Two terms that I've happily added to my trading vernacular with setups are:
1. Ideal Trade Location
2. Continuation Play
These concepts can help you determine the quality of your trade, how the odds of the setup itself shift based on the position!
1/
1. Ideal Trade Location
2. Continuation Play
These concepts can help you determine the quality of your trade, how the odds of the setup itself shift based on the position!
1/
A classic example would be when you are short and the stock starts to reverse, you hold on because you are looking to respect your risk, however it's becoming evermore clear that the price will potentially break to new highs.
B/c you are short, you're...
2/
B/c you are short, you're...
2/
...now realizing this as it's unfolding and COULD choose to flip your bias to long. Despite this, the "ideal trade location" would've occurred at/near the reversal point so no matter how high odds the setup is, your positioning is going to be considered a "continuation play"
3/
3/
I've been in this situation a many times where I was given clarity through the chart unfolding that I was in fact shorting an A+ long setup & felt the need to go deeper into the long to compensate for the trade quality overall but was getting in at a mid-range vs the extreme.
4/
4/
As a result I have to deal with much more fluctuations, more extreme emotions because size also amplified under volatility and, in reality, b/c I am not in the ideal trade location spot have put on undue risk for the trade itself.
A+ big picture setup doesn't = A+ trade.
5/
A+ big picture setup doesn't = A+ trade.
5/
A lot of that emotional and PNL volatility would've been avoided had I come in with my long bias and tried to identify the ideal trade location (as close to my true risk as possible/reversal point).
That is what makes your trade quality increase on top of the overall idea.
6/
That is what makes your trade quality increase on top of the overall idea.
6/
You could literally turn an A/A+ situation turn into a C, D or F based on this and could create a system of understanding to position more consciously based on this!
Try it out, ask yourself when you're going into a trade if it's an ideal trade location or a continuation.
7/
Try it out, ask yourself when you're going into a trade if it's an ideal trade location or a continuation.
7/
I think this is one of the most practical ideas that you can implement in your thought process immediately.
In their own words, Merritt has a very good video that can go more in-depth than a tweet.
youtube.com
Credit: @merrittblack @apterostrading
End.
In their own words, Merritt has a very good video that can go more in-depth than a tweet.
youtube.com
Credit: @merrittblack @apterostrading
End.
Loading suggestions...