Trading Lesson: Fade Trade—$TSLA

Dec 22nd, 2013 | By | Category: General Comments, Reading the Tape, Steven Spencer (Steve's) Blogs, Trading Lesson
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Tesla has demonstrated itself to be one of the very best short term trading vehicles in 2013 (no pun intended). After putting in an all time high above 190 it has presented numerous setups on both the long and short side.

READING THE TAPE

This trade began as a “pattern recognition” trade but morphed into a “tape trade” as there was a clear seller on the tape. Traders who develop this skill are able to better manage risk and improve their results.

I initiated my short position just below 155 based partly on a pattern I saw developing on the 30 minute chart, and eventually adjusted my “trade management” to account for the identifiable seller on the tape.

Profit targets were based prior days’ support and resistance areas and discussed in the video review. Sometimes trades go worse than expected but sometimes the results are much better. Trading is a game of probabilities so we just put positions on and then manage them based on the evolving facts on the ground.

DISCUSSION

I discuss the details of this trade in this video, including the trade management.

CONCLUSION

If you have any questions about this setup, please leave them in the comments below and I will answer them.

Are you trading this sort of “fade trade”?  How have they been working out for you?  Tell us your experience or ask questions if you have them and I’ll answer them in the comments below.

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: sspencer@smbcap.com.

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  • Dave F

    Can you show a screen capture of what the tape or level 2s looked like when you had an ‘identifiable seller’?
    Thanks.