Singapore iFest 2013

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Singapore ifest 2013

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  • What would it feel like to be him?
  • Singapore iFest 2013

    1. 1. The PlayBook: How Good Can YOU Be? Mike Bellafiore Author of The PlayBook Author of One Good Trade Co-Founder SMB Capital, SMBU
    2. 2. SMB TRAINING is NOT a Broker Dealer. SMB Training engages in trader education and training. SMB TRAINING offers a number of products and services, both electronical (over the internet through smbtraining.com) and in person. SMB TRAINING also offers web-based, interactive training courses on demand. The seminars given by SMB TRAINING are for educational purposes only. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities. You shall be fully responsible for any investment decision you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs. This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by SMB TRAINING or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs. SMB Training and SMB Capital Management, LLC are separate but affiliated companies. No relevant positions Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.”
    3. 3. Congratulations!
    4. 4. SMB Builds Profitable Traders
    5. 5. SMB Trading Philosophy • Trade the Stocks In Play • Utilize the Principles of Elite Performance • Get Better Everyday! • How good can you be?
    6. 6. What We Will Accomplish Together • Improve as a trader • Help you develop a pro trading methodology • Evisorate commonly held trading myths • Introduce key concepts from The PlayBook • Share trading setups for you to master • One Day Course and Live Trading Event • Q and A
    7. 7. The Misinformation Campaign • That’s most retail traders!
    8. 8. The Misinformation Campaign • The Phantom News Edge • Trader Disneyland • Market Calls = Big $ • The right pedigree is mandated • Trading is as simple as hitting a few keys • The Importance of Methodology
    9. 9. The Brilliant Market Mind • This company is better than that company • Who cares? • What does that have to do with trading? • Study trading not markets *”They are fascinating to talk to but they don’t make money.” $12B Hedge Fund Member
    10. 10. The Phantom News Edge • Reading an article online is not a news edge • My experience hiring experienced traders • Most do not have a news edge • Most retail traders do not have a news edge • Huge mistake made by retail traders!
    11. 11. Here is a trading news edge • 85k on research • Read everything • Find patterns for how big traders will react • The market is a vote • It's not what you think but what the majority • Emotional ly Intelligent Investor • Develop a thesis then use price confirmation • Quant studies to determine odds for trade
    12. 12. The Financial Media News Complex
    13. 13. Trader Disneyland
    14. 14. Trader Disneyland continued • This guy is better than me!
    15. 15. How do you become like him?
    16. 16. A Real Pro Trader- Shark • Unimpressive Application letter • Didn’t notice him for the 1st 6 months • More PlayBook trades than the desk combined • Mindset of an elite performer • Get better everyday! • Debunking the pedigree myth • So good will become our next Head Trader • If he can do it, then why can’t you?
    17. 17. A Real Pro Trader- PTO • “I really want to be a successful trader.” • TO competes • Walk on the desk afterhours and he is there • Talking trading non-stop • Thinking trading • Reviewing his trading • Experimenting with new strategies • Tradervue an example of his competitiveness • Passion most important 2 trader success
    18. 18. The Playbook: How to Think Like a ProTrader; Methodology for your trading
    19. 19. The PlayBook- The Prequel • Something good coming from the bad • Stay connected to the desk • Get my guys bigger • A method where they could from each other • Hold for the real move • More Trades2Hold • Substantial performance gains
    20. 20. How The PlayBook helps 1. Find the best setups for you. 2. Eliminate the trade not worth your intellectual, emotional, and financial capital. 3. Get bigger in your A+ setups. 4. Hold your trades for the real move. 5. Sidestep those annoying HFTs. 6. Accelerate your learning curve. 7. Lower your trading stress and pull the trigger. 8. Take the first step toward developing auto strategies. 9. Think through your trades like a pro so that you can adapt when the market changes. 10. Align yourself with the future of trading.
    21. 21. Making a Trading Decision • The Big Picture • Intraday Fundamentals • Long-term Technical Analysis • Intraday Technical Analysis • Reading the Tape • Intuition
    22. 22. Building A Playbook Entry • Title • Strategy Description • Big Picture • Intraday Fundamentals • Long-term Technical Analysis • Short-term Technical Analysis • Reading The Tape • Trade Management • Trade Review • Trade Idea
    23. 23. Title • Give your trade a title • Description of what kind of trade it is • Trade2Hold • Opening Drive • Breakout • Support/Resistance
    24. 24. UHOB above inflection point Shark KCG 08.03.12
    25. 25. Strategy Description • How to identify these trades • How to manage risk on this trade
    26. 26. Strategy Description • Unusual Buying on the Bid • The Bid will not drop • Step in front of the bid • If the bid drops exit • If the bid holds then Trade2Hold • Expect a big move • Foreshadows a huge buy order • Why isn’t the buyer dropping? • Above inflection point increases the win rate
    27. 27. Big Picture • What is the overall market doing? • Uptrend? Downtrend? Range? • What is the catalyst for this market? • What would move the market? • What is the Street most concerned with? • Most important technical levels, SPY
    28. 28. Intraday Fundamentals • Why is the stock In Play? • Earnings? Big news? Sector In Play? • Buzz words: improved margins, new product, raised guidance, gaining market share • News that substantially surprises the Street • Cheat sheet: +/- 3 percent in the Pre-market
    29. 29. Intraday Fundamentals 2nd Day Earnings • Shares of Knight Capital KCG climbed 57% to $4.05 on Friday. For the week, however, they fell nearly 61%. • Knight’s shares tumbled in the previous two sessions. They had closed Tuesday trading at $10.33. Knight said Thursday that exiting erroneous trading positions cost it $440 million, raising concerns about its capital position. The erroneous trades had been caused by a glitch in the installation of trading software on Wednesday morning. • The Wall Street Journal, citing unnamed sources, reported on Friday that Knight has received a credit line that will allow it to operate for the day.
    30. 30. Long-term Technical Analysis • What is the stock doing on the longer time frame? • Is it broken? • Is it at all-time highs? • Are we near important support or resistance?
    31. 31. Long-term Technical Analysis Been in a 3 month range 3 was a huge level premarket and into the close, 3.50, 3.85 and 4- 4:20 were other resistance areas after the failure following the opening drive the prior day.. Other than that the stock is at unchartered territory and the only real levels are the ones from the previous day and some much higher as well…
    32. 32. Short-term Technical Analysis • How is the stock trading intraday? • What are the important intraday levels? • Trade with the Trend • Bella’s No-stress Trading Community • Do I scalp? • “You guys make me nervous!”
    33. 33. Short-term Technical Analysis Been in a 3 month range 3 was a huge level premarket and into the close, 3.50, 3.85 and 4- 4:20 were other resistance areas after the failure following the opening drive the prior day.. Other than that the stock is at unchartered territory and the only real levels are the ones from the previous day and some much higher as well…
    34. 34. Reading The Tape • Information from the Level II? • Is there a big buyer or big seller on the tape? • Important intraday level? • Did an offer hold or step lower? • Did a bid hold or step higher? • Was there a distinct pattern? • If I tap you on the shoulder…………….
    35. 35. Trade Management • How did you trade the setup? • Where did you add to your position? • Where did you lighten up? • Where could you have been bigger? • Step outside your comfort zone • Build from your strengths • Trade the set ups that make the most sense to you with more size and more often
    36. 36. Trade Review • How well did you trade the stock? • Could you have been more aggressive and where? • Should you have lightened up? • What can you do better next time? • Skill can be built reviewing and live trading
    37. 37. Trade Review I like my aggressiveness the first time it started holding higher… was long 4000 shares looking to add… the problem was that by buying on the way up I was a bit top heavy and gave too much back on the drop of 40 cents… I should have been tighter with more size up there, and longer originally from the 8 cent price… I think I gave 20 cents too much importance on the open which made me want to buy less underneath the 20 cents when the bid held… when really 3 was the biggest level and that is the price to get amazing risk reward… good job sticking with the play after the failure at 50 and getting aggressive on the second break.. I like that I was willing to really size up and risk money on the play just wish I had done it form a bit better prices
    38. 38. 3day Growth Stock Swing Trade ($TSLA) Date: Thursday, May 31, 2013
    39. 39. Average Volume: 15 million shares Average True Range: 8.5 Short Float %: 28-40% β: 0.5 Tesla Motors, Inc. designs, develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. The company also provides services for the development of electric powertrain systems and components, and sells electric powertrain components to other automotive manufacturers. Consumer Goods | Auto Manufacturers - Major | USA •Intraday Fundamentals
    40. 40. What is a Growth Stock? • No ceiling on earnings • Cocktail party chatter • Buzz about the stock • Hot stock • Does not trade based on traditional P/E ratio
    41. 41. The Growth Stock $Trade/Investment Strategy • It is really a Growth Stock? • High Short interest of at least 20 percent • 2xs ATR of late • Important Technical Level for Entry • Increasing Volume • History of Explosive Upmoves • R/R of 10x1 and Swing Trade it • Pray for pundits to shout it is overvalued
    42. 42. $TSLA Assumptions• • Tesla Motors, Inc. (TSLA) is a growth company, with stock price doubling since last earnings release (May 8th 2013) that showed first quarterly profit since inception and overall positive outlook on company's future and validation of its business model • Some characteristics of a growth company: o significant market share expansion on a conceptually new product offered o most profits are reinvested back into the company, no dividend payout o increased public interest, polarized views on company's future and valuation o high earnings volatility, high short interest • Attempts to value the company based on traditional metrics, such as P/E ratio will ultimately underestimate its short term price targets. Valuation using probabilities of success assigned to different stages of development and transitioning from the only luxury electric car maker to mainstream car manufacturer, spanning international markets, may serve as better indicator of stock's performance
    43. 43. Secondary Offering? • Public company sells more shares to raise capital • This price becomes a key technical level • Strong before offering and above price-LONG • Increased volume and below then swing short • Major technical level here • Let the big boys fight it out and then expect trend
    44. 44. Secondary Offering- Technical Entry $TSLA •40 percent short interest •On May 15th, 2013 the company announced 2.7mm shares in secondary offering and issuance of 450mm convertible notes. •CEO Elon Musk indicated that he will purchase of $100mm worth of stock •SEC filing showed 3.4mm shares issued at $92.24, which will serve as an important level for this trading pattern
    45. 45. True or False? Bella Asks • A CEO buying more stock is a positive for stock?
    46. 46. The $TSLA Trade Story • After the Secondary TSLA trades below price • Huge battle for days below the price • Reversal pattern from LAS of 84 • Closes for 1st Day Above Secondary Price
    47. 47. Multi-Day $Swing Pattern • Can be 4-5 days • Often an Inside Day • As long as the trend is intake stay long
    48. 48. From the Maternity Ward • 3 hours before Luke was born • Watching the price action on my Samsung SIII • Called our Floor Manager to place the trade • “Mike what are you doing?” asked my wife • “Paying for Riverdale,” I replied.
    49. 49. Reasons2Sell • Reasons2Sell or reduce position in this trade b4 gap failure: o Target price reached - confluence areas with measured moves from different timeframes may serve as potential resistance o Trendline breaks on multiple timeframes o Negative breaking news on the stock or negative breaking news on the market o Overall sector starts to show weakness o Parabolic move followed by disappearing buying pattern • In TSLA trade we use gap failure as Reason2Sell the position
    50. 50. Gap Failure Exit • The pattern of multiple strong days and a gap up exhaustion came true and exiting the swing long is similar to reaching a price target • Pre market buying activity ran the stock for a gap open from 108.40 to 115, with an identifiable buyer stepping up the bid first to 114 and then 115 area, getting price rejection 3 times before failing and not seeing the buyer step back in and rebid • Considering the overall pattern and clear change on the tape the idea is to start taking profits or fully exit the position. Alternatively % of position can be sold on the breach of pre-market lows at 108.5
    51. 51. The Result?
    52. 52. One more of Lukey and Dad
    53. 53. Risk Management • Build your PlayBook • Ferret out your A+ trades • 30% intraday trader, 2-5% Swing trader
    54. 54. The Upside Down Trader
    55. 55. The Pro Trader • There is no destination • The works never ends • The effort must endure • Market Tuition continues • Lessons from Singapore “This is the life we have chosen” The Godfather
    56. 56. There is always a Market Tuition p. 359
    57. 57. Gman and Gr8 Coaching • Gman is a partner at SMB • Started as a trainee • Top 2 Trader Under 30 • Tried to quit 2xs • Works with outside coaches • Phil Mickelson • Traders are not different than other elites
    58. 58. SMBU One Day Trading Course • How to find the best stocks to trade • Trade Setups for this market • How to trade bigger • Preparing your mind to succeed as a trader • And much much more • This Sunday
    59. 59. Live Trading With Me • Watch me prepare • SMB AM Meeting • Trade the Open • Ask me about trades in Real-time • SMB Chat • Swing Trend Trading Strategies • Monday night *Mai- but no promises
    60. 60. The Daily Gratitude Exercise • Please close you eyes- 3 things gr8ful? • Each day list 3 things for which you are gr8ful o new son and my wife o Privilege to do what I love o For Phillip’s invitation to speak with you *Being more gr8ful improves your trading
    61. 61. •Conclusion
    62. 62. Trading’s Most Important Lesson "You can be better tomorrow than you are today!" Mike Bellafiore, The PlayBook
    63. 63. Contact me • @mikebellafiore • mbellafiore@smbcap.com • smbu.com/blog

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