Ten trading lessons from observing an Australian (ASX) Equities trader

I am in Sydney on business, meeting with trading firms and traders.  Yesterday, I had the opportunity to stand (literally) with Austin Mitchum, @AustinMitchyblu, and observe/participate in his trading of ASX equities.  I thought I would share a few observations.

1. One Good Trade

Somebody coined this phrase somewhere or wrote a book about it.  Strikes me as genius, so I will use it again here.

Austin made an excellent trade in APT, as a 2nd Day trade.  APT broke out the prior session on high volume, with a news catalyst, finished above VWAP, and looked strong into the close.  Austin held some overnight and added on a move above the closing high from the prior session.  The trade started working.  Into 17, he took some profits.  A slight pull in offered a trade decision to re-add, which he did.  He made more plans to add and be aggressive with a move through the highs.

And then for the first time in two days the stock slipped below VWAP. And then it reversed.  He cut very well.

The trade thesis on his adds ended up not working.  As a trader, we cannot control the outcome.  We can control making One Good Trade.  He did.

2. Short stocks weaker than the market

SGM offered bad news before the open, reversing some recent healthy price action and enticing bottom traders.  It cracked below long term support, trapping recent longs, brings out new shorts.  More importantly, it consolidated below long term support, intraday VWP, and was weaker than the market.  When striving to be selective in markets, stocks independently weaker than the market is excellent stock selection.

3. Cross the damn Street

I am amazed at the universal adherence to walk signals in downtown Sydney.  No one crosses the Street until the green cross signal strikes.  There can be no cars in any direction remotely close to a walkway and the locals will not cross until the green walk signal.  They do not even seem to be tempted.  What exactly happens if you cross before that green walk signal?  I, myself, as an expert in patterns sense something very bad.

4. Take Uber

Just trust me on this one.  The cab drivers in downtown Sydney need improvement.  There is overwhelming agreement on this from those that live here as well.

5. You only need a few good opportunities to have a big day

US markets are the most opportunistic.  We are fortunate to have such a deep bench of stocks to trade and liquidity.  This is not the case in many foreign markets.  But on this slow trading day, Austin developed 5 good trading ideas.  That is plenty.  On this slow day, trading a market smaller and less opportunistic, a day before a US trading holiday, there was plenty to do.  If you have a few good ideas during a trading session that can be enough for a solid trading day.

6. There are different ways to look at markets

Austin and I had fun discussing different patterns to attack his ideas.  Austin voiced clear patterns that were most comfortable for him.  I saw patterns, entries and exits that made the most sense to me.  There is no right way to trade.  There is a right way for you.  But learning how someone else is seeing opportunity can help you shape your trades best for you even better.

7. Research and price action combined

Austin has done a terrific job building relationships on the Street to provide color on stocks he is trading.  Combining this news edge with price action allows him to develop an effective trading system.  There were two trades where he had a very clear news edge before the price action so confirmed.

8. Fight for price

A good idea was developed in ALL before the open, but entry was no obtainable at a good price.  It is easy to regret missing an upmove, especially after game planning the long idea.  But if you cannot enter at a good price, then your risk/reward is scewed.  It is not a good trade if you do not get a good price.  Fight for price!

9. The best day trades can become swing trades

APT started as a day trade and showed itself as a solid swing trade.  SGM started as a day trade and showed itself as a solid swing trade.  You can develop assymetic swing trades from day trades that act best.

10. It is a pleasure to watch a real pro trade

Pop up alerts, remind Austin to check in on weaknesses that hinder his trading.  Excel spreadsheets stand ready to assist with trade decisions.  Automation connected to e-mail ensure an event is not missed.  The phone rings from colleagues reached out to for input.   Very clear setups to add and subtract come easily. It is fun to watch someone so dedicated and in possession of edge compete in markets.

*no relevant positions