In this video, we share one important reason why you are making losing trades. See how a junior trader creates an AntiPlayBook Trade to help eliminate his bad trading and bad trades that are holding him back as a trader.
View Video Transcriptin this video we share one important
reason why you are making losing trades
hi I’m Mike bellifiore co-founder of SME
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
click our subscribe button so you don’t
miss any of the videos they were
producing for you in the trading
community see how a junior trader
creates an anti playbook trade to help
eliminate his bad trading and bad trades
that are holding him back as a trader
let’s dive in today’s presentation is
going to be on Twilio and it’s gonna be
on a false breakout trade that I was
making on day one of the earnings report
when the stock was going up like 40
percent in just one day so there’s kind
of bigger picture you know what the
results were they were so the profit is
6 cents versus a expectation of a 11
cent loss and revenue beat as well
technology has continued to be a market
leader with this cloud-based software
company leading the way to all-time
highs so there’s kind of understanding
what the market dynamic has been people
have been buying leaders and technology
because they figure that they’re gonna
do better in this economy post Korona
and they’ve been selling obviously like
the weaker names ones that will probably
be hurt more longer-term and just what
the intraday fundamentals are the stock
basically went a parabolic the whole day
and was up 40% intraday which was the
biggest move ever actually for this
company on earnings and also for really
any technology stock that I’ve been
following in a while
next I really like how you did that
really terrific best practice to go
ahead and and see this is a little bit
different but a hey how has this company
done in the past after earnings what are
some of the moves that it has made
actually think jake has done this a
couple of times and share this with us
in our group sessions in our group
mentoring sessions but highly encourage
guys in the desk to do more of that hey
you know on earnings last time it had
the earnings you know we moved to a TRS
or you know the last ten times this
company as earnings here are some of the
patterns that I’m seeing based on how it
trades after earnings and putting that
into your back best your back pocket so
a really like what you’re doing here by
starting with an impression semi thesis
says to hey is this how much is this up
relative to tech stocks and how it’s
done in the past so nicely done there
thank you
and yet just kind of the statute of
stock the ATR ten points volume three
are bottles around five this day short
float kana high but nothing crazy twelve
percent definitely higher than what’s
usual for a big cap tech stock but not
you know crazy high in the twenties or
anything it’s just kind of seeing what
this looks like on the let me just set
the scene as I do at the beginning of
all these videos which is this is an
example of an anti playbook trade so
we’re actually doing voluntarily is
going back in trading and then studying
setups that we don’t trade particularly
well or the trading that we don’t do
particularly well and learning from that
we can get a lot better by understanding
what we do poorly and staying away from
it and the types of trading that isn’t
what we do particularly well and staying
away from it cutting out the nonsense
one of the last and one of the last
group sessions we have more actually all
together in New York as opposed to right
now we’re all virtual was meeting with
team and one of the junior traders who
had made the most progress of anyone on
the team when asked why he had done so
much better said I stopped doing all the
stupid stuff I stopped doing all the
stupid stuff
so this is our sophisticated way of
stopping to do all the stupid stuff I
already got max
just kind of seeing what this looks like
on the daily and as you can see this has
been you know brand new all-time highs
and you know at the time you know that
we still weren’t clearly breaking out to
new levels and the Nasdaq so I believe
that like it was more reasonable to kind
of be like looking for fades which I
guess now in this market you know as
opposed to just you know given the
parabolic nature has not been as
reasonable but ya know I mean they were
up basically 200% from these all-time
highs or from the lows of that year and
just now actually moving to what this
trade looks like so this is like both
like mid day just kind of areas that
I’ve highlighted first I believe was
around 11:00 a.m. time frame and then
the next was around maybe 12:30 both
points for me are historically bad parts
of my trading really just like not
places where I excel like my focus
really for the most part is on momentum
times and you know one thing that I
liked to you know like just a really
focus on for like my trading is trying
to get large size and get quick moves
and when I’m doing that like midday
obviously not really a time for me to be
pushing this size when you know it’s
gonna be more algo driven a lot more
kind of just BS moves and just kind of a
more prone to fake outs and even a fake
out on the you know the other false
breakout where it’s like it seems like
you know it’s my pull and then they just
like throw some phase and it goes higher
liquidity is not going to be as as good
as well right so it’s gonna be a little
bit harder for you if you want to trade
with a little bit aside to protect
yourself when you’re wrong absolutely
and you know especially if I’m gonna be
going in for example actually here I’ll
talk about that in the trade management
but yeah so just kind of like before I
actually go through the
what my errors were 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
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in a couple of hours from this trading
workshop then from years of online
education the biggest error was sizing
too much per turn and not thinking
bigger picture so I’m taking too much
risk on trying to like time to turn
whereas instead I should just be like
focusing on getting a feel for the stock
not as much focusing on trying to time
the exact top with my best or with like
max size and then get the whole move
right and the biggest problem with this
is that one if the trade pans out but I
take two or three losses on what like
would be a good amount of size I
basically priced myself out of the trade
so if let’s say I’m willing to lose 20%
of my stop trying this if I’m gonna be
you know I’m risking 10% on two trades
or I’m just trying to time the defaults
break out based on the tape you know
there’s a good chance that you know I’m
gonna get it wrong and if it actually
did play out I would have been totally
priced out or I would have been
frustrated from the losses and then I
wouldn’t have traded it well right so I
think that’s just kind of key for me
just like going forward just to I
realize that you know I am trying to add
to my playbook better ways to get into
bigger picture trades and more pattern
trades because you know I’m been doing
well in momentum but you know that
there’s not going to be momentum trace
and you know every single day and I came
out just like rely on that so I
definitely feel the need and pressure to
try to expand my playbook so shark does
this right when he thinks something’s
overbought and he thinks it’s ready to
turn he wants to trade the turn or
to trade be on the front side
anticipating the turn he’s gonna get the
three tries so when he’s thinking about
his risk on try Wan he’s livin himself
risk for try – and he’s leaving him
himself
risk for try3 and he’s leaving himself
overall risk for if he really sees the
turn and wants to really size into it I
think you’re saying the same thing there
yeah basically and yeah so like you know
that’s definitely a place where I have
to improve on as a trader actually just
going through the trade management so
kind of what I was seeing you know in
the highlighted areas I was looking to
see if there would be a new breakout and
then a immediate rejection so we kind of
saw that in the 170 area where you see
it broke it failed at 170 started to
like pull in this was not my main area
putting on this trade I think that I
kinda like noticed that and then was
trying later on versus for a similar
style setup but as you see in the next
highlighted area you know like there
would be a wicks breaking out and then a
subsequently red bar pulling in and then
it’ll just kind of be doing that for
like 30 minutes and in my head I’m
thinking I this stock has come $25
2.5 ATR it’s just from the open not to
mention that you know it was gapping up
so I felt as though that my RR was
really solid but you know as you can see
it’s not so that there was any volume
there showing that there really was
gonna be that false breakdown like what
it should have been is if let’s say it
broke 173 which was like the prior high
and then it went right to like 170
something where I’m like okay I could
see this going back to the whopping only
165 and that is a clear rejection
instead of just you know a red bar and a
stock that’s moving to $3.00 per minute
anyway and you know like that just comes
with you know just understand the stock
better and just experience
you know but as you can see trying it
there you know with tight stops is
clearly just uh you know trading time of
day is important right so you’re gonna
have you could have different play books
for the open for the middle of the day
and into the clothes we all know that
there’s one particular trade which we
actually can’t talk about that you love
after three o’clock yeah which you my
baby your favorite rate so and you want
to be thinking about your wrist or out
the day and I know that you do is saving
risk for that trait as well but you
totally right which is there can be
false breakout trades with rules that
you put into a playbook for the open
that you take on the open that work on
the open that you don’t take in the
middle of the day that you may or may
not take into that close of trading hour
into that last hour of trading so that’s
and you know one of the things that’s
particularly helpful to do this is to
think about the day in three separate
sessions the open is one session the
middle of the day is another session the
close of trading is another session and
to create a demarcation between those
three periods of each day to actually
physically get up off the trading desk
and take a scheduled break for ten
minutes or more after they open after
the afternoon session
where you’re really putting in those
barriers and then spending some time
during that break thinking about hey
what are the stocks that I want to trade
midday what are the setups that I want
to trade midday how do I want to attack
this new session get a clear head
recharge restart and then attack those
very specific different portions of the
day with very specific playbook trades
that work best for you that you trade
well for each different period that’s a
really advanced way to trade during the
middle of the day and you’re starting to
think like that by making that very
significant distinction which is hey
this doesn’t work for me probably mostly
because it’s middle of the day but but
might work on the open you know if
you’re gonna be a fade trader for stocks
that gap up right on the open is gonna
be a very advantageous time at 10
o’clock is gonna be a very advantageous
time and 11:30 is a completely different
trade absolutely and as you can see here
by the executions you know the first one
it broke 170 my thinking there was okay
we just broke the round number
maybe we stopped people out it’s
starting to like go back under and I
think was all right we just had a pretty
carbolic move and the reason for this
rally I remember it was on CNBC there
was this mentioned that there were calls
being bought and I figured that I this
is just kind of pushing me retail buyers
into this kind of just like chasing this
up it’s not really a true reason for
there to be a volume explosion so that
was that Najarian yeah yeah so I saw
that clown we see him yeah absolutely
he stripped me over but you know so he
so like the rally was like five dollars
on that comment so a German was calling
out unusual options activity and the
particular name in the middle of the day
and that caused a little bit of a spike
yeah so what am I thinking was that that
was gonna create a false breakout and
then because it was just a retail
traders buying it pros
then they come in kind of smack it back
down to where it was before so I was
taking that like the 170 stuff would
have like made sense but as you can see
you know it probably should have held
under 170 at least from one or two
candles for that to be valid and then it
was still giving me a pretty good RR and
there was more volume on the break than
on the red bar and like right there that
was probably a 50 cent loss which is
fine but you know that with that size it
starts to slowly add up and then I try
again at 172 that’s a fake break out or
you know are thinking that and then
finally what you know on that building
red bollard my thinking is all right big
family just jump in right here because I
know you’re more advanced than most of
the people who are watching this right
now so you know so Pete and Jon Najarian
run a service let’s explain unusual
options activity okay want to do what do
you want me to do it I can give it a try
yeah you give it a try your show you’re
an options expert so the run sure so
basically what they’re doing is they are
highlighting unusual options activity
which means that there is a larger
volume of contracts being bought or sold
what you know in a particular name so
for example if let’s say light usually
there’s only a thousand contracts being
traded in a stock or in a particular you
know expiration if suddenly there’s five
or 10,000 it probably means that there
is some institutional player that is
coming in and placing a large bet on the
direction of the stocks what I can tell
you is that there are people with real
money coming in with a you know a thesis
backed trade that I’m most likely and
then many times people will just kind of
follow what is called the smart money
and that’s definitely one of the more
common trades that they go over and
discuss in their service and on CNBC is
that something you watch it all max the
show or or
oh yeah do you have an indicator for
unusual options that you watch I watch
it but not as much since you know just
now I’m just like focusing on stocks and
very just like short-term moves if I you
know it started to like go back to
options trading that would definitely be
something that I’d be watching I found
from my experience that usually that
works best when you’re trying to
anticipate a breakout or break down and
you let’s say have a higher volume move
in the stock that’s also accompanied by
that options line it’s like let’s say
for example in tests all right it’s kind
of been the consolidating at last couple
weeks
what if let’s say today by the close it
just suddenly goes up $20 and you just
see a flurry of call volume it’s
probably a good sign that there’s going
to be follow-through the following day
so even if let’s say like you’re not
trading options you can still use that
as a thesis for wanting to play that
momentum the following day because this
probably means that smart money is
starting to pile back into the stock
it’s like that’s how I would use it or
haven’t used it yes for like just like
you could see here just kind of had the
smaller you know candles like it wasn’t
really doing much and I was making
patterns that weren’t there it’s kind of
you know essentially what this was so
there’s going to be a tape reading just
kind of like summarizing what for me a
false breakout trade is my trigger was
when I saw the creepiest high break with
little follow-through and then a
subsequent pullin and failure to go back
to the high quickly so the reason why
this would be they might trigger is that
I figured the new high was based on a
stop run and that there were sellers
that were waiting there there’s
potentially a heavy area and that this
was kind of finally the move and you
know my best was kind of the idea behind
a false breakout trade
I think these traits are a lot easier in
stocks that are cheaper and much more
thick because you can clearly see when a
very particular price is holding so for
example I’ve been trading LK a lot the
last couple of days
a $2.00 stock it’s the Chinese name that
had the accounting fraud and one of the
main triggers for me we’d be seeing it
come up or come down to a whatever price
that was either support or resistance
see them really hammer that price but it
just not drop or not break and then see
the opposite side so if let’s say it was
trying to break out and there was a held
offer and then see like the bid start to
decrement that would tell me that
there’s a seller there that is not
budging so kind of the same theory here
except in Twilio a 170 our stock that
has a spread of 25 cents it’s obviously
harder to see a held price because
there’s not gonna be as much liquidity
percent that there would be in let’s say
a $2.00 stock so this trade could work
better in something like a a lk rather
than that of a toyou so just kind of a
trade reviews going back this month this
is overall my worst trade setup and you
know is trying to play false breakouts
the reason I tried adding this is
because if you’re clearly able to see
the false breakout usually it’s a start
of a trend reversal and then you’re
basically in from the best price and you
can you know add along the way like if
let’s say I was actually right on this
trade and this thing just crashed right
through 170 broke the low that was
before on the Jerry and spoke I
basically would have a starter position
from an incredible price and that’s kind
of my thinking but you know just kind of
saying it it definitely sounds as though
that’s kind of more Hope than actual
sound trading logic when you’re trying
just to pick out points in a chart that
hadn’t proven to be significant yet and
that’s something that I’ve quickly
realized you know for all my trading
that is midday and how that’s been kind
of my biggest focus you know over the
last month or two is really cutting back
and not completely eliminating mid day
trades but just picking my spots more
carefully and really just having better
reasons to be in what I’m in max are you
tracking
your fake breakout trades in trader view
and measuring your trading stats for
that particular type of trade yes so
this tag for me is false breakouts right
and that tag is my worst one currently
well there you go yeah
so yeah so I think that that’s it again
I mean it’s it’s one thing to say
anecdotally I feel that my worst trades
are fake breakout trades you might be
right about that it’s another thing to
say
I measured and studied my fake breakout
trades after I’ve tagged every single
one of them in trader view and in fact
they are my worst trades statistically
and then now I got to do something about
that which is either a eliminate them
completely or tweak them so that you
keep the ones that might work or get
better at at the ones though there may
not so super important to do that so you
and I were talking a little bit about
this offline and one of the things that
I see when really really elite
discretionary traders do very very well
save a save a few there there are some
discretionary traders where this will
not apply but but a large majority of
them do better when they put rules in
place they do better when they put more
variables specific variables into the
trades that they trade best that they
understand and they can they can say in
detail when I’m looking for a fake
breakout trade I want to see XYZ 1 2 3
when I see traders not trading at their
best or when I see traders
underperforming they have general
comments about their trading and the
trades that they’re not trading
particularly well and so one of the
things that you can think about here is
being really really specific about the
fake breakout trade you want to take so
you’re making a great distinction mid
day is probably not the best time to
take it if you’re making a good
distinction by saying I want to see the
type of volume that gets me into the
trade so you know some ideas for people
to be thinking about for fake breakout
trades and any rules to that is what is
the time of day that these trades are
most likely to work you’re gonna have
completely different results for this
trade open mid day close period full
stop the volume explosion or lack
thereof do you want to tell me what you
mean by that
sure yeah so like for example right when
the other was that 170 break that came
on strong volume right so there’s less
reason to doubt that breakout then if
let’s say that was one of the lowest
volume bars of the day because I keep in
mind if we’re trying to trade a false
breakout or break down rather than
wanting to see the Vonn come in we want
to see the volume not come in as kind of
the way to have confirmation right that
you know the trend should go to the
opposite because there’s not that much
commitment in that final move so I think
that that is one of the biggest factors
and the same way how in the follow of
traits you know are only 172
there was not that much volume on the
Poland’s right so really for that to
have worked there should have been the
low volume continuation from 170 and
then the sharp red bars with bigger
volume and that would have served as
more confirmation that I was right
rather than these just being regular
trades and part just kind of the mid day
sure so let me jump back in here it’s
gonna matter how much the stock actually
gaps up on the open there’s going to be
different expectations of today as to
how stocks move if they gap up one
percent relative if they gap up 20-plus
percent
there’s gonna be and you’re gonna you’re
gonna want to craft rules around gap up
percentages or think about that one of
the other things that you might think
about and I know shark does this really
well when you’re looking for things to
turn is yes the example that you’re
talking about on the tape but there’s
another example on the tape that this is
this is a very old-school insider
baseball tape breeding signal that we
used to talk about back in the day when
the markets were really really strong
that really typify the turning point and
that is heaviness on the tape so
something makes a new high and does
trade a little bit higher but it’s much
harder for the stock to go up it’s not
going up as much as it did and it’s
passed moves and there’s still lots of
volume coming in we call it heaviness on
the tape and that can be a way for you
and this might be a different trade for
you overall this might be a different
name and have a different tag but that’s
gonna be something that you look at and
that’s gonna have a different entry
requirement and you should be thinking
about entry requirements for this
overall so for fake breakouts are you
gonna be the one who shorts that into
the fake breakout with a stop against
the high or are you gonna watch to see
it make that faint breakout pull in and
then short it at a much lower price
after it’s made that fake breakout
pulled in and it’s now much lower with
the stop against the high that’s gonna
be you’re gonna have to set rules for
how you enter these fake breakouts and
it’s going to matter whether or not you
do short into the fake breakout or if
you short a little bit lower you’re
gonna start to come up with a thesis as
to whether or not the news catalyst is
overvalued and you may you might develop
rules over that
so there might be certain things you to
stay away from a day one blowout
earnings blowout new product it might be
something you don’t take for a fray for
a fake breakout daily chart over
extension it’s gonna matter if this is
overextended on the daily chart relative
to it just made a new high on the daily
chart and you’re gonna want to develop
rules for that it’s gonna be a better
they breakout trade if we’re
overextended on our daily chart and now
we’re finding an over extension on our
intraday charts to make that to trade
that turn you’re gonna obviously make
more with something overextended on the
daily chart and then you see it
overextended on the intraday chart and a
turn then something that is not
overextended on daily chart because it
has so much more that it can possibly go
down distance from B while so hey if
this is 280 RS away from V well then
you’ve got more you can make if you’re
making a return into V wah then if it’s
50 cents away from from vo so how far
away it is intraday how extended it
overall it is intraday you can develop
rules based on technical indicators and
go from there I also think one of the
things that really really good tape
readers do really really good active
traders do is that let’s say they give
it a shot on a fake breakout they think
they see it they short it I think this
is towards the top they watch what it
looks like when it’s pulling in and they
know what it’s supposed to look like
when the stock is going to crack and if
it doesn’t crack they make a trade
decision quickly to lighten up or to get
flat they know that when it’s pulling in
if they’re just too much buying on the
bid that that’s a trade decision for
them and they probably should get flat
so
they can minimize bad decisions too
short and too fake breakouts they can
improve their overall resort that their
overall desert results for these great
breakout trades because they can get out
of their losing trades based on
observation on the tape and rules they
can develop on the tape to take a little
bit lighter losses when they’re when
they’re not right and then you can you
can develop rules about how’s the market
doing how this have the stocks in the
sector doing how’s the sector ETF doing
if it’s not cratering you may decide to
make trade decisions based on that I’m
not suggesting to you and any means that
you should be thinking about all of
these things I’m not suggesting to you
you need to do that I’m saying to you
you will see improvement if you’re in
the group of the minority the majority
of traders who do better when they put
rules in place the odds are you probably
are one of those traders when you’re
thinking about your trades and you don’t
have to be not suggesting you should be
100% systematic I’m just saying be more
systematic
I’m not saying be a hundred percent rule
base I’m just saying be more rule-based
and that will get you to make a couple
of jumps of improvement in this type of
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