Trading Theory

Previous entries

It Was Fun While It Lasted

Mar 9th, 2013 | By | Category: Trading Theory
Two weeks ago while on vacation I wrote this market-related post, wondering if the most recent down move would lead to a higher level of market volatility or simply retrace and be back to business as usual. Well, it appears that we have our answer as it is back to the #NewNormal. In the past four trading days the SPY intraday range has been 82 cents and that includes Friday's price action following an unexpected jobs report that gave us a 99 cent range. This is the market we are in now. If you are continually looking to make "market plays" you are expending energy on an area that is not providing a good risk/reward. Every day we are seeing a few stocks have unusual moves that warrant our attention Read more [...]

Tags: Posted in Trading Theory | No Comments »


The Market Sells Off. Now What?

Feb 26th, 2013 | By | Category: General Comments, Steven Spencer (Steve's) Blogs, Trading Theory
I was off the desk today travelling and visiting with family, but checked in several times to see how our traders were doing. It was an exciting day in the market. It is the type of day you typically see only a handful of times each year and as a short term trader you dream about being able to "crush it" on such days. Of course that is easier said then done. These are the words I wrote to the head of our systems trading desk at 3:12PM right before that final 1.70 down move. We are starting to see early signs of improved market conditions during the past 4 trading days. Haven't seen anything like this for many many months. Of course "improved" market conditions from my perspective is the Read more [...]

Tags: , , Posted in General Comments, Steven Spencer (Steve's) Blogs, Trading Theory | 1 Comment »


Not So Fast

Feb 16th, 2013 | By | Category: General Comments, Steven Spencer (Steve's) Blogs, Trading Lesson, Trading Theory
One of the more common patterns seen in a strong market are longer term players buying stocks that have gapped lower after earnings. Sometimes this plays out on Day 1 with momentum buyers aggressively buying the stock leading to a gap fill. But many times a gap fill will play out in the days following the earnings release once the longer term players have sifted through the earnings report and feel comfortable that a positive fundamental thesis for a company is still intact. It is important to pay close attention to price action and not be overly aggressive committing to a "gap fill" thesis until the larger players have tipped their hand. Let's look at two companies that gapped lower recently Read more [...]

Tags: , , Posted in General Comments, Steven Spencer (Steve's) Blogs, Trading Lesson, Trading Theory | 2 comments


Should Short Term Traders Consider Fundamentals–Part II

Feb 11th, 2013 | By | Category: Steven Spencer (Steve's) Blogs, Trading Theory
In Part I of this series I discussed whether understanding the news could help short term traders limit their risk on overnight positions. Today's post discusses whether understanding the news gives a short term trader a possible edge in determining profit targets and when to exit an intraday position. As examples I will use two trades that Sammy, an SMB trader, executed today. The first involved a short right on the Open in GOOG. It was gapping lower on news that the former CEO Eric Schmidt was selling 50% of his position in the company. My analysis of this news from our AM Meeting was that it was a non event from a long term perspective but might create a short term trading opportunity. Read more [...]

Tags: , , Posted in Steven Spencer (Steve's) Blogs, Trading Theory | 1 Comment »


Danger Will Robinson

Jan 13th, 2013 | By | Category: Steven Spencer (Steve's) Blogs, Trading Lesson, Trading Theory
One of the final lectures in The SMB Foundation is on risk. Risk as it relates to intra-day trading is not simply evaluating the order book for possible exits if a stock moves against you. It involves understanding the current market environment, the type of catalyst that is the primary driver for a stock on a given day, the price action a stock has exhibited recently, as well as many other factors. During my 17 years of trading I have seen hundreds of stocks exhibit price behavior that makes it impossible to control my risk. And the first question a trader should always ask is "can I control my risk?" If the answer is "I'm not sure" or "no" then stay away. Now sometimes you may answer this Read more [...]

Posted in Steven Spencer (Steve's) Blogs, Trading Lesson, Trading Theory | No Comments »


The #NewNormal and $SPX 1680

Jan 6th, 2013 | By | Category: General Comments, Steven Spencer (Steve's) Blogs, Trading Theory
I was on BBC a few days ago to talk about the market's reaction to the "fiscal cliff" legislation. I had hoped to use the opportunity to spend some time clearly outlining a concept I discussed in my final webinar of 2012. The BBC economics reporter prattled on longer than expected so I only had about 60 seconds to outline my market observations, which I have termed the New Normal. The idea is that after four years of above average volatility in the US equities markets we had clearly entered a period of reduced volatility. And with the failure of each successive negative macro headlines failure to increase volatility, but for a few hours, this period should be accepted as the New Normal. As Read more [...]

Tags: , Posted in General Comments, Steven Spencer (Steve's) Blogs, Trading Theory | No Comments »


Guest Post: “Reversal Rehearsal” $DG

Dec 16th, 2012 | By | Category: General Comments, Trading Lesson, Trading Theory
This guest post from experienced futures trader Bruss Bowman provides an excellent example of how to incorporate higher time frame price action into a possible lower time frame trade. It is clear from the post that Bruss in a methodical thinker who is also flexible in his thesis if price behavior fails to confirm. Reversal Rehearsal: Stock Study in DG DG provides an excellent price reversal $Study from 12/11/2012 to 12/12/2012.  This price pattern occurs frequently across asset classes and time-frames.  This strategy and subsequent setups provide a high probability trading environment worthy of study. After Tuesday 12/11/2012 close, there was a significant probability that DG would Read more [...]

Tags: , , , Posted in General Comments, Trading Lesson, Trading Theory | No Comments »


Electronic Trading

Nov 4th, 2012 | By | Category: General Comments, Steven Spencer (Steve's) Blogs, Trading Theory
In the past 20 years US equity markets have evolved dramatically. The two major US markets the NYSE and NASDAQ have moved forward at different paces but pretty much have converged at this point with how they interact with traders. Trades can be executed on either exchange within a blink of an eye by computers and humans alike. For an excellent book that summarizes this evolution check out Dark Pools by Scott Patterson that was released a few months ago. In it Patterson somewhat prophetically quotes a consultant that claims a financial institution will lose "billions" from a loop in HFT code at some point. The loss turned out to be $440 million. The move to automated execution can be traced Read more [...]

Tags: , , , , Posted in General Comments, Steven Spencer (Steve's) Blogs, Trading Theory | No Comments »


The Stock Market Does Not Exist To Serve The Long Term Investor

Oct 6th, 2012 | By | Category: General Comments, Steven Spencer (Steve's) Blogs, Trading Theory
I appreciate being invited on to Bloomberg TV Monday to share my thoughts on market regulation and HFT trading. This issue has received a lot of press recently in part thanks to Mark Cuban who has used his notoriety to bring attention to an important issue. I applaud him for using his platform for bringing this issue into focus, first with this blog and then on CNBC, as the healthy functioning of US capital markets play an important role in our economy. I would like to clarify a few things that I did not have a chance to cover during my interview. I have read and heard several times that the stock market exists to serve the "long term investor". That is a mistake. The purpose of the stock Read more [...]

Tags: , , , , , Posted in General Comments, Steven Spencer (Steve's) Blogs, Trading Theory | 1 Comment »


Part Time Forex For Equities Trader Webinar

Jul 13th, 2012 | By | Category: Trading Theory
In this presentation, I explain the subtle differences between forex and equities trading. I also introduce the S&P / FX intermarket relationship and how I use this as a filter in his own trading. You can also see my recent blog example here. I conclude the presentation with an example of one type of trading strategy that is employed by professional traders on the SMB Forex desk. I also show how the S&P correlation applies. So what do you like more about the forex market compared to trading stocks? Marc Principato, CMT Director, SMB Forex Training Program Risk Disclaimer Forex Swing Trader 6 week online program - LearnSMB's unique price pattern setups Read more [...]

Tags: , , , , , Posted in Trading Theory | No Comments »


Previous entries