Follow up to Margin Post: SNAP Short Trade

So today I did exactly what I told you not to do. I went full-on, balls deep, max margin on one name - nothing but SNAP, SNAP and more SNAP short for me. Let me explain why I did it. 

Disclaimer: Again here I'm not talking to the beginner trader anymore. This is just me talking about my style now, so please read it in that context. 

Why size? 

First of all, the liquidity was there to do this today. Don't go randomly taking 20-30-40K ss of some smallcap low float stock where 100 share prints are moving the bid & offer. That's an absolute nightmare. For SNAP today though, you could take whatever you wanted and get in and out very easily, so it worked in that sense.

I'm glad this happened today, because it was perfect timing to build on that entire blog post I just wrote last week on how to use margin. Let me just say this is not a normal trade for me. I don't do this on a daily basis (have 0 BP constantly) However, I do 100% identify as an aggressive trader. I'm not clinically insane and in need of professional help yet like Elkwood. Key word yet ;) But truth is I really admire his style, sure it gets crazy sometimes and makes some people want to throw up in their mouths thinking about a trading style with an increased risk profile like that, but I kind of like it and I think if you're using it correctly, you can do some serious damage. 

Remember when I mentioned it's fine to have idols and try to model your trading around someone else, but you have to make it your own somehow? That's sort of what I've done. Difference between me and Eric is he'll add to infinite sometimes on a conviction play, and I won't do that. He has the bankroll and experience to do it and has earned the right to trade like that, I on the other hand, have not yet. So that's how I made his style my own for where I'm currently at - I don't do the add add add higher/fix trades thing, but, when I'm right, I have NO problem piling the fuck in, which is one of the things he does better than anyone out there. 

Most people are afraid once a trade is green, they don't want to add anymore and ruin their average. I could care less. When a conviction trade is paying you, pile. in. End of story. If it goes against you then it goes against you, you cut it flat/small red and move on. But if you're RIGHT....man you're in for a payday. That's what aggressive traders live for, the "payday" trades. Some people think small, consistent days are the best way to grow a trading account. I on the other hand, subscribe more to the notion that the BIG green days are what move the needle. Basically what I'm saying is I'd rather have my days look 

Like this:

small red. HUGE green. small red. 

Rather than this:

small green. small green. small green. 

If that makes sense. Again just my opinion here. I've found that the most efficient way I grow my account lately has been through larger green days, not a string of smaller green days. So when I find a play I really love like the one I'm about to discuss, you better believe I'm going to do everything in my power to make it a "HUGE green" play. Hit one of these every few sessions and watch your account go parabolic way faster than small consistent wins. 

So again, this is not normal, but I want to just go through why I did this today. Here's the chart, have a look and digest it for a minute, then lets talk about it.


You good? Ok. So what's going on here. I guess it's easiest to just go in chronological order through the chart and discuss.

I spent the entire weekend reading the SNAP prospectus and every news article out there on this name, I probably did 10 hours of research Sat and Sun. Long story short, I decided this was a great short opportunity. I'm not going to get into why, we'd need a 2 hour conference call for me to get everything I hate about this company off my chest. You can do your own DD and figure out why, but point is I absolutely LOVED this trade. I've been waiting for it, anticipating it, and it's finally game time. I was shorting it Monday, was up huge, didn't take any and let it grind me all the way back to a loss. SNAP won that battle. But this is not a battle, it's a war. Tuesday I was shorting small, still unsure if the games and squeeze nonsense was over, made a little money. After it faded all day yesterday, that gave me the confidence to say "Ok...this is weak. Early investors are going to start panicking soon to get out now that the "huge squeeze" isn't coming like expected (do your DD if you don't know what I mean there), and it's time to lean on this thing." So I had full conviction in my head this morning this was going to be heading lower today, hence why I started in premarket ) I rarely short pre.  

So I put a feeler on pre I think I had 4K shares. If I am shorting pre, it's never with huge size. You never know what the open candle is going to bring. SNAP could have opened and ripped .50c in the first two minutes. It's done it before. So nothing too crazy pre, I just wanted to be involved. Now you can see the 9:30 candle there, tried to go and immediately stuffed, I love that. So it almost went red there right out the gate and I chased some adds and doubled my size, then it started to come back so I took the add off flat, just incase we were in for a trap dip n rip there (remember it's like 9:34 right now, market just opened, first half hour is the "wild wild west" anything can happen.) So I took the add off in case it wanted to go. It didn't go, so I put it right back on a minute later. Then from 9:45 on I never saw another red number. That's when it gets fun. 

It's not even 10am, $SNAP is red, $DANTE is green, and all is well. So at this point, I'm saying "great. my thesis seems to be correct." All I see is blood-red bid tape printing and an endless amount of supply. That's exactly what I was looking for. 

So most would probably freeze here, breath a sign of relief "ahh..my trade is working for once" and sit there with regular/small size and let it work and then pike out, say "I'm waiting for a pop to get back in" and then never get back in lol. Sound familiar? So many people are scared to ruin their average..I don't get that. If you double your size, sure you cut your average in half, but guess what? Every tick you're also making twice as much money now. It's the same thing. So the trade is paying me, I like what I'm seeing, so what do I do? A la Elkwood I start piling the fuck in, of course. Adding adding, then it really starts to speed up lower near 11am so I lock some in. Always pay yourself some into any downside speed up. Then I wait for pops to re-attack. I've got a 13.08 avg, so pretty good, and we're well below that now, so I'm NICELY green on the trade here 11am+. 

You're probably looking ahead to 12pm noon now and saying "wtf is wrong with this kid, he do some cocaine before those adds? Jeez." Right there at noon, I went full psychotic mode and legitimately added as many shares as possible until I had no BP left. Why did I do that? The #1 reason: I'm very GREEN on this trade, I have room to push if I want to. I'm not fixing a red mistake. I'm pushing a good trade trying to turn it into an amazing trade. Calculated recklessness. 

Unfortunately, SNAP didn't fully cooperate as I wanted later, after I piled all-in at noon, we got another .20c or so, but I was hoping for a complete afternoon meltdown, or a late day meltdown. Neither happened and it held .50 (for now), so I didn't hit the "grand slam", but still a home run in my book. But I digress, let me get back to what I was saying about the 12 o'clock adds. 

This is when you make a decision to either go for the gold, or cover. I had conviction and chose to go for the gold. Let's playfully call this "fuck you" mode. What's that mean?

Dante you have enough size already, don't add more. 
"fuck you i'm doin it."
Dante you're going to ruin your average, don't do it!
"fuck you im doin it."
Dante but y....
"fuck you im doin it."
You follow lol. Where you don't care what others have to say or think, you're playing YOUR trade, with YOUR conviction, and that can involve getting reckless if you have a cushion to work with. So that's what I did. Man....if this thing gave up at .50 and rolled over, this would have been an absolutely epic, massive trade. Was still a really nice one, but that was the point of the 12 o'clock pile in. To make it a GREAT one. No harm no foul, at the end of the day, I can say I was there and I was ready for it with my hat in the ring. It's not always going to play out exactly how you want. 


To Recap:

If a trade is paying you and you have conviction, do NOT hesitate to pile in. Just do it. Again back to the "Calculated Recklessness" - sure I got reckless towards the end of that trade, but it was after I was WELL green, had already paid myself some, and decided to press my luck. Right at the open, I was sizing down into pushes, doing complete damage control until I was GREEN. So important to make that distinction, do not pile into a marginal idea that you're flat on with minimal conviction. Not good. These plays aren't going to come along every day, so when you find one, you better take advantage of it. Someone who comes to mind that does this better than anyone I know is Alex (@AT09_Trader) and DRYS. He doesn't toss around 6 figure size on every trade he takes, but you better believe when DRYS rolls around and sets up right, he's bringing the goddamn house on it. As he should. THOSE are the trades that move the needle. Not the scalp trades on low conviction plays you're trading out of bordom. 



That's all I wanted to say. Hope it helps and gives some insight to my thought process. 

See you out there.

- D 

Comments

  1. Thank you for you post.
    Find myself in this "I'm waiting for a pop to get back in" and then never get back in lol. Patience will pay off eventually.
    Keep the good work

    ReplyDelete
  2. God damm, this is going to help a ton. On JMEI i hit it near the top with nathans "power close Gap up Parabolic" pattern and it was only with starter position. Then as it goes my way, im waiting for the G/R move. Instead of counting my money, i couldve added on a big momentum shift (green to red move) and got a bigger trade. Thanks Dante.

    ReplyDelete
  3. Also i know you get this a lot, but i really want to know how you use fundamental analysis for trading. I never use it, and im fine. But i miss countless trades because my lack of fundamental knowledge.

    ReplyDelete
  4. Thanks, Dante! You made my day again :)

    ReplyDelete

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