am and that I am going to be a multimillionaire in a few years, to where if I lose I think that I am a terrible trader and how could I have made some of those trades during the day when I know that they were bad in the first place and were strictly emotionally based.I really don’t know what caused the sudden shift in attitude or mindset but I know now that I need to get back toward the process of skill development and simply having fun by learning new things each day, rather than being focused solely on results (which really mean nothing for me one month in). So instead of focusing on pnl I am going to judge my day based on if I am better than I was the day before.

I need to focus on learning the craft of trading and not making money

I am going to trade the open on the demo for the first 30 minutes until I feel comfortable trading it live. There is so much opportunity but I need to develop this skill first.

I am going to trade much less than I have been. I have been glued to my screen pretty much all day and I have no energy left at the end of the day to review trades and to ask questions to traders bc I am wiped mentally. I am going to review my morning trades at lunch and watch tape of my trading. This is where I will get better and not by trading so many stocks that it is impossible to really know what I did well or what I need to eliminate. If I am in a position then I will monitor it and if I miss a trade so what.

Basically like we talked about I am just going to take it much slower and relax by not being tied mentally to my pnl at the end of the day. Yes I want to make a lot of money but I need to start developing good habits first and worry about the money later.

Thoughts?

Bella

One Good Trade