Ya Gotta Be Flexible

sspencerSteven Spencer (Steve's) Blogs, Trading Theory8 Comments

As an intraday trader I need to make many adjustments during each trading session.  I have to determine if a stock is a short, a long, or a no trade.  I may also make adjustments in how I am entering and exiting my position.  If I don’t keep an open mind it is impossible to make the adjustments necessary to be consistently profitable.

I was trading RHT and AIG when the market opened today.  AIG had a very powerful opening drive above 49.  I decided to buy on a pullback as I thought the opening drive was the beginning of a multi point up move.  I bought some stock at 48.50 and some more in front of 48.  I got flat when the 48 bid dropped. Rip!

I then had to make a decision whether to continue trading AIG.  And if I should be short or long.  This was not easy to figure out during the next ten minutes as AIG was bouncnig around between 47.65 and 48.20.  One time it dropped the 47.65 bid but the small down move to 47.40 was quickly followed by an up move to 48.  It wasn’t until I saw aggressive buying at the 48 level but the offer not lifting that I was convinced to maintain a short bias.  I maintained a short position for the next two points.

The second type of adjustment that I needed to make related to how I was entering and exiting my position in AIG.  After the initial rip I took I began selling into weakness and buying into strength.  As you look at the intraday chart of AIG below you can see that following many of its down moves it would pop 30 to 50 cents.  And then begin a new down leg.  This pattern continued to repeat itself from 48 all the way down to the 45.50 area.  It made no sense to short AIG into weakness.  I had to offer into the short term strength.  I also had to cover some of my position into each down move.

Both of these adjustments allowed me to turn a negative Open into a very positive day.  As I was turning my day around in this stock one of the better traders on our desk was cursing how poorly AIG was behaving and that he couldn’t make any money.  This trader had the correct bias in the stock but was struggling with his entries and exits.  He was continuing to enter short trades into the weakness and was covering into the strength.  He finally gave up.  This is a trader who is probably in the top10% of professional day traders.  His talent and correct bias were not enough for him to conquer AIG today.  He needed to make additional adjustments to account for its intraday trading pattern.  If he adjusted his entries and exits he would have conquered AIG as well.

aigflex

8 Comments on “Ya Gotta Be Flexible”

  1. Great trade Steve. I too went long AIG at the open when it broke 48.50 and got ripped for .25. At that point was watching it and was looking to go short below 47. Did not like the way it was peaking through then running up .50. Watched it hit a lower low each time but with big up swings. At that point FAS was breaching my number so I shorted it for a successful trade. Also got short PALM. Watched AIG all day but the churning made it difficult for me to find an entry. (felt like I had to have such a big stop that I needed 2 plus points target for it to make sense).

  2. Great trade Steve. I too went long AIG at the open when it broke 48.50 and got ripped for .25. At that point was watching it and was looking to go short below 47. Did not like the way it was peaking through then running up .50. Watched it hit a lower low each time but with big up swings. At that point FAS was breaching my number so I shorted it for a successful trade. Also got short PALM. Watched AIG all day but the churning made it difficult for me to find an entry. (felt like I had to have such a big stop that I needed 2 plus points target for it to make sense).

  3. Like that bar at the 48 level….think that’s where tape reading helps out.

  4. Like that bar at the 48 level….think that’s where tape reading helps out.

  5. I don’t understand why you guys are so fond of trading AIG when there are so many other stocks that are easier to read and trade.

  6. I don’t understand why you guys are so fond of trading AIG when there are so many other stocks that are easier to read and trade.

Leave a Reply