Mastering is to develop the skills of entering and closing trades with accuracies only the elite proprietary traders possess. Years of experience, carefully conceived strategies, and a deep understanding of market movements allow those in the know to always find the right opportunities and execute trades with remarkable accuracy. The article below speaks to several strategies used by experienced traders, a New York City-based proprietary trading company, to spot an upside and bring home large profits.
Navigating Complex Market Dynamics
Since most traders feel that developing the optimal trading entries and exits is too difficult, mainly due to the high frequency of price changes, identifying a right entry or exit opportunity may lead to missed profits or even high losses.
Capital is known for its ability to train seven- and eight-figure traders. Here, they use a process-oriented method of trading. Their analysts study price action, volume patterns, and market sentiment and then place highly precise trades.
The discipline of preparation, technical knowledge, and use of real-life examples help SMB traders illustrate how to spot and capitalize on trading opportunities with surgical precision.
Strategies for Identifying Buying Opportunities
Let’s discuss a few real-life setups to detail their process below.
PLTR: Earnings Momentum Play
Setup:
PLTR reported outstanding earnings on November 5th, with a reported operating income of $275M, beating consensus estimates. Following the earnings release, the stock reflected an impressive momentum play, consolidating near the pre-market support level.
Execution:
- Key Levels Identified: Traders kept tabs on the resistance at $47 and the support zone between $46 and $47, established during pre-market consolidation.
- Trigger: Bounce off the $47 level, followed by a volume spike to 56% of the 30-day average volume in the first seven minutes, was a good sign that buyers were aggressively stepping in.
- Entry: Once PLTR recovered the opening price and VWAP, traders opened longs. Stops were set just below the low for the day to manage risk.
Exit:
Using a two-minute bar trailing stop method, traders locked in on the move towards $50. As price slowed near its one ATR ($3) move from the low, they booked profits incrementally.
Tesla: Day Two Continuation Post-Election
Setup:
After a strong first-day rally fueled by speculation of Elon Musk benefiting from the election, Tesla held onto the top 20% of its intraday range. In this case, the price action suggested a possible continuation on day two.
Execution:
- Key Levels Identified: Resistances at $290 and supports at two-day VWAP ($285).
- Advance Entry: After failing to break lower, a rebid occurred at $286 and traders entered long with stops below the day’s low.
- Wedge Breakout: A wedge pattern formed near VWAP. A breakout through $290 on elevated volume resulted in yet another entry for the traders.
Exit:
Traders took profits at Tesla when it approached $300, a psychological resistance point. Profits were taken stepwise, and the positions were closed when price indicated rejection.
DXYZ: Mean Reversion Opportunity
Setup:
DXYZ is a fund largely invested in SpaceX. It shot up parabolically from $11 to $50 within four days on news regarding favorable policies towards Musk’s enterprises. On the fourth day, the stock showed true signs of overextension.
Execution:
- Pre-Market Rejection: Traders identified $50 as the pre-market high and observed a sharp failure from this level at market open.
- Entry Strategy: Shorts were initiated on the rejection of $50, and more positions were added as the price broke through VWAP and key support levels.
- First Bounce Play: Following the initial drop, traders waited for a bounce into the 21 EMA to go short and add to short positions, expecting the sell-off to continue.
Exit:
Profits were booked as the stock hit the $40 level, and stops were rolled to limit risks as the trade played out.
Key Takeaways
- Preparation is the Key: Focus on professionals pre-planning their games before the open, planning out their levels, volume patterns, and potential triggers.
- Confirmation through Volume: Monitoring relative volume helps confirm the strength of a move. High volume near key levels often signals strong institutional interest.
- Patience and Discipline: Waiting for setups to align with predefined criteria ensures high-probability trades, reducing impulsive decision-making.
- Risk Management: Appropriate stop-loss placement and incrementally taking profits prevent adverse moves while locking in profits.
- Adaptation to Market Conditions: A fundamental understanding of the market condition pertaining to the trade setup is required, whether a momentum continuation, mean reversion, or breakout.
With the help of strategies such as those employed by SMB Capital’s traders, you will improve your results dramatically. You will understand how to identify important levels, manage risks, and use volume patterns for more accurate entries and exits.
This could either be in the momentum continuation play, wedge breakout, or mean reversion setup. Preparation, execution, and discipline are key.
Start putting these professional techniques into your trading plan, and watch your precision improve trade after trade.