We evaluate our trading at SMB on the process.  If you focus on the process instead of the result in any endeavor in life your chances at success are much greater.  Too often people focus on the results.  When you confuse a good outcome with good work you are bound to form bad habits that will harm you in the long run.  You also will eliminate good habits that would have propelled you to success.  Let me explain.

Yesterday,  I was down some money in AIG.  Initially, I was short based on the prior day’s weakness.  I lost some money on the Open as AIG popped above its prior resistance at 45.60.  I then lost some money long as it traded powerfully up to 46.50 before reversing.  Both of my trades were fundamentally sound but resulted in losses.  If I overvalued the loss as opposed to the reasoning behind the trades I would cause harm to my future trading results.  I might pass on similar setups in the future that offer excellent risk/reward.  I have been doing this far to long to fall into that trap.

I used the afternoon trading session to enter into a few far less risky yet sound trades.  The trades were in HOG, MGM, and AXP.  All three trades were perfectly sound yet only two of the three ended in a profitable result.  The one caveat I would make is that I have vowed several times in the past “to never trade that piece of X@%$$” when referring to AXP.  But the setup was so nice I had to make the trade.  Of course it didn’t work out 🙂

AXP released charge off information around 11:45 AM.  It popped on very heavy volume.  It then consolidated in a tight range for over one hour.  I bought it when it broke through the day’s high of 35.  I lost.  Not surprising.  It’s AXP.  If it was any other stock I probably would have set an alert at 35 and given it one more shot.  My failure to do so was an example of me overvaluing the result as opposed to the process.  If I had bought on the next break above 35 I would have been rewarded with a 50 cent up move (love his stuff).

The trade in HOG was based on a stock that was consolidating above it’s morning high.  One of our traders had identified a hunt order at 27.09 that would scoop any offer below 27.10.  I bought a small position at 27.11 and set a stop order for 27.05.  I was rewarded with a $1 up move.  Chop!!  I love buying stocks that consolidate above the opening range high.  Sound reasoning and a good result will further entrench this trade in my playbook.

The final trade was in MGM.  After being weak in the premarket MGM popped to 11.90 right on the Open.  In the final hour it released some financial data and was holding the bid at 11.92.  I bought some at 11.95 and put a stop order in at 11.89.  I was only looking for about 20-25 cents on an up move as there is major resistance at 12.20.  I was rewarded with a twenty cent up move.  Again, I love making trades where there is a held bid in a stock above its morning high.

If your reasoning is sound and you are consistent in your execution good results will follow.  That is the essence of trading.  And for those of you who maybe be wondering about the title of the blog—yes it could be a hint as to the upcoming title of a highly anticipated book on the world of prop trading…

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