At SMB we distinguish from good, very good, and great set ups. Or we make A, B, and C trades. We use this to determine how much risk we are willing to take on a trade. An A trade receives risk the equivalent of 33 percent of our intraday stop loss, a B trade less, a C trade even less.
Today Rosie, one of our developing traders, bought LMT above an important technical resistance level, 80. She started a position equivalent to a B trade. She was waiting for more confirmation above 80.30 on the tape for this set up to be an A trade for her. LMT had not traded above 80 for 6 months. This was a level she was watching for quite some time. But the volume was thin, she did not see a big buy order enter the market. So she just held her B trade.
The market started an uptrend after 10AM. SPY resistance was not till 115, or much higher levels. So we had a very strong intraday market without resistance till 115.
Rosie grabbed me after an end-of-the-day SMB meeting and asked me whether she should have traded this set up with more size. Can an important technical level trigger an A trade for you? Or do you need confirmation above this important level to make this an A trade? What would you have done with LMT above 80? Full size for an A trade? Or would you have waited for confirmation on the tape, or with price above 80.30?
Best of luck with your trading.
4 Comments on “An A Trade or B Trade?”
EZ in hindsight, but considering what was going on in the market today it was an A trade above 80 and trader should have bid with size above the figure and stop out under .90. Risk .15 to make $1.
For me there is no “confirmation”. There is only taking and controlling risk. If there is a strong setup, the risk is smaller the closer your entry is to the level. Waiting for confirmation only increases risk, IMHO.
EZ in hindsight, but considering what was going on in the market today it was an A trade above 80 and trader should have bid with size above the figure and stop out under .90. Risk .15 to make $1.
For me there is no “confirmation”. There is only taking and controlling risk. If there is a strong setup, the risk is smaller the closer your entry is to the level. Waiting for confirmation only increases risk, IMHO.
I think a trend is always confirmation. The broad market was trending up. If LMT was also trending up with only small pullbacks, then you have your confirmation and can add size.
I think a trend is always confirmation. The broad market was trending up. If LMT was also trending up with only small pullbacks, then you have your confirmation and can add size.