The Evolution of a Trading Answer (Part II)

BellaMike Bellafiore's (Bella's) Blogs, Traders Ask11 Comments

Yesterday we examined a trading question from one our remote trainees here.  When faced with such a question often a trainee wants an answer ASAP.  And for me certainly it would take less time if I just offered the answer to trainees and moved on with my day instead of asking them questions, letting them struggle for the answer, and wait for it.  But is that best for their learning?

In my last post I asked what a great trainee would do after struggling with the question of flipping.  Below is the answer of a great trainee.  He sought advice, considered the advice, found the best system for flipping FOR YOU, and then asked an experienced trader to review.  We remember most what we figure out ourselves.

I’ve thought through the flipping scenarios that makes most sense to me.  Its definitely a combinatorial issue but the below does provide good guidance to keep.

General scenarios to consider flipping (ranked from less risk to more risk);

  1. Range plays of 15 Cents and above
  2. Breaking news intraday (ones that are unexpected and especially causes a lot of uncertainty or high hopes like for example, lawsuit against RIG regarding oil spill, products adopted by tech giant like AAPL, etc.. )
  3. Sudden and significant change in market (SPY, futures, etc)
  4. A very sharp and fast move in the stock making it stretch very much (bias that needs to be further explored: less risky  when flipping from short to long due to “dead bounce cat” and “human nature pessimistic rejection” effects).

Specific conditions (on top of the normal entry conditions to the stock);

  1. Unusual Held Bid/Offer
  2. Waning momentum
  3. Identifiable strong support/resistance (intraday and/or daily)
  4. Consolidation
  5. 5 to 1 risk reward
  6. Confirmation for adding size and confirmation to enter when stock stretched too much.

After writing this down and reading it again I suddenly felt that I understood your thought process of why to go short in SLM at .53.  Like you said, there is no wrong or right.  There is just correct thinking.   That was a nice way to see it.

This list is dated 12/20/2010 in my notebook.  I shall review it once in a while to fine tune it adding more items that work and delete ones that doesn’t.

Thank you for showing me this “fishing rod” (opposed to giving me the “fish”)!!!

11 Comments on “The Evolution of a Trading Answer (Part II)”

  1. Sorry for my post at part I. Now I get the “zen-meaning”. 😉

    Cheers,
    Markus

  2. I was blind without the tape. Now consistently profitable as my biggest risk factor has been nearly eliminated and I can confidently trade stocks in play. I am waiting for the series on from Guy, hope it is more profitable than tape reading, although i am not holding my breath. And Guy, I don’t trade for SMB, too old for them 🙂

  3. Do not listen to (GUY) this d***** bag bitter at life internet wankster, because he is probably one of 90% who failed to develop the talent to trade intra-day.

    I started my proprietary remote day trading career exactly one year ago and I can tell you it has been the most difficult challenge I have ever faced in my entire life. Yes I have paid a tuition to the markets to learn and yes it has been quite the emotional roller coaster ride, where at times the pain is so unbearable. I can tell you that every time I got kicked in the nutz, which was probabbly 10000 times, I somehow managed to get in front of my screens and do it again. Long story short, I did not take SMB Capital’s training or did I ever work for them as I am from Toronto Canada. I was a trader that traded a basket of 30 stocks or so in correlation to the market. I would recognize a chart pattern and execute the trade, which did not work out too well on most occasions. Not too long ago I was mentored by someone who trades In-play stocks (catalyst) as well as I learned to read the tape, which I had never learned. Let me tell you that my trading has made a 180 degree turn for the better, as now my profits are 5-10 times as large and the “tape” guides me leaving much of the emotions out. Am I a more profitable trader now? Yes. Am I a more emotionless trader? Yes (but not completely as I am human). Am I a more mechanical and focused trader? (one good trade at a time, and yes I read that book and its damn good, because I learned a crap load) Yes. Am I on my way to becoming the next great trader? Hell ya. I am Canadian dude that is a true believer that reading the tape is must have skill, and trading the in play stocks is the only way. Therefore, for all you folks that “LOVE” intra-day trading and are truely passionate about it, learn to read the tape, trade in play stocks, and apply your technical analysis and your trading should make a turn for the better. Don’t be discouraged by wanksters like GUY as I was in your shoes only a year ago and I am starting to finally break out. In my early days when starting last year, I would always read crap from people like GUY on different forums etc. Yes it discouraged me and I had to second guess whether I was doing the right thing or not. Don’t hurt your eyes with this type of negativity as it will only set you back. Stay positive and happy trading!

    P.S. GUY, nice twitter page and yes I am a huge 2pac fan myself. Let me tell you this, 2pac was a real G and a revolutionist. He was not a hide behind my computer screen wankster. Reality check buddy.

    Bryan

  4. Guy

    If you believe this why do you even visit this site let alone actively blog negatively?!?!?!?!

    Amazingly your not even flogging an alternative service or product. I can only surmise that you either have a misguided view that your trying to save the public from the mythical wolf or alternatively are just a really sad bitter person that needs to big note yourself at the expense of others.

    Here’s a free piece of advice: Get a life!!!!

    To the guys at SMB (particularly Mike, Roy & Adam) I say thanks for all your tireless efforts and for sharing your experiences. Contrary to Guy’s comments this site, and Mike’s book, has definitely had a positive effect on my education and trading and I really appreciate the time you spent with me showing me your program and office on my recent trip to NY.

    Have a great xmas & new years guys 🙂

  5. The SMB Blog is a place for new and developing traders to learn. Contrary opinions are welcome. However personal attacks are not welcome. The first thing you learn in law school is attacking another does not disprove their argument. So let’s keep the discussion to evidence and arguments about best trading practices (in the words of Dr. Steenbarger).
    And just as a point of clarification. SMB does not make trading decisions soley on Reading the Tape. We use intraday fundamentals (Stocks In Play), Technical Analysis, and Reading the Tape to make our trading decisions. We do use our Reading the Tape skills to give us more confidence in our trades. It does help us to find better entries. We can find plays on the Tape that are not present on our charts. It allows us to trade with more size when we spot Reading the Tape catalysts.
    Reading the Tape is a difficult skill to develop. It takes a great deal of practice. If you do not develop these skills you will indeed think the Tape is blind.
    This is a blog where we seek to get better everyday. We do not have time for personal attacks. How would that help our trading?

  6. smb is great company am private trader i use be a trader on the floor now retire and there systen great its not casino the stockmarket is the casino please watch blog and there book is great . ps i use there system gman rocks

  7. Hello Gentlemen

    Found your site quite by accident and thought I would take chance, so for the moment I am a “thread on the water” for lack of a better analogy.

    I am a retail trader with significant experience. My initial approach probably not unlike many others was to throw money at the problem (and lose it promptly). Because I don’t like to lose at anything, I took a step back and found a method that seems to work. I trade futures (primarily for tax reasons). I would say that I am a tape reader…that is to say, I interprete the “time & sales strip”, along with the NYSE tick and a few other data points. I believe I “have got it” because I find that I am able to find favorable entry fairly easily based on what I see on a chart and how a contract trades. Personally I find “the tape” to be a walk in the park..I hope not to be misunderstood, but it seems that once one can recognize a “held bid or offer” especially at a what I characterize as key reference areas, its game over…for those struggling to find their way I suggest looking at this market from an institutional point of view…that is to say, look at what professionals are trying to do with respect to time (yearly, quarterly, monthly, weekly, etc)…..once I put the markets into this context it became fairly clear to me where the parade was headed….I have enjoyed listening to a few of the available videos and want to wish you and your colleagues a pleasant holiday and a prosperous new year.

  8. i read guy’s blog and his posts and he is right and wrong.

    daytrading is not gambling. plenty of people making plenty of money and im proof of that. there is a lot of good information on this site and many others like it.

    then there is the dark side to prop trading. sad but true most”prop trading firms” care more about your churning than you making money. firms are structured to make this the primary way of income off you as a trader. the backlash would be much less if prop firms would just be more transparent about this. most choose to hide this fact and one area i would like to see improved in the near future.

  9. I deleted the comments from “Guy”. That type of negativity is harmful to the writer and the reader as well. I also edited some of the stronger language in the replies to him. There is no need to be dragged down into the cesspool….

    The “value” in trading can be found by digging down deep to within oneself and striving for excellence. This will carry over to all aspects of one’s life.

    Happy Holiday

    Steve

  10. For various reasons, very few people who try to trade succeed. For those who do manage to make money, even fewer manage to keep it and adapt to changing markets. Of those, even fewer manage to translate their success to different markets / timeframes… we all know this and the end result of this is that there are a lot of people who tried to trade but couldn’t do it out there… and some of those angry and hurt failed traders focus a lot of attention on internet forums where they can make themselves heard as an expert.

    I can tell the readers of this blog that one of the things that held my trading back as I was struggling with adapting to a new market (short-term S&P futures after making the transition from intermediate term currency futures… this was around 2001) was all of the negativity on the internet. At that time, it was various chatrooms and forums, but it’s the same crap we see on some the better known trading bulletin boards and in blog comments all over the place. A lot of the people who try trading are aggressive, intelligent people and the draw the not-unreasonable (but wrong) conclusion that if they tried to trade and couldn’t, then no one can. Furthermore, they assume that anyone who says they are successful must be running some sort of scam, and these people are also often angry and hurt from their failures… the end result is a lot of people have attitudes like “guy”, but reading their garbage definitely put my trading development back a few months or years at one point.

    My point here is directed to new and/or developing traders: do not spend too much time reading or thinking about attitudes and comments like Guy’s. Yes trading is very difficult, and frankly most people who try to do it will not succeed in any real capacity. If you are successful, it will probably take longer than you expected and you will have to give up a lot of your ideas and misconceptions along the way… this is very hard. Trading has always been, for me, a process of learning what doesn’t work and what beliefs I hold that are wrong… this has been incredibly painful at times, but the end results do justify the struggle.

    Focus on your own growth and development… never believe anything you are told without proving it yourself (which is why I emphasize knowing how to test your ideas with statistical tools.) If you fail, pick yourself up and try again… that’s the only recipe I know for success. Sometimes, just simply refusing to quit can be your greatest asset.

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