When people hear the word flexibility they think of yoga, working out, sticking one leg over your head, or something to that effect. But in trading, flexibility is also an important skill. In fact, I believe that being flexible is one of the most important and under-rated attributes you can posses as a trader. The worst traders are stubborn and get married to trades, and the best traders simply read and react purely to the price action.
I will use today's trading in ExOne (NASDAQ:XONE as a perfect example of flexibility. I came in with a long bias because yesterday's daily green bar close was the first in green day in six trading days for XONE. The oversold stock was due for continuation to the upside, in my opinion. I believe recent IPOs have a particular penchant for reversing and following through after several days in one direction.
The stock opened up above yesterday's high of $27.20 and looked like it was going to head back to the $28 area. It took a while for the stock to get going, but it eventually got as high as $27.72. It then set up a small bearish consolidaton on the 5-minute chart between $27.20 and $27.40. When it broke that channel to the downside the whole complexion of the trade changed. XONE went from $27.40 to $26.30 in the blink of an eye. At that point I had to adjust my thought process to go from wanting to be long on pullbacks to shorting on bounces. The stock bounced back to $27 where I initiated a short and then ultimately covered for new lows.
As a momentum trader you have to check your pride at the door. Just because I gameplanned the stock as a long, doesn't mean the situation can't change. I am never afraid to admit when I am "wrong" and flip to the other side of a trade.
Although I played XONE for a short in the late morning doesn't mean in the afternoon I won't look at it again from the long side. That is the beauty of being a momentum trader. Once we have identified the most in-play stocks, we will continue to trade them in both directions based on the intraday signals.
A perfect example of an inflexible trader is one who is still focusing their attention on Apple (NASDAQ:AAPL). The former market leader was once a great momentum vehicle, but at this point it is dead money. Many traders are programmed to always watch and try to play AAPL, and in doing so they are missing out on a ton of great tradable action over the past few months. The 3-D printing stocks like Stratasys (NASDAQ:SSYS), 3-D Systems (NYSE:DDD) and XONE, for example, are providing great two-way action.
Take a completely free, and hassle-free, 5-day free trial into my private Momentum Trader Mentoring Room, which utilizes our VTF technology so you can see my long and short positions in real-time. I will be showing off my flexibility all week, and at some point maybe I will attempt to trade with both legs over my head!
*DISCLOSURES: Steve Levay is long XONE, long VHC calls, long BIDU puts.