The Infamous Shoulder Tap
Can You Justify Your Moves?
Why Are You in a Trade?
Back when prop firms were a big thing (real office-based firms, not the virtual ones today) a head trader would randomly come up to a junior, tap him on the shoulder and say.
“Tell me why you are in this trade”
If the trader couldn’t give a quick, clear, and simple answer, he was told to close the position. The idea behind it was to encourage all traders to have a proper well-thought reason to be in a play.
“Price has broken through highs and is forming a bull flag, so I’m long”
“Price failed to break the low, found strength and I’m using the VWAP as a magnet”
“Er, I think it’s going higher”
I heard that some even went as far as to lean over and double the trader’s position if the answer was good!
Today, think about how you would answer if you got the shoulder tap. What’s your quick valid reason to be in a trade?
It helps you think more clearly about your reasons to be in the trade and simplifies your strategy. Try it!
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In a recent members call, we talked about oil going negative and that reminded me of a small group of prop traders who made over $600 million on that trade. A must-read.