Consider This Before Making a Trade

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Good day Mike,

How is work and family. Please, I need you to clarify a few things for me. I want to know the role the following indicators play in selecting stocks for day trading.
1. Beta: what value will you use in determining stocks to play(buy/sell or stay away from)
2. ATR
3. ADV
4. Relative Volume:How to determine it
5. Short Interest: How should I relate this to stocks to buy or sell.
Thank you for your anticipated cooperation.
There is certain information we want to know about a stock before we trade it.  When we first started SMB we created the SMB Stock Data Sheet. This was an example of all the information we wanted our traders to know before they hit any buttons. Intraday traders trade off of price action mostly but there is important data that we need before making any decisions.
ATR- average true range: This is significant because it helps us determine how far a stock might trade intraday. If the ATR is $1 and a stock is up $1.80 we might start to wonder how much more it can go up and be quicker to exit our longs.  Not that we will exit our longs just that we might use this information to be tighter with our exits. If the stock was still showing strength we would sit in our longs and wait for the trend to end.
ADV: average daily volume.  We use this measure when a stock is trading with increased relative volume.  We want to trade stocks with increased relative volume.  We want to trade weak stocks on the short side with increased relative volume.  And we want to trade strong stocks on the long side with increased relative volume.
Short Interest: In One Good Trade I shared a humorous anecdote about Trent p.120.  who traded TZOO with a short interest of 62 percent.  If you find a short interest above 20 percent the stock will move differently.  It will spike and drop more so than other stocks because of the mini short squeezes.
I hope that helps.
You can be better tomorrow than you are today!

Mike Bellafiore

The PlayBook

One Good Trade

no relevant positions

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