Chat Room Lessons

Trading lessons archived from the OneOption chat room.

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Dave W
13:36:33
SAVA    a note on the stock it has completed what is called a doji sandwich  ie  big green candle (10 points) on tues followed by a doji on wed and another 10 point candle today   almost exactly the same as tues  that is a perfect doji sandwich      for anyone interested in candlestick patterns 
puckshaw
13:39:17

Question Is there an expectation for what comes after a doji sandwich?

Dave W
13:44:07
FREY is a doji sandwich setup for trading tomorrow if it opens green 
Pete
16:03:35
puckshaw wrote:

Question Is there an expectation for what comes after a doji sandwich?

Follow though in the direction of the long candle that precedes the doji. Typically that pattern will produce. If not, I expect heartburn from that sandwich.

Pete
09:05:52
According to purists, yesterday was not a doji, but close if you strip out the last 10 min yesterday. DaveW is enjoying his breakfast doji sandwich.
Dave W
09:16:23
regarding the doji sandwich    what you are looking for is the doji sandwich setup which is a big green (or red) candle followed buy a doji then if the stock opens green after the big green candle and doji or red after the big red candle and doji you can take the trade looking for todays candle to be approximately the same length as the original big green or red candle 
Dave W
09:17:03
SAVA was a perfect example of a bullish doji sandwich yesterday 
ican
09:17:29
NIO is on doji sandwich today
Dave W
09:37:22
NIO is a doji sandwich setup yes

SubZer0
12:14:18

Question @Hariseldon Another mindset question. I come from a scalper’s past and tight bid-ask spreads were highly critical to my stock picks. I never traded stocks that had spreads larger than 0.03 because if the stock moves against me, it could’ve burnt a hole in my p&L very quickly with a large spread. I see many tickers traded here have large spreads and i’m still not comfortable trading them. Do you even look at spread when selecting a stock to day-trade using the RS/RW method? Or just overlook it because you are confident with your conviction?

Hariseldon
12:48:24
SubZer0 wrote:

Question @Hariseldon how do you develop the mindset to trade very slow moving tickers? They show up in the scanner as having great RS or RW but the tape barely moves. For me, a decent or fast moving tape shows good liquidity and enough interest from traders, which means you can expect the price to move. I have always traded those type of tickers and avoided slow moving ones because i could be waiting for a long time and still not make much money from them. Thoughts? Totally avoid slow moving tickers? Or is there a different approach to day-trading them?

Answer It has to have volume foremost, if it trades under a million shares a day I will generally skip it – but if it does, than I use the daily chart as my guide

2022-09-22
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AriS
10:08:04

Question If you buy/sell a tech stock. Are you looking at QQQ or SPY for RS/RW or paying attention to one more than the other? I typically watch both but with tech I favor QQQ a bit more.

Hariseldon
11:12:34
AriS wrote:

Question If you buy/sell a tech stock. Are you looking at QQQ or SPY for RS/RW or paying attention to one more than the other? I typically watch both but with tech I favor QQQ a bit more.

Answer SPY – not saying ignore QQQ but absolutely you should be looking at SPY for RS/RW

2022-09-22
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SubZer0
11:36:40

@Dave W @Hariseldon How do you know where to exit on a stock that is at all time high… with reference to FREY here

Hariseldon
11:40:14
SubZer0 wrote:

@Dave W @Hariseldon How do you know where to exit on a stock that is at all time high… with reference to FREY here

You don’t.  I had decent profit, so I took it.

Dave W
11:41:42
Hariseldon wrote:

SubZer0 wrote:

@Dave W @Hariseldon How do you know where to exit on a stock that is at all time high… with reference to FREY here

You don’t.  I had decent profit, so I took it.

I had a sell order already working  

Superpantz
16:42:41

Question if I decide to only swing trade, what is the best timeframe to trade with?  I’m considering to switch over to swing trade primarily when my day job take too much of my attention.  5M would be too demanding during a busy work day.

Hariseldon
16:50:35
Superpantz wrote:

Question if I decide to only swing trade, what is the best timeframe to trade with?  I’m considering to switch over to swing trade primarily when my day job take too much of my attention.  5M would be too demanding during a busy work day.

Answer You should be using the daily chart to make your decisions – it is fine to look at the M5 for entry reasons – but really all you care about it the daily candle

Superpantz
17:11:38

Question follow up question.  This is something that I’ve been confused about for a while and I’ve been asking questions in different ways, but still a little confused.  If we lean on the daily when we day trade, how is it different than swing trading other than entering and exiting based on 5M and closing the trade during the day? I think I’m confused because I size my positions based on where I set my mental stop where some others have a specific share/contract count.  So if I’m daytrading and I’m leaning on D1, should I set my mental stop based on D1 structure or M5 structure? If I’m setting mental stop based on D1 structure, that would make any trade swingable, but it would also make sense to exit based on D1 as well since exiting on M5 would make risk way bigger to reward, but that becomes swing trading.  As of now, I’m using D1 to determine what stock to trade, entering and exiting based on 5M structures.

Hariseldon
17:19:30
Superpantz wrote:

Question follow up question.  This is something that I’ve been confused about for a while and I’ve been asking questions in different ways, but still a little confused.  If we lean on the daily when we day trade, how is it different than swing trading other than entering and exiting based on 5M and closing the trade during the day? I think I’m confused because I size my positions based on where I set my mental stop where some others have a specific share/contract count.  So if I’m daytrading and I’m leaning on D1, should I set my mental stop based on D1 structure or M5 structure? If I’m setting mental stop based on D1 structure, that would make any trade swingable, but it would also make sense to exit based on D1 as well since exiting on M5 would make risk way bigger to reward, but that becomes swing trading.  As of now, I’m using D1 to determine what stock to trade, entering and exiting based on 5M structures.

Answer There are several answers to this question – first – when the intention is to day trade, trading a stock in the direction of the daily chart (i.e. if the stock is bullish on the day but the daily chart is very bearish it is not as high a probability trade than if I were to day trade a stock that is both bullish intraday and on the daily chart).  So the first reason to use the daily chart even when your intention is to close the position before the end of the day is that informs the trend and tendency of the stock you are trading.  Next – as we all know very well, not every trade works out – I could short NVDA with every intention of making it a day trade but the market may have turned against me and gone bullish, and now my NVDA position is under-water.  Trading in the same direction of a strong daily chart now gives me a viable option of holding the trade.  So even though it was not my original intention to swing NVDA (in this example) – because the daily chart is so bearish, it becomes an attractive choice rather than just closing it for a loss.  However, since my trade is intended to be a day trade I would be using the M5 to guide my decisions on a potential exit.  I hope this answers the question?

2022-09-21
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Fox
13:07:55

@Zander re institutional participation in options, volume & liquidity is obviously in SPX above all else, often as conjunction with part of their nominal exposure in equities (as hedge or leverage). vol fund guys are very very active in highly liquid retail names and they consider this the easier money than reliably farming SPX option inefficiencies

st0rm
12:27:28
Purely hypothetical, but wouldn’t a time spread on spy before FOMC benefit the same way as a time spread over earnings? I suppose one reason it wouldn’t is the unknown expected change. 
Zander
12:33:44

@st0rm Part of the time spread is selecting companies where the market has a strong historical tendency before earnings to over-estimate volatility and subsequently over purchase the post earnings options – you would need to know that the market has the same tendency pre-FOMC and I’m not sure it does or does not. I would also wager that due to the much greater liquidity of SPY options, that institutions would have more of an incentive to pay attention to inefficiencies like that than on the less-liquid options on individual equities, and any edge might be harder to find. Curious to hear thoughts on this from someone more experienced. 

Zander
12:55:32
Also, with a time spread, I think it’s been mentioned that part of the mispricing is due to retail traders predominantly using the cheaper weekly expiration to speculate on earnings instead of more expensive further-out options, so a disproportionate amount of earnings-related IV is packed into that nearest expiration options chain. I would also bet that FOMC related speculation is more evenly distributed among different options expiration dates than earnings related speculation, since people know that post-earnings moves often happen immediately overnight but post FOMC moves might take longer to materialize, so paying more in time-premium is worth it. If this is true, it would further reduce the edge of the time gap between the short-vega leg and the long-vega leg because the FOMC related IV is more spread out among different expiration dates. But that part is entirely just speculation and a total guess on my part and more relevant to a pure interest in options than actual trading. 
Fox
12:56:56

@Zander yes

Fox
12:57:23
time spreads largely depend on the inefficiencies of pricing single name option chains around binary events
Fox
12:57:36
such inefficiencies are not to be so easily or reliably found/farmed on index options

2022-09-21
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Fox
15:43:49
one that’s been working well for me all year – buy 1*25delta C and 1*25delta P about an hour before the meeting and sell a minute before the meeting starts. natural increase in IV as a whole outmoves the loss in delta from one side. well it has this year with so many people piling into bets pre-meeting
Fox
15:45:01
the idea comes from OptionStalker “Buy into Earnings” (buy the build up and get out before the boom)

2022-09-20
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A man
14:27:56
Done for the day. 4L, 2W. I’m one of those who got ripped up today lol. The chop burned me. Red for the week, will try and reset. Won’t trade until after Fed tomorrow. Hope everyone is having a better day! 
Dave W
14:28:33
low probability trading days will do that  much better to sit on the sidelines 
A man
14:29:44

@Dave W Def should’ve stayed on the sidelines today, but I was trading 1/2 position size so was able to manage my risk somewhat. 

Dave W
14:30:31
you maybe trading just to trade then  
A man
14:34:44

@Dave W I’m not trading for the sake of making a trade, I’m trading to learn. I’d like to get better at navigating these choppy environments, and I think the best way to do that is to trade with real (but reduced) capital. I risked what I was willing to lose, so I don’t feel too bad about it. After all, every red day is an opportunity to learn!

owensd
14:38:44

@A man the lesson is that not all days or times should be traded. I took three trades today, with high probability setups, got out quick, and have been completely in cash for about 70% of the day.

Dave W
14:42:59
A man wrote:

@Dave W I’m not trading for the sake of making a trade, I’m trading to learn. I’d like to get better at navigating these choppy environments, and I think the best way to do that is to trade with real (but reduced) capital. I risked what I was willing to lose, so I don’t feel too bad about it. After all, every red day is an opportunity to learn!

I am just trying to help   learning to not trade with no edge is also a good thing to learn 

owensd
14:43:35
ROKU has been beautiful today… 
Hariseldon
14:44:29

All – understand this – a consistently profitable trader is very rare – in fact, you will not find many out there offering advice, in any at all.  So when someone like Dave W. gives you advice or tells you his interpretation of what you are doing take it for the gold that it is.

Fox
14:49:05

@owensd that sounds like a great approach to getting paid on a day ike today

owensd
14:49:43

@Fox been employing it all month – best month trading so far!

JohnB
13:49:47

Question When selling .10 delta weekly covered calls against a long position, do the professionals make any adjustments to this strategy during weeks like FOMC knowing volatility will be high? (e.g. avoid doing it, picking a different delta, etc.)

Hariseldon
14:04:36
JohnB wrote:

Question When selling .10 delta weekly covered calls against a long position, do the professionals make any adjustments to this strategy during weeks like FOMC knowing volatility will be high? (e.g. avoid doing it, picking a different delta, etc.)

Answer yeah, don’t do it on those weeks

Pete
10:30:57
When I trade futures if they drop really hard on stacked red like this, I will take some gains. Those really big drops retrace and I can usually set a sell limit higher and re-enter well. Very short term tactic. If I don’t get filled, no worries, I will just have to wait for follow thru and I can usually catch an even bigger move. That is why I pull my bid if not fill quickly. 

2022-09-15
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lilsgymdan
11:00:17

Answered View  are REIT’s reliable with the RS/RW method or are they more akin to some basic materials stocks, energy stocks, or ETFs where they are subject to other forces than just SPY?

Pete
11:07:15
lilsgymdan wrote:

Question are REIT’s reliable with the RS/RW method or are they more akin to some basic materials stocks, energy stocks, or ETFs where they are subject to other forces than just SPY?

Same concept works. The RS/RW in the group will make them come up in the searches. We  don’t care too much why they are RS/RW, we just follow the money like we do for basic mat stocks. They have rotation in and out just like other groups.

2022-09-15
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Pete
11:34:33
As I have said a hundred times, this is a game of chess. If you only focus on what you are going to do, you are going to be mated quickly. “OMG the trendline was breached. I am going to buy some puts!” That is how most retail traders think. Your opponent is thinking, “If I can poke through that D1 trendline I can lure a bunch of shorts in and then try to squeeze them. They have no staying power there because then we will be back above that trendline and they will be afraid that it confirms support and they will cover for a loss.” The seasoned trader shorts the high today on signs of resistance that that trendline will be breached. He treads cautiously at the trendline and waits for a breakdown and then continuation to confirm the selling pressure.

Hariseldon
16:13:22
BennettN wrote:

 Question @Hariseldon I know this is one of those things that often comes down to feel/experience, but were there any signals you can point out that tipped you off to the possibility of a bull trap here?
Answer Very difficult to quantify – it just lined up too perfectly – it is exactly the type of bounce that would get people out of shorts and get bullish specs long – there was no reason for it other than to do that.  In my head it went like this – the Algos had one job today – Sell – but if on the way down they could grab some extra $$ from retail, why not take it.  Basically I felt it was a Bull Trap because it was what I would have done if I were them.

ican
16:43:14
I need to learn how not to sabotage myself. I had bearish thesis, which played out today. I was holding onto my position through all drawdown without being anxious actually (position was sized appropriately). But as soon as I knew my thesis was playing out today – I exited for a small gain. somehow thesis being proved was enough as opposed to making gains on it. I do not really know what triggered the exit – maybe subconsciously – don’t want to see drawdown again? Need to introinspect. Ironically, I entered new positions with same thesis soon after. 
Hariseldon
16:44:45

@ican was it an issue with position size?

ican
16:49:23
not really. I had SPY oct $400 put for $14 about. I had been selling daily puts against it every day. Cost had come down to $12 already. Now as soon as hit the first LOD at around 11 today – I knew we have decent selling pressure and good likely hood to go down further. On the bounce there after I got out of position. Have been holding this position for over couple of weeks and thru the 389 test on 9/6 and the massive bounce. Had chance to exit for profit on 9/13 – didn’t take it with bias of “going lower”. Somehow today was the day – still struggling to figure out why I exited. 
Hariseldon
16:54:57

@ican first as an aside – likelihood is one word (I know that sounds obnoxious to correct, but figured it would help you if you use it in the future) – and I hear you and know the feeling – after awhile you actually get sick of the position itself and just want to be rid of it, and then you see it in profit – I had the same feeling with ENVX been holding it for a month and got it for around $9 a contract, averaged it down to about $6.75 – but it has been a stand out RED at the end of each day, and then today it finally went green , actually up around .75 a contract.  I wanted to close it, I really did – but I stopped myself and instead added two more contracts to my position.  And that is what I do now, when I get that urge to close the position that finally made it into profit, I add to it instead – that is the deal I made with myself and I stick to it.

ican
16:56:34

@Hariseldon I think that describes my feeling very well. I just lost the patience with “this particular position” – not logical at all. Thanks, I will work on this. 

Hariseldon
16:58:58

@ican another thing you can do is put an order in to close it, if for example it was at $11.30, put an order in to close it for $1 higher at $12.30 – if it hits your target, great, if not you still have it

Hariseldon
17:02:57
This really is the number one reason why traders do not come out ahead in the market – there are many reasons, but after all my years doing this, I truly believe this is number one – When your position is working in the direction of your trade is also when you are most likely to close that position.  Now obviously nobody can have the “perfect exit” where you get out right at the top (or bottom if you are shorting) – but it is the most inexplicable phenomenon that really only happens in trading – Traders leave when they are right and stay when they are wrong.  If the position is going your way, there is a much higher chance it will continue to go your way – 
Think about it – we spend all day looking for the highest probability trades, right? Well the highest probability trade is the one you have that is currently working and in profit – and yet that is the one we shut down and close.  That is the number one reason traders don’t “beat the market”.

Crux
11:10:52

Answered View For Dave/Hari/Pete, do you guys try to avoid swinging biotech stocks for exact reasons situations like ALT? Or is it just part of the game. I hadnt really thought about this before but it makes sense that a biotech stock is more likely to have a wild 50% swing that say AAPL would

Pete
16:43:19
Crux wrote:

Question For Dave/Hari/Pete, do you guys try to avoid swinging biotech stocks for exact reasons situations like ALT? Or is it just part of the game. I hadnt really thought about this before but it makes sense that a biotech stock is more likely to have a wild 50% swing that say AAPL would

That is why I do not swing biotech. They are very prone to news. I am not a scientist so I would have zero to go on apart from the technicals. GS has researchers who know the potential and I can’t compete with their fundamental research. They have clinical trial updates and I have no way of remembering those dates. They are also cash furnaces and they have to issue stock all the time. I will day trade the heck out of them, but I do not like to swing more than a CDS based on short term momentum.

owensd
14:02:07

Short TLSA 300/295 PDS for $1.90 – got the confirmation I was looking for the algo rejection and has lost all it’s RS from earlier.

Hariseldon
14:02:43

@owensd are you currently shorting a stock up $9? Just checking is all 

Dave W
14:03:44
TSLA also above the 200 and is having some news moving it today    be careful shorting TSLA
owensd
14:04:49

@Hariseldon yes – but the algo rejection is more influencing to me. Also why I did the spread, to limit potential loss on an overnight swing.

Dave W
14:05:54
in my opinion algo rejections are a reason to exit longs but not necessarily short it 
owensd
14:08:04

@Dave W I’m in TGT and META as well, but didn’t post those entries.

Dave W
14:09:25
perhaps post those and not TSLA

2022-09-14
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st0rm
17:45:25

Answered View  How do you handle short-squeeze rumors around tickers you might be holding short? I was holding CLAR short on 9/1 when it jumped (from 14.87 briefly to 17), then began to fall back. I held for a few days based on the D1, but then got scared when I noticed the ticker in reddit short squeeze comments. I sold immediately at a fat loss. Any lesson here? May be hard to answer. Thanks!

Hariseldon
17:49:29
st0rm wrote:

Question How do you handle short-squeeze rumors around tickers you might be holding short? I was holding CLAR short on 9/1 when it jumped (from 14.87 briefly to 17), then began to fall back. I held for a few days based on the D1, but then got scared when I noticed the ticker in reddit short squeeze comments. I sold immediately at a fat loss. Any lesson here? May be hard to answer. Thanks!

Answer The only thing I can tell you is that they actually did a study on this, although I am not sure where the citation might be, but I do recall the findings and they were this – there is no correlation between the magnitude of social mentions and the likelihood of a stock going up significantly

st0rm
17:51:12

@Hariseldon So I should stop taking my daytrade picks from reddit? Seriously, that’s a very interesting study I will go find it. Thank you.

Hariseldon
17:51:48

@st0rm if you find it, please link it here – thanks!

st0rm
17:56:53
I suppose a ticker with rw and clear institutional selling may offer a safeguard against a harmful short squeeze since those same institutions would defend their short positions (and my baby position riding on their coattails). 

2022-09-12
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Tonga
07:49:58

Answered View  Hi guys, I have a question regarding the CDS/PDS. It is always suggested to buy them with expiration in the same week. But on Friday, with so short expiration date, I would want to avoid buying lottos. So my question is if in Friday I could buy next Friday’s expiration and the strategy is still valid. 

And what about Thursday? Can I still buy next week’s?
I read the Wiki and I am still not clear about this, sorry if you already talked about this before
Pete
08:40:07
Tonga wrote:

Question Hi guys, I have a question regarding the CDS/PDS. It is always suggested to buy them with expiration in the same week. But on Friday, with so short expiration date, I would want to avoid buying lottos. So my question is if in Friday I could buy next Friday’s expiration and the strategy is still valid. 

And what about Thursday? Can I still buy next week’s?
I read the Wiki and I am still not clear about this, sorry if you already talked about this before
Yes you can buy the next week out and often your lottos are going to be excellent candidates because they are showing incredible strength/weakness late Friday. You do carry additional risk by holding over a weekend because of news and that is why you don’t see us trading them as often.

st0rm
16:08:11

Answered View  Is it ever OK to buy pds/cds beyond Friday? I like buying spreads for the safety it provides, but last week realized a mistake was buying pds that expire Fri when I should have bought calls further out. I allowed my desire for “safe” spreads to cloud my judgment and got myself trapped, instead of just buying longer-term puts. Thx.

Pete
16:28:38
st0rm wrote:

Question Is it ever OK to buy pds/cds beyond Friday? I like buying spreads for the safety it provides, but last week realized a mistake was buying pds that expire Fri when I should have bought calls further out. I allowed my desire for “safe” spreads to cloud my judgment and got myself trapped, instead of just buying longer-term puts. Thx.

Yes. I you are looking for a move that could take longer to unfold you can go out another week with CDS/PDS. We tend to wait for the move and then take the position when we feel the momentum will continue. That is why we prefer this exp for PDS/CDS. This week’s also moves better. 

Hariseldon
16:48:06
Also remember with a CDS/PDS you want to get to the natural intrinsic difference between the strikes , meaning you want premium to burn away, as your long call goes ITM – that is accelerated when the expiration is the same week.  Otherwise, both Calls go up as the stock rises meaning it is difficult to get a % profit without expiration approaching .

Russ
17:14:19

One thing I’ve observed recently is a lot of people changing their bias on the same stock intraday (i.e. being long a stock and then wanting to flip short after taking a loss). That is something that should really only be done by professionals and is also very different from flipping your SPY bias from long to short or vice versa. Why? When you made your original entry, you should have looked at the daily chart, assessed it as strong, and then looked at the intraday chart, and saw it met all your criteria. Even if it falls apart on an intraday basis, or if you have an event on a daily chart basis (breach of an SMA or the 8-EMA), then all that should change is the stock going from a good long setup to a good no trade candidate. You need to see a significant reversal on the daily chart which you will not see in one day except in exceptional circumstances! The chances are if you are getting a desire to switch your bias on a stock, what actually happened is you either 1) Made a poor initial entry and the stock did not actually have the strong/weak daily chart needed to justify your original position or 2) You are trading emotionally because you just took a loss.

Option_B
18:04:52

Can someone please elaborate on what it means to “Wait for confirmation”? Specifically, I was wondering 1) What kind of pattern formation do you look for after a trendline breach. 2) Do you have a resting order as you wait for price to come back to a “better” level, or do you jump in with a market order as soon as you have confirmation. 3) In the case of the resting order, what do you do if the price continues to take off after confirmation. For example, do you then decide to jump in with a market order, or do you consider it as a missed trade and move on to something else? Specifically, I’m trading on the larger time frame as more of a swing trader (anywhere between H1 to D1).

Pete
18:08:35

It means that the underlying has to move through the price point. If you are a swing trader, it need to close through it (not just trade through it). If you are a day trader, you need the M5 bar to close through it. Even then, I like to wait to see if the next bar follows through. If it instantly reverses it is a head fake and that does happen often at those price points. How the underlying approaches that price point matters. As I describe in The System under trendlines and MAs, we want it attacked. I never suggest using live orders (buy stops, sell stops). Alerts are much more effective. When they are triggered – evaluate. If all does not seem right, set another alert. You will notice in the charts I posted today that we had multiple new highs for the day. You want to make sure that breakout holds because it could be a head fake. Especially today where the trend strength was not very good and we were creeping up to those price points. It means you will miss a little bit of the move, but you will know for sure that the breakout is legit.

Superpantz
13:10:06

how do you set profit target for stocks at ATH or ATL

Pete
16:49:31

Without context it is impossible to answer this question. I am going to assume you are not talking about GME making a new all-time high. If yes and you are swinging it, you had better be using a CDS with limited risk and be willing to lose it all. If you are day trading it you would watch for compressions and retracements. You would also watch for bearish engulfing candles at the hod, bearish hammers at the hod. Is the volume heavy? Is it continuing? Is the stock still strong relative to SPY? Is this a normal stock like BJ? How did it get to the new high? Is it attacking it? How far did it have to travel during the last rally to get there? Are we swing trading it or day trading it? Every one of these elements matters. Please be very specific with your questions. Provide a symbol and your trade duration and we will be able to answer your question.

DanielF
17:05:55

Following up on the last question, in general, how do you set your targets? Every book has a recommendation, like if it’s coming off a flag, your target is double the pole or whatever. However, this doesn’t seem to work well when SPY is going haywire. I’ve just been aiming for the next area of resistance or support to exit (horizontal support, trendline, etc.), although I don’t know if there is a better way. To give an example, TNK had a good morning and I set my target to the 8/11/22 then going way back to 4/28/20 since that was the next one back.

Hariseldon
17:10:46

Honestly, I judge it from the price action – like with SPY today, I judged I could get a $1 but probably not more, same with GOOGL – that was based on how I felt the stock was moving and how the market was moving.

2022-09-06
Mark As Read

Pete
09:43:00

When you look at a D1 chart like ZI, notice how the candles overlap. “What does that mean?” It means the stock retraces a lot and you do NOT have to chase. I don’t even have to look at an M5 chart to know this.

Amerikaner
16:15:45

@Hariseldon When D1’s show such large weakness like QCOM did, do you more or less ignore the M5 chart? I ask because at your QCOM entry it was showing a higher low on increased volume and SPY was still in it’s bullish cross. I’m thinking you thought it wasn’t worth waiting on M5 with such overall weakness. You’d rather get in the short and look for other opportunities rather than squeeze slightly more profit out of a slightly higher bounce. Am I on the right path there?

Hariseldon
16:27:09

pretty close, yes -I am bearish on the market, bearish on tech, and QCOM was Bearish, so at that point it is just waiting for profit and whether or not I want to swing it

2022-09-02
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Hariseldon
14:16:00

Btw – I recognize there seems to be an inherent contradiction here – on the one hand we say, “Have a thesis on the market!” and on the other whenever someone asks where the market is going they get told, “Doesn’t matter, just pay attention to what is in front of you!” – So which is it?
I think the best way I can explain it would be to use a dating analogy. Let’s say you are getting ready for a 1st date – you met the person online, and based on the profile and your conversations, you have high hopes for this one. You’ve been on enough previous dates to know that these things can go wrong pretty fast, plus that time you were Catfished by a rather large and elderly Armenian man, but still this one looks good. So here you have your historical information, and your set-up that is informing how you are going into the date – hence you have formed a “thesis” about it, and because you have high hopes you dress nicer than normal, and choose a nicer place for dinner than usual for first dates – your thesis is one of optimism. Now – once you get there though, you need to pay attention to the date in front of you – your thesis can be nullified pretty fast if they start talking about how they still live with their ex-boyfriend/girlfriend – In this example, the two notions are not contradictory – and that is how you need to think of it.

Fox
14:35:15

from view of options trader, i have a thesis on market direction in next 1-2 expiration cycles (absolutely no further than that). then structure my trades & balance them to align with that thesis but also not pay too much if the thesis fizzles out, and ideally a low probability low cost high pay out if there is a total reversal of thesis. tldr: i expect my thesis to be wrong at some point so try to give myself multiple ways to get paid on the trade

2022-09-02
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Fox
14:42:16

one of my bag of tricks is a low probability high reward low risk trade for intra-day reversal. E.G. just now i entered ITM put credit spread on NVDA at 139/140p for .90cr. Meadning if we get an end of day bounce and close above 139 i can close it for 0 ($90 profit). if not, max loss of 0.10 ($10). my overall book is bearish so i wanted something just to get a surprise upside whoosh into EOD which is always possible on pre-holiday light volumes. but not actually wanting to risk more than .10 on a reversal because catching bottoms is for idiiots on fintwit. Please only do [this] if you are consistently reaching the win rate & PF milestones. this is a step 12 out of 10 to trading for a living

2022-08-31
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Auto
16:04:56

I truly do not understand how to properly play stocks such as MEGL, ALT, NERV or any momentum play. I avoid trading stocks like that completely because in the past I have found myself losing more than winning on trades like that. So how do you size for those positions and how do you choose when to get in and out? To me when I see stocks like that all I see is chaos. To expand on that I trade leaning all my decisions on the D1 chart. I know if I cannot get my target today, more often than not I will get it another day. But with stocks that are borderline bankrupt like REV, I cannot justify holding something like that because the risk is just too much. So for me when the position goes against me I get out quickly to avoid a bigger loss. I just would love to understand how you and Dave play these because I see you guys make so much money on them.

Hariseldon
16:37:51

You want the honest answer here? It is all price action. Playing these momentum stocks is the cherry on the trading sundae so to speak – after years of trading and experience, you get to trade these types of plays. Anyone that tries to trade these set-ups without the experience of knowing how to read pure price action is going to lose money – I don’t care how many 3-Bar method videos there are – the simple answer is – don’t play them until you are ready.

Auto
16:42:53

Alright thanks Hari I’ll just continue ignoring those stocks for the time being then. It’s just so frustrating when I can see just how profitable those moves are when we are in such shitty market conditions. But then again it’s not like anyone has ever became a profitable trader by being greedy and impatient so I’ll just continue to do what I’m doing then, thank you.

Hariseldon
16:45:47

I get it – they move fast, and they are cheap – perfect combo. Here is the problem – one never knows when to get out – how far down is too far when you have stock that jump 20% in a single candle, if you enter at $6, and it is now at $5, do you bail? Even though you saw it go from $4 to $7 just an hour ago? Do you average down? Ahhhh….it’s volume you say? But wait….volume totally dried up and the stock sat there for two hours doing nothing, and then for no reason whatsoever volume exploded again….so what the hell….?? If you are in a stock like F or CLF and you are down .50….well you know it will take a lot to turn that slow moving grinder around, so the decision is pretty easy to bail – but a stock like MEGL that can go from $5 to $100 in an hour?? Yeah, that is a different story

Superpantz
16:18:47

When it comes to leaning on the daily chart to determine stop levels, it significantly increases my win rate as I don’t get stop out by intraday noise. However since the stop level is determined on the daily level it is usually further from my entry resulting in undesirable risk to reward ratio. Since it is a day trade, the profit are usually significantly smaller compared to taking a loss. Therefore even if I have 90% win rate, my profit ratio could be 1 or less than 1. For example, if I win 9/10 trade risking $100 each trade and on average make $10 each trade, that 1 loss would take all the earnings. Especially recently since there are a lot of sideway price action from SPY. How can I improve this situation? Am I doing something wrong?

Hariseldon
16:39:11

Next time you are halfway to your profit target, increase your position by 50% – that will solve your issue

2022-08-30
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Pete
09:24:43

Better one safe way than a hundred on which you cannot reckon. A cat goes up a tree and gets away while a fox is caught trying to figure out what to do.
Better one safe way than a hundred on which you cannot reckon.

Pete
09:29:15

Once a Cat and a Fox were traveling together. As they went along, picking up provisions on the way—a stray mouse here, a fat chicken there—they began an argument to while away the time between bites. And, as usually happens when comrades argue, the talk began to get personal.
“You think you are extremely clever, don’t you?” said the Fox. “Do you pretend to know more than I? Why, I know a whole sackful of tricks!”
“Well,” retorted the Cat, “I admit I know one trick only, but that one, let me tell you, is worth a thousand of yours!”
Just then, close by, they heard a hunter’s horn and the yelping of a pack of hounds. In an instant the Cat was up a tree, hiding among the leaves.
“This is my trick,” he called to the Fox. “Now let me see what yours are worth.”
But the Fox had so many plans for escape he could not decide which one to try first. He dodged here and there with the hounds at his heels. He doubled on his tracks, he ran at top speed, he entered a dozen burrows,—but all in vain. The hounds caught him, and soon put an end to the boaster and all his tricks.

Pete
14:20:23

ADP revamped the way they calculate data. They stopped publishing their number in May and the first jobs report will be posted Wed. It might show weaker job growth just because of the way the number is calculated. It might not carry much weight for that reason. Initial jobless claims the last 4 weeks have been super steady. I am not expecting a bad jobs report. The BLS number is filled with seasonal adjustments (one reason I hate it) so maybe those will force it to be weaker. A strong jobs report could be bearish. Good news is bad news. Either way, the Fed is steadfast and as long as inflation is hot, one weak jobs report is not going to impact them. They said that taming inflation might come at the expense of economic growth and they are fine with that. This is why the reaction last Friday was so bearish.

2022-08-30
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Hariseldon
16:17:08

What is the point – or the check boxes, that tells you to Leg Out of an OTM Bullish Put Spread, rather than just close it for a loss and how far out in time should one make that decision?

Pete
16:35:22

There are many moving parts (the market, the stock and time). Since it is a swing trade and it is OTM it is going to take a fairly big move for it to go wrong. I evaluate the spread near the close and I let it move around during the day. When the technical support levels for the stock are in danger I need to know the cause. Is it stock specific or market related. If it is stock related, I better check the news. I don’t worry about broker downgrades, but material news on the company or group will get my attention. Then I look for continued rel weakness in the stock. I need a market backdrop where the market is setting up for a drop and then I can leg out. If the stock is super weak it won’t take much of a market move, I just need to make sure the market is not going to rally. If the stock is breaking down because of the market, I need to know the market move is legit and that it will have follow through. Then I am a bit more focused on timing the market because the stock will follow it. With regards to time, if the spread has more than a week until expiration I am in no hurry. Assignment is not a factor and I will have chances to leg out. Spreads that expire in a few days and that are ITM are more dangerous because I don’t have the luxury of waiting for a good set-up. Once I buy back the short put, time decay is working against me on the long put. My confidence that both the stock and the market are going to drop has to be VERY high or I will just close the spread as a spread.

Editor's note
23:59:59

Pete discusses legging out of bull put spreads in this video: How To Leg Out Of A Bad Spread

AlamVert
16:34:12

Is there a particular logic to defer mostly to bullish vs bearish time spreads for earnings? Does this mostly have to do with the ones bias on the stock/market going into the earnings?

Hariseldon
16:40:08

A time spread is neither bullish nor bearish – we use Calls because if the stock drops than you let the Call expire worthless and hold the long call for the next week. If we used Puts then you are hoping a stock that had a positive response to earnings is going to drop in the following week (if the result is outside the expected number). But a time spread is neutral on your hoped for direction.

2022-08-30
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Superpantz
16:22:03

I heard you said this today and last time on Twitter live; you said that setting stop level on 5M levels is consider momentum trading and is susceptible intraday noise and getting stopped out. I know we’re supposed to lean on the daily, but what exactly does that mean when it comes to determining mental stop for a day trade and not a swing trade?

Hariseldon
16:40:08

On my day trades my stops are typically determined by the daily chart, not the M5 – on occasion I will use VWAP but that is dependent on the trade. The overall point was that people exit trades because of 5-Minute candles that are basically just noise and not really cause for an exit.

lilsgymdan
10:20:03

Thanks for the pep talk coach 🙂 The hardest part of this is where you remodel your identity and beliefs. When they are still new It’s a fragile house of cards that can fall over once in a while and needs a hand to prop back up.

Hariseldon
16:32:18

You need to get three straight months of WR 75% and PF 2.0 or higher on paper trading, and then three straight months of the same thing with 1 Share – and only after that should you begin trading normal sizes. Any shortcuts around that never, like ever, end well.

lilsgymdan
16:49:52

should it be 75/2.0 for each of the those 3 months or on average across 13 weeks? Because I am EXTREMELY close

Hariseldon
16:50:20

It should be consistent – so for each month. I mean if you are close, it really is a matter of how you feel – the whole point of it is not so much learning the method, but being able to maintain the mindset needed to be consistently profitable.

lilsgymdan
16:53:07

That makes perfect sense. This month I have felt very confident but not this week. Taking it very very very cautious just tons of fear in my head for some reason yesterday and today. I am scared of messing up my win% and PF now

Hariseldon
16:59:18

Don’t be – they are just numbers – indications that you can mentally handle trading in a consistent way, that’s all. You’re a very good trader – but what makes you especially good is your ability to improve and learn, which I have certainly noticed. You will get there, and in fact, I agree – I think you pretty much are there – you have shown confidence, consistency, you’re finding great trades, you are also ignoring bad trades, and you are constantly improving. Have more faith in yourself – trust me, I know a good trader when I see one, and you will be an excellent trader.

lilsgymdan
17:26:39

@lilsgymdan mate your quality of picks & trades is visibly there or thereabouts. the difference between where you are now (trading ability CHECK) and where you want/expect to be is still a huge journey of personal growth & development. the rest beyond technique, which we have shown over and over to be simple, is all in the grey matter between your ears and it will take time. you will have great runs then have bad runs and think you just were lucky and are actually a total fraud and today your skillset has no value anymore. not only you need to be ok with that struggle but actually enjoy it. thats why we are all sick in the head and stay together as a bunch of nutters. Time at the screens. There’s a reason why prop desks give their junior traders at least a 1.5 year runway without any expectations other than follow the system and dont blow up.

Hariseldon
12:40:03

There is no asset manager in their right mind that is looking at this market and thinking, “Yeah, I should buy here”

Dave W
12:41:37

of course they all arent in their right mind

Hariseldon
12:42:09

And that right there is the entire problem with the rational actor model – there just aren’t enough rational actors out there!

Hariseldon
15:17:48

This is a rather important distinction here – Support and Resistance exist as guideposts during regular trading, buying and selling – rebalancing, retail, etc. However, they typical do not withstand either a news related catalyst or an market with a strong trend. When they do (as was noted with DASH ) you know that the catalyst was either recycled or not that strong. Also, not all S & R are equal – an Algo line that has had multiple tests against it is going to withstand a lot more than just VWAP will, if the stock has remained above the SMA 50 for several months with various failed attempts to breach it, that might hold against a news event but not something like missed earnings report, etc. Just like ATR is an important metric, but it is also important to note that most of the stocks you are looking to trade, by definition of all the boxes they check, will be acting outside its’ normal ATR range for that day. So how important is the SMA on AAPL ? If Powell came out right now and said it is going to be at least 75 BPS then that SMA is going to fall like it wasn’t even there.

Fox
15:19:19

@Hariseldon ATR is by its definition, going to be misleading on the days when the stock is in play (and why we would be trading it)

Dave W
15:21:44

i think too much emphasis is given to ATR i only use it if i am doing a straddle or a strangle to judge what move i may get and if it will create a profitable range

st0rm
15:26:39

I think of ATR as “the stock is running up/down the stairs two at a time”, I can make my profit goal with a small number of shares. Is there a better way to measure that besides eyeballing it? Your point is totally taken, ATR is useful until things explode and it’s not.

Russ
15:29:23

@st0rm All I look at it – does this stock normally move enough to make a trade off of and justify my use of buying power? Okay, if it normally moves a bit then if it is behaving especially RS/RW it should be enough to justify a trade. My view is that trying to optimize sizing/other factors specifically based on ATR or IV is not worth your time. Focus on the chart, and at what point would the stock reaching invalidate your thesis (put your mental stop there) and at what point do you think the stock can reach based on how it normally moves (recognizing it should be moving more than normal) and nearby support/resistance (put your limit take profit order there).

Hariseldon

There are various ways you can look at it – for example, let’s say you have a max loss of $1,000 on a trade – no matter what you do not want to exceed that –
Ok, so that is your rule. Now there is a trade you want to take on a stock that is currently at $100 – you want to go long. Looking at the chart you notice that VWAP is at $99.45 and the SMA 50 on the daily chart is $98.20 – You feel the stock is bullish overall and the market is bullish, so you don’t want to use VWAP as your stop as you don’t want to get knocked out of a good trade just because of a .55 cent pullback. So you are going to use the SMA 50 – that stop is $1.80 away. That would mean you should size your trade to around 555 shares. If you hit your stop, that will be roughly a $1,000 loss, which it your maximum.

William T
15:03:56

What’s the most efficient use of study time outside of market hours? Assuming you have a good understanding of the system here, if you hypothetically have 10 hours total on the weekends to study, what would the hours be spent on? Reading charts, reviewing trades, re-reading wiki, re-watching youtube vids, etc?

Hariseldon
18:31:40

That all depends on where you are in your trading but I would suggest one of two things – either use the time to analyze your trading journal and review your trades of the past week, or use the time to set alerts and go through charts.

2022-08-27
Mark As Read

Crux
22:49:20

@Hariseldon DaveW I know you guys preach Tradexchange but what is the actual edge that this paid service provides? News is free and there are many sites like financialjuice that give all the economic reports as well. If a Bloomberg terminal costs 10s of thousands to get the news first and the internet has it free, where does tradexchange fit in? If we aren’t trading off the news either then why pay for this source? I’m generally interested because I haven’t used it yet myself. 

Dave W
23:23:52

@Crux TradeXchange i use for getting early heads up on news and rumors that can have either a short term or longer term impact on a stocks price and option premiums. You have to be selective choosing the news that will impact the market. I get 3 to 5 trades a week of the information. Today MMM was a great example of a TradeXchange story that dramatically impacted a stocks price. It was material to the stock in a negative way and i traded it short using a pds and legged out for a beautiful profit. I made enough on the 1 trade to pay for TradeXchange for 2 years. Again you have to be selective, there is a lot of unusual options activity most of which can be ignored but some are significant. Free news is not going to give you any edge in your trading, TradeXchange does, at least for me 

Dave W
23:25:13
Remember, news whether it is earnings or any other significant news, over rides technicals on a stock, at least for a while 
Russ
00:19:19

@Crux Highly recommend TradeXChange. It only takes 1 news event to pay for it – MMM alone paid for my entire years service today. Their morning report is excellent as well. My morning routine involves reading their report, identifying stocks of interest from it and marking up the charts, then doing the same with selected Option Stalker searches.

SubZer0
00:25:15
I attended a webinar hosted by a guy who runs the news desk at Benzinga (Luke Jacobi).  He explained how the news flows from the source to the masses. When the source (fed, govt or corporations) release news, the first tier to get access is reuters, bloomberg and few others. Next is Benzinga, Dow Jones and others. Followed by WSJ, CNBC and others and the bottom tier is Yahoo, MarketWatch, CNN, MSNBC. I am guessing TX and Benzinga would be at the same tier
SubZer0
00:26:30
In the world where information is king, getting early access to the information would set you ahead of everyone else, which is what the paid services do. If you are getting it from free sources, there is a delay and its often too late by the time you see it.
SubZer0
00:46:10

@Crux i know my earlier response doesnt directly answer your question and you have a good point. If your strategy does not involve trading news events then it wont help but the way i see it, having such a news service would atleast let me know why the stock i am trading behaved that way and would give me heads up to bail out or double down.

2022-08-26
Mark As Read

2022-08-26
Mark As Read

Pete
15:51:12
Zander wrote:

Likely stems from a deeper issue where I have extreme trust in my analysis of individual stocks but very little trust in my market thesis beyond the next 15 minutes. My thesis all week has been that we will test the 100ma but I didn’t capitalize on that at all because I insisted on staying balanced between longs and shorts in case I was wrong. Still ended up ahead due to patience and good stock selection but probably made 1/10th of what I could have if I trusted my market thesis and balanced accordingly 
Most days you will see at least some type of bounce. It is unusual to see price action this steady. I still take gains once support has been established and I will play the odds that we will have a bounce. That does not mean buy. You wait for the price action to tell you whet to do next. If you get nice bounces with good retracement, there will be opportunities on both sides and it is business as usual. When the market can’t even muster a solo short covering candle, you know that the sellers are super aggressive. 

2022-08-26
Mark As Read

Pete
16:09:46
I missed an opportunity to do a video on legging out of LOW BPS this morning,. I will try to do one next week. It broke the stop level and the market had steady selling pressure. We’ll see what the market does at the 100-day MA. LOW broke the D1 up trendline and it has room to the 100-day MA so it has more downside. 
Izzy
16:11:38

@Pete I bought back 1/2 of the short puts and let the position run, then sold the other 1/2 of the long puts at EOD.  Still not scratched but better

Pete
16:13:28

@Izzy Good for you. You scaled out. It is not easy legging out of spreads because you are switching your bias on the stock and increasing your risk profile from neutral/slightly bullish to out right bearish. 

Izzy
16:13:30
Not sure if that’s the correct way to do it, but I figured I had more limited risk without 2 naked puts
Pete
16:16:28
For BPS we are leaning on the technical support when we put the trade on. When that support is breached convincingly (not just intraday) it is significant and the move is likely to continue. In the case of LOW it was market related. we still need to close it down, but now we know the market could be in for a round of selling and the stock will have a hard time finding support now that it has broken a D1 up trendline

Bez
16:12:04

Hi all, I have thought long and hard about this but today is the day I finally call it quits on trading. I have been at this for about a year now and haven’t seen any significant progress towards profitability. I have had good months and bad months. I have tried trading RS/RW…couldn’t string together more than 1 green month. I have tried options (time spreads, debit spreads, credit spreads, etc.)…couldn’t find an edge/positive EV in that. I am now currently trading futures and made good progress this month with /MES only to lose almost all of the gains this month in one day.

Bez
16:12:09

I have tried countless strategies and tagged my setups in TraderSync, I have used tight stops and wide stops, I have tried scalping and swing trading, etc…I have gave it my very best. Spending hours at this every day and on weekends. Unfortunately, this profession is not for everybody and I have finally accepted that I am not good enough to call this a career. I will most likely finish out my Option Stalker subscription (which ends in a few months) and just observe you all in the chat but my time in trading is most likely done.

Ruddiculous
16:15:58

@Bez Ultimately it’s your decision, and if you’re done you’re done. But what I’m reading is that you’ve spent a year bouncing around between a dozen different strategies. If you want to give it a go, why not just focus on the strategy here, which has actually been shown in real time to be reliable, and shut out the other noise? You aren’t expected to be profitable until two years anyway.

Jerson
16:20:01
I agree this month really wiped a months’ worth of gains, if sucks but like @Ruddiculous says if you bounce around trying new stuff eventually you get tangled up in bad thoughts. The new plan is the old plan, only trade the highest probability trades and always market first. My account is still up for the year but I’m being more patient with the market I’m not giving up without a fight because this lifestyle is worth trouble.
Hariseldon
16:22:02
Again though I don’t understand when I hear things like “Weeks of gains” or “Wiped out the last months of profit” – I don’t know how many times I have to say it – until you can achieve a 75% win rate and a PF of 2.0 or higher for 3 consecutive months on paper trading, and then replicate that again trading only ONE share for another three consecutive months of hitting those targets, you should not be trading your capital – period.  
Collin
16:22:50
Thanks, Hari, and I really appreciate the input. I’ve just had really bad luck taking losses on stocks that eventually go back up, even if they lose RS, they almost always gain it back according to my backtesting. I’ll do some studying on this one.
Bez
16:22:55
@Ruddiculous I was trading RS/RW for the most part of the year but I could never string together a few good months using it. I would tag my setups everyday and see which setups gave me the highest win rate but I would end up getting emotional at times and overtrading on some days. I have tried sitting on my hands on choppy days but how can I expect myself to make a living if I am sitting out half of the time? I just don’t have the belief and mental fortitude to do this everyday. Like Hari said, you need to love trading in order to last in this profession and I can’t say that I feel that way now. I feel demoralized. I need to stop and take a break from trading entirely.
Jerson
16:24:09

@Hariseldon this is something I needed to hear I will return to papertrading starting tomorrow and wont return to capital until I achieved that benchmark 

Crux
16:24:59

@Bez Sorry to hear this. There are a few things you can do to help if you do wish to continue. First, I really think time off after an event like this is so important. I took a month off this spring and it really reset me. It allowed me to reflect from a more neutral stance on what I am doing and the reality of the situation. You may also realize that a year is not that long. Ive been trading for over 2 years and in 1OP for 15 months and feel like it was just recently I started to get a better feel for things. You can go back to paper trading to dial the system in while keeping cool mentally. One of the biggest things for me was market timing and preventing FOMO, as in not jumping in when everyone posts trades if it doesnt align with your SPY read and that means watching a lot of stocks fly by you.

Ruddiculous
16:25:04

@Bez Again, totally up to you. You may need a break. This may not be for you. But also, it seems you are about where you’re expected to be in your progress?

Crux
16:25:05
This has been crucial for me and it can be very tough when the chat is filled with trade entries and you feel like you need to join. Anyways, I hope you keep at it but if you do I highly recommend taking substantial time off from anything stock related to go enjoy life for a bit
st0rm
16:25:45

@Bez Taking a break and clearing your head for weeks or months is an enlightening experience. I like the idea of hanging out in the room for the rest of the year and watching trades. And maybe you aren’t so far away as you thought. Or maybe it’s not for you and that’s OK too – you will be a better investor/human for the experience you’ve had.

Hariseldon
16:26:12
I don’t mean to be a dick here, I really don’t – but most of you should not be trading with money – you just shouldn’t.  You have an incredible opportunity to actually practice a proven method at zero cost….you can keep at it until you feel confident enough in your numbers to switch to trading one share….but so few people actually do that.  I say it again and again – there is almost no chance you will be successful at this unless you properly train first or have unlimited capital to lose while you do.  
Bez
16:26:52
Crux wrote:

This has been crucial for me and it can be very tough when the chat is filled with trade entries and you feel like you need to join. Anyways, I hope you keep at it but if you do I highly recommend taking substantial time off from anything stock related to go enjoy life for a bit

Thank you, Crux. I will likely be taking vacation soon and will use that time to reflect on things.
Ruddiculous
16:26:52

@Hariseldon But I’m special and different

Hariseldon
16:27:29

@Ruddiculous lol, yup – everyone thinks they are – 

Dave W
16:29:02
As has been said hundreds of times, trading successfully is hard and getting through the drawdowns with out giving up and having your emotions ripped apart is very difficult. It is not easy and every and i mean every pro trader has been through these times. The information you are getting here from Hari and the rest of pro traders will make your journey easier but it is not easy. You have to keep your expectations of what you can accomplish is a short time very low. Hari points out the paper trader and then 1 share and 1 contract for a reason and that is to not get your capital decimated as you learn. If you are trading for significant money when you are learning you are trading for ego thinking that you can beat the odds, you cant 
Jerson
16:29:04
you can be a dick all you want the fact of the matter is, you are correct and the most painless way to do this is the long way again I appreciate your bluntness 
Hariseldon
16:30:59
This is why I say it takes two years – two long and hard years where you are watching everyone else trade with money and you are trading with paper fake crap….two years of screwing up and having two straight months of hitting your numbers only to miss them on the third months, having to start all over again – two years of intense studying, giving up weekends, giving up time with family and friends….two years of reviewing your mistakes and implementing them…and somehow you have to maintain your desire and love for doing it –  only at the end of that process can you say you are truly ready – and for some it takes longer, but it shorter for almost nobody.
A man
16:32:05
Today was hands down my worst trading day ever. I’ve never suffered a loss so big and I’m especially demoralized at the fact that the past two months have been quite profitable. I feel so defeated right now. 
st0rm
16:32:07
I went off the real money and paper traded for three months. I had more exhilaration, fun, and PEACE OF MIND trading that way while I learned. I switched to 1 share/contract a few weeks ago and for a bit the old emotions came right back. I’m still settling out of all that phase and finding my swing again. Listen to the advice people. My year-to-date balance stares me in the face is ludicrously stpuid and reminds me every day what I came from.
Ruddiculous
16:32:14
One of the things I struggle with is reconciling sort of contradictory advice. For example, “let your trade breath, rely on the daily” vs “cut your losers early.” Usually the advice is to cut your trade after a technical breakdown, but in this market, we’re trying to get .10-.20 on most trades, and a technical breakdown might be a couple dollars away. So occasionally you “lean on the daily” only to have one trade that cancels out all the other ‘base hits.’ I know this part is subjective and part of learning how to trade, but it is difficult
Hariseldon
16:33:25

@A man putting aside the caveat I just wrote and that you should not be trading with actual money right now – tell me what happened, specifically…outline your trade(s), let’s see if I can help

Hariseldon
16:35:01

@Ruddiculous you just hit on the crux of why it takes two years right there – because that distinction, that fine line, is extremely difficult to quantify and takes a detailed knowledge of price action, the stock itself and the market – but for the sake of discussion can you give an example of one that you feel could have gone either way

Pete
16:46:38
The title to my pre-open comment was “Slow till Jackson Hole”. The theme was treat this like an FOMC day. My comments to day traders included, “temptation is your biggest enemy”, “we need  heavy volume (which we did not have)”, “trim your trade size and your trade count”, “error on the side of not trading,” “you do not need more than a good trade or two”. I provided a play by play for the first two hours and did not take a trade for the first 3 hours. Hearing that this was the worst day in weeks and that you got crushed tells me that you can’t control yourself. It makes me sad to hear this.
Pete
17:22:51

@Bez Trust is built over time and after almost a year you trust your instincts more than you trust my comments and the system. I wish I could have gained your confidence by now. Taking time off is a good thing. It sounds like you have done some reflecting. I’m not throwing in the towel on you and I will try to help you in any way that I can, but I can only do so much if you ignore what I teach. 

Bez
17:26:03
@Pete You are right, I should have listened to your comments. My thesis for the trade was that after a strong opening, the bearish cross would lead to a bullish divergence and another leg higher but my mistake was trying to anticipate the price action instead of waiting for confirmation. I will still be in the chatroom but will take the next month to observe other traders here.
Pete
17:29:24
Bez wrote:

@Pete You are right, I should have listened to your comments. My thesis for the trade was that after a strong opening, the bearish cross would lead to a bullish divergence and another leg higher but my mistake was trying to anticipate the price action instead of waiting for confirmation. I will still be in the chatroom but will take the next month to observe other traders here.
I 100% thought the same thing and I probably posted it. The difference is that I did not act. I watched to see if the scenario I felt was most likely played out. When the market started stacking red candles the drop was much deeper than it should have been for that scenario to play out and my suspicion was wrong. No worries, adjust my expectations and continue to evaluate. Look for the next set-up. 

2022-08-24
Mark As Read

Hariseldon
13:41:02

https://twitter.com/RealDayTrading/status/1562494968031195136?s=20&t=FHK_cLKl94bqVZ4JuH1tag

After the market closes I will give a tutorial on Options, from beginner to advanced – if you have any difficulty with options you should definitely attend!

2022-08-24
Mark As Read

Pete
13:47:05
corey_mv wrote:

Question How does one confirm when it is a breakout or a headfake?

You have to wait for follow through. If the breakout candle instantly reverses it is a head fake. and the market is likely to go the other way as those traders get trapped. You do not want to retrace more than half of the breakout candle and you want to see continuation in the direction of that breakout candle in 15 min. Any longer than that and you run the risk of retracing and the move is running out of gas. 

Pete
13:50:17
Think of yourself. If you bought that solo green candle thinking the bounce was underway, you are regretting that decision 10 min later. You are bailing out of the position along with other traders and that fuels the drop.
Pete
13:51:42
We have all been < 75% win rate early in our career. If you think about the mistakes then and what motivated you to take the trade (or now if you are still learning) it will help you understand price action. 

2022-08-24
Mark As Read

Pete
16:07:22

Harry48 wrote:

Question TSLA calls for 8/26 are $17 for 9/2 $27. I’m looking to sell a covered call. Willing to have some stock taken away. How do I compare the risk?

Your market opinion and you confidence in it along with your opinion of the stock’s potential movement (direction, magnitude and duration) determine the best option strategy. If you believe the market and the stock are going to stay put for a few weeks, take advantage of accelerated time decay and sell near term. Then you can re-evaluate after the option expires. If you feel that the stock could drop and you don’t know if you will have a chance to resell your options at this level, you might choose to go longer term. That will provide you with a little more protection. Models are roughly all the same. The inputs are what matter and that is what you need to determine. 

Hariseldon
16:08:32
Harry48 wrote:

Quesiton TSLA calls for 8/26 are $17 for 9/2 $27. I’m looking to sell a covered call. Willing to have some stock taken away. How do I compare the risk?

Harry didn’t we discuss this last time? Always go with weeklies if you can

Dave W
16:09:43
Hariseldon wrote:

Harry48 wrote:

Question TSLA calls for 8/26 are $17 for 9/2 $27. I’m looking to sell a covered call. Willing to have some stock taken away. How do I compare the risk?

Harry didn’t we discuss this last time? Always go with weeklies if you can

weekly calls in general return 2 to 3 times what monthly calls do when they are being sold for premium

Zander
22:09:58
Getting comfortable leaning on the D1 chart has been a total gamechanger. Now, my current biggest goal is learning to lean on the D1 chart in a more dynamic way than “I am holding onto this trade for dear life until my target is hit as long as the original breakout level holds and D1 1OSI is above/below zero”. That all or nothing approach, while it has kept me from overmanaging trades, leads me to take way bigger loses than necessary if a stock is within a valid setup on the D1 chart but has CLEARLY lost RS/RW over multiple days. It can also lead to capital being tied up in a stalled position for weeks for no reason. 
Zander
22:10:00

This balance has admittedly been a very tricky one to figure out, largely because it is so highly dependent on the unique story the charts are providing at that moment, and my specific market thesis at that time. Hari’s position swapping has been very helpful (focusing more on maintaining exposure to my favorite positions at all times and not being concerned about my exit price when a position is no longer a favorite), but every time I exit a position while the D1 is still valid I worry I am working against everything my walk away analysis told me. 

Dave W
22:11:53
Izzy wrote:

Dave W wrote:

I am really gratified to see so many traders leaning on the daily chart before taking a trade, it is a critical criteria in finding the highest probability trade setups 
Dave, there were a couple of months this year where leaning on the daily wasn’t really an option (after initial interest rate increases and the beginning of the Ukraine invasion). Are you now more comfortable swinging a trade that goes against you vs then? I’ve personally Started to add a bit more swing positions mainly using spreads and selling premiums, as well as some stock that I’ve been able to hold for a day or more. 

i always lean on the daily chart first regardless of the market. I would be inclined to take profits intraday in poor swing environments but still having the daily chart with you gives you are lot more flexibility even if you think you have to exit during the day. You can take more heat on a pullback than if you had no daily chart in your favor. Even in poor swing conditions most of my trades were intraday but the ones that i took overnight  still had net gains overall. The gap downs hurt the overnight longs of course but helped the swing shorts and visa versa on the gap ups. By knowing that you need to lean more on intraday trades during those times and be more passive with your profit targets and focus more on exact entries then when you have an overall trending market. By following my criteria for the highest probability trade setups, one of the criteria is to enter on a break out of compression, the results will be improved from entering later in a trend. That said the overnight trades didnt work as well as during trends buit still produced net profits.

Jared B
22:40:49

@Zander Would you say the bigger losses are still manageable with the all or nothing approach since you’re less likely to over-manage a position or turn winners into losers via not holding long enough? Walk away analysis allows you to take bigger wins, but also eliminate the medium losses that would be winners if you just held a little longer. Basically just by increasing your win rate and PF, the bigger losses are ok?

Zander
22:50:58

@Jared B To be honest, I haven’t been disciplined enough in trying/documenting one approach consistently enough in multiple environments to give you a conclusive answer to that question. My limited sample-size trade review suggests that the all-or-nothing approach (i.e. taking a position and sticking with it no matter what until it hits a target or breaches significant D1 levels) based on a basket of actual entries I’ve made would be profitable, but I don’t have a live track record to back that up. Why don’t I? Because I am very impatient and am prone to switching methods of managing trades when one doesn’t go my way for a day or two. 

Jared B
22:54:33

@Zander Understood!

Dave W
22:55:15
Zander wrote:

@Jared B To be honest, I haven’t been disciplined enough in trying/documenting one approach consistently enough in multiple environments to give you a conclusive answer to that question. My limited sample-size trade review suggests that the all-or-nothing approach (i.e. taking a position and sticking with it no matter what until it hits a target or breaches significant D1 levels) based on a basket of actual entries I’ve made would be profitable, but I don’t have a live track record to back that up. Why don’t I? Because I am very impatient and am prone to switching methods of managing trades when one doesn’t go my way for a day or two. 

that is an interesting comment. it is very common for traders to try a strategy for a short time, take a few losses, and move on to another strategy. They will never know if any strategy they were using is a net profitable or not because they weren’t patient enough to actually test the strategy over enough of a sample to get a definitive answer. This approach has traders jumping from one strategy to the next and they will never find a successful one because every strategy will have losers, sometimes several in a row 

Zander
23:04:41

It’s an issue of mine that’s definitely rooted in perfectionism. Whenever I take a loss or have a red day, my urge is to try to figure out exactly how I could have prevented that loss (“oh, I would have won that trade if I just got out on the m5 3/8 cross” or “oh, I would have won that trade if I had just set an alert below the 200ma and gave the trade plenty of room over the last week). I don’t think that kind of review and data collection is necessarily bad, but it leads me to assume that every loss is indicative of a deeper problem with the system I was using which is not a good assumption. Luckily I have recently begun to break that pattern and stick with things for longer while collecting better data. 

Crux
23:06:15

@Zander What you said about trying to figure out the fine line between Hari’s “swapping a loss for another trade method” vs trusting the walkway analysis is something I resonate with as well. I’m always working to increase my patience with trades so I feel that doing that method is tricky. WA shows most my losers would be profitable so if I wait they will likely be fine and if I start dumping them for a new trade then I am not actually trusting my trade’s thesis anymore. So far I havent figured out how to combine both these methods, both patience and efficiency. Any thoughts on that Dave?

Crux
23:09:06

@Zander That is also important. Something worth remembering is that even the best trade could be a loss. We have no way of knowing if the next trade will be a winner or loser but we can only take trades with the best setups for the highest chance of success. I try not to beat myself up on every loser. Sure, many of them had mistakes but some losers were great trades at the time that just didnt work for whatever reason.

st0rm
00:39:18
Such good discussion about D1 tonight. The more I think about it, not trusting the D1 is almost like we’re picking a top or bottom. We’re using our imperfect judgement to say the D1 trend is wrong. 
st0rm
19:19:17
I’m working on trusting the daily and having faith that the rug won’t be pulled on my trades (market and chart willing, of course). I realized I’m in constant fear of the rug being pulled from watching the GME chart for 18 months before discovering this group. I think a whole generation of us has PTSD from the experience. Rug pulls are all we know. 
SubZer0
19:38:25
st0rm wrote:

I’m working on trusting the daily and having faith that the rug won’t be pulled on my trades (market and chart willing, of course). I realized I’m in constant fear of the rug being pulled from watching the GME chart for 18 months before discovering this group. I think a whole generation of us has PTSD from the experience. Rug pulls are all we know. 
I know exactly what you mean. Although my PTSD isnt from meme stocks, it was from scalping SPY. I got burnt on choppy days. Every time i entered, it violently went against me right away, took my stop out and then went back in my direction and kept doing this aggressive yo-yo dance . I was green many days but all it took was a few choppy days to trigger my revenge trading and unleash the hulk. Those were the days i overtraded and lost  2x of what i had made that month. 
SubZer0
19:38:28

That fear is something im still trying to shake off and this group has been like AA for me trying to detox me from my past bad habits.

Long way to go but i hear ya
flowbee
20:00:09

@Hariseldon yes ive read up on them, its just for eg, if you talked about a stock last week , i couldnt go and look at the options today to get an idea of why you picked those strikes, because all of the values would change,  i know they might not move much.  I know you’ve mentioned HD in the past,even if you could do an example with todays closing option prices , then i could go look at ALL the options, see why you picking a certain strike price over another,(the Greeks,Volume.IV ect) just learn faster

Big-Bear
20:23:13

flowbee wrote:

@Hariseldon yes ive read up on them, its just for eg, if you talked about a stock last week , i couldnt go and look at the options today to get an idea of why you picked those strikes, because all of the values would change,  i know they might not move much.  I know you’ve mentioned HD in the past,even if you could do an example with todays closing option prices , then i could go look at ALL the options, see why you picking a certain strike price over another,(the Greeks,Volume.IV ect) just learn faster

Please correct me if I’m wrong Hari 🙂 
But I believe the main takeaway from your “market reversal” post was conducting fundamental analysis, which would be much more important than the strike price selection or its corresponding Greeks.
In either case, I believe Hari did say he prefers to buy 70~ delta calls with less than 5% premium for both straight LEAPS and LEAPS for fig leafs. I would assume that it also depends on the liquidity as well. 

st0rm
20:33:57

@SubZer0 you said it so well – that’s exactly what happens. I’ve avoided the hulk and revenge trading, and am on track in so many ways. But my “unlearning” the hyperactive instinct to watch every tick for a monster red bar reversal will take time. I’m doing walk-aways on all my trades now and am seeing the power of the D1 chart – this should help me stay calm when a trade seems to be getting away.

Alan B
20:40:22

@st0rm I keep seeing “walk-away” referenced.  Do you simply mean to put on a trade, and walk away (ie dont watch every tick)?

st0rm
20:41:27
It’s a method of looking at your daily trades and figuring out what would have happened if you left the trade on for an hour longer, or until the end of the day
st0rm
20:41:35
I’ll find you a link
st0rm
20:42:16

Walk Away Analysis from RealDayTrading

st0rm
20:42:59
But in my case, “walking away” would be the solution in many cases 🙂 
Big-Bear
20:46:49
Walk-away analysis is integral to Hari’s method. OneOption member AwkwardAlien posted his own experiences with Walk-away analysis last year, and I believe it would be a great read (in addition to the canon source which st0rm linked) for those who are not familiar with it.
thiencly
20:47:49

@st0rm I have the same issue. But recently been able to trust the D1 more. I sized down and became more strict on my D1 criterias. I still have some bad trades but I have had better swings. Just having more and more experience with it gave me more confidence to hold. SPY yo yo-ing a few months ago gave me PTSD. I am finally now getting over that lol 

Zander
20:51:17
The walk-away analysis is amazing. Earlier this year, I looked at a huge basket of my losers and found that 77% of them would have been winners if given just another trading day to work. Now, all my trading decisions are made through that lens. 
Crux
21:04:09
@Zander Same with me. It has been one of the most important parts of changing how I trade. That and timing trades better with the market…which I was quite bad at today actually.
Dave W
21:24:18
I am really gratified to see so many traders leaning on the daily chart before taking a trade, it is a critical criteria in finding the highest probability trade setups 
Jared B
21:35:59
Got inspired to take a peek at my walk away analysis tags on tradersync. Walk away analysis is so powerful.. I quickly went through my losses from this week. 5 out of 6 would have been winners the next day on open and my W/R would be 80% instead of 64%. Frankly, I really have gotten away from considering taking things overnight because of the market environment.
Jared B
21:38:43
To add onto that, about 28 out of 100 trades this month would have been either “Loss to Win (11/28)” or “Win Increased(17/28)” had I waited either 1H longer, or until EOD.
Izzy
21:51:56
Dave W wrote:

I am really gratified to see so many traders leaning on the daily chart before taking a trade, it is a critical criteria in finding the highest probability trade setups 
Dave, there were a couple of months this year where leaning on the daily wasn’t really an option (after initial interest rate increases and the beginning of the Ukraine invasion). Are you now more comfortable swinging a trade that goes against you vs then? I’ve personally Started to add a bit more swing positions mainly using spreads and selling premiums, as well as some stock that I’ve been able to hold for a day or more. 

2022-08-23
Mark As Read

Hariseldon
16:32:33

@BreakfastCrayons There is a very fine line between coming up with a thesis on the market and trying to out-think the market – having the former is essential, but the latter will crush you every time.

Hariseldon
16:49:27
This is an example of trying to out-smart the market: 
“Soon everyone is going to be driving electric cars and those cars need batteries and those batteries need Lithium – so I’m going long LAC  and holding it for a year” – The problem with this? The entire premise of the logic is based on the notion that they are the first person to think of this, and thus the current price of the stock does not reflect anticipated enthusiasm for the future need of Lithium because nobody else has yet to consider it a possibility. It would mean that no Institution and/or enough retail traders have started buying the stock and it is currently under-valued for that reason.    There is either an extraordinary amount of arrogance or naiveté (or both) that goes into this line of thinking.  
An example of having a thesis on the market is: 
Investors have begun to see the latest FED minutes as more Hawkish than they originally thought – and the recent positive economic numbers will only further convince the FED that the economy can handle larger rate hikes – this has dampened the bullish enthusiasm we saw after the CPI indicated the first real reduction in inflation in awhile.  Afraid that the Jackson Hole conference will end with Powell indicating a .75 hike and continued aggressive action to control inflation, even at the risk of inducing a Recession, has caused Investors to cool down their buying spree, even despite the better than expected earnings results across the board.   This fear has led to break the $417.50 support, and if the attitude is indeed more Hawkish coming out of Jackson Hole, we may soon see the $300’s again.  So my thesis is that this market is Bearish and only an indication of a Dovish Fed will stop the return to the downward selling pressure.

st0rm
17:17:36
@Russ had the comment of the day for me about stocks like OXY and CELH that are allowed bigger swings. The position sizing is so important so you can trust the swing and not let the P&L freak you out. That’s my current mindset obstacle. 
Russ
17:54:40
st0rm wrote:

@Russ had the comment of the day for me about stocks like OXY and CELH that are allowed bigger swings. The position sizing is so important so you can trust the swing and not let the P&L freak you out. That’s my current mindset obstacle. 
This is knowledge that has been imparted on me time and time again by Hari, Dave and Pete. Sometimes its hard to hear what you know you are “supposed” to be doing and turn it into practice, but one thing that opened my eyes to the impact over management was having on my trading was doing the Walk Away analysis – I highly recommend it if you aren’t doing it regularly. 
Russ
18:03:28
You need to go into a trade with an idea of how you are going to manage it and size accordingly. One thing Hari said a few weeks ago that has really stuck with me was that you need to either be nimble or patient in this market, but not both. This applies to sizing as well. If you go into a trade intending to swing it and size down, you will lose almost all your trades when they move slightly against you and die a death by a thousand paper cuts. At the same time, if you go into a trade intending to catch a smaller move and size up, you cant afford to be patient with it because of how you sized. That trade you put on intending to make $100 turns into a 4-figure loss that you are bagholding because you got patient with a trade you needed to be nimble on. Stocks like OXY and CELH today both great examples of fantastic setups that you can be more patient with because of how strong their daily charts are. Right now we don’t have the market helping us in either direction so focusing on the daily chart is a must to have a good trade setup. Stocks that are at 52-week highs and lows are great candidates because they are very strong/weak vs SPY which right now is nowhere near its 52 week high or low.
st0rm
18:46:27
@Russ thank you, this is just what I needed to hear tonight. I have not been studious with my walk-aways and the lack of faith in good setups is apparent. I’m going to work on sizing appropriately and being more thoughtful in how I plan to manage a trade. Thanks for the coaching, the lessons are real-time out here and I’ve got some homework to do.

2022-08-22
Mark As Read

Auto
11:53:25
I have done next to nothing today. Essentially break even. On one hand I am annoyed that I am not making money, but on the other am glad that I am not burning capital on crap. 
Dave W
11:54:22

@Auto not losing money is making money

lilsgymdan
11:58:55
Dave W wrote:

@Auto not losing money is making money

Being okay with not taking trades has netted me a 3.5 PF this month so far

Fox
11:59:06
@Dave W the mental capital loss getting chopped up “all my beautiful ideas” during low probabilty carp makes it difficult to load up when the clean move arrives

2022-08-22
Mark As Read

Fox
12:19:05

@Hariseldon the flies have been my bread & butter since May, the combination of credit spread & debit spread at a key technical level gives a few outs to adjust given new market information or just ride out time decay in a low proability market. sometimes i do wider on the credit spread side if its below a key level, and that can almost put the trade on for free or a smaller debit. also having a lot of fun with ratio spreads recently my WMT 137/135p ratio (playing gap levels) i put on for 0.01db and  closed for .30cr! not as margin efficient though

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