This thread has worked out awsomely so far, thanks to everyone who has posted.
Help! These breakouts are killing me
- Thread starter Matt Houston
- Start date
If price gaps against you, stops won't protect you. Stop orders are only active during regular trading hours so your stop will be triggered at the open and filled at whatever the market price allows at that point in time, which means a nice profitable position can be stopped out at a loss.
I recommend for shorter term swing trades (not something you're buying and holding for many months or even years), either close the position prior to earnings or protect your position with a plain vanilla option (such as buying puts on a long position) or a collar (buying puts and selling calls to pay for the cost of the puts). The collar might limit your profit potential, but often pays for itself or costs very little; plain vanilla options can be pricey as the earnings date nears.
As for institutional traders having inside knowledge prior to earnings, it's always a possibility, but the chance of every fund manager having inside information is slim. Also, having a tip about a pending earnings call doesn't mean the institutional participant privy to this inside info knows how all the other big players will interpret a complete earnings call.
If the so-called "smart money" (people responsible for moving price significantly) knew what was going to happen next, there would never be price gaps on after-hours news.
I've seen everything under the sun come out of an earnings announcement:
> During the after-hours announcement, price runs up hard to new highs, then in minutes retraces the whole move and opens during regular trading hours (RTH) gapped down
> A company beats earnings estimates, beats revenue estimates, and raises future earnings guidance, runs up nearly 5% in pre-market, then falls all day from the open to close down 10% from the previous day's close
> A company misses earnings estimates, drops in after-hours trading, but issues positive guidance, and continues to make new 52-week highs for next two years off an already-strong uptrend
> A heavily-shorted company with dreadful fundamentals posts yet another huge losing quarter, yet price trends up strongly all day because the loss was "less than expected"
The point is, earnings is a crap shoot, because all the institutional traders/investors will interpret every little detail of an earnings conference call and the emotion contained in the early reactions is often like a big game of "chicken" amongst them.
IMHO, close the position or hedge into earnings unless your position is a buy-and-hold situation and even then, if the stock is high beta, you at least want some kind of hedge in case of a very bad price gap against you.
I don't swing trade (although I am considering it as an alternative), I have one setup and it doesn't happen often so when it does I need to ride the trend until the cows come home. I guess that's position trading. I hear what you are saying, I will look into the options, have not traded them before.
And I agree re the news, that's why I have never taken any notice of it.
And I agree re the news, that's why I have never taken any notice of it.
That idea doesn't appeal to me
My post does not directly answer what author of this link asked. It does address some very important issues related to trading.
I do not trade stocks. I trade crude oil futures. I did however took training for trading stocks from an excellent firm in NY- SMB capital. Trading stocks was just not for me. SMB head trader Gman (31 years old) was declared one of the BEST traders under 30 , 2 years ago.
I will recommend reading their blogs as they have top notch traders and if one thinks they are ready for PRIME TIME can apply for a job. One does not have to work at prop firm but selection process will give an aspiring trader a DOSE OF REALITY in terms of what takes to be successful.
Here is an example of one of traders asking for advice at their blog.
I am copying this from SMB capital blog. It may help some traders.
Is it time to quit trading?
Jan 7th, 2012 | By Bella | Category: Mike Bellafiore's (Bella's) Blogs
Hey Bella,
Iâm a longtime reader of the SMB blogs. Trading from a home office, I miss out on all of the trading floor banter that I had when I was starting out. It is good to âconnectâ with other traders, even if it is only virtual. I read your book One Good Trade, while I was on Christmas vacation and there was a passage that shot right through me. The hairs on the back of my neck stood up, so I felt compelled to write you. The quote was:
âYou do not slip from trading successfully for five consecutive years to being unable to trade profitably anymore. That is, unless you get in your own way. But your skills are there. Now itâs time for you to compete.â
Let me summarize my approximate net results:
2004: +$10k
2005: +$90k
2006: +$125k
2007: +$175k
2008: +$240k
2009: +$9k
2010: -$3k
2011: -$2k
I applied to the SMB desk in late 2010 and interviewed with GMan & Steve, but was not selected for your desk. I had been hoping for a chance to get back on a trading floor. After that confidence-crusher I spent most of 2011 on the sidelines (I have a 2 & 3 year old which kind of forced my hand, day care being so expensive). So, to sum up, I was totally knocked flat on my butt.
I have really been struggling with a confidence issue. This is why your quote struck me. Iâm not sure if it is all in my head or if I am just chasing past years. On a deep fundamental level, I KNOW that I didnât just get lucky in those years. As you say, I had some skills that allowed me to post those results. And yet now it feels so elusive. I canât help wondering if it all was luck.
I guess my question, if there is one, is how do you KNOW there âis always an escapeâ? Maybe my head is just a basket case and I need to get it sorted out. I read once that when you get knocked out of the game, it is difficult to come back because it destroys your âmental & emotional capitalâ. Such intangibles are difficult, if not impossible to get back. I can identify as I most definitely feel like a failure. But how long is too long to sit and net scratch for an entire year? 1? 2? 3? It is getting old. Maybe I am a washed-up has-been. In some ways it would be much easier if I could point to a single blowup trade where I blew out my account. At least then I could walk away. But I didnât make a huge mistake. I didnât go down swinging. In some of the most volatile markets I kept my risk controlled and never blew up. Thatâs what makes it so hard for me to decide to walk away from trading, and why I havenât yet. How can I quit when I havenât struck out yet? I was patient and waited for the next pitch. Well, it seems I am still waiting, years later.
Sorry to clog your inbox with my nonsense. But I felt compelled to write and I feel better for having done so. I really enjoyed your book.
Bella
If you have made money consistently from the market in the past you can make money now and ten years from now. Particularly you. And my argument is all about how you define skill.
You do not slip from trading successfully for five consecutive years to being unable to trade profitably anymore. That is, unless you get in your own way. But your skills are there. Now itâs time for you to compete. One Good Trade
The skills that I refer to in One Good Trade are not just the trading skills you developed. You have a more important skill. You have the personal skill of being able to be successful. This is a skill far superior to chart expertise or advanced tape reading.
You did not start during the easiest of times to begin your career. 04 was not a great trading year. It was not 07 08 99 2000. Yet you found a way to succeed. With no trading skills you were able to learn how to build the skills to make money. This is extraordinary. You were the 5 percent.
I have written often in the past that many are capable of becoming a successful trader. There is work to do that builds trading skill and if you do that work then you will find out how good you can be. The slogan of SMB Training is: How good can you be? Not: We will make you rich. This is a game of elite performance. Honestly very few will have a passion for trading to sustain the energy required to do the work necessary to play at the highest level. You are not a bad person, untalented, unintelligent, or lazy if you fail as a trader. It is just not your thing. Or better said- the trading you did, at that time of your life, at the place you did it at, was not your thing.
Given your past results you should have made more in 09. This coincides with the best thing that could ever happen to you, your new child. But also a gift that brings more responsibility, less time to work on your game, and more pressure. Did you lose your passion? Have you made the adjustments necessary from this life change to continue your trading success?
We teach our traders very differently than we did in 07 and 08. The momentum trading that was so effective in 07 and 08 is deemphasized. We ask our traders to create their own trading playbooks of set ups that make the most sense to them. We encourage SMB traders to expand their time frame and concentrate on trending stocks. Have you made adjustments to your trading as this new market rewards different set ups?
It is up to you when to call it a career. And how you manage your family is not for this blogger from afar. Since your wrote to me, personally as someone recently married who hopes to have children, I would not be 3 years into being a father without making money- unless my wife and/or I were independently wealthy. Trading is not worth financial insecurity for your family.
Having said all that, there is going to be a new path to being a sustaining, successful independent trader that is more than just the development as an intraday equity trader. The days of sit down and JUST learn to be a discretionary intraday equity trader are gone for almost all. This is still the best place to start your trading career for many reasons. This is still the best way to build your trading foundation. But this will not be the beginning and the end anymore for the new and developing trader.
The trading world has changed. Itâs both harder and more opportunistic. I will write more about this in the coming months.
Bella
One Good Trade
I often run into traders who are working full time and can not wait to QUIT their jobs and trade full time.
Making money 4-6 months does not mean to quit job and become a full time trader. If one thinks he/she can be successful, my recommendation will be to apply for a job at prop. firm and see if you can make it.
One , does not have to work for prop firm but selection process at most good firms is a pretty good indicator if one is ready or not.
Another recommendation would be to have as much trading CAPITAL as possible, so one can trade without LEVERAGE .
I do not trade stocks. I trade crude oil futures. I did however took training for trading stocks from an excellent firm in NY- SMB capital. Trading stocks was just not for me. SMB head trader Gman (31 years old) was declared one of the BEST traders under 30 , 2 years ago.
I will recommend reading their blogs as they have top notch traders and if one thinks they are ready for PRIME TIME can apply for a job. One does not have to work at prop firm but selection process will give an aspiring trader a DOSE OF REALITY in terms of what takes to be successful.
Here is an example of one of traders asking for advice at their blog.
I am copying this from SMB capital blog. It may help some traders.
Is it time to quit trading?
Jan 7th, 2012 | By Bella | Category: Mike Bellafiore's (Bella's) Blogs
Hey Bella,
Iâm a longtime reader of the SMB blogs. Trading from a home office, I miss out on all of the trading floor banter that I had when I was starting out. It is good to âconnectâ with other traders, even if it is only virtual. I read your book One Good Trade, while I was on Christmas vacation and there was a passage that shot right through me. The hairs on the back of my neck stood up, so I felt compelled to write you. The quote was:
âYou do not slip from trading successfully for five consecutive years to being unable to trade profitably anymore. That is, unless you get in your own way. But your skills are there. Now itâs time for you to compete.â
Let me summarize my approximate net results:
2004: +$10k
2005: +$90k
2006: +$125k
2007: +$175k
2008: +$240k
2009: +$9k
2010: -$3k
2011: -$2k
I applied to the SMB desk in late 2010 and interviewed with GMan & Steve, but was not selected for your desk. I had been hoping for a chance to get back on a trading floor. After that confidence-crusher I spent most of 2011 on the sidelines (I have a 2 & 3 year old which kind of forced my hand, day care being so expensive). So, to sum up, I was totally knocked flat on my butt.
I have really been struggling with a confidence issue. This is why your quote struck me. Iâm not sure if it is all in my head or if I am just chasing past years. On a deep fundamental level, I KNOW that I didnât just get lucky in those years. As you say, I had some skills that allowed me to post those results. And yet now it feels so elusive. I canât help wondering if it all was luck.
I guess my question, if there is one, is how do you KNOW there âis always an escapeâ? Maybe my head is just a basket case and I need to get it sorted out. I read once that when you get knocked out of the game, it is difficult to come back because it destroys your âmental & emotional capitalâ. Such intangibles are difficult, if not impossible to get back. I can identify as I most definitely feel like a failure. But how long is too long to sit and net scratch for an entire year? 1? 2? 3? It is getting old. Maybe I am a washed-up has-been. In some ways it would be much easier if I could point to a single blowup trade where I blew out my account. At least then I could walk away. But I didnât make a huge mistake. I didnât go down swinging. In some of the most volatile markets I kept my risk controlled and never blew up. Thatâs what makes it so hard for me to decide to walk away from trading, and why I havenât yet. How can I quit when I havenât struck out yet? I was patient and waited for the next pitch. Well, it seems I am still waiting, years later.
Sorry to clog your inbox with my nonsense. But I felt compelled to write and I feel better for having done so. I really enjoyed your book.
Bella
If you have made money consistently from the market in the past you can make money now and ten years from now. Particularly you. And my argument is all about how you define skill.
You do not slip from trading successfully for five consecutive years to being unable to trade profitably anymore. That is, unless you get in your own way. But your skills are there. Now itâs time for you to compete. One Good Trade
The skills that I refer to in One Good Trade are not just the trading skills you developed. You have a more important skill. You have the personal skill of being able to be successful. This is a skill far superior to chart expertise or advanced tape reading.
You did not start during the easiest of times to begin your career. 04 was not a great trading year. It was not 07 08 99 2000. Yet you found a way to succeed. With no trading skills you were able to learn how to build the skills to make money. This is extraordinary. You were the 5 percent.
I have written often in the past that many are capable of becoming a successful trader. There is work to do that builds trading skill and if you do that work then you will find out how good you can be. The slogan of SMB Training is: How good can you be? Not: We will make you rich. This is a game of elite performance. Honestly very few will have a passion for trading to sustain the energy required to do the work necessary to play at the highest level. You are not a bad person, untalented, unintelligent, or lazy if you fail as a trader. It is just not your thing. Or better said- the trading you did, at that time of your life, at the place you did it at, was not your thing.
Given your past results you should have made more in 09. This coincides with the best thing that could ever happen to you, your new child. But also a gift that brings more responsibility, less time to work on your game, and more pressure. Did you lose your passion? Have you made the adjustments necessary from this life change to continue your trading success?
We teach our traders very differently than we did in 07 and 08. The momentum trading that was so effective in 07 and 08 is deemphasized. We ask our traders to create their own trading playbooks of set ups that make the most sense to them. We encourage SMB traders to expand their time frame and concentrate on trending stocks. Have you made adjustments to your trading as this new market rewards different set ups?
It is up to you when to call it a career. And how you manage your family is not for this blogger from afar. Since your wrote to me, personally as someone recently married who hopes to have children, I would not be 3 years into being a father without making money- unless my wife and/or I were independently wealthy. Trading is not worth financial insecurity for your family.
Having said all that, there is going to be a new path to being a sustaining, successful independent trader that is more than just the development as an intraday equity trader. The days of sit down and JUST learn to be a discretionary intraday equity trader are gone for almost all. This is still the best place to start your trading career for many reasons. This is still the best way to build your trading foundation. But this will not be the beginning and the end anymore for the new and developing trader.
The trading world has changed. Itâs both harder and more opportunistic. I will write more about this in the coming months.
Bella
One Good Trade
I often run into traders who are working full time and can not wait to QUIT their jobs and trade full time.
Making money 4-6 months does not mean to quit job and become a full time trader. If one thinks he/she can be successful, my recommendation will be to apply for a job at prop. firm and see if you can make it.
One , does not have to work for prop firm but selection process at most good firms is a pretty good indicator if one is ready or not.
Another recommendation would be to have as much trading CAPITAL as possible, so one can trade without LEVERAGE .
Thanks that was interesting.
Don't worry I have no delusions about quitting the day job. Although that would be nice.
Don't worry I have no delusions about quitting the day job. Although that would be nice.
You are a total mess as you say. You have spent years filling your mind with horseshit about the market. None of your "knowledge" is worth shit, nor are your guessing "hit or miss" strategies.
The emotional states you describe do indeed show you are not cut out for any sort of trading. Go and do something else.
Thanks mate
Now get off my thread