{"id":31591,"date":"2013-09-22T11:17:27","date_gmt":"2013-09-22T15:17:27","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=31591"},"modified":"2023-04-27T07:18:19","modified_gmt":"2023-04-27T11:18:19","slug":"from-the-playbook-building-intuition","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/from-the-playbook-building-intuition","title":{"rendered":"From The PlayBook: Building Intuition"},"content":{"rendered":"

Learning how to build your intuition is a key element of successful trading. Here’s a discussion on this from Chapter 4 (“How Good Can You Be?”):<\/p>\n

Arggh is the topic of trading intuition misunderstood. Newbs think they are born with a\u00a0\u201cfeel\u201d for the markets and trade accordingly. Yeah, so it doesn\u2019t work like that. Intuition is your\u00a0trading brain telling you when to buy and sell. For the experienced trader, this is an invaluable\u00a0indicator. One to be listened to and honed. If you are a newb, tell that voice in your head to, as\u00a0we say on Twitter, STFU. It\u2019s like a crazy old uncle you want to avoid at a family picnic. You will\u00a0develop intuition through screen time, experience, and trader thought. Like TO did. There is no\u00a0other way it gets developed.<\/p>\n

When the Facebook IPO came to the market in May 2012, it failed miserably. Its IPO open\u00a0price of 38 did not hold. During a discussion after the close, TO critiqued our desk during a trade\u00a0review for not being prepared to short social media stocks. He made his points clearer in this email:<\/p>\n

I really think the desk blew an opportunity not getting short social media plays. We all\u00a0know we can only make money if FB goes up, but we should be prepared if the IPO\u00a0sucks\u2026 and that\u2019s where you go, to stocks like RENN and ZNGA\u2026 especially when they\u00a0show their relative weakness right off the bat. They were crushing ZNGA in the\u00a0premarket, flashing huge size on low offers. There are so many trapped longs who were\u00a0long for no reason other than for today. Hey, I wanted the IPO to be good, too, but\u00a0there\u2019s no reason not to think of ideas to make money off of if it sucks.<\/p>\n

I am beating myself up so much for not being the one to make a massive amount of\u00a0money shorting these things. I have a contrarian radar in my head and for weeks, I\u00a0avoided the social media sympathy plays because the price action was so bad. (I\u2019m\u00a0actually being contrarian by following the trend, how ironic.) Then GMan banks huge\u00a0on FFN, and I can\u2019t help but drink the Kool-Aid as well. I lost close to a grand on my\u00a0personal account by getting long a few of them premarket on gap-ups. (Trading small! I\u00a0just let them all trade against me because I was stuck thinking \u201cwait, WTF is going on?\u201d)\u00a0We were all drinking the Kool-Aid on the open, trying to get long ZNGA with a very wide\u00a0stop, thinking, \u201cWait, this makes zero sense; how much can this really go down?\u201d I\u00a0mean, if you were paying attention, you could have seen this coming for weeks\u2026 ZNGA\u00a0was making new lows into the IPO date\u2026 nobody wants this piece of $hit. Even a leader such\u00a0as LNKD looked very weak. Didn\u2019t follow my intuition. I\u2019m not time-machine\u00a0trading; the foresight was there, but I didn\u2019t listen. That\u2019s why you have got to trade\u00a0price action and not blind hope. If anyone should\u2019ve nailed it, it should\u2019ve been me.\u00a0Hyped-up sector, speculative stocks, contrarianism\u2014those are my roots as a trader.<\/p>\n

Today was classic Wall Street \u201cbuy the rumor, sell the news,\u201d with a different twist. The\u00a0only reason anyone had to buy a garbage company like RENN was for this day, and the\u00a0IPO can\u2019t hold its opening price and traded dangerously close to getting below the IPO\u00a0price as well. None of these companies had the right type of chart coming into Friday,
\nsave for FFN.<\/p>\n

Anyway, I\u2019ll get off the soapbox now.<\/p><\/blockquote>\n

I responded:<\/p>\n

You are not on your soapbox. You are totally right. Your ability to properly critique this\u00a0day started when you created the FINVIZ list of social media stocks and started\u00a0watching how they traded, which were the best, which were dogs, which moved\u00a0together.
\n—<\/p>\n

The trading lesson here is that TO developed the ability to accurately critique this day\u2019s\u00a0trading because of the prior months of work he had done. You build intuition through screen\u00a0time and study. He had paid his dues to gain the insight to offer a better plan of trading attack.<\/p>\n

You can be better tomorrow than you are today!<\/p>\n

Mike Bellafiore<\/p>\n

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

The PlayBook<\/em><\/a><\/p>\n

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

No relevant positions<\/p>\n

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

Learning how to build your intuition is a key element of successful trading. Here’s a discussion on this from Chapter 4 (“How Good Can You Be?”): Arggh is the topic of trading intuition misunderstood. Newbs think they are born with a\u00a0\u201cfeel\u201d for the markets and trade accordingly. Yeah, so it doesn\u2019t work like that. Intuition is your\u00a0trading brain telling you … Read More<\/a><\/p>\n","protected":false},"author":1037,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[879,3405,745],"class_list":["post-31591","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","tag-building","tag-intuition","tag-playbook","no-post-thumbnail"],"yoast_head":"\nFrom The PlayBook: Building Intuition | 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\/from-the-playbook-building-intuition\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"From The PlayBook: Building Intuition | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Learning how to build your intuition is a key element of successful trading. Here’s a discussion on this from Chapter 4 (“How Good Can You Be?”): Arggh is the topic of trading intuition misunderstood. Newbs think they are born with a\u00a0\u201cfeel\u201d for the markets and trade accordingly. Yeah, so it doesn\u2019t work like that. Intuition is your\u00a0trading brain telling you ... 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