We were in our training room in Midtown Manhattan during our 11AM mentoring session, reviewing TSLA from the opening session. Kinda a big trading opportunity for those following markets lately. One new trader had traded it, but not particularly well. I asked him why he chose TSLA. And he rattled off what he thought was the news catalyst in the name.
But the new trader’s description of the news catalyst was not complete. It lacked important details related to TSLA’s potential upside. This could have contributed to his premature sale, which he was lamenting.
Candidly from my seat, I really don’t get how you miss things like this as a new trader. Remember they have taken SMB DNA and sat in on numerous AM prep meetings by now. But it is even simpler than that. How could you trade a stock and not know in detail the news is in the stock you are trading? How could you miss important information and trade the name? Why would you think you will get better if you are trading off of an incomplete understanding of the news catalyst? As I explain in this video, good is not good enough.
But it happens. It happens during every new class. And frankly is pisses me off every damn time. Sigh.
I instructed all in our new trader class and our fall interns to gather after our mentoring session and create a list of everything a trader needs to know before you trade a stock. We need to get this right and right now. I chose a trader to lead the discussion and develop the list.
Below is what they came up with.
What do I need to know before entering a trade:
- News
- RVOL
- Above below VWAP
- ATR
- Average volume
- Long Term Chart (Where are we in the Daily/Weekly)
- Major ETF movement and strength
- Understanding the catalyst (news, technical, etc)
- Tape/Confirmation
- Short interest
- Stock Float
- Institutional Ownership
- SPY (Where are we overall with the market?)
- Where am I right/wrong on this trade?
- Entry, Stop, Target
- Gap% (if there is one)
- Who is in control/how is the stock trending
- What kind of trade am I making (PlayBook trade?)
- Time of day
- How far has the stock come?
We will discuss their list tomorrow and release this discussion on our SMB Capital YouTube channel. I will suggest some additions. But, overall, this is a strong list and solid work by them.
Do you have a list? What would you add to the list that is important to your trading? These lists will differ by trader, but what should not differ is having/creating such a list of information that must be known before each trade.
If you trade with incomplete information in a trade, you are not gaining the proper experience. It is vital for you as a developing trader to gain trading reps with complete information and full prep. Or else you are just getting a look at your trading ill prepared. That is very dangerous for your progress as a trader. In fact, this alone could be the reason for underperformance.
You must obtain the right kind of experience as a new and developing trader. Consistent preparation with a comprehensive list like above will start giving you this right kind of experience. With such information, you can build. With complete information, you can improve. With proper preparation, you can start to build valuable trading experience and intuition to make good trade decisions. Without it, you will just be flailing around as an underperforming trader headed soon for failure.
*no relevant positions