Trader A sits looking at the consolidation in BIIB. We have some nice consolidation. BIIB is above the highs from the first day gap up. There is no resistance above in the near term. Should I pay 80?
Trader B sits looking at the consolidation in BIIB. We have some nice consolidation. BIIB is above the highs from the first day gap up. There is no resistance above in the near term. Should I pay 80?
Trader B pays the offer and plays the momentum above the consolidation and 80. This is the right thing to do. He gets slipped. But BIIB does not go down that far. Should I pay 80 again? He passes.
Trader A watches the same opportunity and asks should I pay 80 the second time? She does.
Walking around the trading room into the close Trader A is very happy. Trader B is talking all things shake out. A veteran mentor explains, “if you really like the level then pay the second time.” Then he proceeds to razz Trader B for missing a trade that Trader A is killing.
Both traders knew all the same knowledge. Both traders traded on the same system, in the same city, heck on the same floor. Both had the same trading opportunity. Trader A bought. And Trader B passed because of the first shakeout. Execution, execution, execution.
Mike Bellafiore
Author, One Good Trade
3 Comments on “Execution, Execution, Execution (BIIB)”
Nice post. I’ve been in the shoes of trader A, trader B and trader C (= getting shaken out twice in the same stock). If the plan/system says you take both entries since statistically both have a positive expectancy then it makes it a little easier, but you have to accept the risk that on some occasions you’ll get stopped out twice.
I suspect the difference between the two traders is the confidence that the second trader had in the level. With so much talk about “liking your level,” perhaps Bella could give a few tips on how to determine the strength/reliability of a level. . . .
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