Hey Bella,
I was reviewing my trade from VVUS today, and there were two things I forgot to run by you that I was thinking about during the trade.
First, I used our discussion on the steepness of moves to help me stay in the trade. I have had problems with past trades where I would get into a position, momentum would pick up and I would be fairly far into the money very quickly on a steep move, but then would get out once it began to tick against me a bit because I would be afraid that I would lose my P&L. When I shorted VVUS @ 28.80 and the price moved very quickly down to 28.20, I was prepared to watch it pullback sharply because of the swift down move. Sure enough, it traded right back up to my entry @ 28.80, but then resumed moving back down. Because I was anticipating this, I kept my position and did not sell too soon.
However, I’ve also been trying to work on being able to keep a core position while lightening up and adding on to my position throughout the trade for smaller scalps and momo plays. I worked on this skill today during this trade, lightening up with that swift down move to 28.20, adding when it retested, etc. I found by the end of the trade when I eventually hit my price target @ 26.00 that even though I had held that core position the entire time, I had also been in and out of scalps well over ten times, lightening up whenever it hit support, adding more on retests of resistance, etc.
My question is: is there a point where you can actually be over-trading within the overall trade? Is there some kind of balance between A) managing a core position while incorporating scalp trades and B) simply ripping through tickets and not holding on to the trade for the full move? Even though I wasn’t losing money on my smaller trades, I just felt like I was doing a bit too much trading on a position that was really working for me the entire time.
BELLA
The real danger of trading too much around a core position is losing focus on the Big Picture. Most of your PnL opportunity will come from holding your Trade2Hold for the REAL MOVE.
Yes you can generate Cash Flow by trading in and out and around your core short position of below 28.80 in VVUS. As we discussed at 11AM in our training room, my trade was short below 28.80 for a Trade2Hold with a target of 26. This turned out to be a very effective trade.
Below 28.20 was an add to your Trade2Hold. If you were Tier1 at 28.80 then you want to be Tier2 below 28.20. You certainly could got Tier3 and Tier4 with momo scalp trades. Hit below the consolidation level of 28.20 and cover into the next support area on the tape.
Sometimes what can happen is that you get into scalper mode by trading around your core position. This can be your self talk:
Why not cover all of my position now? If my scalps are a cover, why not cover all of my position? I will just put back my core position back on when the stock trades higher and it finds a spot for another high probability scalp.
Wrong! But this is the danger. You become consumed with the mindset of the scalp that you lose your perspective on the REAL TRADE.
Also some stocks are much easier to swing trade or place Trades2Hold in than scalp. The Trade2Hold might work brilliantly with the scalping around your core unprofitable and frustrating. This frustration may cause you to add size to your core position irresponsibly because you try to make back the scalping losses. More self talk:
I need to be bigger with my core position so that I can make back that $200 I just lost in the scalps.
And then you might mess up your entire core position, Trade2Hold.
When I have a core position, Trade2Hold, I am most focused on getting bigger. I may add a cash flow scalp but only if the scalp is clean. I must really see a layup scalp.
But that is how I see the markets. I am old and don’t have the energy for all the crazy in and out, scalp trading anymore. I will scalp from time to time but mostly I want to build positions, add to my positions, and follow the trend. There is more opportunity doing so for me.
Bella
no relevant positions
