Know Your Edge(s) and Thanks Joe P

Jun 30th, 2009 | By | Category: Steven Spencer (Steve's) Blogs, Trading Theory
Share on StockTwits


The market has slowed down quite a bit recently.  Unless you are trading the most In Play stocks there is virtually no follow through.  At times like this it is even more important to refocus on your trading edge.  For myself I have identified four things that have allowed me to make money consistently over the years.

1) Previous day’s inflection points: I am great at identifying prices from the previous day’s trading action where I can make trades.  Trades that offer a risk to reward of 10:1 or more.  By the way, this isn’t that difficult a skill to acquire.  Even some of the newer traders on our desk with less than six month’s experience have acquired this skill. i.e Rosie

2) Great technical setups: Finding stocks on longer term charts that are about to break out or break down.  Unfortunately, because I spend a lot of my non trading time engaged in other activities I miss quite a few of these setups.  But that is where Joe P helps me out.  He scans the market every day looking for great technical trades.  He comes up with two or three phenomenal setups each week.

3) Grinding it out: Read the tape well enough to make 10 to 15 cent chops all day if that is what is required to make money.  This is something that takes some time to develop.  It requires excellent tape reading skills and a good feel for how a particular stock trades.  When the market use to trade in fractions I would book 3/8 all day.  Now the chops are smaller but so is the risk.

4) Crushing stocks on the second day:  What I mean is actively trading a stock when it has fresh news so that I get a feel for how it trades which leads to a larger chop the next day.  The most recent example would be PALM.  I traded it in the after hours Thursday after it reported its number, which made it easier to crush on Friday during the day.

I will continue to focus on the above each day to maximize my gains while trading opportunities may be somewhat limited.

I wanted to mention one trade from today that was highlighted in our AM Meeting by Joe P.  I also had Gman tweet it as our best AM Idea.  What I liked about the trade was its simplicity.  The stock had recently been weak and had a clear support area.  Joe’s idea was to short the stock on a break of support and risk no more than 30 cents for a potential gain of $1.50.  The trade was to short DVN below 55 and cover above 55.30.  This trade basically saved my morning and put me in a good frame of mind to make money in the afternoon.  Thanks Joe P.

Don’t forget to follow us on Twitter!

dvnlongterm

dvnoneday

  • Jacky

    what are your standards in determining if a stock is “in play”?

  • Jacky

    what are your standards in determining if a stock is “in play”?

  • sspencer

    Jacky,

    We teach our traders a bunch of criteria to look for to determine if a stock will be In Play for a particular trading day. We receive confirmation from the volume and price action once the market opens.

    Thanks for your comment.

    Steve

smb newsletter
Options Risk Disclaimer    Forex Risk Disclaimer

1. SMB TRAINING is NOT a Broker Dealer. SMB Training engages in trader education and training. SMB TRAINING offers a number of products and services, both electronical (over the internet through smbtraining.com) and in person. SMB TRAINING also offers web-based, interactive training courses on demand.

2. The seminars given by SMB TRAINING are for educational purposes only. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities. You shall be fully responsible for any investment decision you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

3. This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by SMB TRAINING or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

4. SMB Training and SMB Capital Management, LLC are separate but affiliated companies.

5. No relevant positions

6. Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.

Log in | 80 queries. 1.343 seconds.