In this video SMB Trader Justin offers feedback to an intern on a trade made in JPM. They discuss an issue this new trader faces which every trader encounters in their career – overtrading.
Justin shares his rules for overtrading and what has worked for him.
View Video Transcripthey everyone it’s justin and i’m a
trader at smb capital
in this video i give some feedback to an
intern on a trade he made in jp morgan
in the beginning of the video we
discussed a recent issue
this new trader faces and something
every trader faces at some point in
their career
over trading i share my rules for over
trading and what has worked for me
throughout the video you’ll hear me give
just a few pointers
on trend following and trades to hold
you’ll hear me share my thoughts
on his trade in real time enjoy
this is my playbook i made last week on
jpmorgan
and the overarching theme of this
presentation
is that keeping it simple and a few
other things i’ll talk about in a sec
is the best response um to over trading
so
it’s an issue we all face right over
trading is something
that uh you know i’ve talked to a lot of
traders
since starting at s b and um all face
all face the issue no matter what
um stage in their career they are but
especially at the start
of the trading career when someone’s
trying to balance experimentation
and not over trading it’s easy to make
mistake the two because
it’s at this point where uh people are
trying to figure out what they’re good
at where their strengths lie
and what setup and trading style suits
them so it’s very tough to
to balance the two and that’s some an
issue i’ve been i’ve been experiencing
um for the past two months since
starting here
but uh after reviewing my first month’s
trading statistics
i could start to see the trades that
best suited me
and you know sending my daily review to
other traders
uh allows me to be held accountable even
if i’m on demo even if i’m trading
smalls in my own personal account
the responsibility is ultimately on me
um and
every day if i’m sending my review and
i’m and i’m holding myself accountable
um it’s one of the best ways to to
combat this issue
and so a few weeks ago so after i did my
april review
i realized that you know there was a few
trades that
i shouldn’t have made that they were not
experimental trades there were trades
that i knew
i should have been making and then i
that i i framed them
as experimental trades and that i was
testing out the strategy
but i i knew that this was not the way
forward if i was to
um really progress in my trading so i
devised like a four-step plan to combat
this and i’m currently undergoing this
so step one is to know the exact
variables of my a plus setups
so this trade i made on jpmorgan which
i’ll get into in a second
is not a crazy you know setup it’s it’s
one that many viewers watching this
would probably know off already um but
it’s knowing what the
what makes a great set up an a plus set
up from just the normal average setup
uh is what will make will really make it
easier to combo over trading if i’m
able to see right if a good trade sorry
if i’m able to distinguish between a
good trade and a bad trade it’ll it’ll
make it easier not to over trade
and step two you know take note of how
i’m feeling at times that i’m over
trading you know what is late what has
caused me to make this trade
um because typically it might be revenge
trading i might be tired from the night
before there’s a multitude of factors
and then step three i want to use slower
time store market conditions
times when it’s is easy to over trade
and to get shopped up to
to instead work on enhancing my coding
skills or you know depending how i’m
feeling a walk might be a better option
um regardless though and depending on
how i’m feeling it i must divert my
energy it’s
i’m diverting my energy somewhere else
in a way and away from trading
um specifically and then step four and i
talked about this already um like
properly structuring experimentation
instead of
you know going into the day and saying
i’ll trade any type of setup
and just to see how it plays out it’s
better going to be able to plan
uh on exactly what type of trades you’re
going to be making that day or
or plan on making a lot going on on that
uh
previous slide and i like all of it and
i think we should just take a second
um to talk about those things a little
bit more
sure um i have some feedback on almost
all these steps here that i think might
help you
yeah um so number one knowing the exact
variables of my a plus setups
i’ve made hundreds of playbooks and i
have
uh quite a few setups that are a
plus but something that i recognized
is that no two trades um are the same
sure uh so you know a backside trade is
a backside trade and they may have
similar uh variables but they
never quite set up in the exact same way
um
so i think that is important to uh keep
in mind
okay um take note of how i’m feeling at
times when i’m over trading
uh that is very key um
and the more you’re aware of your
self-talk and how you’re feeling um
and you’re not ignoring that that voice
and
you’re not ignoring how you’re feeling
you’re gonna get better at um
you know say to myself okay
i know exactly what this feeling is
that’s coming on i’m gonna get up i’m
gonna take a walk
um i’m gonna go get up and work out for
a half hour 45 minutes and set alerts
before i leave the desk
um yeah yeah so it’s really good i like
that a lot
if you want to learn three more real
world setups that our traders use
including the simple setup that we teach
all of our new traders and the setup
that turned one of our traders into a
seven
figure big money earner check out the
free webinar that we’re currently
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just go ahead and click the link that
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at the top right hand corner of your
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you won’t lose this video you can also
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you’re going to learn more in a couple
of hours from this trading workshop
than from years of online education use
these slower market conditions to work
on enhancing my coding skills
or depending how i’m feeling take a walk
might be a better option
um divert my energy elsewhere so
i love this a lot and something that a
lot of traders
that i’m mentoring ask me or what do you
do during the midday
um you know sometimes do you just stop
trading you go do something else what do
you do
i mean there’s just so many things you
could do um
you know lucky for us at smb we get a
ton of research
sent to us you could read those research
reports you could
scan through 200 stocks and look for
stocks that are going to be have the
potential to break out
just so many other things that you could
do that will
pay dividends in your trading um
and then step four properly structure
experimentation and i think this is a
really interesting one
so when you’re experimenting
with a trade essentially what you’re
doing
is you’re you
have a trade thesis right yeah and then
you’re looking for
patterns intraday that confirm that
thesis
and you’re executing the trade right
just an idea
and something that worked for me um when
i first started trading
because like you said everyone over
trades especially when they’re
trying to find their niche and um
you know trying to become consistent um
trying to find setups for their playbook
um something that worked for me was
uh some of the guys that are on this
call probably
may have heard me say this is the three
strikes rule
um and that is basically you have a
trade idea
and you give yourself three attempts to
trade that idea
and like baseball after the third
attempt
um you get stopped out that’s three
strikes
you’re out uh and you can’t trade that
ticker again for the rest of the day
um and i think that is just something
that might work
well for you i think that’s i absolutely
agree i think that’s a great idea
because
i what i found is that many times where
i’m trying to um
really place a trade i’m truly trying to
you know confirm my buyers potential
stock i’m definitely i’m definitely um
trading at times it just doesn’t make
sense and i i really like i really like
that three strike rule
um so the trade strategy
itself like i mentioned it’s it’s very
simple but
you know either through pre-market
planning or you know scan alerts i look
for stocks that are showing a lot of
strength in the first half an hour to an
hour
um i then look to see where the chart is
on the daily to see if it’s positioned
well
for continuation after this after this
morning strength
what i then look for is i wait for a
pullback a gradual
retracement to vwop and a whole of ewop
and then a quick bounce off
for an entry and so my target is to take
off half at one standard deviation
away from v wap just to take some risk
off the table
and depending on the strength here i
might look to add more
or potentially add to my position and it
all depends at the moment
um if buyers are really stepping off if
the market supports
uh that move higher but i’m always
looking for a reason to sell i’m always
looking for a change in trend
and so my stops then my initial stop
will be below v
up um and then the view up standard
deviation bands act as a
dynamic trailing stop of sorts if the
stock continues pushing higher
and say in the afternoon it pulls below
view up or pulls below the
the plus one standard deviation band
then i’ll take i’ll take the rest off
um so your stop my initial stop will be
below
v web um just below the price or below
um the the the low of the
candle below v web um where exactly
yeah i know that’s a great question um
it all depends
it all depends on where the market is
itself at this point and if there’s any
support
resistance levels that might correspond
where v wap is
in this case there isn’t there wasn’t um
like a pre-market
resistance or pre-market sport that i
could um
use my stop against you know see if it
couldn’t hold support
uh for example but usually what i’m
doing is i’m risking
um about a quarter to a third of a
standard deviation below v
up um but ultimately what i’m looking
for is that
it doesn’t spend time below that level
and that volume isn’t accumulating you
know below v-wop
um i want to see a hold above that level
um and then a gradually gradual buying
for the for the rest of the day so
you know i guess it all it all depends
on where the stock itself is positioned
okay got it so great you have some
detail there
awesome um and then either through
pre-market planning or scan alerts i
look for stocks that are showing a lot
of strength
in the first hour i think that’s a very
broad statement
showing a lot of strength in the first
hour i think that
you should be a little more clear about
that and make a little checklist for
what you want to see exactly to show you
that the
stock is strong absolutely yeah i i get
into that uh a bit at the end
um and uh exactly what i’m looking for i
guess in this in this uh setup but
no absolutely agree yeah the statistics
so average daily volume 15 million right
arvol in this case was one so this is
something i found interesting
and my stats i i guess support this is
stocks that have you know crazy arvo i
don’t seem to be doing too well without
the minute
and stocks like this where you know it’s
it’s obviously it has great volume every
day
and it’s you know a fairly reliable
ticker you know there’s high
institutional ownership which i’ll talk
more about in a sec
and the arvold isn’t crazy so that’s
something i must bear in mind
um and a more of a reason you know to
hold the stock longer
um given it hasn’t some you know crazy
move but
the atr in this case was three so it has
a nice range
um short percentage of float you know
0.60
that’s not that’s not really relevant in
this case the key here is
institutional ownership of 73 percent
um and so you know given where jpm
was positioned on the daily chart right
uh the string show in the first hour
which i’ll get into
in sec and the fact that they held above
you up is indicative of a move higher
and what i look for in these in these
cases is
high institutional ownership um so that
they
so that these institutions that are
looking at these stocks um
are looking at you know v walk you know
the true average price for the day
uh for logical entry i want to see if if
vwop is being held up by these bigger
players
and and just on friday itself uh there
was this constant battle between your
growth and sql stocks and that seems to
be a trend
a trend these past few um weeks but on
friday you know with the poor jobs
report and stuff a lot of investors
poured money back into tech however
and i’ve seen the next slide you know
xlf the
financial sector etf and spy itself were
you know had were very strong
and were very strong at these points so
i bear that mind
um and then looking at jp morgan right
in comparison to xlf in particular
it doesn’t look as overextended and
still has some potential
for move and i was kind of eyeing this
161
69 level as its recent high
um as my i guess my real target
um to get as close to there as possible
and potentially break um
and so what i’m looking for really in a
long-term chart
is that it’s just positioned nicely and
that there’s no real
overhead uh resistance i know here that
it’s approaching the high but say for
example it was
um you know free a few weeks prior and
it was below that 150 level
i wouldn’t have the same conviction that
i would um intraday
given where it’s positioned on the daily
um and so trade management itself
right so this is what i was um and i’ll
talk
a bit more about the strength what i’m
looking for in the morning
is if there’s any pre-market levels
and that are some way to find so this we
have this 157
and 158.50 level what i look for is
a hold of say the lord the support and
the 157 in this case
and a breakthrough and the pre-market
resistance say 158.50
and then what i look for is it to hold
above the plus one standard deviation
band
and really show some strength for the
first you know half an hour to an hour
um and then what i’m looking for is this
pullback to view up where
we start to see and the institutions in
this case the buyers
the buyers um stepping up really what’s
pivotal for me
is that v what’s sloped that it’s not a
flat fee what
um is that for me uh is more indicative
of a move higher so
what i did was i entered long on the
test of the v walk risking about a
quarter of standard deviation below
and i took off half into this quick
bounce so
this is something i really have to
review and i’d love to hear your
thoughts um in a moment
you know i was thinking that we would
have this big push and
push into the tech and out of cycles and
like hughes at the time right we’re
breaking above you up
and and we’re actually very strong and
so i kind of
i took i took um i took some off the
table took off half
at the table just you know in fear that
we could continue lower so i didn’t
really i really didn’t stick to my plan
and ask it in that case but
um at this point you know i was i was
half in and once we reached this
plus one standard deviation band i took
off a quarter of my position
and then when we started to show some
strength above this 160 level
um i added added to the position and
let it ride for a few hours and then got
stopped out here so
you know definitely a lot to review in
this trade i found
um there there is a lot of things i look
at ideal trade management in a sec
but i think i think ultimately i wasn’t
i wasn’t sticking to my plan
um and i wasn’t keeping i wasn’t keeping
it simple like i should have
um and so this is just a trader view
just to just to show um more in depth of
what i was looking at
and the trade management but the ideal
trade management right
something something i really should have
been aware of
i guess in in real time i know you talk
about this is just being
you know self-talk during these times
and talking with different traders at
the firm i think is the best way for me
to
you know really stay emotionally with a
trade you know i i should have beard in
mind that you know
jp morgan was very near its all-time
high
there was no change in trend um no
change at least in good volume
um there’s no change to trend during the
day i had positioned myself
well enough at the early um hours of the
day
to hold for a longer move and you know i
took off half
i really shouldn’t have taken off half
into that spike because
um if anything that’s showing me that
you know the buyers the big bidders are
that they really do want the stock to
continue higher for the day um
and especially now the volume at this
point it doesn’t show a little volume
it was picking up around here um just
just after
it spiked off you up and buyers taken
control so it’s very much an emotional
sell
in that case um if anything like i said
it’s an opportunity to add
as opposed to reason to sell because it
should strengthen immediately
so the variable checklist um
all what i’m constantly looking for and
what’s what i’m constantly adapting
is what it is are the what are the
variables that make for
a great setup did you think about at all
um what’s been driving the banks and
did you think about it all jp morgan’s
recent earnings report
um did you think at all about
the treasury the 10-year uh widening
we’re back over 1.6
which is bullish for banks um
the treasury back over 1.6 means that
that increases
um net interest income for the banks
which is very
bullish the 10 year is continuing to go
up
um you know from jp morgan’s report
um revenues from investment
banking are back
up over 46 percent year-over-year and i
think
that you know you you
mentioned you sold a little too early um
i think that if
you do a quick dive
into what’s driving the banks and
why is jp morgan um near all-time highs
why is jp morgan
um so strong if you if you just compile
a quick
list of all these bullish catalysts
for xlf and jpmorgan
um that might give you the conviction to
to hold the trade higher and say okay
well this thing’s right at all-time
highs
um it’s acting very strong
the market is very strong the market’s
shrugging off this jobs report
um that day that friday uh
spy did trade to new all-time highs in
the first
15 minutes i believe
and i think that maybe
i’m not sure if you were focused on what
the spy was doing and what xlf was doing
while you’re in the trade but i think
that
um maybe if you
if you said to yourself okay well the
jobs numbers
it was a huge miss um
and we totally shrugged that off off the
open we spiked down
into the jobs numbers low and the market
ripped and within the first 15 minutes
we’re at all-time highs
um and i believe there was one small
pullback and the market continued
ripping that friday
what would help is you know talking
yourself through that and saying okay
well clearly the bulls are in control
today and all the shorts that piled into
that big jobs number miss
um they’re getting squeezed
so i think if you took all that into
context
um you would have done a much better job
holding it
but still a really really great trade
really nice
entry just something to think about
absolutely no i appreciate that because
that’s something
that i’ve been trying to work on i found
that and this is this is more broadly
speaking but
you know before i started at smb um i
was very much
a pure price action um you know tape
trader um and then you know something
i’ve been working on
is since being here is really applying
um the wider context of things
you know like you said where is the
market at this point
um how you know how is the market
reacting as opposed to what the actual
news is
i think what you mentioned about um
reacting
or how the market looking at how the
market reacts to the news is more
important
and that’s something that’s you know
what i really
found um you know talking with different
traders in real time
the real benefit um is i’m able to talk
through things like you said
and because you know in the moment when
you know you’re making a trade and
there’s a lot of different things going
on you might be looking at different
charts and so
thinking through um you know how the job
you know how spy in xlf is doing is
that’s that’s something i’ve been
i’ve been working on so i don’t
absolutely agree there
um so the variable checklist
um i mentioned a lot of these already
but important technical levels on the
daily charts
um obviously that’s that’s that’s
something i look for
intraday technical supporting of course
high institutional ownership this
is a very important one for me and the
market sector
supporting the move in this case orville
wasn’t that elevated
relative volume was not elevated but uh
with stocks like this
i’m not ex i’m not expecting it to be to
have some crazy volume unless there’s
news
um and the stock is showing you know
great strength
in the first half an hour to an hour
staying above that plus one standard
deviation line
and i want to see a slope of you up and
that means that there’s a lot of volume
being done above you up um and then you
know
buyers are really looking to take
control um
and what i’ll show now on the tape
you’ll see here jp morgan
is what i’m looking for at this level
right at this 158.80
is not some first of all i want to see
uh
bidders stepping up but i don’t want to
see like a crazy spike immediately
and say once it reaches v up that
immediately spikes
um because that shows me that you know
maybe it’s not ready to hold this level
um it doesn’t matter on how far the
spike is or how i know how big the spike
is
but um i want to see there to be
gradually buying as opposed to quick
quick buy in this case um and so
i’m looking for 150 80 to hold
we it’s it’s a fairly slow one so i can
i can speed this up
um but
what i’m looking for is gradual
accumulation above this level uh because
i’m bearing in mind like the high
institutional ownership
um and you know where the market’s
positioned i’m not looking for some
crazy spike this is very much a trade to
hold
uh versus the move to move and that’s
something i’ve been working on is
really trying to distinguish between the
two um
because that that’ll help you position
yourself better for the trade
so what we saw here was the 158 is
holding up 150
88 is holding up um
and then 159 bitterster
um and then it’s gradual it’s not i know
this is on 2x now but it’s gradual
um it’s not some crazy it’s not some
crazy move say to 160 and
because for me it’s too sharp of a move
i’m looking to hold this for
longer and i think a lot of people who
would be buying at vr might have
taken profits like i would have um at
that point
and so could we can we just watch that
again from the move into v web to when
it when it shot up
150 880 dips quickly dips below 80.
quickly dips and then you enter your
long
i entered my lawn and then i’m looking
for 159 to a nice break to 159 which we
got here
and it really showed it showed that 159
was not an important level
and that they were not sellers at this
point so i was happy about that
so you’re at this point you’re about 40
cents
in the money seconds later right
you entered in at vwab and there was
strong demand at vwab people
traders institutions whoever
um they were waiting for that dip to buy
and as soon as it got there they bit it
right up
absolutely yeah and did i hear you say
on a couple slides before this that you
took some off into this move
yeah so i’m i’m not sure if i have it on
this tape but it’s it’s just around this
so this is priority’s view up here
um i took some off into this move and
you know like we discussed it really
didn’t make sense
because like you mentioned there it
really like people
were really buying this like there was
an immediate respect
of the view upline and that’s what i’m
ultimately looking for
and selling in selling into strength
doesn’t make sense
and given where we are on a more broader
context in a
like five day five minutes um we’re just
about to approach that
that high so um and i forgot you know in
time this is where
talking to myself in real time um is
essential
um it was a trade to hold this was not a
move to move i was looking to hold this
for the rest of the day
so it didn’t make sense but but how much
did you
how much did you sell i see that you’re
long there
so i i sold half um i sold half into
this move
i think i might i’m not sure if i got it
on this video but i sold yeah i sold
half into this move
and then i let the the other red the
other half uh ryden
and then i added position and once we
got strength later on the day
but you know like you saw yourself like
now it’s testing the 150 950
and it doesn’t have that same respect
uh or sorry the same drive through one
oh 159.50 as we did at say 159.
um so i think i think you know
i really have to really have to be more
um be more uh
or sorry have a better idea of where
exactly i’m looking
or how long i’m exactly i’m looking to
hold this trade for
um because i got i got faked out in a
sec because once it didn’t break this
150 950
that’s when i when i took half off so
this is just my opinion
sure but i think that you’re being a
little hard on yourself about this sale
um your entry was excellent
you recognized how fast it was bid right
back
up after it tagged v whap and
what seems like just a couple minutes
later
you are 70s almost
70 cents in the money um
i think that you even though this is a
trade to hold you deserve to pay
yourself for that
that is an excellent trade and you were
right
um you did i think that you did take a
little bit
too much of the position off yeah maybe
take 20 off and then
once you take off 20 you almost
have a free trade there you were
very right the execution was excellent
you’re right on the trade you recognize
what was going on on the tape you’re 70
cents in the money just a couple minutes
later
you deserve to get paid for that um and
in doing so
and doing so and taking 20 off you also
now have a cushion
and the trade becomes a little less
stressful which could make all the
difference
uh for a trade to hold that’s yeah
that’s a great point i think
i think you’re right there the issue is
i took off too much
too soon right that’s that’s the
criticism i have about that okay i
appreciate that
um and so wrapping it up the trade
review
and approach trading general so what did
i learn from this trade
um knowing the variables of enable setup
that place your strengths will make it
easier to identify great trades
and reduce the urge to over trade um and
creating a book of charts and constantly
reviewing these setups is essential
you know there’s only so much trade you
know the most of the work is done
um after hours or when you’re not
actually
making the trade because the trading
itself should be it should be the easy
uh should be the easy part
um and then you know talking with
traders in real time
ensures accountability and allows you to
build or me to build a better picture
of how to trade how the trade might play
out like you would talk about justin
like
having that context in mind in real time
is the essential bit
um because i had an idea of you know
where xlf
was the financials jb morgan’s earnings
and such but i wasn’t thinking about it
that in real time and i was i was
i was just very much focused on on the
entries and such which i guess
you have to too but um having that
context is essential nonetheless
but ultimately it’s keeping it simple
you know playing your strengths and
having a very clearly defined plan
and these are the best approaches that i
found to combat over trading
and we you know we discussed um how we
could have done better but you know
sticking to the initial plan
and taking only a fifth as opposed to a
half off
and paying myself that would have made a
lot more sense
um and instead of and this is something
i found instead of using say a one
minute chart all day especially if it’s
for a trade to hold
it would probably make more sense for me
to use you know a one-minute chart when
i’m looking to enter and exit a trade
and maybe a five minute
and when i’m not entering or exiting i’d
be curious to hear your thoughts on that
justin
when i am trading intraday uh to my
right here i have a screen
with five tickers and each of those
tickers has a one
five and a fifteen minute chart to go
with it
um and if i’m in a trade to hold or
something that i do think is a trade to
hold
um you know for the execution
it’s always done on a one minute sure
but
once it starts to work um i’m looking at
a five minute 15 minute uh and a 30
minute
um and i took a quick look at
how jp morgan traded on this day
um and i was looking at the five
minute um and i know you talked about
getting a little better at trend
following um
something that i noticed and an
indicator that i like to use i know you
talked a lot about
standard deviation um but i think it’s
important to
incorporate um a couple more indicators
to use
um something that i like to use for my
swing trades is a 9 and 21 ema
um and found that those can be very
helpful
on a five-minute chart uh especially for
trend following once the stock is
trending um and something i noticed
is that on this day on the seventh
jp morgan never
closed below the 21 ema on the five
minute
um there was a point where it dipped
into it
uh dipped below it but it ended up being
a wick once the five minute candle
closed
um and that is very bullish so
um i would challenge you to
look at a 9 and 21 ema on a 5 minute
maybe something there makes sense to you
uh next time you’re in a trade to hold
absolutely thank you um so yeah that
that concludes my presentation
um thank you thank you very much for
your help in that justin um and yeah
that’s that’s all
just another uh thought um when you’re
trading
at jp morgan i i we talked about this i
do think it’s very important that you
have up the spy
and you have up xlf just to get a
general idea of what the rest of the
banks are doing
and um just pay attention to the market
because on this day
jp morgan um was doing an arvol of one
which really um is that elevated
you know right now there are probably
hundreds and hundreds of stocks with an
oval of one
um so the way jp morgan
um is trading it’s going to be very
reliant on how the overall market is
trading as well
um so it’s just something to keep in
mind
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