Lecture Notes: Trading with the Trend
Introduction
- Speaker: Lance Breitstein
- Background: Ex-Trillium top trader, advisor at SMB Capital
- Presentation Title: "A Trend Love Story"
- Key Focus: Trading with the trend
Key Concepts
Importance of Trading with the Trend
- Aligning trends on multiple time frames increases power and effectiveness.
- Avoid being long if a stock is below VWAP unless it capitulates.
- Losses often occur when fighting the trend.
- Best trades typically align with the trend.
Defining Trends
- Uptrend: Stocks moving upward, making higher highs and lows.
- Example: Micron chart showing upward movement.
- Downtrend: Stocks moving downward.
- Range Bound: Stocks consolidating within a price range.
- Tools for identifying trends:
- VWAP (Volume Weighted Average Price)
- Moving Averages
- Prior Bar Highs/Lows
- Trend Lines
- Reference Prices (pre-catalyst prices)
Trading Rules Based on Trend Analysis
- Never long if a stock is below VWAP unless it capitulates.
- Avoid trades in range bound or consolidating stocks.
- Increase size when multiple time frame trends align.
Analyzing Trends and Their Impact
- Trends start due to breaking news, catalysts, consolidation breaks.
- Trends end with volume exhaustion, price spikes, no consolidation.
Practical Application
Examples of Trades
- Workhorse: Shorting based on news catalyst.
- GME: Buying after a capitulation using prior bar high break.
- Tesla: Example of trading mistake by not waiting for trend reversal.
Strategies for Trading
- Always wait for confirmation of trend reversal.
- Use historical data and trend alignment for decision making.
- Avoid overtrading by having clear rules and limiting noise.
Challenges for Traders
- Define your criteria for trends and document them.
- Create trading rules based on trend analysis.
- Systemize reasons for trend beginnings and endings.
- Dissect personal trading history for optimization.
Risk Management
- Importance of having stops in every trade.
- Set risk levels based on trade setup quality.
- Maintain a daily report card to track and improve trading discipline.
Final Thoughts
- Trading is a journey; focus on process improvement.
- Importance of staying with the trend for long-term success.
Q&A Summary
- Importance of using scanners for identifying setups.
- Execution focus during trading hours; analysis post-trading.
- Utilizing sentiment and trend alignment to inform trading decisions.
These notes summarize the key points from Lance Breitstein's presentation on trading with the trend, offering insight into identifying trends, creating trading rules, and applying these concepts practically for trading success.