I get too many emails from, I meet too many people who, I hear of too many stories of traders who live off of one play. Commonly this play is as follows: a trader sees a big bid and they step in front or they see a big offer and they step in front. This is my definition of scalping. This is a play that ought to be in your playbook. But it should not be your entire playbook. Let’s discuss.
I met with an ambitious developing trader recently unhappy with his firm. He reached out to one of our traders and some how figured out how to parlay that into a meeting with me. His records are solid for a new trader. Bright, good background, realistic learning curve, nice young man. We all liked him.
This developing trader is one year into his career and his entire playbook consists of searching for big bids and offers. Obviously he is very good at this. But this is all he was taught by his first firm. I am hesitant to ever criticize another firm. In fact I am not even sure this is a criticism so much as I am just making an observation. This is not trading.
It is important to find easy plays for new traders to make when they first start. We have a bunch. A quick history lesson for our readers. This technique used by the developing trader above is one of the last trades remaining from before Hybrid. Traders would search for big NYSE bids and offers and step in front. There was good money finding these plays. But then came Hybrid, like an infectious disease for the One Trick Pony traders.
And then there were so many less of these plays. When I first started trading there was the old High Bid Join play. Whenever a market player went high bid and was then joined by another bidder this was a signal to buy. And this play worked for a few years. Then there was high bid ARCA and higher bid ARCA play that worked for a few years. Of course my favorite was the MSCO high bid, without dropping, for 50 straight points in YHOO play. These plays eventually become obsolete like the horse and buggy. One play is not enough. You cannot be a One Trick Pony.
It’s funny because I was talking to GMan about getting some new filters for big bids and offers for one of our traders, Z$ or Mush. He is such the master at this play that we actually name the trade after him. We say to Mush the play. And GMan gave me a look that said this to me,” Bella what the hell are you talking about? This is a trading desk. We don’t want to expend any energy finding dopey plays like this. We want to find strong stocks and get long and weak stocks and get short. Bella go back to writing your dopey book and leave stuff like that to me please.” Anyway this is what his look said to me. And I got the point.
I understand that this trade works. I understand that there is money with this trade. And I on occasion make such a trade. But you cannot make a career off of one trade. Anyway the whole thing reminds me of that great Bruce Springsteen song from “The Wrestler”,
“Have you ever seen a one trick pony in the field so happy and free?
If you’ve ever seen a one trick pony then you’ve seen me
Have you ever seen a one-legged dog making its way down the street?
If you’ve ever seen a one-legged dog then you’ve seen me”
You can be better tomorrow than you are today!
Mike Bellafiore
No relevant positions
7 Comments on “One Trick Pony”
Not trying to be negative just wondering your thoughts on this, are we not in another “day trading bubble” like the one we saw in the late 90’s? There seem to be a bunch of new firms popping up. Do you not think there will be another shakeout of day traders?
Not trying to be negative just wondering your thoughts on this, are we not in another “day trading bubble” like the one we saw in the late 90’s? There seem to be a bunch of new firms popping up. Do you not think there will be another shakeout of day traders?
Hello,
This has nothing to do with this post and I didn’t want to use your contact form for this question.
But do you guys know of any forex prop firms? Thank you
Hello,
This has nothing to do with this post and I didn’t want to use your contact form for this question.
But do you guys know of any forex prop firms? Thank you
Im relatively new to trading, just under a year, but trading off big size seemed to work until the last couple months. As recent as March I would have no problem finding many big orders and trading off them consistently and profitably throughout the day.
However, now I struggle to find any ‘real’ size plays that hold, and mostly I lose money on them. Not sure if this is related to the VIX, lower volume, lack of hedge/mutual fund participation. Therefore, I’ve scaled back on this trade big time.
Any thoughts ?
Im relatively new to trading, just under a year, but trading off big size seemed to work until the last couple months. As recent as March I would have no problem finding many big orders and trading off them consistently and profitably throughout the day.
However, now I struggle to find any ‘real’ size plays that hold, and mostly I lose money on them. Not sure if this is related to the VIX, lower volume, lack of hedge/mutual fund participation. Therefore, I’ve scaled back on this trade big time.
Any thoughts ?
You need for trading plays. You cannot make a career stepping in front of big bids and offers. You can make some money doing this but not a career.
Your goal should be to become a well rounded trader. You need to learn support plays, momentum trading, break out trades, trend plays, pattern recognition scalping, trades to hold, consolidation plays, bounce plays, technical trades, etc. But you are just getting started so you have time to learn.