Bar by Bar Trading Lecture Notes

Overview

• Focus on "easy money trades" for new or novice traders.
• Highlight key setups: Day One low float trade, Gap give go trade in Nike, and an advanced mean reversion short.

Day One Low Float Trade

• Concept: Trade involves stocks with low float that can experience significant volatility.

• Case Study 1: GNLN

  • Catalyst: News on becoming distributor for safety strips detecting harmful substances.
  • Movement: Stock gapped up 300%, moving from $2 to $10.
  • Volume: Pre-market trading was 25,200% of average daily volume.
  • Float: 845,000 shares with 16% short interest.
  • Strategy: Short trapping all day, eventually reclaiming VWAP, indicating potential short squeeze.
  • Execution: Long position initiated as stock consolidates above VWAP; added to position on breakout above $10.50.
  • Lesson: Use hard stops and understand short squeezes.

• Case Study 2: CING

  • Catalyst: European patent issued for ADHD drug.
  • Movement: Stock gapped up about 175%, spike from $2 to $5.50.
  • Volume: 900% of average volume in pre-market.
  • Float: Similar low float with high pre-market activity.
  • Execution: Long position initiated at limit up; cautious due to lower than expected volume.
  • Lesson: Importance of volume confirmation for sustainability of moves.

Easy Money Gap Give Go Trade: Nike

• Catalyst: Large gap down on earnings; Bill Ackman stake news.
• Setup: Gap give go as stock gaps up, giving back some gains before moving higher.
• Execution: Entry near pre-market support, selling at VWAP, holding remainder for potential further gains.
• Lesson: Ideal execution involves taking profits at VWAP and holding a portion for continuation.

Advanced Mean Reversion Short

• Scenario: Stock shot up 50% in 20 minutes due to zero DTE options buying.
• Mechanics: Explained delta hedging and its impact on stock price movement.
• Execution: Short initiated as the stock struggled to hold above key levels, adding to short position as confirmation of blow-off top was observed.
• Lesson: Understanding market maker dynamics and the use of wider stops for trade stability.

Key Takeaways

• Align trades with volume and float characteristics.
• Use hard stops to manage risk.
• Recognize patterns and volume dynamics to anticipate and react to market moves.
• Importance of refinement and continual learning in trading.

S&B Capital Information

• Firm Overview: Proprietary trading firm looking for new talent, offering training and capital.
• Opportunities: Options to trade firm’s capital without risking personal funds.
• Criteria for Interview: High ambition and determination to align with firm’s culture.
• Resources: Access to firm’s coaching and resources for development.

Sign Up Opportunity: Link provided for a free online presentation to learn more about joining S&B Capital.