How to Use Tape Reading to Help you Keep Your Trading Profits

You are making money in a trade but not sure when or how to take profits. You are fearful if you sell, then it will trade much higher without you. But if you do not make the right decision, you might lose all of your trading profits.

In this video, see how Tape Reading gives a trader on our desk the signal in ABNB, to exit a trade for a profit, before reversing for a loss. Let’s get to work on sharing these important trading lessons so you can grow your trading account.

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you’re making money in a trade but not
sure when or how to take profits
you’re fearful if you sell then it’ll
trade much higher without you
but if you do not make the right
decision you might lose
all of your trading profits 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
class take one good trade and the
playbook in this video
see how tape reading gives a trader on
our desk the signal in airbnb
to exit a trade for a profit before
for a loss let’s get to work on sharing
these important trading lessons so you
can grow your trading account
this is a multiple time frame flag this
is day two of airbnb being listed
and you know this is a position that i
actually in fact took a one-hour loss on
and i think there’s a lot to take out of
it of course you know
nobody really likes to share their
losses but everyone loses and you know
we could learn from them and this is
certainly one of them this will help me
going forward so
we can get right into it so this is i’m
kind of taking this multiple time frame
um this is day two of airbnb being
i’m getting involved on this 149 break
kind of a wide stop
off 146.28 but the idea that is that
this might set up a little bit better
later on
and i’ll be able to get a little bit
bigger with a tighter risk
targets are kind of 151 to 155. my stop
initially is 146.28 so this level right
and it’s a multiple time frame flag it
is a you know high quality setup for me
that simply didn’t work out
and you know there’s you know some
lessons to take out of it so we could
get right into the tape
you could kind of see that this flag is
taking place it’s also kind of this key
level where
you know if we get over 149 these lower
highs right here
or these highs right here as well as you
know this high right here
you know there could be some shorts who
are going to stop out you know this
could really open up
and we break out of that level so
just stop for a second so not every flag
is created equal
when we’re looking at that flag it’s
important to look at how tight it is
how much volume it’s done how long the
flag has actually been setting up for
so that after that we can actually judge
how good the flag actually was stick so
there’s gonna be flags and people are
gonna be like oh i took the flag pattern
or i took the big dog pattern
and it didn’t work out and judge
that just as a as a flag pattern but
you know you want to start to see what
are the better flag parts
as you get a little bit more experience
you’ll be able to eye it and be like oh
that’s pretty tight
oh that’s pretty tight and has been
going on for a long period of time
oh that’s one worth taking oh that’s one
where there hasn’t been enough time
of consolidation you know the sideways
action the flag pattern the
accumulation the coming together the
buyers and the sellers
that that flag pattern is just not long
but and and so you’ve judged this to be
a good trade
i think i think this is a pretty good
flag pattern this is uh
there’s a pretty good period of time
we’re coming together here agreed or
or do you disagree yes i agree i i would
have liked for the wrist to be a little
bit tighter
in regards to the 15 minute i think i
could have got away with risking off
this higher low right here
um but yeah i think the context is there
and it’s pretty tight
and yeah it’s a high quality setup that
really ended up not working out
yeah it’s almost an hour of price action
that forms the flag that’s a pretty good
amount of time and i guess that’s what
you’re probably meaning by multiple time
a flag pattern correct
okay good yeah yeah so
i actually kind of missed the fills
initially we did have to kind of reserve
shares and
and so i pulled back in not gonna run
after it pulled back in it’s starting to
and then i get involved i know i want to
get involved at 149 or lower i don’t
really want to run after this
so i fell at 148.90 what day was this
how many days live is this airbnb uh
this is the second day okay and
what are the important technical
patterns from day one
are we above are we below are we in the
middle of the range
yeah so we’re kind of right below
there’s like a 150 level
um that’s definitely a key level i kind
of wanted to position myself prior to
and thinking that if we did break out of
this flag a lot of
you know stops would go off from the
short side and we would actually open up
um but we are kind of below a key level
so that is
something to take note of yep okay good
um so i’m involved at 148.90 again
would have definitely like to see this
kind of open up a bit more
um initially and push away from price
that’s usually
you know a good sign when you’re buying
some type of timing point where you
you know shorts are stopping out here it
should go here
but we do see elevated volume
and you know we are building higher lows
and it although this is a one minute it
still looks good you know on the five
minute and the 15 minutes so there’s no
real concern
you know decreasing volume
um we could fast forward a little bit if
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and you know we reclaim that’s a good
and you know we’re kind of back to that
same level we’re starting to build
some higher lows and
then there’s a spot right here where
you know if we get a above 148.70 i say
you know that is where we should start
to go
and i’m going to add to my position be
with the same dollar value of risk but
my new stop is going to be 147.18
so i’m tightening up my risk a little
bit that’s very important what you said
there i i really
like how you’re watching something
trading in a tight range for about an
and you’re saying to yourself hey what
is going to be the price that triggers
the new move to the upside if it gets
above this price
i expect it to actually go up that is a
very important question to be asking
when you’re watching it trade in that
that tight range
and then that’s a lot of information as
to how it does
when it gets above those prices so well
done there
so again i’m going to be able to add to
my position get a little bit better of a
cost basis
a little bit bigger because again my
risk has moved up so i’m just kind of
patiently waiting for that to
actually break out
and again we could kind of see this big
offer at 148.73
we could see it stepping up
and i add to my position there
and you know able to get a little bit
bigger risking off 147
18 and again initially probably should
have waited even a little bit longer for
it to go
um but we end up do breaking out
and again if it does end up pulling all
the way back into 147
you know 1920 here the idea is dead so
it’s okay to get bigger right here
you know if it pulls in the idea is dead
so might as well be a little bit bigger
with the same dollar value of risk
and we break out i could kind of get to
and we break out on nice volume um and
that’s a good sign you know that
my thesis is proving out to be the case
you know shorts are stopping out i would
like to see this push away from price
even quicker but we are seeing that
elevated volume
and at this point you know i’m still
thinking this is you know a high quality
but then we kind of start to get a
little bit of a shift in character
um when we get up to you know 150 it’ll
come in a little bit
150 40s but you know we’re breaking out
right now and this is a good sign and
i’m thinking
you know this is this is really working
but you know i’m not here to just pike
it and make you know a little bit
i want to be in for the move
and now we’re kind of above that day one
level of 150 like i
talked about earlier so that’s a good
sign and we’re above it on volume
and we’re holding it for now
we kind of pull back in
and then this is kind of where
some selling really starts to take place
up in these 150
40s 150 50s it was kind of selling that
i really haven’t seen before
on other names on other ipos but there
incredible selling and you know the idea
is if those
if these levels lift you know a lot of
shorts are probably risking off those
and it should open up so there’s no real
reason to
worry but i am starting to see you know
some some big selling
taking place
and if i could capture that you know
if these 150 40s 150 50s go again
i’m thinking it will open up to 151 and
really start to work in my favor
but you know just incredible selling and
this is really my first mistake
is i’m noticing this selling and i’m
telling myself this might need time and
might need to reset with price before
actually breaking out of these levels um
so i should be lightening up at least a
third that’s typically what this
position calls for
and you know i’m not going to net a lot
on it yeah i completely agree you’re
up against a technical level that you
there’s heavy selling you have a stock
you know the ipo price for the stock if
my memory is correct was 68 bucks
correct is that right 68
yes so it’s 150 it’s two days old
yeah you want to keep in mind that wow
this this
is well above what
the deal was sold out to the street so
i’ve got i’ve got risk of a little bit
of a pull-in
that matters um
you have a trade decision there i i
completely agree with you have a trade
decision it’s it’s probably not a flat
yet but but you have a trade decision
yeah for sure and i remember telling a
few guys
man this this is really having problems
up here it needs
you know to reset with time and price
before it
maybe makes an attempt at these levels
and these wicks are really ugly and
you know this isn’t simply short
slamming it down there’s
clearly somebody up there selling you
know unlimited size it feels like
um so i should be taking off a third and
you know reevaluating it i can always
add it back on or even half
um but i think this is really going to
help me going forward on you know the
next ipo that takes place that’s really
in play
i actually think this to me raises an
interesting point which is
and i was having this conversation with
graham and i think sometimes
you guys when i’m trading you’re like oh
man he’s making too many decisions
um and i got the sense today that graham
was kind of making fun of me under his
breath about how many decisions i was
actually making in riot
compared to him um
but i’m doing that for a reason which is
there are certain times where
i’ve got to trade i’ve got to reposition
my position
i’ve got i’ve got all risk at certain
times and positions and
i’m going to use my tape rating skills
to take off my risk
and then watch to see if i should put it
back on and having those tape reading
allows you to because look i know
exactly what you’re thinking you’re
sitting there thinking
i don’t want to take this off because i
may not be able to put it back on
am i right that’s exactly what you’re
thinking you are fearful
that if you take this off up here at 150
in front of 150 40
that you don’t have the skills yet to be
able to put it back on
and you’re going to miss out on the time
that it runs to 160
and that’s that’s a lot of money yeah
and that’s why we actually do these
exercises because
i want you guys to have the skills to be
able to say risk off
let me let me let me lighten up here and
then let me watch
and to be have have that ability to all
right i’m going to take it off at 1
150 40. oh you know
it pulls in it’s not really going down
let me put it back on
i can put it back on okay now i just
made a new high let me put some more
back on and
trade out of that as well you will have
those skills
but you you you know this to me when i
look at this pattern what’s the risk to
this pattern i
i see i see this
as as there’s a potential pattern that
i’m just snuffing out
all day long when i see all that selling
at 150 which is what
that this could flush pretty hard 100
this is a fail breakout
that is not not only is it going to go
down below 147
but it could go down below 147 very
yeah because it’s so young because of
the pattern
so i’ve got all risk here so i’ve when i
see that heaviness at 150 i’ve got to
make a trade decision and i probably
lighten up and that’s a question of how
much and then
uh you know i’ll probably as it pulls in
if it pulls in a little bit more
than i think i’ll probably make another
trade decision might have to get flat
correct but i’m not afraid and i’ve got
my skills to be able to get back in
and because i can get back in that means
i can make i can i can trade with
so much less risk that’s what you’re
really saying
you’re worried you’re worried that
you’re going to miss the big trade
i’m worried that i don’t want you to
trade with too much risk
yeah and when you build your tape
reading skills you don’t have to do that
yeah and those were certainly real-time
thoughts of
if i take this off i’m going to have to
add it higher it’s going to be all
screwed up
and i think that comes with experience
with time but i know for a fact that you
ignoring these reasons to sell reasons
to peace out
you know nine out of 10 times they are
clear reasons
to sell and peace out and if i ignore
them they do cost me
um so just really heavy selling
and again this is kind of the final
attempt where okay
this if it doesn’t go here red flag
i mean it’s already a red flag but
but i i do know you know there’s a lot
of people stopping out at that level
so i want to give it a shot
and then that final push i believe was
where it fell apart you know it pushed
over those 40s
to right to 50 that half dollar and
you know there’s unlimited selling at
this level this is where
the best thing i can do is at least cut
half right now
and then i’m probably going to be in a
better state of mind to cut the rest
and can always get back in if it
tightens up later today over 150
or on this day but instead we get that
nasty whoosh
and you know a lot of people at the firm
are making a lot of money on this and
i’m thinking
man you know if it just broke over that
150 50 level
i think i would have been in the money
but you know that’s not the case
um but i like how you’re thinking
through this which is
all right there are people looking at
this on the short side and they just
noticed it could make a new high
and they’re now going to be able to get
more aggressive against
that high because it’s can’t push
through there should it push through
couldn’t they’re feeling more confident
that’s who you’re up against so that’s
the other side of the trade yeah
yeah for sure and this is kind of
if it gets below this low this is
certainly where it is dead
and it’s probably a good short um
so worst case scenario i probably should
have just taken it off
when it did break below this low
but i ended up eating a full one-hour
loss on it
and after speaking with one of the guys
at the firm
with a lot more experience with me you
we do spend a lot of our focus you know
on bigger ideas
but what i need to understand is it’s
okay to go into the day
and you know focus mostly on bigger
ideas but
at the end of the day most of them end
up not being that bigger idea
and i still need to make money on
you know the ones that don’t end up
being that case you know there was
you know i could have made a few bucks
on this
um but yeah that’s about it you know
got stopped out for one hour loss
and i think there’s you know this will
help me going forward you know
now i know okay this is day two
ipo up a time you know it was indicating
it was supposed to open around 68 bucks
it’s at 150.
i need to be really cautious it needs to
be absolutely perfect
um if it is going to set up and maybe
there’s a lot more money to make on the
short side and that was certainly the
case if
you know you go back and look at day two
on this
yeah but super good experience momentum
trading and ipo
not the easiest type of trading to do
lots of lessons learned there from you
so so good good experience hey go ahead
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