Everything You NEED to Know Before Placing a Trade (assuming you don't want to fail as a trader)

in this video we share everything you need to know all the information you must gather and know about a stock before making a trade without it you'll just be flailing around as an underperforming trader headed soon for failure hi I'm Mike bellifiore co-founder of SMB capital and we're a proprietary trading desk located in midtown Manhattan and I'm also the author of the trading classic one good trade and the PlayBook in this video see the template our new traders created of what you need to know before making a trade this will help you build your template that's essential if you want to succeed as a trader [Music] all right so let's go over everything you need to know before you actually enter a trade the reason why this is important is because we want you guys to have complete learning experiences during each trading session today is a terrific opportunity to learn a lot you know we've got grub terrific learning experience okay we've got Texas Roadhouse pretty good learning experience we've got Twitter a good learning experience we've got beyond terrific learning experience and we need to get this straight for you guys in this room right now so that you are getting the types of learning experiences that you need to get people who succeed at this job get this right from the beginning and do this every day okay we had some discussions about this in the am meeting if there are important details for instance about the news that you don't know that is not a complete learning experience if you do not know you come in and trade grub today and you don't know that they missed by a lot on q4 and you're wondering why is it so weak why's it so weak once a week or you don't know the competition is starting to really impact their sales or that they're the new customers that they're bringing on they're not making as much on as in the past if you don't know that then you're not going to get the good experience the best experience that you need to trade rub today and that's just one opportunity and this compounds daily on your learning you have to get this right so what we're gonna try and attempt to do today is give you a give you guys an idea of a template that you can develop I'm not suggesting that this should be your template I am suggesting that you need a template I am suggesting that you need standards for everything you need to know before you trade a stock you should follow it you want to be consistent with it when you're consistent with this template again that's going to give you experience from which to build on so that you start to build intuition trading skill you get better at actually what we're doing here this is super important and I said this in the a mean again like we're not gonna have another meeting where I sit in the am meeting and you do not know the full details of the stock that you're talking about that we should be trading on the open and if you do you're getting because you're getting sent back to your seat and the reason for that is you're gonna fail as a trader this exercise getting this right right now is going to determine if you're not going to do the work here for something like this you're not going to do the work in other places it's not gonna happen for you I do not want to have the conversation with you in our office about how we have to transition into a new job and help you with that I don't want to have that conversation you don't want to be in that conversation we're not going to have those conversations anymore we're you know half the information we're not going to have a conversation where I asked you where the long-term levels are on on a particular stock that we're trading and you don't know or this short interest we're not going to have those conversations because we know where it leads okay so we're going to build the template you're gonna individualize this okay and you can make it more specific than some of the ideas that we make but you need a template that you need to stick with if you do not know this information you are not prepared to trade a stock if you're not prepared to trade a stock you're not getting the valuable trading information that you need if the value of trading experience that you need you need that that's how you get better all right so max what are some of the you guys all sat in a in a group and came up with some things we need to be thinking about before we trade a stock let's go through that one by one absolutely so the first thing is gonna be news so basically what is the fundamental catalyst for the stock during the day the second thing is going to be our ball so what is the relative volatility today compared to its previous history the third thing is is it above or below view up so is it trending higher or lower view up is obviously very important because institutions will use this as to kind of gauge just kind of buying and selling pressure as well as you can use that just to see where the stock is trending forth as also or is gonna be ATR so this is the average True Range so what this will tell you is what is the average distance between the high and the low during a average trading day so what is the moving or the move potential for the stock during the day the reason why that this is important is because if what's a stock has a 580 are and it's already move 5 it could mean that it's moved it's a potential for that day and that the risk reward for your trade is worse the next thing is going to be average volume this is more so just as a baseline we all like to use kind of a minimum average volume of 1 million just to that way we could be entering stocks that are liquid 6 is gonna be the long-term Sharpe so where are we in the daily or the weekly are we breaking major levels so for example I today in grub breaking down to around 38 this was below levels that we've not seen over the last few years the 52 week low before today was around 52 so obviously breaking down to 38 has some strong significance and and on the weekly the lower in 2017 was around 32 so just kind of keeping these levels in mind is very critical for when trying to Age direction and the and the potential magnitude for trade 7 is going to be the major ETF movement and strength so for example if you were trading a semi stock off of a earning report and you see that there's overall strong relative strength in the cen amis ETF versus the market this is something that you should consider before entering your trade let me just make a quick point about the long term chart so we're not fundamental analysts we're not pretending to be fundamental analysts but when we read the news before the open when we read the news catalysts before they open we do need to be able to gauge potentially how far this stock can move we do need to be able to gauge potentially is this something that could finish low of day or high of day we do need to be able to gauge are there a bunch of people offsides that is gonna bring in a certain type of order flow okay so it's not about you being a fundamental analyst or predicting exactly where the stock is gonna go it's about you understanding that a stock can move directionally quite a bit it could do so potentially for multiple days and it could do it it could do so cleanly or not and that is going that is the context of your trade so that if you see weakness and we're not really anywhere near you know if you see weakness in the order flow and we're not really anywhere near long-term support and we've got a really negative news catalyst and this is something that could finish low a day and this is something where a lot of people are all sides that's gonna help us inform where we're gonna take our covers okay or with Tesla recently if we are looking for a breakout above 300 the news catalyst is going to inform the short interest is going to inform the type of move that we could see to help us with our with our exit does that make sense so I guess that kind of leads into the next point just kind of understanding the catalyst so for example today with grub it was obviously a news catalyst whereas last Friday we all knew that the 300 level on Tesla was very significant because that's where I kind of stalled right at Thursday at the close and then once that level broke Friday on strong volume the stock just shot up and didn't look back so just understanding what strength or what significance the catalyst is as well as the type is very critical the next thing is entities so we can and and just to go over this so we are looking for catalysts to trade that's what makes this the super stocks in play opportunity those are the super stocks in play those that have catalysts catalysts can be from a news catalyst catalysts can come from a really terrific technical catalyst so the next thing isn't it be tape and a confirmation so for example if let's say you wanted to do a trade off of via wob you'd want to see that the tape is showing you signs of buyers right above view off so this would offer you some confirmation and then you'd want to see a push away from price so being able to read the tape and kind of just see how the buyers and sellers are interacting is very critical if you want to learn three real-world setups that our traders use including the simple setup that we teach all of our new traders and the setup that turned one of our traders into a seven-figure big money earner check out the free webinar that we're currently running just go ahead and click the link that should be appearing right now at the top right hand corner of your screen that's going to open up this free registration page in the new window so don't worry you're not going to lose this video you're gonna learn more in a couple of hours from this trading workshop then from years of online education the next thing isn't it be short interest and the reason why that this is important is that if let's say there was a stock that had a very high short interest there's gonna be the potential for a squeeze or just overall realizing what this like level is could just kind of help you gauge sentiments and just overall squeeze up potential yeah so if the short interest is particularly high that can bring out buyers and so when we were talking about trading Tesla and we want to know what the short interest is the higher the short interest the more potential buyers there can be when it had its positive news catalyst yes we were thinking about trading GrubHub even though we were leaning short that helps us inform that one of the patterns that may occur is a spike intraday even though it's potentially gonna finish low a day and we need to gameplan for that the next thing is gonna be stock float so for example if you were trading a low float stock with only 1 million shares for the flow then this is obviously something that is very important to realize before entering the stock whereas if let's say you're trading a uber or something with a billion shares to the stock flow then knowing this cuz it could just help you gauge the liquidity and the potential volatility same thing with Microsoft big contract 10 billion dollar contract from the Defense Department how much can go up because it's so thick when you're trading an IPO what are the IPOs that surprised us the most the one where there are not that many shares available what are the low floats that surprised us the most tend to be ones where the float is is lowest the next thing will be the institutional ownership so the reason why that this is important is that if you see a name with 90 or 95% its ownership there then others could tell you that there's gonna be strong support for the stock or that like you might actually see these firms come in and defend the name or buy it back up if let's say there's something negative catalyst or it or it like gaps down the next thing is going to be the the S&P so where are we in the overall market so are we trending up are we trading down just kind of there's like what levels of volatility as well as just kind of understanding what these key levels are or just inflection points just to gauge whether now they will see large moves and also overall market news as well so for example last month the is M number was a very critical number for the market so if you were trading then this is something that you would obviously want to be aware of before entering your trade the next thing is gonna be where am I right or wrong on this trade so for example if you were trading this versus a key support level then you're wrong on this trade if it breaks down below this support level whereas your right if you see some sort of a breakout and you see buyers come in on the tape I think that's an important one to mention and and you know particularly for our a-plus trades we want to be setting our stops for where we're definitely wrong and when we when we're calculating a risk on the particular trade we want to we want to calculate the risk for the real stop particularly on our A+ traits we don't want to be cutting them short we don't we don't want to have our stops being too tight particularly on a plus trades the next thing is gonna be to debut up this can be very useful for just understanding potential targets or stops in the stock and just kind of overall gauging where the stock is in the relation to the too late the last few days of trading and we talked a lot about that we'll talk some more about that sharks gonna come in next week and talk about his beyond trade who's been short beyond for for a long time and then when McDonald's came out remember the big gap up when McDonald's announced that they were gonna start experimenting in Canada and we had that huge gap up and and and him holding through that and then adding when it started to fail on that particular day he made a really great trade in that so he's gonna come in and talk to you guys about that but he really uses multiple day of you ops and so I threw this in here for you guys to be thinking about because that is gonna be something that you think about like for instance today you guys been talking a lot about shop and spot Spotify and shop and so particularly for Spotify we wouldn't want to just look at intraday view I to trade that we want to look at to Davey WAP for informing our decisions today so next Monday he's teed up to come and talk to you guys awesome the next thing is going to be on the entry stop and target so I guess this is somewhat similar to if you're right or wrong but before actually entering the trade you want to plan out where you should be exiting you know if you're right where that you're wrong and also fighting for a price as well and just making sure that the entry offers you a good risk reward the next thing is gonna be the gap percentage so for example if a stock is having a huge gap at the open then this is obviously something that you should be aware of so that you can kind of gauge whether or not you think that there's gonna be a fade or some sort of a a follow through but also just to be overall aware of what's going on we talked about that last time we talked about that with Twitter so when when Twitter opens and had gapped down a ton we talked about how because it's gapping down so much and we need to be a little bit more careful than normal because it's gapped down so much even though it's such a negative news catalyst gonna have to be careful by getting in a better Isis the next thing is gonna be who was in control how was the stock trending so just kind of a few examples from the last week or so last week in IR bTW we saw that right off the open there were strong buyers that came in and the stock trended up for the first 45 minutes so kind of just realizing that buyers are in control is something that is very critical if you wanted to try to short this name as you want to see some sort of change in character before actually following through for example being able to identify this we'd be seeing higher lows as well as as higher highs as it means that sellers can't break prior prices and buyers are taking out those sellers the next thing is going to be what kind of trade am i making is a playable trade so for example are you making a pullback trade are you trying to trade a breakout is this a move to move trade where the it's more of a scalp as this trade to hold just kind of game playing this before you you enter the trade will allow you to not I guess panic or take profits too quickly because you're frazzled by small moves yeah I'm you made a good scalp trade in texas roadhouse on the open we want to make sure that we're understand we're understanding we're making a scalp trade had pulled in held the bed that's a scalp trade and then there were other trades than there was a break of the opening range trade that has different variables twitter is this is the first day that it's been green at all since it's news day and for that there's a support play to be made Tesla was a second day breakout trade really really important level so we want to be thinking about these trades Beyonc been a swing short for for shark fur for a long period of time and but you have to understand you have to build your PlayBook and then you want to trade your playbook and judge yourself based on how well you actually trade it overall so if you listen to show in Isaiah meetings he's had a really really great month but he'll talk a lot about how he's teach judging himself based on how he's trading not as PNL and so we want to be judging ourselves based on how well we're trading our playbook trades but and then for those of you guys who don't know the PlayBook comes from my second book the playbook that that idea of building your trading business by finding the setups that make the most sense to you that you measure and trade with edge and then doing more of those types of trades but the first the first part is just understanding what kind of trade you're making all right so we got time of day and we got that matters right we've got the open we got the middle of the day and we got the clothes those are all different times you should have different playbook trades based on time of day so we're gonna have a different playbook on the open well we'll do more opening drives will do more scouts will be more selective with our trades to hold the middle of the day we will look for more swing trades and certain setups with that will do more fade trading in the middle of the day and then to the clothes will do more trend trading just as a general example how far has the stock come so that matters obviously as well if you've got something that you know is up up a bunch like for instance you guys are looking at shop and you know that's been a big big runner that's running into this 300 support area boy if that story started to turn around that could really go down a far-away so we want to be thinking about that I did want to give you guys some other things to think about so I think that's a good job by you guys I think that I think that's a pretty good template some of you are gonna make more a certain of these items some of you're gonna add a few things that make more sense to you some of the things that we talked about is anchored view up for swing trading some of you may start thinking about that for those who are more interested in fundamentals you might start asking yourself well how many of the important banks are covering the stock and is there room for any of them to upgrade the stock or is everybody are all the banks with a Buy rating on this particular name and is there really no more room for people to say good things about a particular stock that does matter and we'll talk more about that as she gives a look as you get a little bit more experience and you know some guys are playing around with you know Armand and nano we're playing around with volume on the bid and volume on the offer and is that particularly significant so they build tools to figure out percentage of volume on the bid and the offer and is that a factor that they're gonna start to use for their trading the point of these extra considerations is you should have extra considerations there should be things that matter more to you some of you will make more of the tape some of you will make more of the daily chart some of you perhaps we'll look at where we are in relation to Bollinger Bands on a daily chart or a weekly chart you will individualize that that that's that's that's perfectly fine some of you who on the low float space will make more of the fundamentals and start to start your trades based on how your how you think the stock can do going forward okay so look the challenge in this room for you guys today is for you to create your template all of you will create one and send it to Carlton and myself and you will personally hold yourself accountable to making sure you never make a trade without knowing all of those things before you make it you trade a stock save the occasional breaking news trade but when you build your PlayBook for a breaking news straight you will say to yourself that I know that I'm not going to be able to gather all this information on a breaking news trade right away but I will build that trade knowing that and because of that I will make concessions to ABCD but you've pre-planned that all right so let's come up with a with a personal template and you'll personally hold yourself accountable and we will as well but again the reason why we're making such a big deal about this is that this is a very competitive game these seats that you sit in are very competitive Paris tens of thousands of people apply for these seats and you guys you guys hold them and then from here even from here to become successful is going to be the most challenging thing anyone in this room has ever done and so if you think that you can come in and not know exactly the details of a news catalyst for your stock your trading and know that from the start and start gaining experience from the start and you think you're going to succeed that's not going to happen that's not gonna happen you are I don't even want to say respectfully wrong you know it's our job to explain to you that's just wrong based on our experience over the last 20 years trading and training traders that's just wrong every day you have to compete this is a competitive job not everybody gets to do this for a living this is like being a professional athlete this is a privilege to be able to trade professionally you will have all the resources you need to be good but you have to do the work I've talked about this before about winning each opportunity when your PlayBook trade each day when you're in preparation when the 11 o'clock mentoring session when your trader journal so you know when you are preparing to trade stocks you need to compete you need to know all of those things and be ready to go you need to compete you need to win the am preparation session every day that needs to be your mindset that's how you become as good as you can be and when you know you guys see some of the guys who walk around it's fun to be like that we joked about one of the traders who bought the test sub breakout trade right and made over 250,000 dollars in one particular trading session I think you guys want to have days like that right I would imagine that's we all thought that was fun right that's it's it's fun to do that on a Friday enjoy that weekend but it starts and it's gonna take you guys time but it starts in exercises like this now it's your turn what would you add to our template of everything you need to know before trading a stock let us know by leaving a comment below right now

Channel: SMB Capital

Views: 67,101

Rating: 4.9271784 out of 5

Keywords: day trading tips, day trading tips for beginners, day trading, day trading for beginners, day trading strategies, things to know before day trading, smb capital, trading tips

Id: xx7yIU4etU4

Length: 28min 45sec (1725 seconds)

Published: Tue Oct 29 2019