{"id":17839,"date":"2012-03-16T10:47:19","date_gmt":"2012-03-16T14:47:19","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=17839"},"modified":"2012-03-16T10:47:19","modified_gmt":"2012-03-16T14:47:19","slug":"why-buying-a-stock-at-a-higher-price-can-be-better","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/why-buying-a-stock-at-a-higher-price-can-be-better","title":{"rendered":"Why buying a stock at a higher price can be better"},"content":{"rendered":"

I received this review from a really solid young trader.\u00a0 There are two important trading lessons in his thoughts.\u00a0 Can you spot them?<\/p>\n

Biggest regret today: not using the information I collected on ITMN as a short. I was watching above 17, I had a long bias, but I chose not to buy it because of what I saw. The way it traded around 17, that\u2019s what a failed breakout\/failure at resistance looks like. I was just so fixated on the long because I thought the risk-reward, based on the volume multiple and long-term trend reversal, was to the long side (especially after seeing MCP\/YOKU lately), figured the short was a scalp for 40-50c at most. Trying to get long pre-market also<\/p>\n

It\u2019s like a fundamental error here, not being prepared for the gap fill play. That\u2019s how I trade ideas at the open — stocks where I can have \u00a0a psychological map for when it will squeeze and when it will collapse. So this was lapse in analysis. Some of my best trades on the open have come from looking at breakouts or momentum through the whole and sensing that something was a little off.<\/p>\n

I hate it when I have small size at 16.25 for when it really goes and I\u2019m getting bigger\u00a0 around 17 when it\u2019s battling and then it fails… I got long 16.27 pre-market, sold 16.66. I wanted to buy a pullback into 16.60\u2019s anyway and I\u2019m spending my risk at 17…<\/p><\/blockquote>\n

Bella<\/strong><\/p>\n

Did you spot the two important trading lessons?\u00a0 If so well done.\u00a0 If not read further.<\/p>\n

1) Biases are wonderful to develop before the open.\u00a0 But remember they are just biases.\u00a0 This is just your opinion about how a stock may trade.\u00a0 There are thousands of players in the market.\u00a0 It is impossible to understand what all players are thinking or why they have to buy and sell.\u00a0 Maybe a big HF needs to raise cash and they have chosen this moment in this stock?\u00a0 Maybe an institution sees a different longer term trade that disrupts your intraday trade?<\/p>\n

Biases unconfirmed by the tape for the intraday trader breed irresponsible risk.\u00a0 Think of each trade as just an opportunity for the security to move away from prices you have identified as significant.\u00a0 And not necessarily a marriage between your bias and the next move in a stock.<\/p>\n

2) Sometimes the buy at 17 is a better buy than the buy at 16.23.\u00a0 This is a hard concept to understand for the retail trader.\u00a0 How can it be better to buy a stock 77c higher?\u00a0 But for the intraday trader we must understand this trading principle.<\/p>\n

The trade at 17 has a risk\/reward.<\/p>\n

The trade at 16.23 has a risk\/reward.<\/p>\n

It is entirely possible that the risk\/reward is more opportunistic at 17.\u00a0 Let me offer an example.<\/p>\n

CLF at 12PM (see the chart below) was a much better risk\/reward trade at 69.50 than on the open around 69.\u00a0 More believed in the intraday long.\u00a0 69.50 was not dropping the bid offering an excellent risk\/reward entry.\u00a0 With a downside of 2c we had an upside to our target of 71.25, the next significant technical level.\u00a0 You will make a lot of money as a trader putting yourself in those risk\/reward opportunities.\u00a0 And it all came a good 50c higher than our first entry opportunity.<\/p>\n

\"\"<\/a><\/p>\n

Bella<\/p>\n

One Good Trade<\/a><\/p>\n

\"\"<\/a>
\nno relevant positions<\/p>\n","protected":false},"excerpt":{"rendered":"

I received this review from a really solid young trader.\u00a0 There are two important trading lessons in his thoughts.\u00a0 Can you spot them? Biggest regret today: not using the information I collected on ITMN as a short. I was watching above 17, I had a long bias, but I chose not to buy it because of what I saw. The … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[162,4674,30,1828,1193,653,301,1354,1349],"class_list":["post-17839","post","type-post","status-publish","format-standard","hentry","category-mike-bellafiore-bellas-blogs","tag-day-trading-blog","tag-one-good-trade","tag-prop-trading","tag-smbu","tag-trader-education","tag-trader-training","tag-trading-blog","tag-trading-coach","tag-trading-mentor","no-post-thumbnail"],"yoast_head":"\nWhy buying a stock at a higher price can be better | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/why-buying-a-stock-at-a-higher-price-can-be-better\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why buying a stock at a higher price can be better | SMB Training\" \/>\n<meta property=\"og:description\" content=\"I received this review from a really solid young trader.\u00a0 There are two important trading lessons in his thoughts.\u00a0 Can you spot them? 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