Hi Steve,

I just have a couple of question regarding trend trading:

1) When you see a stock that’s trending but has already much more than its average range (i use ATR), do you skip/pass on it or would you still be buying into pullbacks? Do you ever find yourself thinking, “Ok this stock is just way overextended from its average range, I’m not touching it”?

This is a great question and something that I have discussed many times with new trainees. If a stock is not In Play due to fresh news then I am very cautious about trading in the direction of the intraday trend once it has moved more than its ATR. But if a stock has fresh news or the SMB Radar algorithm has ranked it as very In Play then I am not as concerned that it has achieved its ATR. In Plays stocks can move more than 2X their ATR intraday quite easily.

2) Do stocks typically have 2 legs of directional move when they trend intraday (looking at 5 min chart)? I’m noticing that a lot stocks that trend tend to move in one direction on the Open, consolidates for some time, then makes another leg of directional move. I don’t see many stocks making a third leg of directional move, but maybe that’s just me.

Many stocks will have more than 2 legs of directional moves intraday. Sometimes it can depend on the structure for a particular day, or overall market conditions at the time. I’m guessing you saw more than a few stocks that had 3+ legs last week as we broke out on the SPY.