Our playoffs have begun- earnings season. This is the time where we as prop traders make most of our money because there is so much price action. Interestingly, there has been tremendous price action in the financials and energy sector recently before these playoffs. Hence a dilimena. What to trade?
Do we stick with the energy and finacials stocks that we have been killing the last many weeks? Or do we find a stock that has reported on that AM and trade it? Personally, I lean towards trading a stock with fresh news. When a stock just reports the price action is so significant that I can get on the wrong side a few times, I can wush out and close out my position too early, I can mess up a few trades, the Specialist can screw me out of 50c multiple times, yet I am still gonna make plenty of money trading that stock. Further, I know that that stock is going to be in play, where as I am not as sure when the price action in the financials and energy will slow.
I will set important alerts for LEH, CHK, JPM, HK, etc. And if a very important level is reached and my earnings stock is not treating me well then I will have an option to switch over. But I will focus on a stock with fresh news and preferably one that is up or down more than 5% premarket.
When our training program at SMB Capital was filmed for “Wall Street Warriors” I remember saying at the time, “this is the best trading market we have seen in 7 years.” Well now a year later I can blog: this is the best trading market that I have seen in 8 years! The results from our trading desk were outstanding. And now we have earnings season. All that we can ask for as traders is a market that offers opportunity. It doesn’t get better than a market like this.
Good luck with your trading!