Most of the trades that intraday traders make are from move to move.  We short a stock when it shows some temporary weakness and then cover when it slows into its downmove.  These trades can be held for less than a second at times.  But most good intraday traders also hold longer intraday positions.  We hold a core position.  Basically as long as the intraday trend has not been broken we hold our position.  Let’s talk about what we are looking for to start a core position.

I start a core position in a stock that is clearly trending.  A stock that is clearly in a downtrend or an uptrend.  I start a core only for a Stock In Play.  I start a core only for a stock that has the potential to move a ton in the direction of my position.  I start a core in a stock that has multiple points potentially left in its move.

Today I started a core position in STT.  Let me preface my remarks by admitting that I got my butt whooped (I am pretty sure I can say this in a blog format) in STT from 9:30 AM until  about 2:15 PM.  My win rate might have been less than 20 percent.  Whoever runs the order flow in STT is definitely not gonna be on my Christmas card list.  One of our traders who has traded STT quite a bit, mostly when it was in the 40’s, remarked that he has seen it trade worse.  I am not sure how that is possible.  STT was a disaster.  And it was just not me.  GMan got beat up as well.  If GMan AND I get beat up in the same stock it is safe to assume the stock was not trading well.

But then around 2:15 Bella struck back (sorry for the third person reference).  But I did.  After almost 5 hours of getting beaten up in STT I started my comeback.  Firmly negative, not happy with my trading performance, frustrated with how my orders were being treated, I spotted a great set up in STT.  I spotted a great opportunity to start a core short position in STT below 18.

Hey trading in and out all day wasn’t working.  I might as well try a core position.  Seriously I saw a great opportunity.  A trade that I will make every time.  An opportunity to turn my day around.  STT had not traded below 18 since 10AM.  STT had traded in a range of 18-19.  Finally, STT offered a significant red candle below 18.  And STT tested 18 in a retracement and could not hold above 18.  Game on.  I started a short core position at 17.99.

I tried to trade around this core position.  This didn’t work out so well.  At times I aggressively added to my core short position with little success.  But my core position worked.  Nothing else really worked for me today save this position.  And I caught the entire downmove from 18 to 14.53.  My day changed from firmly negative to profitable with this one trade.  Chop!

When to cover your core short position is a matter of preference.  For me I will not cover a core short position until its downtrend is broken, or I spot an unusual buyer appear, or my exit price is reached.  You should develop your own rules for when to exit a core position.  When I am firmly in the money I will lower my stop with my core.  But I do my best to just hold.  As an intraday trader our strength is noticing the likelihood of the very next move.  Our weakness when holding a core can be to cover when we notice that the next move is probably up.  We must fight this human instinct to cover and try and short higher.  Hold that short.  Short some more into the next upmove.  But do not exit your core unless there is a very good reason to do so.

Time to head home and watch American Idol.  Best of luck with your trading!