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 “Rome was not made in one day.” —French Proverb


Learn to judge your trades based on how closely you followed your trading fundamentals. The following is a trade that MoneyMaker made in August 2009 in AIG and judged by the seven fundamental principles. (See figure 2.1). Your goal every day should be to make One Good Trade, and then One Good Trade, and then One Good Trade.

Proper preparation: AIG had a strong move from 34 to 37 on heavy volume in the last 30 minutes of the Close the prior day. The next day, AIG gapped up above the high from the prior day on news that AIG’s founder would work with the current CEO to help rescue the company. Levels: Res: 41.50, 42.25. Sup: 40 Average Volume: 38m Short % of float: 20% 52-week range: 6.60–99.20

Hard work: On the Open, the stock consolidated in a range between 40 and 41.50. AIG began to consolidate around 10:45 AM in a tighter range close to 41.50. I noticed, however, that the stock could not hold above 41.50. When 41.50 finally started to hold, and buyers stepped up, I bought 3,000 shares.

Patience: Got long at 41.58 as soon as I saw buyers step up and hold above 41.50.

Have a detailed plan before every trade: The plan was to get long as soon as buyers stepped up and held above 41.50. I would scalp part of my position initially but if I saw significant buying above 41.50, I would buy back the shares I sold and hold a core until there was a reason to sell. Conversely, if the stock traded below 41.45, I would exit my long position and re-evaluate.

Discipline: Sold half of my position between 41.70 and 42.00. Held a core and bought back the shares I sold when the stock got above 42.00. Held a core to 50, when I sold.

Communication: I shared this level with the desk.

Replay Important Trades: When the stock held above 41.50 and then 42.00, I could have held more size for a bigger move. I knew that there was a high short interest in the stock and the shorts would be squeezed if the stock continued its upward momentum. The stock also gave a clue the prior day into the Close that it had the potential to explode. I actively traded most of my position catching 20–50 cents at a time, but after seeing offers being paid aggressively and buyers stepping up, that should have given me confidence to hold a larger core. 

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