{"id":32411,"date":"2013-10-10T08:49:47","date_gmt":"2013-10-10T12:49:47","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=32411"},"modified":"2023-04-06T12:49:49","modified_gmt":"2023-04-06T16:49:49","slug":"contemplating-insanity-into-my-trading","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/contemplating-insanity-into-my-trading","title":{"rendered":"Contemplating Insanity Into My Trading"},"content":{"rendered":"

I am one of the subscribers to the new SMB DNA program<\/a>. I missed your mentoring session yesterday, but I just watched the recording and was wondering if you could answer one question for me.<\/p>\n

I just also wanted to say that I read both of your books not too long ago and thought they were the best books on trading I have ever read (and there were a few). You boiled trading down to the core and explained very actionable concepts in simple terms. After every chapter I just wanted to start trading and test what I just read! So thank you.<\/p>\n

\n

My question is this: You talk a lot about risk\/reward and only taking 5:1 setups. It does make a lot of sense to me. What I was wondering was this: if you have a particular entry price in mind and the stock reaches that price, do you always wait for a confirmation, for the price to move away from that level in your favor and confirm that support\/resistance level? Would you only then you would put your stop at that original entry level and target at ~5 times? Does it mean that you never enter a position pre-empting the move in you favor, trying to catch a local high\/low? Also, when you are trying to decide your stop and target before entering the trade do you give priority to a stop level and then from that see if there is a room to have a ~5x move to your target? Do you ever start with a target if there is an important technical level for a market to test and then from that just put an arbitrary stop?<\/p>\n

Apologies for one question turning into several. You probably have a blog post about it somewhere already, so can just point me in that direction. It’s a painful topic for me because my mistake seems to always be that I put my stops too close only for the market to move in my initial trade direction ;).<\/p>\n

\n

By the way, DNA is a great program<\/a>. I came from a sell side trading background where they just sit you in front of a screen, show bid\/offer, and ask to take risk and make money! After several years of “punting” around I made a decision to go back to square one and actually learn how to trade, and I am glad I did. Looking forward to new software and more traders on the chats!<\/p>\n

@mikebellafiore<\/strong><\/div>\n

1) I use a risk\/reward as a benchmark for new and developing traders. I encourage new and developing traders to make the easiest trades at the start as this is the worst they will ever be as a trader. I am thinking of the best way for a trader to start when I use the risk\/reward of 1×5.<\/p>\n<\/div>\n

2) Experienced traders can use a risk\/reward of 1×3 perhaps on swing positions.<\/p>\n

3) Microscalpers and scalpers might adopt a risk\/reward of 1×2 as their win rate will be near 70 percent.<\/p>\n<\/div>\n

4) I do not always wait for confirmation. This is a terrific question and the answer depends on how aggressive you are as a trader. An aggressive trader may not wait for confirmation and just buy on price. A conservative trader, like Shark from The PlayBook<\/em>, will wait for confirmation. For example, Shark might not make one trade all week if his stock was not holding above VWAP, his favorite indicator, for a long position.<\/p>\n

Yesterday I bought NFLX into the 300 technical level. I did not wait for NFLX to hold. I just bid in front of this 300 level and bought. When it hit 304, I exited 1\/2 of my position. I had an uneasy feeling about any long overnights in momentum stocks like NFLX and FB, so I hit the rest near 303. This from a trader who has been comfortably and consistently buying pullbacks in FB and other momo stocks. I have no interest in potentially getting in the way of an insane government, even though the odds of a default have to be almost zero percent. Normally I would not have started selling that swing position until 308. So as you can see I do not have to wait for confirmation for all entries. Having said that I only make this buy if I love the technical level. Usually, I do wait for the tape and price action to more confirm my risk\/reward.<\/p>\n

I hope that helps.<\/p>\n

Related blog posts:
\nA Sale is a Sale is a Sale!<\/a>
\nThe 800-Pound Gorilla in the Room: Exits<\/a><\/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","protected":false},"excerpt":{"rendered":"

I am one of the subscribers to the new SMB DNA program. I missed your mentoring session yesterday, but I just watched the recording and was wondering if you could answer one question for me. I just also wanted to say that I read both of your books not too long ago and thought they were the best books on … 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":[1],"tags":[2444,2449,4703,2448,2451,4706,4707,1718,653,2445,1989,4712,4690,1888,207],"class_list":["post-32411","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","tag-daytrading","tag-how-to-be-a-day-trader","tag-learn-trading","tag-prop-trade","tag-stock-market-course","tag-stock-trading-education","tag-stock-training","tag-the-playbook","tag-trader-training","tag-trading-careers","tag-trading-course","tag-trading-courses","tag-trading-education","tag-trading-school","tag-trading-stocks","no-post-thumbnail"],"yoast_head":"\nContemplating Insanity Into My Trading | 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\/contemplating-insanity-into-my-trading\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Contemplating Insanity Into My Trading | SMB Training\" \/>\n<meta property=\"og:description\" content=\"I am one of the subscribers to the new SMB DNA program. 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