In this video learn why entry prices matter to make quality stock trades. See how a junior trader creates an AntiPlayBook Trade, in this case with a poor entry price, to help eliminate his bad trading and bad trades that are holding him back as a trader.
View Video Transcriptin this video learn why entry price
matters to make quality stock treats hi
I’m Mike bellafiore co-founder of SMB
capital and we’re a proprietary trading
firm located in midtown Manhattan and
I’m also the author of the trading
classic one good trade and the playbook
click our subscribe button so you don’t
miss any of the videos they’re reducing
for you in the trading community see how
a junior trader creates an anti playbook
trade in this case with a poor entry
price to help eliminate as bad trading
and bad traits that are holding him back
as a trader let’s dive in mRNA which
I’ve taken a lot of trades in and been
able to see what works best with it and
what doesn’t work best with it and so
far I’ve had a few of these SSR short
trades and they can work sometimes
sometimes they can’t but you know
there’s a couple characteristics I
figured out about them about my trading
the way I trade that has made this trade
pretty unprofitable for me and very
uncertain and that’s kind of what I’m
gonna go through today so let me just
set the scene this is the third anti
playbook video that we’ve done we’ve
asked guys at our firm and starting with
the newest guys to share a trade that
exhibits a setup that they should stop
taking or bad trading also as we’re
doing that perhaps we’ll get to the
bottom of a few things that lead them to
take a bad trade or do some of their bad
trade and the idea is on our desk to
grow and build from the trades that we
trade best put them into our playbook
and then this new exercise that we’re
doing this anti playbook exercise that
we’re doing to get rid of our lesser
trading the setups that just don’t work
for us so just like we want to make more
in our best setups
and make more P&L we can make more P&L
by getting rid of the lesser trades the
bad setups so that we keep more of what
we make overall so right up front Garret
I apologize for putting you on the hot
seat and purposely asking you to share
with us trade that has not worked or
trading that is that is you at your
worst but and I’ve tweeted about this
this week we can learn from our losses
we need to learn from our losses the the
biggest losses that we take from our
losing trades is us not learning from
them and so let’s do that in this case
as a trader sometimes what we learn
overall is just to cut it out just to
cut the nonsense out just it with the
suboptimal trading from our from our
playbook just to quit the nonsense the
lesser trades that don’t work for us or
perhaps for anyone the bad entries the
bad technical setups the over trading
let’s just get rid of that so Garrett
want you to get going here with the anti
playbook a one bad trade yeah no I agree
you know I I’ve definitely noticed in my
trading that a lot of times I’ll have my
best days right after I make my I have a
trading day where I make a ton of
mistakes and it’s just you know it’s
sobering and it shows you you know it
kind of gives you a slap on the back of
the hand and you know tightens you back
up so I definitely agree with going
through you know each of these trades
and gives you know each of us presenting
a you know a better reflection on how
we’re trading but yeah so the big
picture here I’ll start off with that
you know obviously we’ve seen some
historic moves and you know the simpie
lately or just the entire market and in
some sub sectors and you know we we came
down from the coronavirus and everything
looks so you know so daunting at the
lows and a lot of times that’s when
no we’re at our Lowe’s and since then
we’ve rallied like what is he like 35%
or something that market has just been
so resilient you know on any sort of you
know sell-off and so with that in mind
you kind of start thinking all right
there might be might be some days where
there’s you know it’s a two-sided trade
but you know when the spy picks its
direction and gets out of ranges you
know it’s pretty good to trade for us
day traders so that’s kind of sitting in
the back of back of my mind as I make
trades if you want to learn three-wheel
world setups that our traders use
including the simple setup that we teach
all of our new traders and the set up
that turned one of our traders into a
seven-figure big money earner check out
the free webinar that we’re currently
running just go ahead and click the link
that should be appearing right now at
the top right hand corner of your screen
that’s gonna open up this free
registration page in the new window so
don’t worry you’re not going to lose
this video you’re gonna learn more in a
couple of hours from this trading
workshop than from years of online
education so the intraday fundamentals
at this time when I had taken the trade
on moderna so they had been under
pressure on a capital raise and they
were getting some data questions on you
know they released phase one I believe
it was data on their our stock or early
stage I guess you could say I’m showing
positive action right now like the
market sees anything with these vaccines
it’s gonna buy it up really hard and
then at the same time you know it’s kind
of similar thing that happened with
Gilead you get the initial news everyone
buys it and then a couple days later
they say oh well you know it’s not that
great there’s some questions here and
there and then it comes right back down
and then on top of that you know they
were doing some some equity offerings
and you know seventy-five percent of the
time that’s usually negative for the
stock in the short term sometimes they
can have some stronger offerings and
they get bought up off of that stuff but
on this day I believe it was trading
around that $76 range and a lot of times
we can use that you know that offering
price is kind of a level to trade off of
and that’s kind of my idea behind this
trade
or I had taken it but you know it’s in
the biotech industry which has been
stronger than the market considering
they’re trying you know a lot of the
names are are thrown out Co vid and that
gets a pop so you know biotechs kind of
outperformed the market a bit here on
the bounce
the relative volume at the time of the
trade was twelve ATR is five she’s very
good average daily volume was up you
know normal short interest and then a
normal pretty normal flow and
institution ownerships probably flipping
around every day so I don’t know how
accurate that could be it’s from fenves
but you know people own it so I usually
do a checklist for my play books that I
love and in this case I did like an anti
checklist of you know all the things
that I didn’t love about this trade and
so and I’ll go through each of these but
you know this a lot of times the way I
trade things need to be out of range
even the pre-market range and in this
case you know mrna was holding on to
some pre market levels was trading
within an intra range if we’re going
from like 3 a.m. in the morning so that
wasn’t great SSR was on and that’s the
biggest you know attribute of this anti
play book that I was doing and kind of
just to explain SSR for anybody that
doesn’t understand it it’s a rule that
gets put on stocks when something goes
down 10% where you can’t if you’re
trying to short the stock you can’t hit
the bid and so the only way you can get
into the stock if you’re trying to short
it is there has to be an uptick and if
you know a lot of times you’ll see a lot
of people try and get short on something
and it kind of you know a bunch of green
prints will come in and it pushes the
price up and it just makes shorting lows
on SSR stocks much more difficult so
there’s a lot more factors that you have
to thrill in when you’re thinking about
doing this trade of okay does it have
the extra juice – anytime it gets an
uptick you know whoever is holding the
stock long is still selling those are
the people that are going to be pushing
it down it’s the people who are holding
it long that are selling so you kind of
have to flip your ideas
with these types of trades and they can
just be so difficult but you know other
things that I didn’t like about this
trade I’ll show the one minute setup on
it was pretty stretched out it wasn’t
clean you could say it’s overextended
stuff like that there was a good amount
of energy already exhausted on the open
so it had sold off and then we were kind
of bouncing a little bit and I’m getting
ready to push another low but it really
hadn’t spent enough time consolidating
again to make a really strong push lower
and when you have a stock on SO sorry
you need strong pushes and then finally
the gap fill had finished so we’ll go
through each of those ok so I actually
like that checklist a lot question for
you when you’re in a trade are you going
through the reasons why this trade may
not work out while you’re in a position
when I first came to SMB I came on as an
in-house trader and I you know I set up
with Kenny and big thing I learned from
him was self talk and you know that’s
why I always do these checklists you
know big style of his trading as he
loves to do checklists and self-talk and
so he’ll go through and be like ok I
have this I have this I have this I
don’t have this I don’t have this and
you know and that’s kind of how he goes
about sizing and deciding when to take
trades when to take some off when to add
back on so I do like to try and do that
and in this you know I might have been
clouded I think at this time and you
know I saw how far MRNA had come down
and you know when stocks have this huge
of catalysts
it’s really hard to tell you know how
much something will go and I think that
you know conflicted my head of thinking
oh this thing can go a lot more I don’t
I don’t mind shorting you know something
that isn’t that great but then once you
go back you sober up from the adrenaline
and you look back at the checklist
you’re like ah I don’t have these things
and so what I try to do every day is I
try to do in my trade logs you know this
I do check March 4 check marks against
and I try to do that every day so I can
you know build the muscle memory for
that when I’m in a moment
I can remember it a little bit better
but yeah I do try to you know go through
these these check marks in my in my head
to you know make trading decisions yeah
that’s a terrific best practice for
anybody who’s watching which is you’re
in a position you know the reasons why
you think the trade should work for you
that’s why you’re in it but you want to
spend a good deal of time as well
thinking to yourself running through
this self-talk that Garrett is talking
about having this conversation in your
head while you’re in the middle of a
trade ok here are the reasons why I’m in
the trade here are the reasons why this
trade should work but also here are the
reasons why this trade may not work and
when you do that when you engage in that
self-talk it brings it breeds and
open-mindedness to your trade to your
position to your trading which is what
we see is a characteristic is a mindset
of what we see when elite traders are
trading at their best a little bit of
chart action so here’s the daily and
that taking this up to the end of the
day but you can see what I meant by the
gap so as we you know we had this
consolidation then we get the drug news
here and then since then we had been
selling off I think the delt came in
somewhere around here and before this
green candle happens we sell into the
gap fill and that’s what I meant by you
know I had taken this trade basically at
this gap fill which you might have you
know people who are looking bigger or
longer-term having just some bids in
there and they get bought up making it
harder for you to shore something so
that’s a little bit of daily and here’s
the 5 minute time frame this is what I
was going off of for my initial trade I
like to trade these inside candles they
you know they measure like time fractals
and ranges that you know give me some
information on how far I think I can get
in a trade where my stop should be stuff
like that
and so I was shorting the low on this
candle which is 67-72 and I was looking
for 2r which was or a 2 R for this trade
it was 1r because I was using the full
bar so this is a little bit different
but 1r would be 66 83 so I was trying to
get it you know under the 67 which was
it was still in this free market range
you know there’s a lot of stuff it’s got
a fight
I believe this hashed line is the open
of the pre market so here was the one
minute so this is a few of the things
that side mouths and you know trading
the range and come down a lot already on
the open you know it doesn’t this is
pretty stretched one minute I think this
is also what clouded means I saw it
happen here and so I was like okay maybe
I could see a similar thing happen right
here but you know that was I would say
that’s a little bit of foam I was trying
to get into the trade a little bit too
late and I shorted down at these lows
and you can see right away what I’ve
noticed with SS are stocks if it doesn’t
work you almost have to take it like a
momentum trade if you’re trying to short
lows with an SS our stock and it comes
down you get triggered and and it just
won’t go well we’re like usually SS our
stocks will like vacuum if it’s gonna
work it just comes right down and in
this case it doesn’t and when that
happens you know tons of people are
trying to get short and with us are the
only way they can get in is on those
green prints and it just you know it has
a circulating effects where you know
short after short just keeps pushing the
stock higher and I got stopped out this
wick high and it just went so quick a
lot of my trades I like to tighten up
you know see the price action a little
bit more and maybe move the stop here
stuff like that and yeah I just couldn’t
even do that on this trade and it just
comes up and takes my full stop like
right away and I’ve noticed that so many
times with these SS are stocks it’s
really got to have like an extra
catalyst some extra volume a really good
one minute setup you know be out of
range not in this pre market range stuff
like that and I just you know I had way
too many check marks against me and I
just took the loss for a pretty low
probability trade so here’s my trade
review this is what I had in my trade
book for check March for check
against you know I had the are vol I had
it under the day before slow so it was
out of the day before his range but then
again I didn’t have this s are not a
great one minute set up still pre market
well I think I thought forgot to throw
in the gap fill but you know similar
stuff I had from before you may be
saying this in a different way but you
know from the open how much has that
gone down well I mean just in points
sake it’s gone down two points you know
get from and it’s gone down to plus
points from the open and then how much
time has gone by since the low since
they’ll be open yep
sent from how much time has gone by
since the load that I took the trade no
the low from the open so from here
yep ten minutes okay
so you’ve got what I would characterize
as a bad price would you agree with that
no yeah exactly yeah I mean for us to
take a trade like that
what was your trade I mean we’re
swinging this where you momentum trading
this where you’re scalping it um I will
throw it in since it’s some trading off
the five minute time frame we’re in the
first 15 minutes open this is most
likely this is gonna be a scalp for me
okay and how much did you lose overall
in that tree looks like a dollar and a
half that’s not yeah so that’s what’s so
I’m trading off of fractals and I’m just
trying to go off of what’s going on in
the action of that five minutes and so
if we have this strong of a move I’m
looking for a relative move you know
what’s the other saying for that
measured move and so in this case since
we had come down two points you know a
two point move
and or we had come down 2 points in 10
minutes another 2.2 point move and a
bell another 10 minutes
I mean I’m for as far as scalp I’m I’m
referring to the time frame you know
this should be a trade that only takes
5-10 minutes maybe less yeah so but
you’re willing to lose a dollar 35 to
make $2 yeah so a lot of my trades are
one-hour trades that start out to be 1
hour trades and then once I get in them
they create some different levels I can
you know ratchet up the arse on them a
little bit which is something I’ve been
experimenting with lately but yeah I
usually take one our trades yeah so you
know when I look at a chart like that
the time that I mean it’s steep to the
downside we talk about this a lot it’s
gone down a couple of points pretty
quickly so there’s gonna be some risk
that it can just pop up you know a
dollar or dollar 25 a dollar 50 and
still find a way to actually trade low a
day because of how steep the opening
drive was and you’re gonna need some
time to go by to give you some
protection to be able to take that trade
so that’s that’s something that I think
I think these trades will work but
you’re gonna need to see a consolidation
period that’s longer than what you’re
seeing here on the chart or you’re gonna
have to be a lot tighter with your stop
and truly make it a scalp I mean a scalp
is the momentum scalp is hey I think
this is going lower right now and I’m
gonna take it I’m gonna short this right
now and it’s gonna go down right away
and if it starts to move against me I’m
going to get out of it and I’ll I’ll
start over perhaps at a lower price but
my scalp my momentum scalp is not
working because what a momentum scalp is
is I’ve seen that it’s now ready to go
down and it should go down and if it
doesn’t that I’m going to get out and
I’m wrong on the momentum scalp and I
understand you’re looking at markets a
little bit differently but for you to
actually get this to make a little bit
more sense those are some things that
you want to think about and so you know
one of the things that I’ve noticed and
studying when elite traders trade their
best and I’ve written a little bit about
this and I shared this with you and the
guys plenty of times which is you know
you develop a thesis your thesis is
based on my study of markets that this
is going to have a lower leg next fine
terrific and you know then you want to
see a set up that’s within your playbook
to take and okay you’re describing one
of them and then you want to see it and
you want to see the price action confirm
that your thesis is correct and the
setup is being confirmed by price and
then you want to fight for price you
want to get in at a really good price
this strikes me as missing potentially a
set apart I’m not sure the setup is
there because I don’t think it goes
sideways enough I don’t think the
consolidation period is a is a long
enough period of time that’s something
for you to really think about and then
your price based on where you’re taking
your stop is
well questionable it’s a tough price
you’re not getting I wouldn’t suggest
this is a good price to get it and so
you know I’m seeing working on work on
your pricing I’m seeing is your setup
really there to be making to be making
some good trades I don’t know I don’t
know if you have any thoughts about that
no no I totally agree that’s what I I
was trying to touch on that with the one
minute to stretch one minute that’s what
I meant by that you know it didn’t not
spend enough time to really have energy
you know that was it’s exhausted too
much energy at this point you know it
doesn’t have the real energy to push
through you know the trigger that I was
using which was look like it was a
little bit under 68 it doesn’t have that
energy to push through it and really
take out the pre-market low you know
that would have needed to spend some
time between 68 and like 68 or 6750 it
looks like and then push and then you
know hit lows maybe yeah and if you’re
gonna say that this is where your tape
reading skills are essential if you’re
gonna take a trait like that so far so
steep so young so far away from view op
with SS are you can do that sometimes
you just got to sort of see it on the
tape that the weakness is actually there
and the weakness on the tape is giving
you protection so maybe you know went
down two points it popped up 20 cents
and you’re noticing noticing noticing
noticing recognizing recognizing
recognizing seeing seeing seeing that
there is just sellers that have stepped
to this 20 cents below the bottom level
and they’re not lifting surprises you
you would think it should go up closer
to be Bob but it’s not and they’re being
stubborn there’s they’re tipping their
hands that they really need to get out
of the stock right now they’re taking
profits in this case and now you have
something that you can trade against for
the type of trade that you’re making for
the price for the price where this is
out where this is at to make sense on
the risk reward aspect
because there’s I mean this this doesn’t
have to do anything and this is one of
the high flyers it’s in a sector that
spikes up and down it’s in a sector
that’s gotten a bunch of shorts into it
it’s it’s a highly opinionated sector
this thing’s run up from you know the
teens I remember when we were actually
not all remote having a conversation
with somebody who I don’t remember that
time it pulled in from the 30s into the
20s that first time it had a big down
move I remember talking to one of the
guys who has a business next to ours who
was just like literally imploring me to
back the truck up and get along this
name I said I remember that he’s totally
right and and lots of people have been
really following this but uh you know
this is this has gone all the time and
so you’ve got it’s a high flier so you
have a price issue here and if you have
a price issue you’ve got to be able to
have protection that you’re seeing from
the tape to trade against to make it
make sense to control your risk yeah
exactly I totally agree so I’m curious
so we’re in agreement price is a little
bit sketchy here is this is there
something that causes you and your
trading to jump into something like this
at a bad price that you’ve recognized
it’s a pattern that develops with your
trading yeah totally I was actually just
gonna bring that up you know a lot of
times when I jump into these that look
overextended or that just hasn’t spent
enough time to really create a trade
setup it’s usually one of the most
talked about names you know when we were
going through the stuff with the Cruise
Lines and Airlines I made a few trades
like this because you just think in your
head oh my goodness these things make
massive moves you know this little this
little little bounce might be the last
chance I get to really get in on this on
a big move and so you know it becomes a
FOMO thing and other times it’ll be you
know I don’t see a whole lot of other
things in the market and you know this
is the closest thing to a setup ice
see and sometimes I jump in and when I’m
not you know have my most disciplined
trading and you know usually I’m pretty
disciplined trader and this was
definitely one of those times where I’ve
you know I guess I got stumped on this
yeah that makes sense I get good to
recognize the trades that are you’re one
bad trades you’re anti PlayBook trade
and then what precipitates you taking
those trades so that you can put the
protections in place whether that
self-talk whether that’s having a
trading buddy
whether that’s rules whatever it is
whether that’s having Carlton come over
our floor manager to come over and smack
you upside the head or take the keys
away from your your trading account for
a little bit or a walk whatever it is
good to recognize those patterns because
you’ll catch yourself in time as you
gain experience saying oh wait a second
this is an overcrowded stock I’ve done
this three times in the past every time
I do this I tell myself I’m gonna stop
doing it I’m not gonna do it this time
and and to support that I’m gonna
actually get up and and can go grab a
drink
Max and I are gonna go get what’s that
chicken you guys like to go get oh yeah
that chick-fil-a chick-fil-a I’m gonna
go get Max and we’re all gonna go get
some chick-fil-a and I’m gonna stay away
from the stray and as a consequence I’m
gonna keep more of the P&L with my
really good trades yeah I got to be able
to drag max from his desk before I could
do that that’s that’s difficult task
sometimes well maybe if you pay you kill
a dragon off his desk yeah exactly
all right good let’s finish this off
cool yes that was the check marks and
then just lessons similar stuff we
talked about yeah if I’m gonna take a
trade like that you know it’s got to
have higher our ball it’s got to have
some you know really critical things
that are moving the stock you know just
a super weak tape like you said critical
level being broken you know out of an
intraday daily range time of day you
know needs to show true weakness without
looking over it
standed and you know you know I like to
do ratings in my head like that
checkmark stuff I was talking about you
know you know what Vanessa saw her name
if I think this is kind of iffy I don’t
know if this thing really has enough
than I need to just trash it I call
those 5050 trades but yeah that is that
was my anti playbook look I apologize
for making to do the anti playbook trick
but actually I take that back because
learning from your losses is a great way
for you to get better very few people do
it
most people bang and strain the costs
and blame everybody but themselves and
that’s not a way to get better there’s
lots we can learn from our olestra
trading and I would just say this what
is it like two o’clock today and you
know my day is usually pretty packed
I’ve had five phone calls today with
profitable traders some of them star
traders who we talked about their lesser
trades with a majority of them needing
to sort of get back on track with their
trading and you know so this idea that
you’re not gonna make bad trades and
you’re not gonna get off track and
you’re not gonna make lesser trades it’s
not my experience running a proprietary
trading firm proprietary traders even
the best ones get off track make losing
trades but what the best ones do what
they learn from them they take
responsibility for their losses they use
it as an opportunity to grow they use it
as an opportunity to see the patterns
when that precipitate them trading badly
the patterns and the setups that don’t
work for them and they work to eliminate
them
and this doesn’t ever stop markets are
changing and you know obviously we’ve
talked about the historic march that our
firm had it was the best trading month
we’ve ever had as a firm and then April
I think a lot of people expected for
reality to strike and we had a we had an
amazing month in April and I certainly
said I said to my wife actually in
passing because now that we’re all in
lockdown we actually work in the same
floor together I was just having a
conversation with her that ok now things
are really gonna get back to reality and
we can’t possibly do as well as we did
in March and April and so far in May
we’re doing really well as well but the
reason why we’re doing really well and
the reason why the best traders are
doing really well is because they’re
constantly doubling down on what leads
their best trading they’re constantly
doubling down on reminding themselves
things like self-talk that help them
stay away from their anti playbook
they’re they’re one bad trades and
getting back quickly to what they do
well so very useful exercise all the
best guys are doing it appreciate you
spend a little bit of time with us
excellent review and I promise we’ll
have you back for a monster trade yeah
awesome
all right thanks appreciate it hey go
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