Recently I was sent this question from one of our SMB Training trainees:

On day 10, you show a video about flipping in SLM.  When watching the video I could understand your thought process of entering and flipping based on looking at the tape.  Nonetheless, what I could not understand when watching the video is your thought process when wanting to short that .53 level and especially with size (opposed to waiting).

From what I analyzed before you made that short in the .53 level, it looked more probable that this level is not going to hold the offer because of 5 major reasons that were all present before that .53 short was executed;

1. On the first attempt of getting short below the .37 level, the stock did not go down much and no strong conviction in that move.
2. From the chart it seemed a clear trend upwards just before that consolidation on the .53 area (thus implying a strong stock)
3. Futures looked positive (although I cannot see their clear number) thus do not seem to support a down move (on the contrary – support an upmove)
4. The ..37  level after breaking down then being a possible resistance level did not hold the second time it got tested (implying stock not weak as thought)
5. The .46 level which was kind of a resistance later on could not hold the offer either (implying additional strength of the stock).

So the only thing I saw in favor to short it at that specific .53 point was just a held offer (perhaps an unusual one).  I kept asking myself, is that enough to get in under these circumstances? In my view it wasn’t.  But apparently you thought it was enough to enter (and especially with size).    So, could you pls explain your thought process to short it at the .53 level  (and especially with size) opposed to just waiting till it breaks or gather more confirmation before entering (especially with size)?

I responded:

You are concentrating on learning more about the tape at this stage so keep this in mind.  We are working on building that skill.  Full plays come later.

I followed up a little later with this email:

Its all about u developing a system for when u would flip. Should not b often. Should know when. Should b determined by what makes sense to u from the foundation we teach.

And then I waited.  A good trainee would thank me for my answer and then privately think about his system for flipping.  A trainee who will be looking for new work soon will read my response and then flip back to SportsCenter.

What would a great trainee do?  If your goal was to become your best trader how would you respond to me?  And doesn’t the depth of your response mean more to your learning than actually being given the answer of when to flip?