Hi Mike, just finished listening to your SFO seminar. I also finished your book last week. I can’t tell you how grateful I am for the abundance of trading lessons you provide on your blog. I have written you once in the past and you were generous to give me a timely thoughtful response. I have a few questions.

Thxs for reaching out again.

With regard to tape reading, you always highlight the importance of perfecting entries with the tape, but I have yet to find literature anywhere that really explains what to watch for, and how to understand the tape. In your book you give examples of how watching the tape is important, but you don’t entirely break down the whole process. (I understand this wasn’t the purpose of this chapter) Where can I learn about the nuts and bolts of reading the tape?

GMan created a Reading the Tape training program. Not trying to sell this in anyway but just sharing that that is why he created the program: there is very little info on this anywhere.

Also, I am trying to build up my playbook of trades, starting with ones that might be easier to master. I always trade earnings/news stocks, and right now I am trying to buy pullbacks in strong stocks and short bounces in weak ones. Is this a good place to start?

Pullbacks is not where we start with most of our traders. Support plays, breakout trades, flag patterns are easiest. Adam Grimes has written extensively on SMB Blog about pullbacks. But if you are most interested in pullbacks then this may be the best place FOR YOU to start.

My approach is to build positions up to 500 shares in size by adding as the trade works. As I add to my positions I bring my stop loss up keep my max loss consistent, consequently I often get stopped out because i bring my stop past the level that I believe the stock will trade away from. How can I get proper size without getting myself stopped out so often? When something is working you have to get bigger size, right?

You must get bigger in your A set ups, the patterns that you notice are clean and really working. This does not necessarily mean the positions that are working. There are many positions that start working for me for which I do not want to get bigger. In fact I might want to lighten up. But most new and developing traders are too small in their A set ups, their best positions that make the most sense to them.

I was talking with a trainee, about to become the first Junior Trader in his class, about creating risk rules for your A set ups. An idea is you must put on 30 percent of your intraday loss limit for your A set ups. I am stealing this idea from GMan and it is a wonderful way to help you start getting bigger.

When you find a pattern that makes sense to you, that is an A set up, that traded cleanly, go back and reverse engineer it. Why was it so strong and clean? Where could I have added size? Be very hard on yourself with these plays. Could I have made more? Visualize being bigger and making much more. It may not be the days where you are losing that are holding you back from reaching that next level as a trader.  It may be the good days that you could have made great.

Thank You for your time in answering my questions, and all the effort you put into educating traders through your blog. Please know it is greatly appreciated.

Great job on working on your trading game.  Emails like yours is the first step towards improvement. Thxs for reading our blog.

Mike Bellafiore

Author, One Good Trade