Trading Theory

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 [...]

Spencer Trade Review–$AAPL “Sell The News Trade”

Dec 6th, 2013 | By | Category: SMB on TV, SMB Video Blogs, Steven Spencer (Steve's) Blogs, Trading Lesson, Trading Theory
One of the few short setups that has consistently worked in 2013 has been shorting stocks after extended moves that then gap higher after some sort of news catalyst. We saw this on Monday in $AMZN after the "drone story" on Sixty Minutes and again yesterday after $AAPL inked a deal with China Mobile that had been discussed ad infinitum the past few months. As an aside one of things that causes me to believe this market is a "Bull" and not a "Bubble" are the pull backs momentum stocks continue to have after large runups. In this video I share a few thoughts on this trading setup. You can sign up below for my more detailed Read more [...]

NFLX is the New AMZN?

Jul 22nd, 2013 | By | Category: Steven Spencer (Steve's) Blogs, Trading Theory
Netflix is the new Amazon. What does this mean? It means for the foreseeable future hedge funds will step in and buy this name on every large dip and it will continue to have huge breakouts after periods of consolidation. Why is this the case? In the case of AMZN it got enough large players in the market to buy in to the idea that it was going to be the Wal-Mart of the internet. WMT is far in away the greatest retail company in the history of the world with sales in the hundreds of billions of dollars. They were able to figure out how to provide to consum-ers the products they wanted at the lowest price possible. WMT was light Read more [...]