SMB Training Blog https://www.smbtraining.com/blog Lessons from the trading desk Sat, 19 Sep 2020 11:34:42 +0000 en-US hourly 1 https://wordpress.org/?v=5.5.1 https://www.smbtraining.com/blog/wp-content/uploads/2017/08/favicon-100x100.png SMB Training Blog https://www.smbtraining.com/blog 32 32 You Can Supercharge Your Options Trades With THIS technique https://www.smbtraining.com/blog/you-can-supercharge-your-options-trades-with-this-technique?utm_source=rss&utm_medium=rss&utm_campaign=you-can-supercharge-your-options-trades-with-this-technique Sat, 19 Sep 2020 14:08:57 +0000 https://www.smbtraining.com/blog/?p=50135 Day and swing traders frequently use momentum, trend, moving average and other types of indicators to inform their trading decisions. In this video we talk about an advanced technique that experienced options traders use when they use the RSI indicator to take directional traders in equities and other asset classes. * no relevant positions

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Day and swing traders frequently use momentum, trend, moving average and other types of indicators to inform their trading decisions. In this video we talk about an advanced technique that experienced options traders use when they use the RSI indicator to take directional traders in equities and other asset classes.

* no relevant positions

The post You Can Supercharge Your Options Trades With THIS technique appeared first on SMB Training Blog.

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Improve your trading this weekend with these educational videos https://www.smbtraining.com/blog/improve-your-trading-this-weekend-with-these-educational-videos-23?utm_source=rss&utm_medium=rss&utm_campaign=improve-your-trading-this-weekend-with-these-educational-videos-23 Sat, 19 Sep 2020 11:34:42 +0000 https://www.smbtraining.com/blog/?p=50138 Level 2 Strategies Every Day Trader MUST Know (Taught by a Prop Trader) You Can Supercharge Your Options Trades With THIS Technique A New Trading Strategy from Future Star Trader How to Trade a SPAC with Tape Reading (3 Prop Traders Reveal) How to Trade a Market Sell Off * no relevant positions Important disclosures  

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Level 2 Strategies Every Day Trader MUST Know (Taught by a Prop Trader)

You Can Supercharge Your Options Trades With THIS Technique

A New Trading Strategy from Future Star Trader

How to Trade a SPAC with Tape Reading (3 Prop Traders Reveal)

How to Trade a Market Sell Off

* no relevant positions

Important disclosures

 

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Level 2 Strategies Every Day Trader MUST Know (Taught by a Prop Trader) https://www.smbtraining.com/blog/level-2-strategies-every-day-trader-must-know-taught-by-a-prop-trader?utm_source=rss&utm_medium=rss&utm_campaign=level-2-strategies-every-day-trader-must-know-taught-by-a-prop-trader Fri, 18 Sep 2020 18:01:40 +0000 https://www.smbtraining.com/blog/?p=50131 In this video, learn level 2 strategies every Day Trader MUST know (taught by a Prop Trader). Let’s get to work on sharing these important trading lessons so you can grow your trading account. * no relevant positions

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In this video, learn level 2 strategies every Day Trader MUST know (taught by a Prop Trader). Let’s get to work on sharing these important trading lessons so you can grow your trading account.

View Video Transcript
in this video learn level two strategies
every day trader must know
taught by a prop trader hi i’m mike
bellafiore co-founder of smb capital and
we’re a proprietary trading firm located
in midtown manhattan
and i’m also the author of the trading
classic one good trade and the playbook
let’s get to work on sharing these
important trading lessons so you
can grow your trading account
my name is ryan i’m a junior trader here
at smb capital
today i’m going to go over a way to
scalp around your position
build into a nice core size as a way to
build up cash flow while you’re looking
to execute
a larger larger idea trade so for
example i’m going to show you a trade in
apple
the idea is apple had a really weak
close the previous day
had a strong gap up with the overall
market and the idea is that i’m looking
to
build into a long position as the stock
builds its opening range on the day
looking to build some cash flow selling
out into some upwicks
building back into my position when it
retraces back down
eventually looking to solidify my core
for a larger up move
back towards the previous day’s highs so
the context for the trade is apple was
trading roughly around 117 on the open
and i’m expecting there would be some
sort of pull
back down towards 115 115 50.
any type of down moves given the overall
context of the market
i’m going to be really interested in
looking to try and buy into a core
and given the fact that i’m not
expecting us to have some really crazy
opening drive to the upside
just given the fact that we have to
digest the previous day’s move
and we really need to see some actual
strength come in to bring this stock off
the lows
and you also need to see some strength
from the overall market coming in the
queues for example
until i see that i’m not going to be
comfortable holding all of my size
and that’s when the strategy of reading
the tape and using the tape to your
advantage
in order to scalp out and build up cash
flow so that your overall risk and
average price gets better
that’s when that really comes in handy
right off the open
we get a really quick move up to 117.76
and then a quick rejection down as soon
as we start coming down into the 116
30 16 40 area i’m starting to initialize
my position
so i’m watching the tape here i’m seeing
it to be a little bit heavy as it comes
down towards 116.
you can kind of see it stall then it
re-bids back up towards the 30s
i added one lot two lots
kind of looking to hold maybe a two lot
position but willing to get all the way
up to five lots
hasn’t given up 116 yet
just kind of stalling here the opening
wick down
added up to a third lot as it continues
to hold into this 30 cent area
and we’re still kind of stalling here
right so as i pause the video
the biggest thing i’m thinking about
here is i’m in three lots of my position
i’m interested in getting potentially up
to five lots
and scaling out any move back up towards
117.
if 116 drops i’m going to have to be
really careful with the way i scale in
to any further ads because there’s a
potential that
we completely wick down underneath this
pre-market consolidation
we take out 115 and then i’m underwater
trying to catch a falling knife on a day
when
you know if you look at the 15-minute
chart
apple’s relatively weak hit a five-day
low
and now it’s gapping up back into the
range kind of the breakdown period from
midday the previous day
so i really need to be careful here i
really need to make sure that if
i think that the market and the queues
and apple are going to bottom
that opening drive or any type of
retracement from an opening move lower
i really need to be quick to scalp out
my risk until i can build into a core
where apple proves itself says it’s
going to stay up
and then potentially we get that opening
move higher if you want to learn three
real world setups that our traders use
including the simple setup that we teach
all of our new traders and the setup
that turned one of our traders into a
seven
figure big money earner check out the
free webinar that we’re currently
running
just go ahead and click the link that
should be appearing right now at the top
right hand corner of your screen
that’s going to open up this free
registration page in the new window
so don’t worry you’re not going to lose
this video you’re going to learn more
in a couple of hours from this trading
workshop than from
years of online education so i’m
watching 116 really carefully here
holds nicely my average price is
roughly at 41 cents now so it’s a little
higher than i would have liked would
have liked to be closer to 20s but
obviously the stock’s moving very quick
we get an interesting upside wick there
i think that’s a late print up at 118
but we did spike up to 117. it was too
quick for me to take any profit i don’t
want to just hit the spread
but now i’m starting to think okay any
move back up towards 117 i’m going to be
really interested in taking off some of
my size
so i’m layering out some offers to see
whether or not it’s going to get up
there
a little wick back down towards 116 but
it’s not breaking yet
still digesting this little opening move
lower
you can see it’s definitely very sticky
around the 20 to 30 cent area and by
sticky i mean
when the stock comes down to that price
it kind of sits there for
maybe a half a second and then pushes
back up towards the top of the range
50 60 cent area
average price still 40 cents
a little bit of size came in on the 40s
and stock like apple i’m not really too
interested in watching
size get stacked on the offers unless
it’s some type of key technical level or
a whole number
so i’m still hanging in there add it up
to another lot
so now i’m in four lots total
looking to scalp out probably one or two
lots as we push up towards 117.
so now i’m thinking if we break above
like 60 cents i’m expecting to get that
upside wick that can
cover a little bit of my risk
get about 60 cents
very quickly into the 70s watching how
it comes into 117
thinking it might possibly break but any
quick failures here i’m definitely going
to take off two lots
took one lot off there
kind of flicking around
if we get back up into the 80s i’m
thinking i’m just going to take off that
other lot
took it off right there so now i’m back
into my 2 lock core
average price 1 16 40 but i just took
off 40 cents of risk
so now if we drop 116 i’m in a little
bit of a better position
to potentially work that down
essentially you can think about it as my
average price is now 116
which is the area that i’m wondering if
we drop out from there
and we hold 115. i’m going to be scaling
into that again
so lo and behold
we’re still spending some time here i
haven’t touched it
haven’t touched it dips back into the
40s
i put on another lot now i’m up to three
lots
again my average price is technically
probably somewhere around 1
16 20 at this point but on paper my
average price is 48 cents
we’ve got to move back into the 80s
layer out an offer not sure if this
offer gets taken
i move my offer down a little bit just
because i can see
kind of feel momentum slowing here
you can see we’re having a really hard
time getting and holding above 80 cents
which is kind of the top of this range
you know you can think about this as
being kind of a shelf right here
kind of 117. no reason to add a momentum
lot
or add another lot and not take it out
when you get 40 cents on it
so now i’m still kind of hanging out my
average price has moved up to 50 cents
but that’s okay because i’ve now taken
three lots off for a 50 cent profit 40
to 50 profit and now i’m just waiting to
see we got to break over 117 potentially
i’ll add a
another momentum lot and if we flush 116
i’ll have a trade decision to make
i want to see how that flush happens i
want to see where the cues are at that
time
and if that flush looks like something
that’s potentially viable
i’ll look to work into a five lap
maximum
again scaling out into any moves in my
favor
so we get the 116 flush move all the way
down to 80 cents i haven’t done anything
yet i’m looking to see how this moves
this move develops
sorry i’ll rewind that a little bit
now any push towards 1 15 50 i’m going
to slowly look to add some lots
got up to a third lot right there
so i’m using this entire base
consolidation
as a little bit of help a little bit of
support as we flush lower
i got another lot there in the 40s
the ultimate stop on this is if this
entire consolidation breaks
i’m gonna take the loss i’ll probably
lose a point on it but if i lose a point
on three four five lots and
i made half a point on three lots
you know the risk reward ends up being a
little bit better than just taking a
full stop on that entire full lot size
usually in these situations if you take
a full-size loss on those
you’re going to feel a little bit worse
if you don’t have any cash flow built up
if you’re developing and you’re not yet
there where you can read the tape
and you’re still trying to learn the way
to flow with a stock
my suggestion would be pick your niche
whatever your niche is let’s say you
trade low floats let’s
say you trade the market let’s say you
trade high beta stocks
pick one that you can get a feeling for
that you have some some success with
trade it on paper watch how the tape
develops apple will very
often dip down to these levels kind of
take out little wick consolidations it
kind of trades like spy in that way
it’s not going to hold levels very
clearly you need to see how it behaves
around those areas
it’ll very often re-bid after a wick out
a little bit of a stop run
you can kind of see it stop runs this
area stop runs this area
very quickly re-bids about 50 cents so
at this point i’m in four lots i’m very
close to adding my fifth lot
and any move back above 116
i’m going to take that 50 to 60 cents
back up towards my average price
because of my core is from 116 two lots
and i have five lots down
now where i’m adding in the 50s the 40s
the 60s of 115
tossing those out back above 116. i’m
consistently moving my average price
lower and lower and lower
while also adding cash flow on these
little wiggles
so now i’m back up to full size all five
lots
any of these moves above 116 i’m going
to take an opportunity to take some off
we get a really nice retracement pop
right up to the 1 16 30s
and you could see me aggressively taking
size off got
literally all the way right back to my
core because i just got a point on the
scalp
so now i have a point that i just made
on three lots i’ve made
40 cents on three lots before so now you
can do the math on that pretty easily
i’m now basically i’ve made myself two
points on a trade where
the idea hasn’t even played out yet the
idea on this day
is for this swing high from the previous
day to be taken out and for us to
potentially gap fill from that day
before
so on a scenario like that i’m targeting
119 i’m targeting 120 for spy
or i’m sorry for apple and we literally
haven’t even moved out of the
pre-market range but here i am already
sitting in the money
up about two points on two lots so
effectively
i’ve moved my average price all the way
down to 114. you don’t have to think
about it that way
you think about it as having cash flow
still risk the right opportunities
you know you don’t want to say oh my my
average price is 114 so i’m just going
to take this all the way down if apple
completely fails
the stop on this trade is still 115 and
you still have to be really careful with
that
so now that i’m sitting in my core the
next trade decision is
if if apple pulls back and we get a
little bit of a move to the downside
do we put in a higher low and what does
a higher low look like
so it was being a little bit aggressive
here as it’s holding this 1 16 30 area
kind of the level where you saw me
scaling in before
but in my mind i know that if this drops
116 i’m going to have to puke
potentially everything because i i’m
also watching the cues i don’t want the
cues to fail from view at
and i know i can always get back in and
restart
like i said i’ve already built up a
decent amount of cash flow on the trade
the idea is not invalidated unless 115
gets broken
and i can always get back in
so now i’m sitting in i actually got up
to six lots on this one
you kind of see we’re we’re still
spending some time above 116 here 1 16
30s
skip the head a little bit so as you see
a really nice compression here
there’s two things that can happen we
can either break to the upside and get
to 160 117
or again i’m going to scale all the way
back down to my core or we drop out
116 and i have to see whether or not we
make a higher low
that move can happen kind of violently
and if it happens really violently i
might just tell it all
and reset and see if these bids step in
so very quickly we get back into the 80s
and the 70s
i’m sitting in this position i’m all the
way up to six lots so i have to be
really careful here
any move underneath like 60 or 70 cents
i’m more than likely just gonna get out
reset
maybe be somewhere around flat on the
overall idea
but i’m still not sure about whether or
not apple’s really gonna have what it
takes
to make this larger context move that
i’m interested in
so i’m looking to be flexible i’m
looking to be nimble i’m looking to stay
involved in the trade
so if this wick right here doesn’t stay
and we get some type of flush into the
50s i’m more than likely going to have
to exit
we get that flush i quickly get out i
want to make sure the low of the day at
26 cents doesn’t get taken out
if it doesn’t get taken out i can get
back in
they barely hold it there we start to
re-bid get back into the 60s and 70s
and now i’m reinitializing my position
i’m about flat on the overall trade
but i now i know the real risk is
definitely 115. 115 gets taken out i
think the trade idea is invalidated
but now i have some levels to work
against i’ve
gotten a feel for the way that the
tape’s flowing i’m not necessarily just
sitting flat-footed riding this down you
know
i still think the idea is valid
so as we’re kind of stalling here on the
tape i worked up in
back into a core so now i have a core
from 64 cents
the stop on the day is 115 about 60 risk
on my on my core so any
40 50 increments i get on any ads i’m
going to be quickly taking off
so i’m all the way up to four lots now
any wick above 116 i’m going to likely
take
we get the push back up towards 116.
kind of the previous failure point of
that consolidation is right here
so any thrust up into the 20s i’m likely
going to take off and get all the way
back down to my core
get the push here i want to see how it
behaves
all the way up to my fifth lot
so now i’m watching really carefully
here to make sure we’re not getting some
type of wedge breakdown
i’m all the way up back into six lots
here so if we do flush 50 cents i’m
going to be really quick to get out
i can’t afford to watch this go all the
way under 115 full size
my average price is all the way down to
1 15 80 now so i’m still in the money 20
cents or so
in a relatively decent spot any moves
above 30 cents i think are gonna be
great opportunities for me to scale out
again six lots my core size is two lots
if you know your core size
ahead of time it’s very easy to know
when you’re a little bit too heavy when
you’re a little bit too light
and you can use those opportunities to
take advantage of the way the tape is
wiggling
before you get some big momentum break
nice move to 40 cents or so
doing a good job holding this thinking
we could potentially break this little
swing high right here
now i’m thinking one 1650 gets broken
i’m going to try and scale
all the way back down to my core
two lots off right there previous
failure point
117 a little bit of a psych level on the
day
down to three lots
and on that 117 break i get down to my
two lots
so now
i’ve worked my way into a core of 200
shares my price is 116 again
i know the real stop on the day is now
low of day 1 15 26 about 80 cent stop
but i just got a point on four lots and
i’m in a two lot size
so you can make the argument why aren’t
you holding all of your size for the
bigger move
why are you getting being so quick in
and out you know are you paying all
these fees are you doing this or that
the moral of story is the idea is never
invalidated
the idea that i can find better areas to
risk against
better areas to build into a very solid
core
and then let the stock work and
capitalize on these wiggles
by using my tape reading skills it’s
perfectly okay
to just pick a level to risk off put
your size on
and size in but as you get a little bit
more sophisticated with your tape
reading abilities
you can build up cash flow so that if
you are wrong on a trade
and the overall idea ends up stopping
you out you could have still even made
money on the process
so like you saw when i got wicked
underneath on six lots
so i had six lots and i look we moved
all the way back down
to one fifteen sixty even on this move
right here when i was in six lots
i wasn’t even down on the position i was
probably pretty close to flat
so my head was still in a great space
when they made a higher low i was able
to scale back in and then i very quickly
got a point and a half on that move
and established into a very nice core
and then from there
apple ends up just consolidating kind of
wedging the rest of the session
i was working my way in kind of doing
the same thing
you know stopping out when i didn’t have
enough or stopping out when i had too
much and it went too far against me
getting back in building into a solid
core what you’ll see
ends up playing out
this right here this compression this is
a 15 minute chart
throughout this entire compression i’ve
been building in building in building in
taking off
and then we start to get a really nice
sit sit sit sit sit
you see before 15 30 45 an hour an hour
15
we stay in probably about a 50 cent band
once that band breaks to the upside
towards 119
you start to see apple curl up a little
bit
it’s around one o’clock it’s not the
best time to think that you’re going to
really get some type of momentum break
we barely stop out anyone short from the
top of this wick from the previous
session
scale out into those moves you can kind
of see
this is all this is me very active very
active scaling out
very active very active this is
everything you just saw in the video
then we start to compress
i buy a little more by a little more by
a little more we get the momentum break
that you guys saw i sell out into that
and then just kind of ride it into the
potential highs
so again that’s a great way to use your
tape reading skills
to build into a core get some cash flow
to manage your risk properly
and eventually have a really nice size
position for a much larger move hey go
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train and trade well

* no relevant positions

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A new trading strategy from a future star trader https://www.smbtraining.com/blog/a-new-trading-strategy-from-a-future-star-trader?utm_source=rss&utm_medium=rss&utm_campaign=a-new-trading-strategy-from-a-future-star-trader Wed, 16 Sep 2020 16:16:18 +0000 https://www.smbtraining.com/blog/?p=50126 In this video, learn a new trading strategy from a future star trader. A trader who is producing impressive results, shares in step-by-step detail his Give and Go trading strategy. Let’s get to work on sharing these important trading lessons so you can grow your trading account. * no relevant positions

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In this video, learn a new trading strategy from a future star trader. A trader who is producing impressive results, shares in step-by-step detail his Give and Go trading strategy. Let’s get to work on sharing these important trading lessons so you can grow your trading account.

View Video Transcript
in this video learn a new trading
strategy from a future star trader
hi i’m mike bellafiore co-founder of s p
capital and we’re a proprietary trading
firm located in midtown manhattan
and i’m also the author of the trading
classic one good trade and the playbook
in this video a trader who is producing
quote world-class results
shares in step-by-step detail his give
and go trading strategy
let’s get to work on sharing these
important trading lessons so
you can grow your trading account
[Music]
so this is a trade in tesla that i made
in august
um in my playbook this is the higher
time frame breakout
play and the give and go pattern is the
specific
pattern intraday pattern in which it
manifested
this trade is significant to me to study
because it offers an opportunity for me
to work on my goals so there are
specific things that i want to be
working on the most and this play
exemplified a lot of those aspects
number one find intraday inflection
points as a way to add size
that’s been an important focus for me
for the last
month and a half specifically it’s
something i’ve been studying in more
detail
and this trade offered an intraday
moment or two where i could really
recognize
that it was working add
to my position even perhaps against a
closer stop
and even on a swing trade idea
begin to get bigger
with tighter risk his second point
overnight holds on higher time frame
breakouts
this is a goal that i’ve had coming into
this year
because upon studying a lot of my higher
time frame breakout plays
i have seen that i have
basically been catching day one of a lot
of these breakouts
that in bull markets go on to make big
moves
and so i wanted to improve on
capitalizing on those
plays on those entries on the higher
time frame
and holding them overnight and that
could be
an overnight hold for a gap up that
could be
two to three days or it could also be a
longer swing trade
number three long-term account swing
trade so that’s an extension
of what i just talked about but using my
long-term account to express
these longer ideas that might last two
to three weeks
and then number four risk more and trade
bigger in my best setups and so this
qualifies as a best set up so
this gave me an opportunity to trade
bigger
and then go back and study how i could
have traded bigger you know there were
areas where
i think i did really well with that and
there are area areas where i could have
done way better
with that what’s interesting about this
is i really like how
you are incorporating your longer term
goals with a specific trade
and dr steenbarger would highlight your
work
as world class in terms of consistency
so there are stars at the firm that we
talk a lot about but there are also
rising stars that we don’t really talk a
lot about
who are in their own right showing
literally in dr steenberger’s world the
words
world class results
consistency and
they’re not yet the big names at the
firm
not yet and maybe some of you guys who
are going to watch this as as garrett
presents or not yet
you know some of the big producers at
the firm or people who are watching this
at home not
big producers yet in your own trading
but there are people out there that are
doing just tremendous work
that we need to be learning from that
are going to be the future stars
that are going to be the future stars of
this firm
and elsewhere and their work is
clearly showing that and we need to be
learning from them
and so you’re one of those people
garrett and this
is particularly interesting
and i look forward to watching back this
tape in
a couple years from now and uh seeing
where you are then
and you are
this is the work that you’re doing right
now to sort of get to that point where
you know you are reaching your goals
so sorry to cut in right there let’s
talk a little bit more about the trade
overall big picture so this is just the
view kind of coming into the trade
what i’m thinking about the overall
market and in this kind of trade this
this really matters
um so tech especially large cap tech has
been heavily in favor
so that that’s been the leader fed’s
massive stimulus has been the
justification for the relentless rally
off the march lows
um not that everyone expected it but
that seems to be the narrative
in terms of explaining it um and
breakouts have been working
and that sounds super simple but that’s
really important to me and that’s
something that
i always need to be keeping tabs on
because sometimes
there are environments where breakouts
are not working and sometimes they’re
environments where breakouts are working
and the way that i keep tabs on that
is i just look at really good setups and
if they’re not following through
then that’s a really good indication
that something might be changing in the
market and if really good setups
breakout setups are following through
then that’s information
and so this is an environment where
breakouts have been following through
spy is at or near all-time highs so
you know of course we have a lot of
people saying it’s up too much and it
it needs to pull way back and then we
also have a lot of momentum
to the upside so the way i look at that
is i want to be trading in the direction
of the tape
and i really want to be keyed in on the
fact
that prices are moving higher and the
breakouts are working
but also in the back of my mind
understanding that
at some point something will change and
i also need to recognize
that shift in the market which we
you know we had about a week ago
yeah and from my seat i’ve been
listening to people
say that this buy is too high since
2012.
right yeah
and it seems like i mean if you just go
back to the 1920s you know the market
mostly goes up
so i try not to
get too biased when the market is
trading higher
i try to believe the tape the best i can
especially when breakouts are working
and these setups are working
and again that’s all with the caveat
that
things do change and markets do shift
but
i i should be able to recognize that you
know i shouldn’t have to anticipate
every step of the way that that shift i
shouldn’t have to try to pick a top and
i shouldn’t be
swayed from taking my best breakout
setups just because
the market’s been rallying for a little
bit so yeah and eventually we’ll have a
pull in or a correction
right now we’re not seeing that what’s
paying as you’re mentioning are certain
patterns one of those patterns is
breakouts
we’re observing that
so that’s our job is to observe what’s
working
and to find ways we can express trades
that are working in markets
yeah yeah and the last point which bella
you just touched on is just that as the
market climbs higher more people doubt
the rally and expect a market pull
and so sometimes that can add fuel to
the fire
so if you’re watching spy and you see a
liquidation break
that looks scary and it closes at the
lows
but then the next day we get bought
right back up and it’s business as usual
you can
you can kind of put put a little bit of
that narrative together and understand
that
short-term traders might have just been
washed out that little extra
jolt of fear in the market might be
enough to fuel
you know a next little little up move in
the market and next round of breakouts
and just more information that this may
not be ready
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in a couple of hours from this trading
workshop than from
years of online education so the short
term big picture
um and again this is just the last few
days and just kind of what’s been going
on and so
spy underwent a swift liquidation break
the prior
day after making an all-time high which
spooked the market at the close so
that’s basically what i was just
explaining
so the previous day if you were
really zoomed in on the tape you would
you might have been
extra cautious maybe a little bearish
thinking that you know we just made an
all-time high
and then we just sold off pretty fast
and closed at the lows
so with tesla over the last few days
tesla broke its daily chart wedge to the
downside
and closed weak right at support on this
prior day
so tesla’s been consolidating in a tight
range
it’s been holding up it showed relative
strength on a vicious up move and then
went sideways for
about a month and the previous few days
leading up to this trade it started to
break to the downside a little bit and
it closed weak on the same day that spy
had its liquidation break so again
we have kind of a short term
bearish look to things leading into this
trade
and after the closed tesla announced a
five to one stock split
and the stock gapped up seven percent so
that’s the catalyst
that’s the impetus for this trade
intraday fundamentals the stock split
i mean that that was it um and it was
you know at this point it’s august 12th
and
august 28th is when the split will occur
and i think it’s important to mention
for me when i’m making this trade that
it’s not
so much the fundamentals of a stock
split
that get me excited about this catalyst
i’m not thinking to myself
this is a changing fundamentals play i’m
not thinking wow you know this is going
to add value to the company and
long-term investors are going to pile in
and this is a total game changer
i’m just thinking that we have an a plus
technical setup here
and the stock just needs an excuse
to to start the move and i thought that
this could be a really good excuse for a
number of reasons one
stocks have a history of reacting
bullishly to
stock split news and that was
exemplified a few weeks earlier with the
apple
stock split which started that on a run
and so again if we’re just looking at
themes in the market we’re looking at
large cap tech has been running and and
apple’s been leading that with it with
stock split news so
so that’s that’s how i saw this catalyst
yeah so we have the atr um again
adjusted for the split
35 75 million average volume
um the arvo was about three it wasn’t
crazy on this day but it had been you
know this stock’s been in play for a
while so sometimes when
when the stock’s been in play for a
while the relative volume you know it
gets adjusted for that
short float about 10 percent fluctuates
quite a bit
others have my two cents here which is
to me the catalyst
for this particular trade was
a because the stock splits
shouldn’t mean it should trade higher
that that isn’t
a reason why a stock should trade higher
i would add a caveat that
maybe it is in a strong market because
tesla was
so expensive and now it’s going to be a
little bit more affordable for some of
the retail traders to buy some so maybe
that’s a reason
but we actually hadn’t even split yet
the stock was still going
up with tesla being so expensive
so it’s almost like the catalyst in in
this case is
it’s going up for a reason that doesn’t
really make a lot of sense historically
that shouldn’t make a stock go up
but it is and anytime you sort of see
something it doesn’t make sense but it
is
that catches my attention and the other
thing you mentioned which i thought was
super important is
what did apple do when it split what is
the pattern the marketplace which is
when these stocks have split
they have traded higher
that is the pattern and so this is
another example of that
those are the two things that stood out
to me
yeah that’s great and tesla also had
some other
potential catalysts on the horizon which
they didn’t need to come to fruition
because they were on the horizon and
we’re talking about now
but just the whole storyline of the
stock like i said i just
i i felt like it just needed an excuse
to trigger this technical pattern and if
it did it on elevated volume
because of this then that would be
enough
no and i like that idea it just needed
an excuse
yeah so so the play in the setup for me
and this is this is just
important for me in my trading and how i
think about things and in order to
define this in order to
define what this is and able to
be able to repeat it to be able to
understand it to be able to
understand what i’m looking for both in
terms of context
and in terms of the intraday pattern
that’s going to serve as a vehicle for
me to get involved in this trade
so this is a higher time frame breakout
for me and so these plays for me my
objective is to capture the momentum
and the range expansion created by a
breakout
from compression on the daily chart in a
relatively strong stock within a hot
sector or
theme or an individual catalyst
so sometimes this is purely technical
and sometimes it involves a catalyst
but either way i want to see elevated
arvol
on the day one breakout and as we can
see in this trade this can be an
intraday trade
and a multi-day swing trade depending on
how you see it and so
the intraday pattern for me in this
tesla trade was the give and go pattern
and that’s just a name that i’ve given
this particular pattern that i’ve seen
repeat itself in other stocks like
amd and like apple when they have a
catalyst that causes them to gap up
and so the idea here is that after a gap
up
above or right to a higher time frame
breakout level
the stock will pull in and hold shallow
enough and that’s really important in
the morning
to maintain the energy to take out the
intraday highs by 10 30
or 11 and trend higher
so i want to be buying this pull in and
i want to be adding as it confirms and
sets up to break out
and trend so just really quickly
i just want to highlight what to me what
made this tesla trade special and we’ve
mentioned a few of these things so i’ll
just go over it quickly but
at the time of the catalyst tesla was
already compressing
on the daily chart and exhibiting a lot
of relative strength
so it held this level for a month so
this was unusual sideways action on the
higher time frame
so when i see a momentum name like this
they can’t pull back
and then it kind of goes to sleep and
then it wakes up
you know that’s that’s a big big lookout
for me
the catalyst came at the apex in support
of this compression pattern so again
like it just couldn’t have come at a
better time
technically for the stock and so as i
said before
tesla just needed an excuse to break out
of this pattern
it had other catalysts on the horizon
aqua had reacted well to the new to its
stock split news a couple weeks before
this and there was a shakeout in the
tesla pattern
prior to the catalyst which is something
i like to see on all time frames
because it’s almost like a confirmation
that it can’t go down
or it might be something that traps
shorts
it might give you a better stop those
kinds of things
the intraday price action followed
script and acted very well
and then the domino effect which has is
becoming more and more important to my
trading and this is just a thing that i
see a lot that helps me get really good
risk reward in my trades and i just call
it the domino effect
and basically what this is is that an
intraday
pattern risk when it follows through can
cascade into higher time frame
reward and so you might have a big
picture
context play but you might see
[Music]
a lower time frame intraday pattern that
you think is going to
trigger momentum and so you can you can
enter that trade
with smaller lower time frame risk and
if it does happen to
trigger the higher time frame breakouts
then perhaps the thing
continues and actually gives you the
reward
of a higher time frame trading so to me
that that’s how you
that’s how i see how to get these like
five to one or ten to one or
some of these really good risk reward
opportunities
um so this is why i want to find
inflection points on both the higher
time frame
and the intraday time frame and so
this tesla trade was really a multiple
time frame breakout play because it was
it was kind of triggering on all time
frames at this point
and so i want to see tesla hold the gap
if it gives up the gap then to me the
catalyst is not triggering the breakout
and my thesis
is invalidated so i want to look for one
of my intraday patterns to serve as a
vehicle for getting involved and what
the reason why that idea is powerful to
me
is because if i just go in at the open
and think that i just want to be buying
the stock because of this catalyst
and it does start to sell off at the
open and it does start to give up the
gap
you know what am i going to do like how
am i going to see
how to control my risk on a lower time
frame how am i going to time this
am i just going to keep buying it at all
different places throughout the day and
so in order for me to be patient
i actually i have to know what i’m being
patient
for and so that’s that’s what these
intraday
patterns really help me with so i want
to see the price action and the tape
confirm my idea intraday
um so i want to i want there to be clues
like i want price to hold higher
i want pullbacks to get by i want to be
lots of order flow because these are the
things that happen
when one of these higher time frame
breakouts are working
the ultimate confirmation will be for
tesla to take out its higher time frame
breakout levels on elevated our ball and
close above these levels and so these
were a little bit higher than where
the stock started on that day but on a
higher time frame this is what i wanted
to see in order to hold the stock
overnight
in order to give the swing trade a
chance
and so the key for me is that i need to
maintain a
higher time frame vision while executing
this idea
on an intraday level so because this is
an intraday trade and a long-term
account
idea and this is just a note that
for the charts that i’m using um you
know this
the split had already happened so
everything’s adjusted for the split so
it’s
it’s uh it’s the price divided by five
so here’s the weekly going back a year
and we can see the breakout at 1 000.
it’s 200 on this chart because of the
split but that was the breakout at 1000
very strong relative strength and then
we see the bull flag
so on the weekly that’s a bull flag
that’s the consolidation on the daily
chart that i’m talking about
playing here so here’s the daily chart
so we’re just zooming in on that flag
and the thing that i just want to
draw attention to is the two days prior
we start to break the bottom of that
wedge pattern
and we close near the lows on the
previous day right at support
and then the catalyst occurred and so
that’s the shakeout that i’m talking
about
and so i like to see that sometimes even
intraday if this were an intraday
pattern
and i wanted to buy this if i saw that
and then sought reclaim to me that’s
sometimes that’s even more confirmation
of the law
and so just zooming in on that
consolidation
i just want to draw attention to that
that 303
50 301 area
um that that i had acknowledged as the
the initial breakout level that i wanted
to see it clear on a higher time frame
that idea is amplified by the fact that
that’s where most of the volumes been
done over the past
month and you can really see that on the
volume profile there how much volume was
done
around that 301 like almost all of it
and so we can if we can get back above
there and hold then that would give me
more
confidence that this trade is working
that’s a great
use of the volume profile right there
you’re using it alongside of the daily
chart
you’re using it alongside of
a tight wedge pattern daily chart
which tends to have big moves after it
breaks in one particular area
but i really like how you see
a very clear level by using that
volume profile uh with this particular
setup
i i find that to be particularly well
done
great yeah i i love it i think there’s a
lot of information in the volume profile
it’s not something i over analyze but
sometimes when very simple big things
like this stand out they can really
serve
a purpose in the trade so here’s spy
it’s been on a really big run since the
march lows
and you can just see that previous day
candle that red candle there
was the liquidation break that
obviously did not damage any technicals
on the
on the daily chart but intraday you know
it looked a little nasty and so here’s
the week leading up in spy
and you can just see the previous day
again you see that liquidation break at
the
close you know we gap up to all-time
highs
and then completely fail into the close
and so if you were looking for this bull
run to end if you were already
bearish if you thought this was up too
much that might have been something that
got you excited about the short
and then we walk in the next day and spy
completely reclaims the level
and we know tesla’s gapped up as well so
that’s
this all to me kind of plays into that
shakeout idea
that i talked about earlier
and so here’s the week five minute
chart of tesla and again we you can see
the last two days start to drift lower
and then we get the catalyst and we gap
up
and so when i look at this what i’m kind
of asking myself
is you know is the control
shifting from the bears to the bulls
here on on a
short time frame like over the last week
like are those bears that
might have gotten excited over the last
couple days
are they trapped and are the bulls
taking control back
so the give and go pattern and this is
what this is what i was looking for
as we opened um and so i’m just going to
outline this a little bit
how i think about it but we get a gap up
on the catalyst
like i said before it gaps to or above
the breakout level
developer develops a range in the
pre-market
and so the preparation for me what i
want to be asking myself if there’s a
possibility that we might see this
is where do i want to pull into hold if
it does pull in at the open like where
do i
where do i not want it to be trading
below
and the reason i ask myself that is that
there is a point
where if it pulls in too much
there’s a lower probability that it’s
going to have the energy
to reclaim break the highs and trend all
day
so what’s the powerful pulling level
watch the tape at the potential turn
when it is pulling in does anything
change
is there absorption do aggressive buyers
come in which is what happened
here does the speed of the tape change
which is what happened here and then
confirmation so after it breaks the
trend line off the lows can it hold
higher
can it reclaim v web or significant
entry level
is there a big time moment that i can
recognize where i’m going to want to add
swing size against the low of day
and it really i really wanted to take
out the highs by 10 30 or 11.
i mean that’s the most powerful version
of this for me
so here’s the two-day chart showing the
gap up in the pre-market
action and this is just to show how i
figure out where i want it to hold so
we have the after hours spike and then
it goes sideways
and my thought process is usually i
don’t want it to
give back more than 50 of the move and
if it can hold like a third of the move
then that’s
really bullish and so it just so
happened that that 287
20 pre-market low level that i have
highlighted there in black
right here um
that that that was right between you
know the 50
and the in the third pullback so this
shaded area
with this particular pre-market low
level was the area that i’m looking for
for a pull-in to hold if it starts
holding below
here then i’m thinking you know it’s
giving back too much like this isn’t
this isn’t nearly as powerful as i want
it to be
and that way if i make the play it has a
potential of being powerful
and if it does go down then
i can stay uninvolved so here’s the
morning pulling
and this kind of happened in three steps
and there were three places where i
bought it
so it pulls in and then i i see the tape
change right at this 287 20 level
took it out by 20 cents you know held
287
and then the buying came in and you
could see that on the tape it was a
little more aggressive
um but it might have looked more like
this one too
over here on the left and you can see
that this failed
so the next thing i really want to see
which it hasn’t done yet is i want to
see after this up move i want to
see it be able to hold higher because it
had it didn’t do that over here so that
would be a change of character so the
first clue is here
when it held it higher for the first
time and then broke up
and then i thought this was very
significant when it held 290 50
unusually on the tape
for seven minutes i mean this was just a
really strong hold so much so
that that i think it would have been
viable to buy this
with a stop below this 290 50 for a
portion of the position in order to
get more size and see if it can break
the highs
and i think it is important to keep in
mind too that
you know i’m thinking of this as an
intraday trade but i’m also thinking of
it as a swing trade and so this is one
of the things i’m working on like i
i need to be risking enough so that i
have
enough size to express both trades
and so i’m i’m buying some in the long
term account i’m buying some in the
intraday account
but but ideally you know i’m
acknowledging this in real time and
really putting the risk on here
yeah and a common theme with something
like that after a a little bit of a down
move
is when you start to see the stock hold
so so go back to that chart so
you know it sells off a bit a bit much
pulls in a bit much
starts to trade back up then holds
higher for that first time
and then holds that 290 50
area unusually one of the things
that you need to fight against and one
of the reasons why doing a playbook like
this
is so helpful uh is to make it easier to
buy that 290 50 level it’s so easy
to sit there and say i could have bought
this a lot cheaper
i think this needs to pull in a little
bit more from that 290 50 area
or else it’s it’s too expensive
but when something starts to turn around
and starts to catch a bid
lots of times when you go back and study
that pattern
when it’s holding higher unusually
and when it’s holding higher and usually
at a price that strikes you as
too high in the near term
that’s a signal that’s a that’s a very
aggressive buy signal
that’s a signal that not only is there a
buyer here but there’s probably going to
be a buyer that continues
for a while and so so easy to bid there
sit there and be like oh this buyer’s
too aggressive let me wait for it
no no no you actually should be thinking
the exact opposite
which is he’s buying up here
unusually and he’s buying up here and
usually at a price that’s too high
because there’s a big order to go here
and i want to follow and i want to be
adding
even here and so
when you’re seeing that that unusual
buying that’s different than chasing
that’s different than not being patient
about price
that’s the exact opposite that is good
trading
that’s good adding that’s good seeing it
when you talk about those moments you
know it should really work from there
yeah i couldn’t agree more
and you know the only way that i can get
it through my head
in those moments is to go back and study
these and see that
because it repeated that that happens
you know and after everything’s all said
and done you can go back to that moment
and see it in the context of things
and experience it again and realize what
the reward is too
in terms of where you think this can go
um
you know we’re not just looking for like
a test of the highs
you know this isn’t a scalp um
although that moment could have been if
you’re a scalper i still think that
could have been a great trade but
um but yeah i i couldn’t agree more it’s
really important it’s again it’s
something i’m working on
you know i added there at that time
but i probably didn’t add enough and i
think one of the
difficulties for me is that i’ll say to
myself you know i’ve done such a good
job so far of buying this thing
and it’s it seems to be working and i
don’t want to mess up
you know the good trade that i have on
that i that i think i can
fully realize here
but the more you see these the more you
realize like you know it it is working
and i have to be adding here here’s a
chart that just goes up to 12
40 in the afternoon just to show the
confirmation that it was showing
after it took out the highs so you know
we see the three buy points right here
and it did take out the highs
and it did have a nice up move
and it did have a pullback that held
this minor pre-market level
and then continued higher and took out
the pre-market high
tested that volume level that we looked
at on a 30-minute chart and came back in
and held the pre-market high so again
you know every pullback is getting
bought
so far and view app is rising
and our prices that we bought at are
getting better and better
as time goes on and so this is just this
is an example of a trade that’s working
i mean this is what i want to see like
if i i did all this work
already and one of the most important
things for me to recognize
is when it’s working not just when it’s
not working but when it’s working
really well and this was working really
well
so here’s the whole day and
this is just to show that even those
higher time frame levels
that i was looking at were getting
confirmed on this day
so this blue level right here is that
volume node
and then this other dotted line is just
that that nearby
you know breakout level so this is
basically the area i’m looking at on a
higher time frame for
it to break out of for it to close above
and it does and when it when it takes it
out
it actually speeds up and gets a little
parabolic
and so again this is just what i want to
see when i’m making this higher time
frame breakout trade i want it to take
these levels out
like it’s butter and that’s what it was
doing
so the execution on those three ads
for me one of the keys to maximizing
this trade
is realizing when i can be trading
against the low a day
really well and then when i can be
trading against
a higher intraday level safely
and so the question i’m always asking
myself is
you know when are these stops really
really good
like if it takes it out it i’m probably
wrong
because at that point it it
it allows me to put on more risk against
those levels
and still really give the trade a shot
and so
for that first buy you know i want to be
adding
tier one on that change of tape and the
trend line break and then when it when
it finally holds higher i want to be
adding because at that point
now i’m thinking now this load day is a
much better stop
than it was before when i bought it
based on the tape
and then we just talked about that
unusual hold and that’s where i want to
be buying
there and i think there it’s it is safe
to be
trading part of the position below that
level
because that really should work
and so then i want to just take 25
of my position and scale at certain
intraday extensions for the intraday
trade and then hold 25
overnight and this is the idea for my
intraday account
and then there’s also the long term
account that has a position
in it it’s for a longer swing trade and
so these are
these are the extensions you know and
sometimes it’s it’s never
as perfect as this sometimes you’re
taking that 25 and you’re scaling it
you know slowly into that extension but
the idea
is to like i don’t want to find myself
out of 75 of my position by 11 o’clock
when i had a much bigger idea for this
trade and so that’s why i want to be
thinking about this
and so here’s the daily chart just after
the fact just to
[Music]
just to drill into my mind like what
kind of trade this was
um the idea of when when you’re
executing that morning
and you’re you’re seeing the potential
of this trade
why it’s so important to put the risk on
why it’s so important to
be okay with risking against the low day
for a swing trade
why it is okay to be holding positions
during pullbacks because we’re really
thinking on a
higher time frame here so to review the
trade
you know for me this is a future seven
figure trade so that’s why i need to be
reviewing this as much as possible with
as much detail as possible
and just one of the things that it makes
me think of is just as skilled active
traders
we have a huge advantage in executing
higher time frame ideas
and the thought process there is just
that
we’re not just trading off of a daily
chart pattern
you know you could you could be a guy
who goes to work
at like a sales job and puts on some
swing trades and maybe you see a good
close
you go in and you know put a position on
you know at the market in the morning
and you’ve got to stop based on the
daily chart and that might be a great
trait
might be awesome but you don’t have the
ability to read the tape
at key moments at like 10 o’clock in the
morning
and really understand like when you can
trade your position against low of day
and when you can make a momentum trade
and when there’s an unusual buyer and so
those things don’t only come into play
when we’re scalping they also come into
play
when we’re executing swing trades
so i need to be big enough in this trade
in order to trade an intraday
two to three day swing and also a
potential multi-week swing trade
so i was able to accomplish this trade
on all those time frames but i can be
bigger in the trade
so the way i can get size in order to
trade it on multiple time frames is to
use the intraday pattern risk
for the swing portion of the trade as
soon as i recognize i can safely trade
it against the low of deck so the
biggest mistake that i made and that
that we made in our
joint account when we put this swing
trade on
was that we were making a longer term
play here
and we had originally been trading it
against the daily chart low basically
against the previous days low we had a
little bit of a position and we added to
it on this day
but there was a point in this day in the
morning
where we could have said we now
can trade a large portion of this trade
against today’s low because this trade
is working and it should not
stop working and therefore we can get
much bigger in this trade
that eventually basically went up
a thousand points i’m sure you’ve been
working on this trade a while
and you keep talking about how you know
it’s working
and you feel more comfortable how long
would you say you were really working on
this setup until you could really
recognize those areas that said it was
working for you
as someone who’s really developing my my
strong setups or what’s gonna work best
for me in these
first months i’m really just trying to
you know see
what works for you and maybe how you
really notice uh what’s working for you
yeah i know that that’s great that’s a
great question um
you know it’s a gradual thing it’s not
something that
was like happened overnight kind of
thing
but i would just say that
the you start to see it on the best
trades
first you know it’s it’s hard to see it
on mediocre trades
but when yeah when you get involved in
in the best trades like a trade like
this or like
someone a few others come to mind where
it was just a serious breakup and there
were a lot of things going for it
and you can really see it on the tape i
think that those experiences are really
valuable and you can’t force it because
you might not be in a market where
that’s happening
right so if it doesn’t happen for eight
months
you know you can’t blame yourself for
you know not not getting the experience
of
of seeing that and getting better at
recognizing that it’s just that when it
does happen
then it’s really worth paying attention
i think and it’s really worth going back
and looking at the play but also
watching the tape in real time
you know i’m not i’m not scalping in and
out of these things
i might be playing a bigger picture play
but i’m watching the tape like a hawk
you know while i’m sitting there like
all day and
you know after a while you can really
get to see
what the difference looks like on the
tape and something like this that just
has a bit
where the where the pullbacks every
pullback is getting bought back up
and there’s just a lot of overflow and
so
so that’s what i would do is just in a
market where these things are happening
just try to try to watch the tape a lot
yeah that makes a lot of sense to kind
of just waiting till a setup that does
really make sense to me just
kind of shows up in front of me and then
i know that’s something to look out for
in the future
yeah exactly and one of the things i do
is i i like to go back and look
at the best plays
ever you know like the best plays of all
time that makes it more personal
yeah i might not even have traded maybe
i totally missed it
but it could be something that makes a
lot of sense to me but they’re the
things that i think are the best trades
of all time
right and i’ll go back and i’ll look at
like like how did this happen
what did it look like when i should have
been buying it
and you know you start to notice things
like
you know you know what like none of
these pulled back
at the open more than like 50 of the
move
right so like all of a sudden you start
to put together things like
you know like if it starts to do that is
this really gonna be one of those
special plays like that kind of stuff
and also you know okay all these special
plays like after it started working they
all kind of
acted like this you know and then you
start to just connect the dots and get
used to
like how these things act how they look
when they’re really really working
then i actually just have one more uh
smaller more just like technical
question
yeah um do you what uh time frames do
you like to use that
volume profile in and do you ever use it
for
intraday trading yeah i have it up on my
intraday chart
i kind of have it on all my charts and i
don’t always pay attention to it but i
just have it there
so right yeah just another check if you
wanna
yeah and so i would just say that when i
use it the most
is when i have a question that i’m
trying to answer so
if i see a consolidation on the daily
chart or consolidation over the last
week
and i’m wondering like you know can it
break out of this consolidation or or
can it break down
i might want to look inside that
consolidation and just find out okay
like where’s the most volume been done
and that just gives me an idea of like
which side of the
the bull bear scenario is this thing
trading like where might it have to hold
above
or below in order to make a move and it
just gives me a little more information
as to like where the where’s the
equilibrium within this consolidation
cool yeah i was thinking about kind of
using in a way looking at
previous days levels and just seeing
those volume profiles
where those levels were for maybe an
opening drive the next day or something
like that
to help give you something on top of
just pre-market levels
absolutely i mean a lot of the stuff
that i look at is from the previous day
so that would be a good example like i
might really just want to know where the
most volume was done
on the previous day just to give me an
idea another piece of information in
terms of like
for example like if i want if i’m
thinking i want to go along something
today
and it’s trading below its volume where
it did the most volume the previous day
i’m gonna have i’m gonna be a lot less
confident
that this is an idea that’s playing out
for me
that this is an idea that i want to be
putting my energy into
right because it did a lot of volume
somewhere yesterday and now it’s trading
below
there so like why would i be thinking
this is going to be the best long of all
time
okay you know unless it can reclaim it
and so just just stuff like that
it helps me be more selective sometimes
thank you so much to this garrett um
i was gonna ask you like what are some
things you did to help get better at
reading the tape
man that’s like such a good question i
mean it’s like the golden question i get
asked that a lot
and the only thing i can say is just
watching the tape a lot
because when i started i didn’t know
what i was looking for in the tape
like i’d never looked at the tape before
and and i
would wonder what are other people
looking for are they reading
size on the tape are they looking for
particular
you know bids to drop and stuff like
that and what i realized over time at
least for me
is that the tape is such a dynamic thing
and there’s like such a flow to it
that rather than getting caught up and
thinking about
very specific things that i’m looking
for
i try to i try to zoom out a little bit
and just get a feel
for what are the prints
so what are the what were the aggressive
buying and selling
what are they doing to the bids and
offers like how much are they able to
accomplish
and so that sort of battle
that you see there can sometimes give
you a lot of information even if you’re
not looking for a trade
so like you know if they’re really
really really hitting the bid all of a
sudden and the tape
speeds up and there’s volume and there’s
a lot of red prints going off you know
i’m wondering what
what’s going to happen to that bit you
know does the bid just drop
out and the next one drops out or does
the bid hold
or does the bid drop and then re-bid
and refresh and is there someone there
you know absorbing all this kind of
stuff and so
as soon as i kind of started to look at
it like the prints were kind of like
this
water pressure and the bids and offers
are kind of like a dam
and it’s like can the water pressure
break the dam
how strong is the dam like that kind of
feel i started to
glean a lot more from the tape
especially at the inflection points that
i care about so like if there’s a chart
pattern
and i think we’re at an inflection point
and i think something
should happen then i can look at the
tape
and kind of see like how are the bids
here you know how are the aggressive
how’s the aggressive buying and selling
here
is the tape confirming what i think this
chart pattern
is telling me so stuff like that
i hope that answers your question at
this point i kind of forget what you
asked about the tape but
no no that did uh yeah i’m definitely
going to start working and looking a lot
more into prints as well so thank you
for that
yeah i had another question about
potentially
your like nightly process for generating
ideas the next day
do you have like a basket of stocks you
like to look through just whatever has
been in play and popular recently
or like indexes or just trying to figure
out better ways to brainstorm more ideas
when i have free time
to bring to the market totally like the
first thing i always ask myself is what
kind of environment
are we in and what has been working
because i have different plays
for different environments and you know
sometimes
low floats are hot and the market’s dead
and there’s no volatility sometimes the
market volatility is high and we have
like market stocks
um and we have vix sometimes
we’re just in a bull market that’s kind
of holding higher and a lot of breakouts
are working so the first thing i want to
ask myself is just like what
what motor we in where you know i can
sort of dust off the correct
plays in my playbook for the next day
and obviously that could change as soon
as you wake up
um the next day but that’s the first
question i ask and then from there
yeah i’ll have a basket of stocks that
i’m watching that are just that have
been in play
um and then and then i’m really just
waiting to see what has fresh news
like so i go every night i go over
charts
you know look at the spy and the queues
and stuff like that
and just kind of get levels get a feel
for the market you know go over the
basket that i follow
same kind of stuff go over anything
maybe like a second day play maybe
something wasn’t played
the day before and just get a feel for
everything that i already know about
and then just realize that when we wake
up there might be something new and that
might be the best thing for that day
and then all the other thing i do a lot
which i just
can’t stress enough is like i get on the
phone with people i mean especially in
this environment where
you know we’re all a lot of us are
remote
but i might i might get on the phone
with some fellow traders and just
say hey you know what what do you see
and sometimes sometimes doing that the
night before that actually becomes very
valuable because they might have a good
perspective
that you didn’t think about and it might
get you thinking and i just know for me
if there’s something really good setting
up and i can visualize it like the night
before
and actually be that much more prepared
um then that can actually make a really
big difference because i might be able
to it might start to make more sense to
me over the course of like
five hours of you know if i’m sitting
there watching an nba game
in the back of my mind i might be
thinking about this setup
right and after a few hours it might
start making more sense to me
and so you know talking to other traders
to me is really big
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How to trade a SPAC with Tape Reading (3 prop traders reveal) https://www.smbtraining.com/blog/how-to-trade-a-spac-with-tape-reading-3-prop-traders-reveal?utm_source=rss&utm_medium=rss&utm_campaign=how-to-trade-a-spac-with-tape-reading-3-prop-traders-reveal Mon, 14 Sep 2020 18:54:28 +0000 https://www.smbtraining.com/blog/?p=50122 In this video, learn how to trade a SPAC, after a Bill Gates investment, with Tape Reading as revealed by 3 prop traders. Mike Bellafiore and 3 prop traders walk through in tick-by-tick detail how to trade the hottest SPAC in the market with tape reading. Let’s get to work on sharing these important trading lessons so you can grow ... Read More

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In this video, learn how to trade a SPAC, after a Bill Gates investment, with Tape Reading as revealed by 3 prop traders. Mike Bellafiore and 3 prop traders walk through in tick-by-tick detail how to trade the hottest SPAC in the market with tape reading. Let’s get to work on sharing these important trading lessons so you can grow your trading account.

View Video Transcript
in this video learn how to trade a spac
with tape reading as revealed by three
prop traders hi i’m mike bellafiore
co-founder of smb capital
and we’re a proprietary trading firm
located in midtown manhattan
and i’m also the author of the trading
classic one good trade and the playbook
in this video
three prop traders and i walk through in
tick by tick detail
how to trade the hottest spec in the
market with tape reading let’s get to
work on sharing these important trading
lessons
so you can grow your trading account
we’re going to be going over a trade
today in a recent ipo spac
kcac and for those of you who are
unaware
a spac is a special purpose acquisition
company
they’ve been very hot for the past few
months
and essentially they raise money
through offering up equity in their
company and then use that money
to later on acquire a different company
that isn’t public
and then the two merge and that becomes
the company you’re really trading
these have been very very hot recently
and the only item in the market that’s
been hotter than specs
has been electric vehicle companies and
here we have a trade
where a recent spec ipo kcac
has announced that the company they’re
acquiring is an
ev company led by bill gates
so this is huge news and it’s easily the
biggest day
in the company’s short history in the
pre-market
we’ve already traded more volume than
the total amount of volume traded before
today
in all days combined so we go up from
what was i think around ten dollars
closed the previous day to over 16
in the pre-market and you can see that
going into the open
we’re consolidating between this 1550
and 16 50 1625 area
area range for those of us watching it
in the pre-market
we’ve realized that 1550 is an area that
has been defended
with very very large bid size twice
and that’s something to keep looking for
off the open
yeah and so we couldn’t get an exact
share count but the float is somewhere
around 20 million so this is going to
trade like a bit of a low float
and so at least for me in general i have
two
strategies that i’m using for logs for
the front side of these low code names
and one of them is going to involve on
the open facing
low floating gapping up significantly
and unable to trade
significantly lower even on elevated
volume
so we’re going to see that here and
we’re going to kind of talk about how we
go about
taking advantage of that strategy so
even before the open we get this push to
pre-market highs so
going to be seeing i’m not going to be
touching it directly off the open buying
the opening
or anything like that we’re just going
to be seeing how this trades as we open
up
we’re open now there’s going to be a
stuck print here at 16.
try to ignore that
it’s now just watching seeing what
levels are going to be important here
for right now holding up reasonably well
um looks like the 16 may be a bit of a
battleground
but again doing reasonable volume and
not really able to trade lower so i hit
in long
fairly soon here once this dip gets
bought up
now we get in i finished i just fell in
a small position at 16 expecting this to
work immediately
so we don’t really have that follow
through to the upside so if something
strange happens here
i’m trying to exit my position
and i think for this two gram is like we
we tried this a couple times
on uh and we were talking through this
on chat i’m just see if we did hold that
16.
but we were in like our tier one size
exactly and so i have more shares
borrowed here this isn’t the full size
i’ll be trying to do it sometimes you’ll
have to take more than one
shot at this but seeing that we’re not
getting that follow through right now i
think we’re gonna need more time
hey guys how do you feel about trying to
enter around
1575-ish with a stop below 1550
since it’s holding up pretty well one
issue
i that comes to mind with that is that
you know the stop is going to be a
decent bit wider and if this thing does
end up actually going we probably won’t
see 1575 again
now we do actually see this in this
trade later on and we do take that trade
you’re you’re talking about
um but i i just wanted to have some size
on so that i’m at least getting
uh one tier into the trade before it
rips without me if that does happen
yeah well i agree with that too uh 1575
was the technical level we were watching
um but just go on along with graham you
know in case we did
you know retrace near that 1575 level
and we did gap and go
that was something we were aware as well
so we were trying to be
more careful with our size and that’s
what we were trying to do like a tier
one entry
but yeah definitely agree with that 1575
level is a key inflection point
if you want to learn three real world
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than from years of online education okay
so really if this is going to work out
now like it should have gone by now
so once 1590 the leap gives out
i’m out of my trying to get out of my
position but end up having a bit of an
issue that i’ve never had before with
the ecn arca is not filling me
on the on the sell side here for
whatever reason i’ve never had that
happen so it takes me a little bit
before i actually switch over to edgex
and get out of my position but you see
i’m getting rejected all my
my shares right now
so a bit of a special case here i
haven’t had this problem since
one thing we’re looking for here too is
how we’re gonna hold up
against 1550 and if on our level two
we’re seeing
any kind of bids step up and
you’ll be able to see in this next
minute here that the selling that
happens for
the first two three minutes of the day
just comes to a grinding hall
yeah sure and you see even though we
broke below that 1575 previous wick low
we didn’t get any real continuation so
now just looking to get in for a better
price again looking at this 1570 area
for now seeing if that’s going to be the
level
i don’t believe i try it one more time
but again even the volume we’re trading
now isn’t too significant it’s really no
different than what we were trading in
the pre-market the sellers aren’t really
stepping in to take this one lower
so even though i’ve taken a hit on it i
still am pretty
pretty much liking the idea
so i’m in again risking a real move
below 1570
and we end up getting that and when that
does happen especially in these low
quote names
even though this is an s pack so it
trades a little differently you do want
to be out quickly you don’t want to try
and give it any wiggle room because
these do have the potential to really
drop out if you’re not careful
have to be very careful of risk
management in these trades
we’re not getting the volume that we
thought we were going to see here at
this 1575 level it was holding up but we
just couldn’t get that continuation
so we drop out there
again no real continuation to the
downside though
so you know i like to say with these low
float opening
consolidation setups that i take on the
one side even though we’re selling off
some i do view this as
quite bullish because we’re not falling
off as much as we should be
well we see new lows there and we
eventually drop out quicker than we have
all day
touch 1550
and you’ll see that it immediately gets
bit up exactly
that’s where i got very long
yep and so at this point you know this
could go one of two ways
really this could re-bid very quickly
like it does here or it just continues
and this turns into an all-day fader
all the chance in the world that happens
but the tape gives us the confirmation
that i need to take one more try at this
trade
and once we see this rebid uh it’s
you know it’s game on and i feel quite
comfortable with the yeah and so when
you see that rebid
you’re thinking hey let me buy this
against a little bit below 15.50
and see if we can catch a run exactly
at least for me i end up getting like
1580 or something here
and i have a hard stop i’ll have a hard
stop at 15 49 but then if this thing
just holds down below
1570 i’m gonna be out of the position if
we sustain down there
uh this should kind of rubber band and
snap to the upside pretty quickly
yeah what price did you get 1580 yeah
i’ll get it in a couple seconds here
just something to think about for that
so that’s a
a bit far away from the mid 50s
you know so you probably ideally wanted
to get in around 15
somewhere in the 1550s if you have to
pay 1580 like that it’s
pretty far away from where you want it
to enter so one of the things that you
can do
is all right i’ll buy a little bit at
1580 but but bid for some
at 71 cents 66 cents 61 cents
and then have all of that
against below 50 cents and just try and
make the spread
on some of those other tiers so that you
can improve your price from 1580. a bit
of an advanced
a bit of an advanced
trading technique but when you get in at
a bad price
and you’re pretty confident that the
overall idea
could work and you have a very clear
area where you would be wrong
bid for better prices
and then make the spread on those better
prices
improving your overall price and then go
from there does that make sense
yeah absolutely it’s not something i’m
implementing right now just because it
feels tricky but it’s definitely
something i need to be working on if i
want to
take my trading set up to the next level
100 so like i do something just as
simple as
all right i get some at 81 cents i bid
for some
at 71 cents i get hit at 71 cents i try
and kick it out at 84 cents i bid for
some at 66 cents try and kick it out at
79 cents
if i get hit at 61 cents i’m not going
to
try and do anything with that i’m just
going to add to my core position from
from those prices
so great prices i’m just adding to my
core other prices i’m literally kicking
it out
and making the spread so that my 80
cents on tier 1 really becomes like
60 cents or something like that another
thing to
i want to keep in mind is that you know
when i’m thinking about price targets
for what i view as a short squeeze trade
really
my my thought is that most of my shares
should be getting ditched if this works
well
above 1660 so i’m a little bit more
comfortable putting on some shares at 80
cents
but obviously the better your price can
be the more shares you can actually
build into that position
just the better the rr will be i’ll
continue
again i’m just looking to make sure that
we’re sustaining at these prices but now
that we’re really holding up
i believe i get in quite quickly
one more wash and then once we walk it
back up i’ll be hitting the offers
and so now we push above 1590 and it
looks like this is working properly
properly we’re back above that 16 level
so things are looking good for now
and here’s where i enter my uh tier two
it’s trying to break above the opening
or that 16-2 level
and you see i offer summit 1633 there
which may be a little bit early it’s
only a quarter of my position
i’m just taking some up before the
actual high of day in case we do get
that stuff
and then put some other orders for the
actual short squeeze move above
so if we do squeeze above 1641 hopefully
i can get
filled up here in the 1660s
and then holding the rest to see if we
can really squeeze higher towards 17.
so i will say given how long we
consolidate here
i would expect those to squeeze through
highs quicker
and this ends up giving us more of a
fight than i was really expecting or
looking for
generally these fall through to the
upside like i said like a rubber band
fairly quickly
so this does concern me that it’s taking
this one but there we go
straight through
and i get filled for half my position
i’m out now and looking to see how the
latter half will play out yeah when i
see a move like that guys
i’m gonna bid 26 cents 16 cents 11 cents
just in case somebody wants to make a
mistake and hit me on the bid
you know we’re above the intraday
resistance levels
it’s made a new high it’s showing us
we don’t know where the top is yet
and so i i want to add more and i’m just
going to try and add more at a better
price
yeah you know so when something makes
that new high
i’m going to bid at a price that i think
is pretty advantageous
to add to my position
and you have to do that like you have to
do that instinctively you might sit
there and say well i’m never really
going to get it you’re going to get it
sometimes particularly in something
that has a low float particularly in
something that just moved
that violently to the upside
particularly when it’s that early in the
morning
so you want to you have to get into the
habit of you know i’m going to bid
26 when it makes that new high i’m
bidding 26 16s 11s
and doing that all the time and i feel
like that’s somewhere i could definitely
improve is
using technology just hotkeys to be able
to be quick sending in those orders
that’s usually my
my issue with that is trying to do it
too much manually setting these orders
20 cents below hoping that i can get
filled so that’s something i need to be
working on on the
technology side
and so as we go up i’m scaling out as
well
and down to a quarter of my position and
now that the short squeeze has really
happened and confirmed
i’m not looking to swing this idea
instead i’m looking to see
are we going to go limit up and you see
that above 17 we actually start stalling
and we can’t really go limit up so
pretty quickly i end up getting out of
my final shares
because if this is going to follow
through and go limit up it it should
happen
immediately it shouldn’t be taking this
long consolidating
i believe this is where the tape really
changes to the 17 level and you see i
just got out of my last shares at 17.
we just went so vertically that it seems
like we may need to
have some relief to the downside if
we’re going to go any higher
so that’s important for these trades is
just trying to engage that momentum and
where it’s starting to turn around
in these short squeezes not overstaying
your welcome in your position
and ty i believe you were flat here as
well yes
yeah when you see something vertical
like that you want to pay attention to
how they’re paying the offer
and notice when they stop paying the
offers aggressively and when they stop
doing that
take some take some risk off the table
in above 17 there wasn’t
like a continuation in volume and so we
were really watching above those levels
and and you can even see here with this
indicator we have on the level two
i mean on the squeeze bar almost all the
volume being done on the offer
on this turnaround bar above 17 almost
all the volume being done in the bid as
all the longs are
getting out of their positions and we
saw that in piton today on the open
right
we noticed the way they were paying the
offer paying the offer paying the offer
and they just stopped paying the offer
at a particular price and that happened
to be
a shorter term resistance area
super important to take a look at how
they’re paying the offers
on the tape and noticing when they stop
so we can let this play out a little bit
this
ends up actually being the top and it
sells off from here
so i didn’t get involved for anymore
um i tend to think that i i don’t want
to get short for
names like this right now i struggle
with the risk reward of the trades
but something i’m looking into for the
future i know matt took advantage of
this
and there we just see 16 8 break
yeah and we haven’t seen a dropout like
this in the name all day
our thought process here is like we’re
above the pre-market highs and all-time
highs so we want to see
you know find a direction where this
could really run to
more just sitting on our hands at this
point yeah and so i i don’t
by any means think that the play is over
and that this thing is just going to
fade the rest of the day
but i am thinking if i’m going to get
along this thing again i want to see
some consolidation
you know above these opening prints i
wanted to show me that it still has
strength and
stop showing downside i do think you
have a trade decision there
particularly around that 30 cents 26
area
you know when it pulls into like 16 26
16
30 to just dip your toes into the water
and by a little bit and then really wait
for the turn
to potentially head back i mean it’s
entirely possible that
because it’s so early in the day it’s
entirely possible that
this thing stalls out and and isn’t
going to trend for the day
but you know we did just see this above
17
near 1725 and it just pulled in a point
in a stock that’s above
the opening range and so
you may want to think about for your
trading strategy dipping your toes in
there
into a really
steep decline
and adding that to your strategy the
best strategy is you see a turn and you
save most of your risk for that
but i would have been pretty tempted to
buy a little bit there
right right on the bid of 26 cents
anyway
so i’ll just fast forward this we end up
not seeing much life in it for a little
while
uh you know the tape just keeps rolling
over
we fade all the way back down to this
1550 area
where for a minute it’s also a view up
and for a minute it looks like this
might be defended
but once we flush through there that’s
it for
the rest of the day pretty much and
that’s why
you dip your toes in and you wait for
the real turn
as opposed to just really buying a ton
based on price
um but yeah that’s that’s essentially it
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* no relevant positions

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