Trading Theory

April 21, 2014 Locke In Your Success Weekly Market and Position Update

Apr 23rd, 2014 | By | Category: General Comments, Guest Blog, John Locke, Options Education, SMB Options, Systems Development, Systems Trading, Trading Ideas, Trading Lesson, Trading Psychology, Trading Theory
No relevant positions Risk disclaimer M21 purchase link John Locke Be sure to visit our trading blog! And check out these great videos! May Group Mentoring Open House Part 1 May Group Mentoring Open House Part 2 Bearish Butterfly Trade Simulated March Bearish Butterfly Review M3 Trading Strategy May and June Bearish Butterfly Strategies Butterfly Trading with Deep in the Money Calls to Control Deltas M3 Trading System   Learn to trade the M3, Bearish Butterfly and ROCK trading systems! Read more [...]

What statement are you making with your trading?

Apr 21st, 2014 | By | Category: General Comments, Guest Blog, John Locke, Options Education, Trader Development, Trading Ideas, Trading Lesson, Trading Psychology, Trading Theory
I talk to traders all over the world and it surprises me how many “high probability” or “market neutral” traders don’t realize that they are making a statement with their position. By making a statement I mean whenever you enter a position, you are defining the conditions under which you will win and which you will lose. For example, when a trader buys a stock he’s saying that if the market moves up he is going to make money and if the market goes down he is going to lose money. He’s essentially betting on the market going up and he understands that if the market comes down then he’s going to lose money. That’s Read more [...]

The Luckiest Trade Ever

Mar 23rd, 2014 | By | Category: Steven Spencer (Steve's) Blogs, Trading Theory
It was Spring 1997 and I walked into the lobby at 60 Broad Street to head to my firm's trading floor. As I entered the elevator the firm's head trader commented to me "hope you aren't long Intel". I responded that in fact I was short Intel and a few other technology stocks that had behaved weakly the prior trading day. At first he was taken aback and seemed not to believe that I was short. To put this conversation in context the time period from 1995-1996 was bullish for technology stocks. The first Internet stocks were becoming public and the PC market was experiencing a period of rapid expansion. So the idea that a trader would Read more [...]

SMB Trading Lesson of the Day: Buying Pullbacks on The Open

Feb 26th, 2014 | By | Category: Trade of the Week, Trading Lesson, Trading Theory
In this SMBU Trading Lesson of the Day, Bella, author of the “trading classic” One Good Trade and The PlayBook, talks about a trading pattern that's been working in this Bull Market. Highlights from this trade: 1) This pattern works extremely well in a Bull Market. 2) Incorporate this strategy into multiple timeframes. 3) LOW gapped up significantly on earnings; see Mike’s thoughts on how he planned to trade this after watching HD trade yesterday. 4) After the gap up, LOW was extremely weak on no news, but then it reversed strongly to the upside. 5) Are traders getting too aggressive on the sell side as a Read more [...]

Trading Lesson: When Price Action Confirms A Trading Thesis

Feb 10th, 2014 | By | Category: Steven Spencer (Steve's) Blogs, Trading Lesson, Trading Theory
In this video I discuss a fairly common trading pattern that occurs when a stock in a long term down trend gaps lower. The discussion is from our AM Meeting where I prepare the desk to trade each day prior to the Open. Steven Spencer is the co-founder of SMB Capital and SMB University which provides trading education in stocks, options, forex and futures. He has traded professionally for 17 years. His email address is: No relevant positions For the first time ever SMB U is offering all of our trading & mentoring tools free for two weeks. The trial hit capacity in under 24 hours but we are Read more [...]

Who Has Made The Most Money in 2014

Feb 8th, 2014 | By | Category: Steven Spencer (Steve's) Blogs, Trading Theory
As a partner of a trading desk I get to observe many different trading strategies at work. One of the most interesting aspects of this to me is seeing which traders at any given point in time are pulling money out of the market. Five weeks into 2014 and three separate groups have done extremely well. And they have done well at a time when I see a lot of chatter on social media of most traders/investors struggling. This is who I see doing very well right now. I will offer a few comments on each to give you a bit more color on how they are maximizing their trading styles. Traders positioned for a market pull back: After 30%+ Read more [...]

What is Risk?

Jan 6th, 2014 | By | Category: Bruce Bower, General Comments, Trading Lesson, Trading Theory
What is risk?   Imagine a word that everyone threw around constantly, but that no one could define. A word that was critically important, but never used properly. In trading, that word is “risk”. Of course, we have to use the word constantly. We are taking risk in order to generate a return. We put on positions and make sound decisions in order to make money. With trying to make money, there is inevitably some downside—naturally, we could lose money or we could make it.  “No pain, no gain”—or in this context, “no risk, no return”. We probably don’t want to lose any money. Inevitably, there Read more [...]

All Hedging is Not Created Equal

Dec 19th, 2013 | By | Category: General Comments, Systems Trading, Trading Lesson, Trading Theory
In this post I will show you a strategy that can be long and short financials at the same time and end profitably. The concept is based on pairing instruments that have different natures. The nature of leveraged instruments is to increase the impact of one-way movements. The nature of unlevered broad-based indexes/funds tends to have more reversion and overlapping price movement. In order to eliminate any curve fitting or algorithmic voodoo, I’m going to simply apply a long/short signal using a 20-period exponential average on both instruments. The signals are to buy a new 60-minute high above the 20 EMA and short a new Read more [...]