In this video, learn exit strategies for your trading to lock in more profits (be definitive!). Two developing traders break down their exit strategy in a winning technical Tesla trade, with critical feedback from Mike. Let’s get to work on sharing these important trading lessons so you can grow your trading account.
View Video Transcriptin this video learn exit strategies for
your trading
to lock in more profits be definitive
hi i’m mike bella fury 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
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in the trading community in this video
two developing traders
break down their exit strategy in a
winning technical
tesla trade with critical feedback from
me
let’s get to work on sharing these
important trading lessons
so you can grow your trading account so
this is a higher time frame
consolidation
short squeeze into all-time highs in
tesla
which has been a stock that continues to
break higher with outstanding
follow-through and volume price action
and fundamentals
this is a trade that both nathan and i
took long at different times in the day
and
it had similar technical variables that
we distinguished to have
an edge the setup that we saw in this
trade was a big dog
these variables have edge and it what’s
it what creates
uh the big big dog breakout we want to
see
a stock in play with an arville over two
it’s holding above v-wop
tight consolidation wedge pattern
elevated volume confirming the breakout
significant amount of time in
consolidation and i think
the more time it spends in that
consolidation the more significant
um the breakout can be volume in that
wedge is relatively decreased it’s a
highly shorted stock
because that adds some fuel to fire and
then
um to the back side or you’re to your
reason to sell you want to see the
change in character
some some of these variables can be blow
off top breaks ema
you can use atr’s for a guy to do an
exit do you need to see
an ascending triangle to make the
straight no
it can be a asymmetrical triangle it can
be
a wedge formation where it’s it’s higher
lows and lower highs that wedge into one
point
i just i just want to put that in just
to visualize that the price action gets
tighter and tighter
but it absolutely does not have to be
that flat top where it’s like
it’s hitting that offer and it’s not
able to break that offer i gotcha
and then another reason to sell is a
series of lower highs
and on and with the reason to sell i i
don’t think it should be just one of
these things
i think it should be a culmination of a
couple of them maybe three
but putting multiple factors together to
make a decision to reason and sell will
increase your odds of getting that full
bulk of the move
in the big dog because the goal of it is
to catch um
the bulk of the move and get big feels
to me
like you’re going to get a little bit
trapped
knowing whether or not you should get
out of position based on what you just
said
it feels to me like it’s not
you’re not clear enough on what’s going
to get you out of this particular
position
yeah so you said hey well maybe it
should be a couple of them together
i don’t know what that means if we see a
breakout and it shows the variables of a
blow off top like um
we see that big wick up on a one minute
candle and the volume surging in
and we see it uh price pull back
maybe that that that could be that
would be one of the variables to sell
but that also could be a pull in and we
could be watching the tape and you can
see like oh okay i see
on the tape that the buyers are still
holding the bid
and their most transactions are still in
the ask so maybe this is a trade that
can hold for a little longer and we’ll
see continuation
as like a false breakout okay look i
it to you to give that it’s worthwhile
for you to give that some more thought
you don’t always have to be exactly
definitive as to how you can get out
but i don’t want you to get caught
not knowing what to do being indecisive
in real time
[Music]
so strikes me as an area to watch for
your trading
to see if you are getting indecisive
about taking your profits or exiting a
winning position
yeah i can jump in and just say um you
know the idea of this trade is to
really catch a big move
so i think once you enter the trade you
really
uh you don’t want to try and find that
reason to sell like it should
come to you uh you know and i think a
big
thing for me and you know with this
trade would be to maybe move to a
5 or 15 minute chart look at the bigger
picture
and if we have you know a real change
where
you know maybe bids or supports are
dropping where it was previously holding
and and there’s that really clear change
on a higher time frame i think
that could be a good guide for this
trade
on a reason to sell if you want to learn
three 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
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so don’t worry you’re not going to lose
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in a couple of hours from this trading
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years of online education i think the
important things to take out of this
for tesla trade as we see relative to
the past four days we’re holding in a
range between
310 dollars and 320 dollars and then
a little bit bigger picture maybe like
two weeks out we’re holding in a range
between
300 and 320 dollars these are different
sectors
so we what do you want to take out of
this is that the momentum names have
been outperforming so like the tech
sector
um the large caps and the qqqs
and tesla’s uh contributing to this
outperformance
coming into this day there wasn’t you
know a major
major headline or something that you
would think should move tesla 100 or 200
points
biggest headline that there was is that
tesla could potentially be added to the
s
p 500 um you know obviously this is
significant
and it could drive further demand for
the stock but
in our opinion i think the bigger uh
catalyst in this trade is overall
sentiment
and psychology coming into this day
tesla already ran
almost 50 in a few trading sessions
after that thousand dollar breakout
um and it was almost like the entire
world was talking about tesla
every financial media network was was
talking about it
you know you would see a new headline
every day tesla surpasses volkswagen’s
market cap you know it’s the most
valuable automaker in the world
you know more valuable than jp morgan so
you would just
you know everyone was talking about this
move obviously when you have such an
aggressive move
and you know a cult stock kind of like
tells
tesla there’s going to be a lot of
people
shorting this move and and tesla is
already a highly shorted stock you know
it has those
kind of perma-bears and you know there
are definitely funds that want to see
this
sub 1000 maybe even in the 500 range
after a move like this there are going
to be a lot of people
with a very extreme psychology um and
and that was really clear in the
sentiment you know in financial media
twitter and you know i even had friends
who don’t know anything about trading or
the markets and they’re saying
what’s going on with tesla you know like
should i buy tesla
and usually when you know retail traders
and people who don’t
really know anything about the markets
are asking about stock
that’s how you know we’re getting to a
very extreme um
psychological point so i i would say
that is the uh
the real catalyst is you know that
psychology and sentiment coming into the
day
the fundamentals you know tesla has that
uh elevated short float
almost 10 percent um it had that crazy
run
the previous week that thousand dollar
breakout it was at
500-ish just two months earlier
so it had a crazy move and another
interesting point that we wanted to talk
about you know that’s been mentioned a
lot in the past few months
is the impact that robin hood users
could have on some of these crazy moves
and you know you look at that chart and
you see as tesla’s price
you know just continues to rip higher
exponentially
so does the use the number of uh
robinhood users accumulating the stock
that retail buying and that pressure
definitely we believe could have
contributed to this
uh squeeze and you know it just shows
that
there is that demand from retail money
pushing price higher
so that that definitely played a role in
our opinion another point we wanted to
touch on
neither of us have enough experience in
the options market to
really go into detail on this but we
wanted to see if you could uh
maybe clarify there was a lot of talk
that
it’s kind of like this self-fulfilling
prophecy where
people are buying these far out of the
money calls and that kind of drives the
market makers and
option underwriters to try and push the
stock
up uh to be in the money in those calls
and the 1480 calls were up by almost
four thousand percent
and it was a friday and opex day we
think this had an
impact but we we don’t know
um enough about the options markets
really speak on that if you wanted to
say anything bella do you guys know how
much volume was being done
in some of the calls once that breakout
occurred it was
it was extreme it was just up yeah
i don’t know off the hand but it was
extreme a couple of strategies some guys
use so some people look for
what’s called unusual options activity
and that can if you
are select about it potentially give you
some color as to
what may be coming in the future and
then
yeah if you’re noticing that uh an usual
amount of
action is being done at higher prices
then can that be a signal for you guys
can i give you a little bit more
confidence maybe that’s another way that
people are buying maybe they’re buying
the underlying stock maybe they’re
buying calls
maybe the call to put ratio is out of
whack
and you can start to utilize that
in severe decision making then certainly
you know what’s happened with the firm
is after you get good at equity trading
you start to gain the
right to trade in different ways one of
the ways is to be able to express your
positions and options so for example
for example right now amd is one of the
big runners
and well this will be
watched at a date where what i’m about
to say
i can say because our guys positions
wouldn’t
won’t be impacted you know but
there were guys who in amd
instead of buying the underlying stock i
either
bought calls expiring today
or out in time
and or bought the underlying stock and
so
that was a way that they have learned to
express
uh their traits so
yeah i mean good to be good to be
looking at this
so here’s the big picture chart of tesla
you can see just how absolutely
extreme that breakout was after a
thousand
coming into this day we had those three
days
of of somewhat consolidation and lighter
volume
and that was after we already had that
breakout from a thousand and touched
uh like 14 30 almost
and at this point you can just imagine
how many people
would be shorting that move and maybe
it’s it’s
not totally irrational you know a fifth
almost 50 move in
in about a week but there are a lot of
people
that are now wanting to see this break
down and
and it almost it does that a few days
before
but it holds so price not being able to
break down
on that daily chart is a very very
significant
tell during this intraday we experience
two wedges form
the first one i liked really a lot more
but i didn’t see it coming
we’re seeing it the price get tighter
and tighter and tighter and that volume
just stay low low low and we’re also
wedging right up
up against all-time highs which previous
to this breakout was
1429. we get this move higher
and then we form into another wedge
showing that the sellers aren’t really
interested
in getting bigger in the positions and
the longs aren’t really interested in
getting out of their positions
so we’re just holding higher we’re just
holding higher and
yet again we get that lower yield
relative volume and then we get the
breakout on
elevated volume an interesting part
about this trade and why coleman and i
wanted to collaborate on it
is because i took the first wedge
and coleman took that second breakout
and on this first wedge you know i was
watching tesla the entire morning it was
top watch for the day
and i actually tried this uh
move right here uh that first attempt at
breaking out from 1420
and that move did not work so i had
you know that previous context of what a
breakout that didn’t
work looked like and then i saw you know
the breakout that did work
why i was watching this very closely and
and why i thought it could be an
absolutely massive trade
is because i i was really thinking about
where
other big participants were positioned
you know it all comes down to that
psychology that sentiment
you know elon musk releasing those short
shorts mocking short sellers the sec
everyone talking about tesla like 1429
that previous all-time high
that’s where you know all those shorts
logically would be risking off of so
uh this wedge right under that level
you know a lot of shorts would be
nervous at this point and
when that breakout happened on elevated
volume
uh that is showing us that yeah our
trade is
working there are now new players
entering
this trade there are those shorts that
are now trapped and have to exit
uh running for the gates and you know
there are now you know new algos new
funds coming in
uh and driving price higher all right so
this is
wedge two this is the trade that i took
um i think some of the important
variables to see here is that
now we’re in right into new all-time
high territory so there really isn’t too
much risk resistance above
um prices um above one atr from opening
it’s holding half of atr from v wop
so it’s much more extended compared to
the first wedge the time of day is
different
we’re holding around 1 30 to 3 p.m in
the afternoon
the time it held in the wedge was 36
minutes and
another thing i thought was very
interesting is it’s wedging right up
against a huge psychological number of
1500
and uh same thing with the dried up
volume and then we get that breakout on
elevated volume so this is just uh
a quick venn diagram we we made just
showing that
these are uh very similar setups but
they have their slight
nuanced uh differences the first wedge
uh within half an atr v-wap still below
all-time highs so you know shorts were
still okay at that point when it was
consolidating
um time of day it’s actually interesting
that the breakout occurred at usually
the
you know lowest volume of the day and
lunch hour
um and the time consolidating that first
wedge
was uh a bit longer than that second
wedge
spent consolidating so you know there
was more of that battle
of buyers and sellers and more
indecision
and then coleman’s wedge too i thought
that was interesting that time of day
um i think that definitely plays a role
in this setup
even though tesla was extended pretty
high from vwop
because of the time of day i believe it
had that extra push to close high a day
um another factor is that we got that
consolidation
uh for like we uh for 36 minutes
and also i think with important with
wedge one is
nathan had that first wedge to
consolidate for 51 minutes so that’s a
lot of time that’s a lot of pricing
compression because with compression
leads expansion
and then we can talk about some of the
similarities between these
two wedges is that they both had lower
relative volume in the consolidation
elevated volume on the breakout both
holding above v
up shorts are trapped and we’re wedging
against all-time highs
when you’re coming up with your playbook
trades for a particular strategy
you’re going to have a sense as to what
variables you want
but with certain trades they’re not all
going to be there
each trade’s going to be different shark
is famous for saying that
each trade is going to be different this
trade is a little bit different
and you are going to have to make some
decisions stationary trader in real time
as to
how you’re going to handle the fact that
maybe not all your variables are here
but a lot of them are how much risk do
you want to put on
maybe this trade is a little bit
different than the other one that just
worked
what are you gonna do what what the
importance though of
outlining the variables is is is that
you won’t have to think about as many
things in real time you’ll be able to
make better trades because you’re
only perhaps considering one or two
things as opposed to 10 things in real
time as
data is moving around really quickly and
so you know just
it’s good to acknowledge that there’s
going to have to be some discretion that
goes into this
but you can set yourself up
to be able to make easier decisions and
to be able to use your discretion better
by going through a playbook and
understanding what you trade best
you shouldn’t expect everything to line
up perfectly that’s not realistic
you should expect yourself to have to be
observed and use your thinking
during real time all right so so so good
good
good to point that out so now we move on
to the tape
of the breakouts um and i’ll talk about
the
first wedge breakout because i took that
trade i was watching this i tried that
first breakout
over here and it just wasn’t ready yet
not enough time
spent consolidating and so i knew
what the tape looked like when the tray
didn’t work
and then i was watching it now you can
see um
once we break that 1415 level and you
know
the wedge is kind of clear we just start
really accelerating with volume coming
in
a lot more green on the time and sales
and
at this point you know the trade i was
literally
screenshotting it for my book of charts
because you know the breakout was so
clean and so textbook
that i just had to save it um
and you know the tape had a clear change
it was so clear
and since i’ve been watching it earlier
and i knew what the breakout looked like
when it failed um i now knew that yeah
this was different there’s a new level
of volume you know they just lifted
price like
ten dollars within a few minutes um
so you know there’s there are new
participants coming in and there is new
uh liquidity uh coming into this trade
yeah now we’re coming out uh you know
all-time highs are 14
29 and i zoomed out to the daily right
when we broke all-time highs you can see
this is when every short is now very
worried
and price just begins accelerating
incredibly fast
and the trade is working you know i’m
good but
i really should have been just you know
looking at that higher time frame
you know sitting on my hands and just
not trying to get fancy with anything
and and
really look into the tape too much
anymore because this is now a bigger
picture idea we’re above all-time highs
every short is trapped and stuck they’re
gonna need to cover
so you know i should just be really
sitting back and like i said earlier
waiting for that reason to sell to come
to me
rather than me um looking for a reason
to sell just because
you know i’m thinking you know it’s gone
up too much or whatnot
all right so this is the second wedge um
i think there’s three
critical points to see in this trade the
initial breakout of 1500
the pull back into 1497
and then the continuation higher which i
would consider the real breakout when
the volume
and the speed of the tape really um
comes in
yeah so right there we get the break of
1500 and i think right away instantly we
move up three dollars
and so as soon as we get that break up a
feed off a few dollars we see a lot of
transactions on the ask a lot of big
prints on it
but um right there like the offer step
up and we get a move back under back
under 1500 which we’ll see coming right
here
oh yeah so we spend a little bit of time
up here um
is it the volume isn’t really ideally
coming in
price isn’t moving away so we get to
pull in to
1497 it gets aggressively bought up and
holds
the bids don’t get dropped and price
isn’t getting stuff
lower so that’s showing that we’re
likely to see the continuation higher
that that fake out was just shaking out
some more shorts maybe some shorts are
still adding to their positions
and then we get that break and
continuation higher right around
um four minute mark
okay yeah so yeah right there
watch the time in sales you see it’s
just all big green prints are just
coming in
and then we’re just gonna break that a
new high a day and then right there boom
look at all those look at all those um
transactions on the ask and look look at
the size of them
we just get that that this is a
legitimate move and it’s likely to have
that continuation and follow-through
higher
as price is moving away
and yeah another factor yeah there and
now we’re up to 5 15 12. i think another
thing that’s important to see is that
we’re spending time right at 1500
and that time spent there uh maybe
creates it from a
b setup into an a setup because now
we’re just consolidating right against
that 1500 and we’re spending time there
we’re not getting a move lower and we
then we get that flush higher yeah so
that’s an important point
you can just based on the tape
have a stock go from a b tray to an a
trade
because of what you’re observing it may
be
very clear that there’s a strong buyer
or seller from the tape
that gets you to upgrade the trade from
a b to an a trade
a b to an a plus trade
and that’s important being open-minded
seeing it and if so then
make sure you have enough risk on
appropriate for that type of setup
so now we come into the trade management
um you know
honestly this could be a you know half
playbook half anti-playbook because i
did not
trade this as well as i should have
given how many variables were aligning
um and the fact that you know i was
seeing all this happen in real time
and and coleman can attest to this it’s
funny i said in the chat
in discord you know this seems like a
good potential hold
into the close i couldn’t stick to that
and
so my first entry was that 1415 break
you know when the tape confirmed it but
then i make a really really
stupid uh trade decision where i take
half my risk off below that
1429 all-time high
and i did this because over the past few
months i’ve i’ve kind of found
a niche and edge in uh scalping and very
quick trades
you know i’m usually not in trade for
more than five or ten minutes so
i was still in that mindset and i was
still too focused on that one minute
chart and the tape
when i should have just been sitting on
my hands and um
remembering what kind of trade i am
actually taking
and so i wasn’t in real time remembering
and telling myself
this is a bigger picture idea this is a
potential trait to hold
not a scalp not a move to move you know
this is
a really big technical breakout
um so then 1460s
uh i meant to take another 10 off there
as we were getting a bit steep
but my hotkey um my
i fat fingered the wrong hotkey and i
got flat which was
frustrating um but you know i just got a
pretty big move so
overall you know i couldn’t be too mad
about that but
um then you know where it’s highlighted
c
this is where i could spend a whole hour
you know as an anti-playbook
um i was playing for that 1500 break
but now i’m kind of chasing and i’m a
little bit on tilt
because that uh hotkey uh incident
happened
and i wasn’t big enough in the trade and
i knew it and i should have made more
and so those are all triggers for me to
get me on tilt and
and i was and so then i was just you
know taking all these different scalps
looking for that 1500 break and i was
just
too early you know i wasn’t patient
enough i didn’t wait for the tape to
confirm it
and i just was getting chopped up and
gave too much p l back so
after that i i had to just um
take a step back from my trading desk go
on a quick walk listen to music
and um you know of course the the trade
that i was looking for did happen a few
minutes later but
uh you know overall on this first
breakout you know
i’m glad that i took the trade but there
was so much
room uh to for this to be you know one
of my biggest trades ever
if i if i traded it well uh same thing
with nathan
this definitely we were both had the
right idea but weren’t thinking about
the bigger picture
um my mindset coming in this trade was
it should work right away as soon as we
break that 1500
um sometimes like we get that fake out
and then we get that pull in and where
the real buyers come in to get that
continuation higher
i wasn’t thinking about that and that’s
one of the biggest mistakes in this
um so my realizations is that we would
get this this massive 36 minute
consolidation at all-time highs
uh the volumes coming in continuously
throughout the day in this up move
and we created multiple inside bars on
the five ten
and fifteen minute time frames expensive
stock
do you feel like this is a
stock that you can trade at this point
in your career i feel like it’s too hard
feel like it’s too spready what are your
overall thoughts
for me yeah like uh i’ve
before this summer um you know i was
never trading
a stock over a thousand dollars so but
the previous weeks i had been you know
practicing with very small size
in trading tesla and you know i did
notice that it touches so many prices so
you know i can’t be too big initially um
but on this trade i was so convicted uh
and you know i just really was confident
in it that i entered full size right
away
but i think the better thing that i
should have done given you know it’s so
wicky it can it can just
jump around and you know you can draw
down a few times
what i should have done was enter half
at that 14 15 break
and then add another half or
you know maybe one or two full tiers
above that 1429 all-time high
and the fact that it didn’t get back in
once we got over that all-time high
and added that size that i took off that
was probably the biggest
error because once we were over that
all-time high you know i knew every
short was trapped in
and and there was nothing they could do
and the volume was just pouring in so it
was an a plus plus trade and very high
probability
um but yeah going back to what you’re
saying it was new for me
um but you know i’m glad i got this
experience in this trade
for me tesla’s actually been my
most profitable stock i’ve traded
throughout this summer
i just checked out my trader view stats
in tesla i have currently have a 66
percent win rate
a lot of times i’m scalping based on
price action and it does touch a lot of
prices
and i think because of the momentum and
because it touches so many prices that’s
why i found success
training tesla so now on to our
intuition
um the biggest thing for me in this
trade
what i spoke on earlier thinking about
the psychology coming into this day
how extreme sentiment was you had one
side saying
this is a bubble this valuation makes no
sense
and then you had the other side saying
yeah maybe that move was a bit
aggressive but the market is finally
realizing
and pricing tesla to be the dominant
automobile and you know autonomous
driving
company over the next few decades um so
thinking about where those other market
participants would be
positioned is you know why
i was really confident to take that
initial entry
and knowing that so many people wanted
to see this breakdown the
few days where it was kind of
consolidating above 13 and 1400
and you know it made me think of a quote
from brian shannon
from failed moves come fast moves um
so when that when tesla didn’t break
down and when everyone thought it should
break down
you know there would be a lot of people
trapped and a lot of people needing to
cover and exit their positions yeah just
going off what nathan said
um i need to be thinking about where
other market
participants um on the bigger picture
to also add conviction to my trade i
should be thinking about that ten
percent of the shorts
or shares and tesla are short meaning
that there is still a chance for a
continuation squeeze higher
and most longs in this position are in
the money looking back
i need to uh hold a larger core
and it um have and think about in this
situation what should be my reason to
sell and be very flexible with that
and putting together the variables will
give me clear conviction for a reason to
sell my trade review and what i could
have done better
i could have done so much better on this
trade
um you know i knew it in real time that
i wasn’t big enough
uh i knew when i took that half off you
know
i should have entered back in um
at least when that all-time high broke
um
and then i should have biggest thing
just zoomed out
remember the bigger picture remember why
i’m taking the trade
and you know really thinking about how
many people
how many big players are trapped and
that’s why i took the trade initially
and
and that’s what i should have been
thinking about the entire time not just
looking at the one minute chart and the
tape and you know since it does touch so
many prices
it i shouldn’t have been so focused on
uh the tape once i was in the trade uh
yet again yeah i
same thing with me uh just looking at
those larger time frames specifically
5 15 minute 30 minute and 60 minute
to have an overall standing what’s
happening now and what is reasonable
to what’s going to come next um
but yeah the rest i talk about is
exactly what nathan
um i think is what i could do better um
so then we just have
the technology slide um with this setup
it’s you know relatively a simple setup
and we should be able to code it you
know work with nick
other interns that have similar scripts
you know like consolidation scripts um
what we would need to code and look for
an elevated rvol greater than at least
two has to be above view op
consolidation of at least 30 minutes or
more
you know a range of no greater than a
quarter daily atr
um preferably lower arvol during the
consolidation phase
at least 20 percent lower um and then
an elevated short float is optional but
definitely you know
is ideal and can add um some more fuel
to the fire
uh and you know within five percent of
52-week highs or all-time highs and
above all major moving averages
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