This morning we tweeted our Best AM Idea (BAMI) in RIMM. Based on our observation from the after hours trading yesterday we thought it was likely that RIMM would bounce on the Open from 69.50 and have the potential to trade as high as 72.
When the market opened RIMM quickly traded down to 69.50 and I got long. Not that much as I was waiting from confirmation from the tape that it would support this level. Once I saw the 69.50 level hold I bought additional shares.
During the next two minutes RIMM quickly traded up to 70.50 and I sold the majority of my position. Why would I do that if the target we identified in our morning tweet was 72? Mainly I did this because I know that at every 50 cent level there are a ton of natural sellers and that most likely RIMM would fail at this level initially.
RIMM did in fact fail and over the course of the next few minutes it traded all the way down to the 69.60s. I used this opportunity to get long again. But when RIMM approached 70.50 the second time I did not sell as I wanted to give it a chance to break to the upside.
RIMM failed to hold above 70.50 so I hit the bid to get flat. My next trade was based on buying I saw on the tape at 70.20. This buying led to an explosive upmove to 70.80 where I got flat.
By 10:30 RIMM had failed multiple times to hold above 71 and I saw concerted selling on the tape from 70.60 down to 70.40. My bias changed to short and remained that way for the rest of the day.
We received some twitter comments and emails about what we were doing with RIMM. We were asked if we were still holding our longs until 72. At 12:00pm when RIMM was trading at 70 we tweeted that our bias was short and that the downtrend was firmly in place.
Our Best AM Idea is simply that. An idea. Far too many people believe that trading is about knowing a level and then making a trade. Once a stock trades to a trigger price mentioned in our BAMI I will use my trading skills to exploit this idea. That is what I did in RIMM today and I was able to profit.
Each person needs to trade based on their own observations. If you are relying on our tweets or anyone else’s as a substitute for your own trading decisions please stop immediately! You should not have money at risk in the market.
There is definitely value derived from reading others’ trading ideas. If for no other reason to see if you can find traders with trading styles that match your own. But at the end of the day if you are risking capital in the market you should have an understanding of the setups you like to trade, what the risk/reward is in each setup, and how you will make adjustments based on market conditions. That is the bare minimum. Otherwise, the other players in the market will take your hard earned cash and deposit in their bank accounts each day.
8 Comments on “Make Each Trade Your Own”
Nice trading in RIMM Spencer…WTG!
Nice trading in RIMM Spencer…WTG!
I agree 100%, if you dont have your own trading plan, dont trade. I learned the hard way, that following someones trades on Twitter (even if you believe he’s an excellent trader) is a recipe for disaster.
I agree 100%, if you dont have your own trading plan, dont trade. I learned the hard way, that following someones trades on Twitter (even if you believe he’s an excellent trader) is a recipe for disaster.
Steve:
How much room did you give RIMM below 69.5, there was a shakeout the first time it approached 69.5 and it dropped to 69.4. RIMM is prone to having shakeouts, do you favour hitting out and rebuying above 69.5 or giving it more room to the downside.
What in your opinion is a good entry on the short side, spy was making new highs above 118. Was there enough reason to short and hold rimm for the whole day given the strong market.
Tapetrader
Steve:
How much room did you give RIMM below 69.5, there was a shakeout the first time it approached 69.5 and it dropped to 69.4. RIMM is prone to having shakeouts, do you favour hitting out and rebuying above 69.5 or giving it more room to the downside.
What in your opinion is a good entry on the short side, spy was making new highs above 118. Was there enough reason to short and hold rimm for the whole day given the strong market.
Tapetrader
Tapetrader,
I was planning on hitting out of my initial buy below 69.30.
I’m not a huge believer covering “In Play” shorts simply because the market is strong on a particular day. After all, the market is strong 90% of the time recently. I am more likely to use the strength in the market to assist me in trading around a core position.
Also, if the market is strong and trending higher I will probably be long a bunch of stuff so being short the weakest stock in the market would serve as a good hedge.
Steve
Tapetrader,
I was planning on hitting out of my initial buy below 69.30.
I’m not a huge believer covering “In Play” shorts simply because the market is strong on a particular day. After all, the market is strong 90% of the time recently. I am more likely to use the strength in the market to assist me in trading around a core position.
Also, if the market is strong and trending higher I will probably be long a bunch of stuff so being short the weakest stock in the market would serve as a good hedge.
Steve