Hi Bella,
I just have to start off as I always do and thank you and SMB for providing excellent trading education and training. Alright now to my question(s). When trading the open, when do you decide that you should hold a core position especially since there isn’t trend in the first 30 mins of the day? Do you decide before the open or sometime during the day? Is it better to make some money on the open and then decide to try to play the stock as an intraday swing even if the prices are worse than they could’ve been had you held a core? Also, when do you adjust the stop of your core position (assuming you’re holding one), especially when you’re playing against a key inflection point, 50 cents in the money, 80 cents, or something more like when there is a clear intraday level that has developed over the course of the day where you can now move the stop of your core to to get flat? Finally, is there a point when you’re trading a stock (time of day or near a certain level) where instead of continuing to look to add to your position, you instead begin to trim your position continuously as a means to book your profits?
Thanks for speeding up my trading learning curve!
@mikebellafiore
Stocks do not trend on the Open, the first 30-45 minutes of the trading day. We say there is price discovery. So a stock that drops right after the bell sounds is not yet in an intraday downtrend, until time and volume passes. During these minutes we momentum trade, gather information, and wait for an intraday swing setup.
There are some exceptions to the rule above. If a stock clears a very important technical level we might start an intraday trend trade during the Open. Also, if we get a feel based on the premarket action, the fresh news, and the technical picture that the stock may start trending immediately, then we might hold. These are some exceptions and not an attempt at an exhaustive list of exceptions.
If you spot a stubborn intraday level, a price the stock is just not trading above, then this might be a Reason2Sell or lighten up. In my next book, The PlayBook, I outline in detail and with real trading examples Reasons2Sell. SMBU did a Webinar on this topic here. For every trade that you are holding you must have a set of rules that you predetermine for when you would exit, or Reasons2Sell.
If I am in an intraday Trade2Hold and it is working I will stay in the position until there is a Reason2Sell. The only time of the day I might peak at is near 3:50PM. The last ten minutes can be arbitrary with price movement. I ask: is it worth it to hold this position and give up some profit because of a random end of the day move?
I hope that helps. Keep working on your trading game! Tomorrow you will be better than today.
Mike Bellafiore
