Would You Make This Fade Trade? $APOL

Jan 10th, 2013 | By | Category: Mike Bellafiore's (Bella's) Blogs
Share on StockTwits

I received this trader question via email on fade trading.  Here goes:

After the (well-known trader coach visit) meeting, I’ve come to realize I don’t ask enough questions from the people who are more experienced than I am. Today was a dull day, lost about $150, I don’t have a lot of talk about except this APOL trade.

I’d like to know what  you think about how I traded this APOL trade:

my idea was to get long on any kind of failure test of the 52 week lows and position myself for a short-covering bounce. the 52 week low was 18.36. the pre-market low was 18.62. the stock made an opening low of 18.52, which i thought was pretty marginal. it didn’t really stick and hold lower.

what do you think is the better approach, getting a price close to 18.50 (fading the downmove, since the tape is telling me they can’t really stick) and trying to stay in the trade all day against that inflection, since that’s the real big picture level where I’m wrong, or being “safe”, waiting for more confirmation, trying to trade with the momentum on my side? I kind of did the latter, I got into the trade at 18.85, 19, and some lots above 19, and little did I know, I walked into a battleground that touched a lot of prices. above-below, lots of quick short-covering bursts that failed to hold, overly-aggressive low-offers… but generally ticking my favor. I don’t like establishing my position in spots where my intuition tells me it’s 50-50 but i didn’t want to miss a trade i prepared for either. at some point, i just felt like my price average (19.03) was too high for me to give it to 18.50, it became a pseudo-“hold higher” trade rather than a support trade, and after 2 failures to hold above 19.25, i just hit it below 18.90. my active trading (getting bigger/getting lighter) was awful on the stock to boot, i kept killing my core average.

i also think this trade would’ve been a lot better if the stock didn’t put in an opening high at 19.48 in the first 10 minutes… that just makes the psychology of the play much different than say, if there was only one move on the open — down — and the offers just tried to mow it down, but it couldn’t get below 18.50. you could argue this is too crowded/hard a stock and i shouldn’t focus my time on it.

I don’t think there’s a right/wrong answer (I’m positive that this will be your response, in that there’s only the right way for ME to trade it), but I’d like a compass so I have more direction in evaluating my execution. any thoughts?


I have been a fade trader and a trend trader during my trading career.  It is too stressful for me to fade trade now.  This doesn’t fit with my present lifestyle.  And we do teach many new traders globally for whom it is much easier to start as a trend trader.  But you at this point you have more experience and fade trading is appropriate.

There is no best way to trade this set up.  There is the best way FOR YOU.  You were correct :)  Having said that there are three intraday patterns that I see for a fade trade:

1) the Puke

You see a steep downmove on heavy volume which looks to you like the end of the move.  Some call this capitulation.  The play here is to get long with a stop below the low and hold for a Real Upmove.  This is only for advanced traders.

2) The CLEAR bottom from the Tape

I like this trade for an intraday, active, superior tape reading Fade trader.  I would caution that you wait for the tape to CLEARLY show you something different.  Wait to see CLEARLY that the tape is different and that the stock CLEARLY is not going down.  This will be the key for this trade.  Having the tape reading skills and discipline to see that the tape is CLEARLY different and CLEARLY not going down anymore.  And passing on this set up when the tape is kinda indicating the stock may be done going down.  This is a very important distinction, one that you must make to trade this pattern successfully.

3) The reversal trade after confirmation

I love this trade.  This to me is where the most money is for most traders.  Now the downtrend is broken.  Now the stock is holding above the intraday downtrend.  We have confirmation of a potential reversal.  What is most important here is a higher confidence level in our trade.  Thus, you can get bigger.  In fact to play this trade properly you have to get bigger when the trade starts to work.  What is terrific about your trade here is you add through 19.  This is spot on.  What is awesome about your trading here is your hold for the Real Move.  You cannot be a successful fade trader without capturing big chunks of moves when you are correct.

I hope that helps.

Please join us after the close today as we discuss a Trend Trend Trade in our The PlayBook Webinar Series.

Mike Bellafiore

One Good Trade

no relevant positions


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 | 60 queries. 1.337 seconds.