Hello Bella,

My name is Jonathan, and I am a day trader and fan of your SMB Blog and Twitter feeds.
I have a trading question for you that I am confident you can help me with; you guys have some serious experience.

I understand your style of trading sometimes involves holding day-trade-intended setup overnight.
I notice myself, several times, some of my day trade setups do not fulfill their destiny until the open of next day.

Even if this is the case, do you find it worthy to hold your trades overnight at the expense of your 4:1 buying power halved and risk of overnight-volatility? I imagine a major component is the probabilty of the trade hitting price target the following day (whether on a gap or volatile open).

I am trying to discover what is more feasible: B.P. resource and risk limitation versus giving a trade overnight-time to possibly complete profit target.

I appreciate your insight and time, Bella. I know you are busy!

BELLA

We used to take stuff out when I first started trading.  Stocks that printed into the close (finished at the highs) would open up quite often and we didn’t want to miss the gap up.  We also traded exclusively on the long side.

I am not sure why but after the bubble bursted we stopped seeing discernible patterns that led to gap ups.  And in today’s market I am just not familiar with too many reliable patterns for gap ups based on a previous day’s intraday volume.  There are some three day trades that work well for Stocks In Play.  But my sense is that is not what you were talking about.

For me the issue is the risk of missing a big gap up.  Stocks that explode intraday, up way more than expected, and in an uptrend for almost all of the day, that sell off too quickly and steeply into the close are candidates for a gap up.  I might take something out like that.  If something cannot get above a particular level and then finally does and hovers just above that level then I might take that out.  Again I do not want to miss the huge gap up.  If a stock is a slow gainer intraday and cleared an important level I might want to hold some of that overnight.

But overall we do not hold stocks overnight like we did when I first started trading.  Stocks that print into the close too often open off on the open and might even trade weakly the next day.  I am not sure why this is.  But the patterns that used to work dissipated and we needed to adapt.

We do not have the same issues with BP that you might have.  An advantage of trading with a prop desk is that BP is easier to get than a retail account.

I hope that helps.  Keep working on your trading game!

Mike Bellafiore

Author, One Good Trade