In this video, we teach a top trade for day traders to learn, especially when you begin. We teach in step by step detail an easy and powerful trade for day traders to learn and make when they first start trading.
View Video Transcriptin this video we teach a top trade for
day traders to learn especially when you
begin 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 off of the
trading classic one good trade and the
PlayBook in this video we teach in
step-by-step detail an easy and powerful
trade for day traders to learn and make
when they first start trading
[Music]
this is one of my favorite setups
especially as of recently because the
market has seemed to really work with
these setups I mean these setups have
been working lately it’s something
that’s really pushing my pl this past
two months with stocks have earnings
might release bad earnings sit at the
lows on day one and and have a really
clean break on dates you for some good
follow-through with some back tested
targets that make me feel confident
about the trade so let’s dive right into
it okay so the big picture for this
trade is that via C with had traded
lower eighteen percent on the prior day
on bad earnings and consolidated the
lows throughout the entire session I
have some info here about but their
earnings clearly they had missed revenue
they had missed EPS they had much softer
guidance for 2020 they also had some
down grades from a couple banks so I
mean a lot of things were going in the
favor of this trade fundamentally and
and technically as well which I’ll talk
about next
anything from the earnings that
particularly stands out to you well what
was unique about about this earnings is
that they had lost a lot of domestic ad
revenue which was kind of what they were
really what maybe a lot of investors
were kind of holding on to for because
of that and so what stood out about this
earnings is that an past earnings that
was kind of their strong point that was
our strong suit and you know this was
this was no longer their strong suit and
this is the only strong suit they had so
you know it it was worse than normal for
sure and the volume shows that you know
somebody clearly knew exactly what they
were doing once once that earnings was
released
so some intraday fundamentals the day
one move is about 26 percent from close
to close by 780 ours 5.7 times average
daily volume really like that number
that’s obviously incredibly unique to
see opening our vol 17 you
elevated for sure ATR 1.47 which is more
than good enough for you know for a
decent move average daily volume 9
million shares you know maybe not the
best but but good enough institutional
ownership 82% we like to see this you
know this tells us it’s an opportunity
here for many institutions to be hitting
out and of course as we know
institutions can’t hit out all in one
day all in want to go when institutions
head out they have to hit out over a
multi-day period and so this is a good
number for us short below four and a
half percent on you know good to know
that not a lot of people or I guess you
know it’s not an insanely high short
float where they could spike up on you
or something crazy like that on the
right here I have a picture of my RSW
scanner anybody at SMB is welcome to ask
me for this scanner I give it out for
free you know I mean that I share with
everybody this is a relative strengths
weakness scanner and basically what it
does at the end of each day me and my
trading partner Armand we go through it
we figure out what stock said the
largest moves what stocks at the most
volume and the largest intraday range
and most importantly if it’s red or
green it means that it closed at the
high or low of top 25% of the higher or
bottom 25% of the low the reason why we
care for the stock to close the lows or
the highs because it shows that people
weren’t really nervous going into the
clothes they weren’t covering their
shorts people intended on selling
further and base all based off some back
tests that we’ve done a stock that
closes at the bottom 20 25 % of its
range will generally have a gap down if
not follow through the next day the
follow-through is less and is less
guaranteed than the gap but it
definitely we’ve definitely seen a
correlation between where the stock
closes and where the stock continues the
next day so we sit around here and think
about what are the best trades for you
guys to learn when you first start and
how do we teach you guys that this is
one of the trades that is easiest to
learn for a new and developing trader
one of the easiest trades to learn as a
new and developing traders one of the
most effective trades that you can take
as an active trader and so putting those
two things together you get a set up
very much worth your attention worth
your time to learn not difficult to
understand had a big move on day one
fundamentals are changing in the company
price actions not showing that the
selling is done levels from day one we
can all understand expectation
follow-through that’s the second date
rate right elevated arvo on day one
lots of expansion so good job looking at
80 ARS here and as Nano said you’re not
going to be able to are a big fund to be
able to get out of your position just
none day one it’s gonna take you some
time
so don’t want underscore my first point
great great great trade for you to start
with as a new and developing trader very
powerful trade what I love here also is
the use of technology so you don’t miss
it the problem with this trade that I’ve
seen in coaching people at this firm and
outside for this particular trade is
they miss the best of them and then when
they go and look at their stats for
second a trade guess what it’s
incomplete because there’s really good
ones that they didn’t take and they
missed because they didn’t take the time
to actually do what Nana did which is
build technology so they don’t miss any
of them and this was I’m not mistaken
this was one of your best trades today
correct yes so I mean it was one of our
best trades you know in terms of in
terms of PL but this
trade came with a lot of regret
afterwards because we’ve hit this trade
before and we know what the cost is of
getting all out on day one the cost is
you’re gonna probably miss 40 50 percent
of the move sometimes I mean vias he
continued to show so much slower and
while it was a good trade I can’t tell
you how much heartbreak we have looking
at via see where it is today because
that work that we did to get via see on
our screen could have paid us out five
times more and I don’t think we’ll be
making that mistake again that can tell
you that these trades follow through
they have power they’re a neat it’s an
easy trade to learn it’s an easy trade
to work with and and you know in the
future I I can’t imagine
hitting out of this trade all on day one
you know so yeah
but yeah it was one of our biggest rates
thanks for bringing that up yeah okay
good all right what else you got
alright so let’s go with the higher time
frame analysis on this one as you can
see this this dog is pretty being down
trading below the 200 daily you know
it’s getting sold overall on the daily
you can kind of see a bit of a covering
rally going into going into earnings I
mean nothing too serious just looks kind
of like a bear flag you know probably
some retail shorts getting out so
obviously this is a day to play so what
I’m showing you here is is what the what
the day looked like the day after
earnings and this was unique the volume
was highest that we’ve had on Onvia seen
years it was breaking monthly supports
that hadn’t broken in years and it was
holding down there right so that that’s
crucial I mean this is a higher time
frame technical chart that I would
probably never buy so you know it’s it
it really lined up very well with this
trade if you want to learn three
real-world setups that our traders use
including this 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
check out the free webinar that we’re
currently running just go ahead and
click the link that should be appearing
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this free registration page
the new window so don’t worry you’re not
gonna lose this video you’re gonna learn
more in a couple of hours from this
trading workshop than from years of
online education bit more zoomed in here
as you guys can see you know we had this
gap down below 52 we closed you know we
had the continuation on day one which
you know sometimes it’s kind of unique
for this for this trade sometimes it
doesn’t even continue on day one but
rather on day one it consolidates on the
pre market low this one even broke lower
through this monthly support really
showing that an institution was hitting
out for sure and then traded that the
lows you know that this is again the
30-minute chart what you’re seeing here
is is these 30-minute candles as you get
as you guys can see they’re getting
tighter and tighter and closing lower
and lower I’m not sure what he else
could ask for for you know for a short
so some overall market context now
obviously and you know this spy chart
looks so incredibly strong but there was
a small shift in dynamic in terms of the
tape leading into this trade it did play
a small role in in this trade for us in
particular what we had the day prior was
a flash crash in the market which was I
mean unique we hadn’t had this in a
while and there was definitely some
coronavirus fear you know fears hitting
the tape the hammer stone you know we’re
seeing a lot of you know cases pop up
here and there and the kind of question
was in our head you can when are we
gonna get this this real case in the
United States and when is this going to
hit the United States and so I think you
know what what’s happening is is again
we’re having a shift in more and in the
dynamic of the tape and it was kind of
getting a little bit more bearish you
know and most stocks we’re not pushing
all-time highs they’re kind of getting
sold off their all-time highs now
regardless I would take this trade
without knowing this this just fuels me
to kind of look for trades that are
working to the short side so you know in
the morning me norm on are deciding what
do you want to do you know we want to
look for for the ideas that are gonna be
long ideas we’re gonna look good ideas
are gonna be short ideas right so on you
know on this day we were we knew that we
needed to look for ideas that were going
to be good short ideas and
this wasn’t just any good short idea was
also a good short idea with some a
changing tape this mattered a little bit
for our you know for our conviction for
the trade but you know regardless of
this we would have taken it so morning
game plan I will mention this game plan
is not much different than any of my
game plans for a second day rs double
use a second date earnings sorry that
that work you know that that looked like
via see first thing we like to see is
the afternoon low afternoon resistance
get tested to kind of put on a little
bit of risk against to Davey WAP the
reason that we do this is because
generally stocks that are gonna continue
lower are gonna get sellers pushing them
even lower from the prior day so you
know the first days level where you see
the stock kind of turnover towards the
afternoon and make another leg lower
that means the seller stepped down there
and what we want to see is those sellers
get tested and those sellers to step
down again that to us confirms that the
sellers are getting more and more
aggressive
you know I don’t and I call it a spike
right I don’t I don’t want to see it
push up the afternoon resistance and
kind of consolidate under it that’s not
good I want to see spike into the
afternoon resistance and fail back down
quickly
we used to Davey WAP when we have a
large gap because it allows us time to
find the people that were where pre
earnings versus post earnings we don’t
use that stop until of course unless we
have an established high a day you know
obviously when you’re shorting something
and you’re not sure where the high a day
is gonna be just yet ads just pushing up
you know you don’t you don’t want to be
to tie you don’t try to top ticket
that’s just not worth your time
you know you’d rather you’d rather scale
into a small short position against a
stop where you think the stock should
stay under such as to Davey out for us
for example is what works and and so we
scale in against you Dave you up again
um add those afternoon resistances next
thing I want to see is quick fail of the
afternoon resistance and momentum to the
downside now right so you know initially
some stocks what they’ll do is they’ll
open up they’ll start crying grinding
lower me no I’m on sit there and say
nope that’s not it
because when the stock is going to go
down it’s gonna have momentum it’s going
to get sold so you know when why is he
for exam
actually it opened up and it started
trading lower and me and Armand were in
a little bit from the pre-market but
what we knew was Anissa establish a high
a day once the stock establishes a high
a day that’s when you can really put on
your core position a position that you
can feel like this should not this
should not get above this high day
anymore and that’s when you really have
the great risk reward you know the the
big full t of risk against and then
finally I want to watch for a break and
hold below earnings low you know once it
puts in high day and gets back below
yesterday’s low which is the earnings
low what I want to see is is for it to
get below that easily and hold below
that and if it does then then I need to
be potentially doubling my size there
for a moment
I need to be getting bigger because that
indicates to me that the sellers from
you I’m sorry the bar from yesterday I
was holding a stock up on that flop
bottom is now gone I mean there’s nobody
there anymore it’s it’s free air under
there and and yeah I mean this is lotsa
more thing is to try to hold three
eleven irrelevant price action you know
a lot of times we make the mistake of
stopping out because maybe we see a a
lesser significant swing high get put in
and and that’s why it’s so important to
pay attention to where your high of day
is because if you can just risk off that
for your core position then you kind of
play with the with the momentum trades a
little bit we you know with some price
action in there and kind of trade around
your trade that’s okay but you don’t
want to touch your core yeah good idea
for when you’re trading your core to
handle your exits with a higher time
frame chart so you know lots of times to
look at 1/2 minute charts think about
looking at a 15-minute chart in a
30-minute chart for making a
determination on you holding your core
we trade checklist here you can be kind
of mostly went over this we want to see
elevator to our vault as we saw in the
interested fundamentals we were 10 times
this breakout below earnings low with
volume quickly get below yesterday’s
prices and then know my targets and I
know what I want to see in Baia see I
want to see it quickly
get below and hold below yesterday’s low
with obvious selling on the tape okay so
um
this is this is my warrant morning game
plan this is my chart so as you guys can
see via see this is this is what I would
consider here are one this would I would
consider here are two and and the most
ideal scenario is that we see a spike
into into r1 and a quick failure of
earnings low yeah so and as you guys can
see right massive moved to the downside
big consolidation all day I mean it
whatever buyer that was at twenty nine
whenever he steps out of the way it’s
it’s definitely time to be hitting it
big a slide I added that I haven’t added
to other to other play books that I
really like about this one is and and I
want to really share this with the SMB
guys a lot because it feels like not a
lot of people understand that the
earlier you get up in the morning and
the quicker you get to your desk and if
you have your your your levels prepared
if you have your stuff ready then what
you’re gonna catch onto is some clues in
the pre-market clues in the pre-market
that’ll a get you better prices clues in
the pre-market that’ll be gets that gets
you more conviction on the trade and
that’ll put you in a position in the
driver’s seat towards the open
understanding what the tape is like what
I loved about this pre market activity
in particular is that we had kind of
tested as r1 and I know you almost can’t
tell but it was a few dashes over here
that traded at r1 and that is exactly
where r1 was after in resistance 1 and
then we quickly got below and then that
8:00 a.m. candle boom right below
yesterday’s close so the name just went
right on the day on 8:00 a.m. now
holding back below view up in the
pre-market I don’t I don’t want to give
too much weight to the free market but
what I do want to say is if there’s if
there’s somebody already selling in the
pre-market and nobody’s really holding
it up that’s the reason to maybe be
putting on a little bit of risk there or
at least something to note for yourself
you know that a this this likely is
gonna work I’m gonna have more
conviction for this trade and B I might
be able to use these pre market levels
as a place to risk off of for my
intraday trade ok so as you can see you
know the prices that mean I’m on got in
the pre market where prices that weren’t
even seen
you know during an on an intraday basis
right so you know we like I said we had
crashed through yesterday’s close price
at 8:00 a.m. on the open you can see
vias he started kind of trading lower
now what was interesting about this is
the way it was happening the tape wasn’t
selling it was kind of slower and so we
were kind of waiting to see if it was
gonna put in a high day a little bit
higher rom and then it did and you know
this is when you kind of know you have
your best trade it goes it goes to
yesterday’s close price it spikes
they’re probably scare some people out
but but really what’s happening is is
you know we’re getting a spike we’re
testing those sellers and then we
immediately fail and then we come back
through open I mean that’s a powerful
pattern to see because I mean it’s it’s
clearly showing the sellers are in
control is showing that you have
momentum for your trade and that this
stock is likely gonna trade lower you
know when you’re putting on you know
half your daily stop against you know on
this trade you want everything all the
little nuances to be right you want all
these nuances to you know to line up and
when we see nuances like this line up
it’s it only makes sense to be hitting a
big you know you’re you’re really
hurting yourself by not hitting a big
really this is the initial breakdown of
the tape well you’ll see basically is
this twenty eight eight level you’ll see
a breakdown very quickly you can see
like there’s there’s a bit there that
gets taken out and then you see some
large offers trying to like almost like
chase it down tooth down
so you guys can see those bids right
there boom taken out quickly trading
below 28.8 check out those offers on
seven eight
quickly trading back below those prices
now
good tape action so let’s see here so
yeah I mean something I do want to go
over with here is that you know what I’m
adding to my position through this
momentum I’m looking for a place to take
off my momentum you know I mean there’s
you know you have to pay yourself for
the trade and in case anything goes
wrong if I can cover my risk for the
trade I will but my goal is to not touch
my core so you know I’m adding a little
bit exercise probably a little more than
I even should in hopes that the momentum
continues and if I see that momentum die
off I’m hit quickly hitting out of it
you know I may not have a define stop
necessarily but my stop is maybe even
like two or you know a few cents above
I’m expecting this momentum to continue
the downside I’m not expecting it to
even get back above you know the last
one minute high that type of momentum
lot I want to take it off quickly pay
myself a little bit for the trade that
way I can feel comfortable holding my
core position which is most likely gonna
get a fat pullback on that will you know
that will retrace a lot of profits and
make me nervous but but ideally if you
pay yourself with the Momo you put
yourself in a much and in the driver’s
seat in a sense with with your core
position that is really what’s going to
make you you know make up your pay no
really so let’s talk about that so when
you have something that’s acting cleanly
and you have something that’s a setup
that you really like one of your better
setups that you’ve measured your mindset
needs to shift towards how do I add some
risk even if adding risk you do so with
tight stops that’s still better you’ll
get used to actually having more size in
a particular play and from there you can
work on you know what are the optimal
what are the optimal exits for position
like that your mind sets gotta be when
you’re seeing something acting well
you’re upsetting in your seat you’re
observing oh wow
this is acting so cleanly this is acting
as if somebody put this in a text book
this is acting exactly the way that I
thought it should be
you should immediately click in your
head how can I put on more risk where am
I gonna put on more risk what are gonna
be my stops for me to put on more risk
and when you do a playbook trade like
this the focus for something like this
should be within my system I would be
shorter more here here is specifically
how I might get those executions a good
thing to do is look for those flash ups
now just put some offers up and get in
the habit of putting some offers up from
the from the breakdown areas when things
are acting cleanly nibble as you said
really really well take some shots at
some of these Momo Lots when things are
acting really cleanly that is what you
have to do and so I like I like the
focus of hey how am I gonna take some
more out of this one more thing on a
separate topic which you brought on
which is a little bit more advanced but
will cover it while you’re here if you
guys want to turn this trade into a
swing trade from day one then I think
that’s a good candidate for you guys to
put into your joint account test that
out and see if you can help with the
system for being able to trade that so
maybe it is that you’re holding this
from day one or maybe this is you’re
gonna hold it day one overnight into day
two based on the price action from day
one and make that into a separate it
clearly separate trade clearly separate
trade but I like the idea of maybe
thinking about that as a joint account
option for you guys yes – and we’ve
definitely been working on on you know
getting some positions into the joint
account that way it’s almost you know
it’s it’s in a different account with
with specific exit criterias that we can
kind of study at on a trader view at the
end of the month and figure out is this
working for us is this you know it is is
this helping RPL yeah okay cool so what
I wanted to go over here is how I kind
of identify where I take off my momentum
a lot and in particular this is where I
took it off over here it wasn’t anything
special it was about one full ATR from
high day I kind of started seeing at
rest the tape kind of started slowing
down
and I could tell you that the
overextension was coming based off the
tape so I think this could be helpful
tape for those of you who are looking to
play with some of these Momo lots so
what I want you to watch here is a
twenty and a quarter bid that ends up
holding
into the overextension you start seeing
a lot more people start paying the offer
you know you’re not gonna see a ton of
green on a normal on a normal stock
that’s going like this but you know when
it’s a full HDR off the highs within you
know within within 15 minutes you’re
gonna expect some short covering which
is probably what you’re seeing here so
as you can see once you know once we had
exited some into into the server
extension that I just showed you the
tape of you know we had this massive
pullback over here and and this pullback
trades above vo up even for a bit right
and consolidates here and and definitely
made us nervous and it probably makes
any any an experienced trader a little
bit nervous once it gets above Viwa but
here’s the thing the stock is down 20 20
something percent you know you can’t
expect it to trade so perfectly to the
tick and and fail view off to the tick
right it’s gonna need to rest a little
bit it might go a little bit higher
first but the idea of your core position
to use a higher time frame swing high to
to drift risk off of its to not put
yourself in a position where you’re
stopping out right above V wop
that’s not a logical thing to do when
you think this stock has a potential to
go to 27 and a half you know my
conservative target was even 27 and a
half and you know we’re only sitting at
28.3 well I’ll turn it if for you guys
to think about and let me just take a
step back stocks down a ton its SSR
meaning that people have to force shorts
first move to the downside steep all
those things get you to be thinking of
this possibly needs to leak above Viwa
before it can we fail again I don’t
really love the idea of holding things
above view up
I like the idea perhaps better of taking
some stops maybe not all of them but
then if you see sort of a lower high or
a failure just above you up or running
out of steam above you up to hit it hard
and use the top of the leak above you up
for that for that for those shares that
you really hit hard yeah and I think
there is nothing
some work that we can do there to to to
managing the position a little bit more
I think a big problem before is that me
nor Mon we would really are trying to
focus on on not kidding out of this core
because it was just costing us so much
to get out of our core position but I
think as we get more comfortable with
these trades and kind of expect this
type of a price action to start panning
out where it’s gonna get above V whoppin
and consolidate I mean there’s a chance
it was gonna break up and and ideally I
would have covered closer well I think
what you want to do there is maybe you
have a trade decision to get out of at
least half but then when you see it
starts to slow not get higher you know
let’s say you were in tier 1 or tier 2
you get out of half your watching you
see the slowing you see the lower high
you see it running out of steam you see
a turn you can be tier 4 them hitting it
hard using that as momentum stocks
momentum tiers trading tiers trading
around your courtiers using that stop
against the high of the leak above you
up and getting the habit of that that
way you’re staying away from being
against the momentum I do think there’s
a trade decision when something gets
above you up in a position to take some
off you don’t always have to take it off
but that is a trade decision you want to
keep yourself away from being against
the momentum as best you can
because you don’t have to you can
re-enter we’re not trying to put on a
million shares of this particular stock
we’re trying to put on a small amount so
you can get out understand if it slows
again and you start to see a turn to hit
it hard get even bigger than you were
that’s a better position to be in that’s
better trading then let me just hold it
through V whap which is the signal that
the momentum is now up because what
happens if it that what happens it just
turns around and and goes all the way
back up to you know its opening price
then you you wipe out all of your your
gains but make that decision take some
off let it soften let it turn and then
boom hit it hard now you’re with the
momentum again when you hit it hard
you’re in control of your risk you’re
even bigger than you were just sitting
through the trade and you’ll make more
money that way and be more consistent
something for you guys to think about
yeah I’m gonna have to take note of that
I think III clearly I think you are
right
there’s and it’s it doesn’t seem like
the most logical thing to do to to hold
through a move above you up because yeah
I mean we we were very very close here
to saying this is just not looking so
good for us you know at one point this
is you know and I would hate it take it
off a 2890 when I could have taken it
off at you know down at twenty fifty
when I first popped that back about V
Bob so definitely some work we can do
there with kind of prioritizing the
process of where where you can hit it
hit out your core and where you can make
sure you’re hitting back in that way
we’re not finding ourselves in a
position where you know we’re not
hitting back in the core for one reason
or another but yeah it definitely makes
sense to me I mean here trade executions
as you guys can see you know we we short
a little we were short a little bit in
the pre-market we short a little bit
towards the open and then once we saw
that big spike and to into yesterday’s
prices and a clear failure through the
through the low shorted more take off
that momentum lot and you know and and
the rest is cake really for the trade
it’s it’s it’s too easy really I mean
these trades when they work like this
you know you expect to get paid now it’s
your turn what one trade would you
recommend for day traders to learn and
take when they begin let us know by
leaving a comment below right now
* no relevant positions