Good afternoon Mike,
I read One Good Trade, and I pre-ordered The Playbook so I could get some additional insight into professional trading. I saw quite a few references to buying the support plays or selling the resistance plays, and I was wondering about the strategy, so my question is overall do you try to buy the low or sell the high of a stock in play and hold on all day, or once in the trade do you trade to a specific profit objective and get out ? From my perspective, if the stock moves against you, well you hit the bid and get out or get short as quickly as possible on a reverse move. Personally, I am trying to learn where these areas are in my DOM and just be more patient for the setup, but this seems to be how to play the game vs. impulse trading. (edited here)
SMB is made up of three entities: our prop desk (SMB Capital), our education arm (SMBU), and our auto-trading division (SMB Systems). At SMBU, our education arm, we teach traders mostly to trade with the trend. We do not advocate picking bottoms and tops. We have identified the easiest trades to start with such as: Trend Trend Trade, Second Day Play, and Intraday Trend Play. These are the best trades to start with to learn how to trade and offer setups where it is easy for a newb to control their risk. After that we roll out more comp-licated trades such as: the Reversal Trade, The Market Trade, The High Beta Technical Trade, The Bounce, etc. Many of these trades are also highlighted in great detail as you mentioned in my next book The PlayBook.
Though there is a very clear system for how we ask traders to start their trading careers, after they have built a solid foundation, we implore them to build from their strengths. This means crunching numbers to understand which trades they trade best. And understanding their personalities to find the plays that best match their unique personalities. So for example, in The PlayBook one trader highlighted Iceman trades a highly volatile strategy because his personality is best suited to take on risk. Another trader TO, enjoys fading biotech stocks, so we encourage him to continue mastering these setups.
Do not go out and try and copy a famous trader’s strategies. That will not work. Co-opt their trades and see if you can make them your own, but only after concentrating on building a solid trading foundation. Build a PlayBook of setups that make the most sense for you. And then trade those setups more often and with more size.
I hope that helps. And I hope you enjoy The PlayBook. Drop me an e-mail with your feedback if you get a chance at [email protected]
Tomorrow we can be better than we are today!