Trading Follow Through Trades

Steve SpencerSMB Capital

August 16th 2012

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6. No relevant positions

Well rounded traders will have various categories of trades by which they make money. This is a bit different than a trading “setup” per se. It is more broad. Many trading setups can fit inside of a category.

The reason we group trades into categories as traders is to make sure that we have a constant stream of good trading ideas

Trading Categories

Here are some examples of categories:

◦ Earnings follow up trades – trades we look to make based on price action we observed after a stock reported earnings.

◦ Market breakout trades – trades we look to make if the market breaks out of a range.

◦ Market open trades - trades we look for during the first 30 minutes of trading

◦ Options expiration trades - trades we look for when options are set to expire

Trading Categories

Within each category you will have specific setups you look to trade◦ i.e. One of my favorite earnings follow up trades

are stocks that have held large gaps the first trading day after reporting. These are great candidates for follow through trades.

Trading Categories

Earnings follow up trades◦ Stocks that gapped higher on very heavy volume◦ Good long candidates in the week following the

earnings move◦ What price action do we look for to enter on the

long side?◦ How much risk should we take?◦ When should we increase risk?◦ When should we exit the trade if not working?◦ How do we determine profit targets?

Earnings Follow Through Trades - Longs

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