Chat Room Lessons

Valuable trading lessons archived from the OneOption chat room.

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510 results

Pete
10:06:58

Editor's note
10:07:00

Algo Lines (New): red D1, Option Liquidity: -2 ~ 15, Heavy Volume Today: 120 ~ 500, Stock < Prior Day Low

2022-09-30
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Zen_Trading
16:11:15

@Hariseldon Thanks. At first, I thought the system here mainly relies on price action alone. And that, for example, things like short percentage interest, unusual sweeps, and other bits of information would be considered extraneous and not necessary. So, I’m surprised to see you mention. If you see an unusual sweep, will that actually affect your strategy? 

Hariseldon
16:12:43
Zen_Trading wrote:

@Hariseldon Thanks. At first, I thought the system here mainly relies on price action alone. And that, for example, things like short percentage interest, unusual sweeps, and other bits of information would be considered extraneous and not necessary. So, I’m surprised to see you mention. If you see an unusual sweep, will that actually affect your strategy? 

Answer Well it relies on technicals and price action combined here – but yes of course I take information like that into account 

2022-09-30
Mark As Read

Pete
15:31:46
I came up 100% dry on bullish lotto searches and I tried for a good 20 min to find one
Superpantz
15:37:40
Pete wrote:

I came up 100% dry on bullish lotto searches and I tried for a good 20 min to find one
when that happens it could be a sign that we’re not ready to move higher yet?

Zander
15:45:54

Superpantz wrote:

Pete wrote:

I came up 100% dry on bullish lotto searches and I tried for a good 20 min to find one
when that happens it could be a sign that we’re not ready to move higher yet?

 Question I’ve been meaning to ask something related to this – how much can the quality of a SPY move be judged by the nature of the results returned in searches? If intraday RS searches mostly return stocks with bad D1 charts in downtrends, is that a sign that the SPY move up is mostly driven by short-covering instead of legitimate institutional accumulation, and more likely to retrace at any minute? 

View Answer View Answer

Hariseldon
16:16:14
Zander wrote:

Superpantz wrote:

Pete wrote:

I came up 100% dry on bullish lotto searches and I tried for a good 20 min to find one
when that happens it could be a sign that we’re not ready to move higher yet?

 Question I’ve been meaning to ask something related to this – how much can the quality of a SPY move be judged by the nature of the results returned in searches? If intraday RS searches mostly return stocks with bad D1 charts in downtrends, is that a sign that the SPY move up is mostly driven by short-covering instead of legitimate institutional accumulation, and more likely to retrace at any minute? 

View Answer

Answer If most of your searches are turning up stocks with weak daily charts that is a commentary on the strength of the market overall (or lack thereof)

2022-09-30
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lilsgymdan
17:07:09
Roughest week I’ve had in months. Came back from a vacation off and just had fear fear fear all week for some reason. Killed on swings and poor discipline. Going back a step, taking it slow and fully analyzing the moves I made that were good vs bad.
Still a lot of really nice trades made this week but taking a week off turned me into a nervous wreck. Does anyone else experience this or is my “trader mind” just not full baked enough yet? This was my first vacation in 3 years
Hariseldon
17:12:04
@lilsgymdan what was your mindset coming into the week after the vacation – were you determined to accomplish or do certain things this week?
lilsgymdan
17:15:45

@Hariseldon Honestly I felt terrible during the vacation. Like my house was on fire or something. Could not relax or unwind. Like time was running out. Part of it is that this is a slower month for my fitness training work and the first month in my entire adult life that we spent more than we made as a family. On paper we literally have years of living expenses but I think that turned me scared of losing, which wrecked the whole mindset. You saw me all week jittery as hell with my scratches all over the place

Pete
17:16:04
lilsgymdan wrote:

Roughest week I’ve had in months. Came back from a vacation off and just had fear fear fear all week for some reason. Killed on swings and poor discipline. Going back a step, taking it slow and fully analyzing the moves I made that were good vs bad.
Still a lot of really nice trades made this week but taking a week off turned me into a nervous wreck. Does anyone else experience this or is my “trader mind” just not full baked enough yet? This was my first vacation in 3 years
Make sure to take time off. You’ve gone way too long. If you get in the practice of taking time off, coming back will not be as hard and you will have a routine for it. Realize that you came back during what I would consider a tough week. I rarely take time off as well and that is NOT good for you physically or mentally. I took a couple of days off this week and I thought I had a good enough bounce Wed to carry an overnight ES long… wrong. I recovered from it, but it took a couple of days to settle back in. 

lilsgymdan
17:19:10

@Pete thanks for the kind words. Too much of my self worth tied up into the ability to provide for family and have work addiction. It’s a superpower when it works until it doesn’t Have a great weekend.

Hariseldon
17:21:36

@lilsgymdan I get what you are saying – it is all on your shoulders – and right now there is a feeling of insecurity.  When business slows down, even if it is cyclical or expected, there is always the fear that the reduction in income will become permanent and not transitory.  That places heavier reliance on your trading – it it is something that you seem to feel you have to get right or you will let everyone down. 

lilsgymdan
17:23:06
Exactly. Which creates a scarcity mindset 
Hariseldon
17:24:03

@lilsgymdan to add – that is an unfair amount of pressure to place on something you have not yet mastered .  Emotionally you seem to be approaching your trading as if you have completed all training and are now at the stage where you should be producing profit and adding to your family.  Thus, when you lose you must feel like a liability, you are not only not adding anything, but you are taking something away – leaving your family worse off at the end of the week than they were at the beginning

Hariseldon
17:24:12
Is this close to how you feel?
lilsgymdan
17:25:17

@Hariseldon to the T

Hariseldon
17:28:02

@lilsgymdan – ok well then let’s reframe that for a moment – You are dedicating yourself, your time and your energy to learning a skill that can provide a safety net for your family.   Rather than leave your families financial well-being up to the randomness of a client-based business and the economic gods which are mercurial at best you have decided to act on it.  What you are doing is something that very few people attempt, or even have the empathic foresight to consider the need for a back-up plan.   

Hariseldon
17:34:32

@lilsgymdan your family is lucky to have you – you are busting your ass to do everything you can in order to make sure they have a better life, for one reason or another you have put all of that on your shoulders and feel completely responsible – their fortunes rise or fail based on your efforts.  Off the bat you are taking on 100% of the burden, and not only that but you are trying to ensure that no matter what happens, you will be able to continue to provide for them – even if that means spending two years studying and getting your ass kicked by the market day in and day out , emotionally dragging you on a roller coaster that you can’t even really share with anyone that truly understands it .  So understand this – what you are doing is heroic – and your motives are selfless.  You cannot also put the expectations of having the results that a full-time trader has before you are ready to be a full-time trader.  

lilsgymdan
17:35:49
Fair enough, climbing a mountain that most people die on or don’t even try to climb is going to be harrowing. Deep down inside I really don’t like people, in general, and always hated having to depend on them “doing the right thing” for me to earn a living for those I love. Part of why trading is so appealing is because essentially you provide for your family when everyone else “does the wrong thing” haha
lilsgymdan
17:36:35
which I believe is a much higher probability.
Hariseldon
17:36:52

@lilsgymdan I hope you read this again and again and truly internalize it and then perhaps you can stop kicking your own ass for a bit , god knows the market kicks it enough without you having to add to it!

lilsgymdan
17:37:27
Thanks for the pep talk Hari. I am not expecting to be full time performance, just frustrated that I played this week like it was my first damn month.

2022-09-29
Mark As Read

Russ
11:17:30

Question @Hariseldon – on the rule around not going long when SPY is down – do you think this applies to hedges if a trader has multiple shorts on and maintain a net short exposure? View Answer

Hariseldon
13:32:37
Russ wrote:

Question @Hariseldon – on the rule around not going long when SPY is down – do you think this applies to hedges if a trader has multiple shorts on and maintain a net short exposure?

Answer No – it doesn’t.  As long as you know how to properly hedge. 

SubZer0
16:00:07

Question Is it a good idea to trade in the last 30 mins of the day using RS/RW or is it too chaotic for RS/RW to make sense? View Answer

Pete
17:24:50
SubZer0 wrote:

Question Is it a good idea to trade in the last 30 mins of the day using RS/RW or is it too chaotic for RS/RW to make sense?

You would need an incredibly strong stock rally that late in the day (ideally it supported by an SPY breakout above resistance). The stock would need to be in a very steady grind higher. I prefer not to day trade in the last 30 minutes because everything has to go perfectly and because the last 30 min can be “noisy” with position squaring. 

Pete
17:31:49
bbordic wrote:

As I clearly stated, yes shorting at the LOY was not good. My point was that there was a long strong trend down right out of the gate, which for me was much easier trading then it was after the consolidation/chop and drift higher. Most of the trades I see posted are fairly small profit targets so I was curious as why no shorts on the way down. That’s all I meant.
Again, it is critically important to identify a gap and go early. If you are proficient at it – fine. Most traders are not. What looked easy today was due to the fact that that pattern was correctly identified. Most of the time shorts will pile in early and you will have violent short squeezes that fly back in your face and leave you with nasty losses. That pattern of stacked candles has to be PERFECT! Realize that when you short after a 40 pt S&P 500 drop on the open, much if not all of the move could have been made. That limits the downside and because of the drop your risk exposure is great because the market/stock could fill the gap. As Hari pointed out, all ships drop with the tide. It is much harder to identify relative weakness because the fakes and the “real McCoy’s” are falling. It is always much easier to look back at what happened than it is to trade in the moment. I hope this perspective helps.

Hariseldon
18:29:42
And if you got lucky and made most of you money in the first 30 minutes of trading – you are doing the exact opposite of what has been taught – that is not repeatable.  If you continue to try and trade the first 30 minutes of the day it will eventually wind up blowing up your account.  It is trading 101 and something that gets hammered into everyone’s heads – do not trade the first 30 minutes. Even profitable traders avoid it – Dave or I make a rare exception at times to trade the opening – but in general we don’t – and whether it is a gap and go, gap and flat, or just plan chop – it doesn’t matter –  you shouldn’t trade it.
Hariseldon
18:33:02
I am trying to teach you all how to be consistently profitable full-time traders, not traders that can have a huge winning day and then eventually lose it, not traders that slowly bleed out their accounts – but actual traders – and do you know how rare that is to become?  Very.  And it is because of a hundred things like this – whether it is adding to winners, cutting losers, not chasing, etc..etc…any one of those things could be the trap-door that ends your trading career.  And as a professional trader you have to master all of them.  
Hariseldon
18:46:58
And if you read back at what @Pete was saying – he was urging caution to “scale in” and he mentioned several times that while he felt the low would be breached, he was also waiting for confirmation that it would be – I was saying we would bounce off that low – but in essence both of us were saying – wait to see what happens at the low.  Pete said this was the “backdrop” for a “sell stupid” scenario – meaning the table was set for it – but it does not mean that dinner was served.  And he was right, this was the backdrop for it – it just did not materialize – it may still, it may tomorrow.  

2022-09-29
Mark As Read

ican
21:07:09
Question on doji sandwich. Trying to look beyond “pattern” and explain price action. Taking bullish side for mapping it out. Big bar signify one side action. Then doji signifies sellers couldn’t deter buyers and any profit taking was bought up – (“gains held”). Then break of doji high means buyers still want more. Is that the right way to think about it? Importance of doji being there were sellers but they got bought up.
Dave W
21:22:06
depends on where the doji is created relative to the first large green candle. Doji needs to be near or over the top of the first large green candle and a break over the doji or the top of the large green candle is a buy. Buyers came in on the first green candle doji is indecision not necessarily selling then a green open after the doni indicates buyers coming back in 

2022-09-28
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Joao
03:21:14

@Pete Does 1OP work well even from a close on a Friday to the opening on Monday, having (I suppose) no data points in between -, and given the notorious differences between intraday timeframes last Friday? What was the late bounce on Friday due to: a. Only short-covering; b. Institutions rebalancing; c. Simply the effect of hedging options flows from market makers; d. None of these or maybe something else?Thanks.

Pete
07:22:14
Joao wrote:

@Pete Does 1OP work well even from a close on a Friday to the opening on Monday, having (I suppose) no data points in between -, and given the notorious differences between intraday timeframes last Friday? What was the late bounce on Friday due to: a. Only short-covering; b. Institutions rebalancing; c. Simply the effect of hedging options flows from market makers; d. None of these or maybe something else? Thanks.Question 
When you say “does it work well” that implies “should I jump on a trade signal Monday morning”. We don’t jump on anything without technical confirmation whether it is Mon or any other day. 1OP is one piece of information and we consider it along with the price action Monday morning. It is always best to wait for the first 30-45 minutes to pass before taking day trades. If you are using longer term time frames for 1OP, you have to take the position Fri based on what the indicator and price action are telling you at that time knowing that conditions can change over the weekend (good or bad).

Pete
13:32:04

Fishing is a lot like trading. You have to evaluate conditions and adapt. All of your skills come into play and you have to know the patterns of the fish and more importantly, the patterns of the baitfish. If you want to catch fish, you have to follow the bait. If you want to make money trading, you have to follow the money (relative strength).

There are times when you should NOT fish (lightening and fall turnover) and there are times when you should not trade (flat markets with low volume). There are times when you can fish, but conditions are very tough. Low pressure systems and cold fronts right now are not good and this is when Mother Nature separates the boys from the men. The same is true for trading. If you have survived this year, you are about to join an elite group of traders. Most traders have been destroyed by this bear market and the snap back rallies.
A good fishing guide can help you navigate treacherous waters and he will know what the fish are eating and where to find the bait fish. He will also teach you his system. The guide I used for this trip I have known for years. He only guides Monday through Friday and he scouts almost every day after he concludes his trips for a few hours. He is booked a year out.
He puts his customers in high probability situations, but he can’t catch the fish for you.
Your guides in the chat room are the Featured Traders. They help you navigate rough conditions. They use Option Stalker and other tools to evaluate the market and to find the best stocks. It is hard to make money and they can’t do it for you, but they will dramatically increase your odds of success.
The last two days I fished the Upper Mississippi River where Minnesota, Iowa and Wisconsin meet. It is one of the most beautiful areas you can imagine with 300’ bluffs and expansive wetlands/tributaries. This is typically a good time of year to fish and perch are one of my favorites. I wanted to catch a few meals for the freezer and some fresh air.
I got more fresh air than I bargained for, but I had the right gear. The temps dropped dramatically when I got there and they almost got down to freezing overnight. The winds were gusting to 30+ mph. Needless to say, the fish were shutting down and the conditions were tough.
With the right guide, some skill and persistence, we were able to do well. For those of you who fish, many of these are 13”+. We caught 14-16” fish, but threw those “breeders” back.
I thought I would share this story because of the similarities.
Pete
13:34:48

Pete
13:41:05
We all do that we can to help you navigate these tough conditions, but it is going to take work on your end. Many of you have already crossed over to profitability. Congratulations and thank you Featured Traders! If you are learning, know that you are cutting your teeth in the toughest conditions. You will look back at this stretch as an incredible learning experience. 

drluke
15:49:11

Question for after hours…from a mental standpoint, how quickly can you reverse your thesis in the day.  I had a neutral/bearish bias and lost my first put of the day.  I managed the position well and saved face (selling against it into a spread, then legged out), but mentally it took a long time to come back from having tunnel vision looking for bearish plays all morning.  I find myself missing out on the bulk of moves on days when I get the thesis wrong and fail to recognize it and adapt.  Looking back on today (and last Friday where I was small green but missed out on so much), there were so many clearly strong stocks I could’ve ridden up (NFLX, META, TGT, etc) but I wasn’t in a place to do anything else until 3pm.  Thanks in advance for any insight. View Answer

Pete
16:12:59
drluke wrote:

Question for after hours…from a mental standpoint, how quickly can you reverse your thesis in the day.  I had a neutral/bearish bias and lost my first put of the day.  I managed the position well and saved face (selling against it into a spread, then legged out), but mentally it took a long time to come back from having tunnel vision looking for bearish plays all morning.  I find myself missing out on the bulk of moves on days when I get the thesis wrong and fail to recognize it and adapt.  Looking back on today (and last Friday where I was small green but missed out on so much), there were so many clearly strong stocks I could’ve ridden up (NFLX, META, TGT, etc) but I wasn’t in a place to do anything else until 3pm.  Thanks in advance for any insight.

You mention your thesis, but you do not provide a timeline. Is this an M5 day trading thesis or a D1 longer term swing trading thesis. The longer term your thesis, the harder is should be to turn. If your longer term thesis is bearish, you can’t ignore what is happening short term. You have to decide if you are going to lighten your risk and take some gains or if you are willing to ride out the bounce and to what degree. When your longer term thesis is bearish and your short term thesis is bullish, you do not have to take bullish positions. You can go to cash and wait to reload. You can also mix in a few longs to hedge your shorts. It is a personal preference. I like favor cash when I am in that situation. An M5 thesis can change many times during the day. 

drluke
16:22:20

@Pete I generally think in terms of less than 10 days for the purposes of this room.  (different from my long term and retirement accounts).  I have been working on win rate and am around 90% in the last 2 weeks, but I’m only taking 1-2 trades a day.  I have to keep telling myself the market will always be there and stop focusing on what I’m leaving on the table.  I will side with you for the cash over hedging and actively managing multiple theses on different time frames.  Mindset issues are always the hardest when you’re not a fully seasoned vet while trying to manage this and a full time job/family.

drluke
16:23:55
Basically, there’s nothing wrong with sitting in cash until the market and my thesis match up.  Overtrading destroys retail. Have a thesis, wait for confirmation, then trade what’s in front of me.  Got it and thank you.
Pete
16:30:13
drluke wrote:

Basically, there’s nothing wrong with sitting in cash until the market and my thesis match up.  Overtrading destroys retail. Have a thesis, wait for confirmation, then trade what’s in front of me.  Got it and thank you.
That is exactly what you have to do. Your 2 week thesis is your guide. You focus on trades inside that window and you look for confirmation across shorter time frames. When they all agree, you size up. When they start to conflict, you take some of the gains. If they continue to conflict you eventually go to cash and wait. Sometimes your 2 week thesis will change from bearish to bullish when you are in cash and then you have to evaluate and gradually adjust to the new thesis. Sometimes your 2 week  will remain as it was and you gradually start to scale back in when the shorter time frames agree. Use the 1OP H1 and M30 crosses to help you. They are perfect for that time frame.

Hariseldon
16:34:08
drluke wrote:

Question for after hours…from a mental standpoint, how quickly can you reverse your thesis in the day.  I had a neutral/bearish bias and lost my first put of the day.  I managed the position well and saved face (selling against it into a spread, then legged out), but mentally it took a long time to come back from having tunnel vision looking for bearish plays all morning.  I find myself missing out on the bulk of moves on days when I get the thesis wrong and fail to recognize it and adapt.  Looking back on today (and last Friday where I was small green but missed out on so much), there were so many clearly strong stocks I could’ve ridden up (NFLX, META, TGT, etc) but I wasn’t in a place to do anything else until 3pm.  Thanks in advance for any insight.

Answer To add to what @Pete said – for me it really depends – If I have a strong thesis already, like I did a few weeks ago having a very bearish thesis, it takes quite a bit to disavow me of it – I need to see major technical indications that my hypothesis was wrong; however, that doesn’t mean that I can’t day trade the trend of the day.  Is it harder to day trade bullish when my thesis is overall bearish? Yes – certainly – but my long-term thesis should not have much bearing on a trade that is 15 minutes long.  But on days like today where I have no thesis other than – the market will chop around between the low of the year and occasional rallies up until new information is presented in Oct/Nov – then I trade exactly what the day presents.  

Superpantz
16:00:49

Question @Hariseldon when there is a compression breakout or trendline/algo line breakout or SMA break, do you ever wait for a retest or you would enter right away or wait a few bars? View Answer

Hariseldon
17:04:46
Superpantz wrote:

Question @Hariseldon when there is a compression breakout or trendline/algo line breakout or SMA break, do you ever wait for a retest or you would enter right away or wait a few bars?

Answer I don’t wait for a retest, but I do wait for confirmation – especially if it is a long-standing line that was breached – so I would typically want to see several directional bars that confirm the break before entering

2022-09-27
Mark As Read

DanielF
15:32:04

Question Hari, why did you say you don’t like trading REITs? They keep showing up in my searches as weak. Is it because they have low volatility (although some seem to move) or is there something else? Thanks! View Answer

Hariseldon
17:05:45
DanielF wrote:

Question Hari, why did you say you don’t like trading REITs? They keep showing up in my searches as weak. Is it because they have low volatility (although some seem to move) or is there something else? Thanks!

Answer They typically have low volume and are subject to single bar burst of buying/selling that can drastically alter the price 

2022-09-26
Mark As Read

Russ
11:20:46
Tips on custom search: Some days you have a ton of good candidates that look great based on their charts and the intraday price action. This tends to have when you’ve have a pretty consistent market direction for more than 3 days (such as this recent drop). One way to filter out the best is to do a Custom Search with Heavy Volume > 300. If you get a ton of results, you can increase it even further (or drop it if you don’t get many). This increases your odds of finding the best candidates that are truly RS or RW and the least likely ones to reverse if the market tides change against you.

Russ
16:48:37

@Hariseldon I’ll ask for advice on what to do with this type of trade in the future. I entered a short on IP at $32.24 at 9:03 AM CST, and then added to double my size as it confirmed at $31.60 at 12:00 PM CST. My target on the trade was $31.11 based on a gap fill level on the daily chart. As you can see, the LOD on IP was $31.13, so I never hit that target. I wanted to give the position room to reach my target but it ended up gaining strength and I didn’t exit until $31.86 for a measly $0.07 on the position. When you have trades like this where you come really close to hitting your target and they reverse, do you manage them (i.e. via an adjustment of your mental stop or even a hard trailing stop)?

Hariseldon
17:06:46

Hariseldon
17:08:40
When adding – if you are in the during the “pullback” portion of a trend (which you were when you took the trade, which was one candle before the long green one) – you want to wait to make sure the pullback does not exceed the high of the previous one, especially when it is as close as this one was.  The trade was fine and the daily chart remains very bearish, so it isn’t a bad swing either – but you could have considered exiting once you saw the downward trend was broken, or next time – waiting until the pullback is complete .
Russ
17:10:57
Thanks Hari and very helpful – that is a really clean way of looking at it. My add was at 12:00 PM not 2:00 PM on the chart. My takeaway is that long green candle should have been my exit point since it broken the trend, or possibly when SPY almost got back to the LOD on the 12:55 PM CST candle and IP stayed well off the lows (preserving the open from the long green candle).
Russ
17:11:47
1:00 PM on your chart*
Russ
17:11:55
(for the add)
Hariseldon
17:15:29

@Russ you’re right I got cst and pst confused – but yes, or when you saw the HA reversal at 1:40pm (est)

2022-09-26
Mark As Read

Russ
21:58:58
We have no edge in trading 99% of stocks in the market on a given day. Our job is all about making sure we are in the 1% of stocks where there is a clear edge.
Dave W
22:17:00
I usually take way fewer trades than most traders in the room because i only take the very highest probability setups 

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
Mark As Read

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
Mark As Read

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
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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
Mark As Read

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
Mark As Read

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
Mark As Read

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
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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

2022-08-22
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Fox
12:22:09
one thing i find helpful as a really quick indicator is to keep my always open SPY m5 chart with 1op on HA candles. just the nature of body size vs. wick size is a good indicator of trend strength in either direction. HA wickless flat bottoms = cleaner move indication
Fox
12:47:01
HA candles on SPY today tell you something : very few flat bottom candles have been green. most flat bottoms were red, and the greens were mostly wicky greens. may sound simple but still tells me something

2022-08-22
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Hariseldon
13:15:53
My wife bought back the short side of the BA, DIS and META BPS’ and is now riding the long Puts 
Dave W
13:18:22
remember when a trader buys back the short side of a bps and holds the longs their bias on the stock has shifted from neutral/bullish  to bearish
Fox
13:19:32
and when spread traders do it, who are normally leaning toward the risk averse side, it is especially meaningful. spread traders dont typically just buy long calls/puts
Hariseldon
13:20:09
Indeed – she is responding to the market and the clear selling pressure keeping us comfortably below 417.50

Hariseldon
13:31:04
So here is a topic that most traders experience but it is rarely discussed – You find a stock you like – let’s say it is going down, the market is bearish – so you wait – the stock continues down, and has now broken compression and you’re finally convinced – all the boxes are checked. You short the stock. And it what seems to be a reaction so constant that it feels intentional – the stock goes up !! WTF, right?? You literally just watched 10 consecutive red bars in a row and when you enter it goes green, in what feels like every single time.  There is a reason for this – the entry you are choosing is most likely the same entry other retail traders are choosing as well – the Algos know this, plus a large number of shorts go in to the stock at the same time, causing a bump.  Another reason is every stock takes a breather, chances are you are entering right after a long stretch in the same direction.  And the final reason is intra-day noise.  You can do the following things – 1) Wait 5 minutes next time – right as you feel the entry is perfect, stop yourself and wait five minutes – see if you get a little reversal and better entry.  2) Enter with 1/2 a position, and when it temporarily reverses, add the other half, or 3) ignore it and have faith in the overall larger trend.

2022-08-21
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Pete
19:37:44

Pete
19:39:59
This search has some nice shorts. I am looking for D1 trendline breaches and the Algo Line (new) search variable will find them. I feel this is a good spot to sell some OTM bearish call spreads (call credit spreads). Look for stocks that have overhead resistance, have broken the D1 up trend line and that have rel weak D1. 

2022-08-21
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thiencly
19:37:53
The upwards slope of the 1OP while SPY is flat or slightly down means a big divergence? So the next bearish cross should produce a nice move down? Which is why you would want to use any upward movement on this divergence as a good short entry ? 
Pete
19:38:12
Correct. 
thiencly
19:47:18

@Pete for identifying divergences, do you put more weight to the slope of the 1OP not matching the SPY direction or when the cross not matching the SPY direction?

Pete
19:51:31

@thiencly Movement (stacked candles) is always the priority. When we have movement 1OP will tell us when a trade is setting up. When the market is compressing, no indicator works well. Know that indicators (other than 1OP) lag. In a compression, other indicators will just be generating a signal and the move will be over and ready to reverse. 

2022-08-21
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Pete
07:37:29

@lilsgymdan It really depends on your market forecast. My forecast is for a pullback and some nervous jitters for a few weeks. I believe that is going to set up some excellent BPS, for longer term trades. How far we pullback and the speed with which it happens will help me gauge support. I suggested a BPS on LOW, but for all intents and purposes, that was just dipping my toe in the water on BPS. CCS at the high end of the range also make sense, but I would not enter as many of those because I liked the bounce and I feel support at the low of year is forming. For longer term swings, I want to keep my distance as much as possible. For short term swings we rely more on momentum and there I favor ATM PDS/CDS.

lilsgymdan
19:40:38
ISRG d1 chart looks interesting for a bearish call spread
lilsgymdan
19:40:52
Would you recommend trying to do a shorter term expiry on these?
Pete
19:46:50

Hariseldon
20:22:22
You can also look for Put Debit Spreads.  Keep in mind the mechanics behind these trades.  In. CCS – much like a PCS, you are getting a 25% ROI, but also putting up 4X Margin and risking 4x’s the credit.  So if you did a 95/100 CCS for $1 for a stock currently at $90, and it expires below $95 you get $1 , if it finishes above $100, you lose $4.  Hence you need to make sure those trades are at a 80% or higher win rate, meaning you need a bearish D1, and preferably 2 major lines of Resistance between the current price and the short strike.
Hariseldon
20:27:51
In a PDS, you are mitigating the cost of the Long Put with the credit from the short Put, these do not have to be OTM given the lower WR requirement – as your risk is defined by the debit – if the same stock at $90 – you bought the $90 Long Put for $5 and sold the $95 Put for $3 , your risk is $2 – you want your debit to be less than 50% of the spread, so in this case the spread is $5, you want the debit to be $2.50 or less.  Much like the Call Debit Spread these are plays done with the current weeks expiration.  You’re looking for around 20-25% on a Mon-Tues, 25%-40% on Wed/Thurs, and 50%+ on a Friday.
Hariseldon
20:30:19
Both a OTM CCS and ATM PDS are bearish plays but also very different.  A OTM CCS takes advantage of a longer-term bearish outlook and provides passive income as theta ticks away, the ATM PDS takes advantage of current weakness in the stock and is much more focused on a larger acute move in the ticker .
Hariseldon
20:31:01
It’s important to fully understand the differences and underlying mechanics of each spread 
lilsgymdan
20:55:51
So theoretically we would want to see a lower high on the D1 trend after this hypothetical pullback to have more conviction in call credit spreads. Where right now if we get some bearish action we can have an even mix of certain high quality call credit spreads and put debit spreads?
Hariseldon
21:41:16

@lilsgymdan OTM CCS follow the same requirements as OTM PCS just reversed – so you’re looking for a chart like the one @Pete showed for WYNN – the stock can stay flat; go up or even drop some and the spread will be fine.  Whereas for a PDS you’re looking for a more immediate move down.   

2022-08-21
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Pete
08:16:06
There was a question about anticipating vs waiting for technical confirmation. It is critically important to read the previous price action and to get context. That helps us to understand what is happening currently and watch for turning points that could be setting up. You may want to re-read my daily comments. They are your roadmap. I have seen a light volume bounce in a longer term  bear trend. The bounce had nice duration and magnitude, but it came on light volume. That makes it vulnerable to profit taking. August is a dull month and the Fed is in recess. The market will get nervous. That told me that I should NOT enter new bullish put spreads. If LOW is your only recent BPS (or you have a couple of different BPS on), no worries. We can navigate those. In general, last Monday I said do not put more BPS on at this level. I am anticipating that the market is vulnerable and I am reducing long exposure. I am also watching what happens at a key resistance level (200-day MA) and the price action as we do so. I am not taking short swing positions until I see signs of technical resistance and we saw that smack down last week. Now that I have that technical confirmation, I can start taking a more bearish stance. 
Pete
08:24:05
If I am playing chess, I am not waiting for my opponent to move and then conducting my analysis. I am trying to figure out what his game plan is based on his previous moves. That helps me to understand how he might move in the future. That reduces my chances of being surprised. I am trying to anticipate what is going to happen, but I can’t move until he does. Typically, my counter to the move is something that I planned for. 

Pete
11:39:36
This is a game of chess. If I move here, they are likely to move here and then I will counter with this move. If I move here and they respond with this I will move here. If you can visualize different scenarios and see a few moves out it will help you plan your trading. At least, this is how I trade.
Pete
11:40:41
You can see from my comments, I am ahead of every move.
Pete
11:41:26
I am not waiting for the market move and then reacting, I am anticipating what the market will do based on what I see and based on the 1OP cycle
Pete
11:42:21
In chess there are a million variations, but only a few that are likely so you plan for those.

2022-08-18
Mark As Read

Dave W
15:55:49
yes taking time spreads earlier in the day can work out well sometimes to take profits before earnings so risk is removed. This is especially true on thursday due to the rapid time decay on part of the short option 

Hariseldon
15:30:09
It is really important to be able to be honest with yourself – when you see conditions like today and several pro-traders are saying, “This is a crap trading environment”, at that point it isn’t a matter of how much you learned or how well you know a method, it is all about self-control. Are you able to sit back and not trade – to use the time to study, annotate charts, make lists, adjust your scans, etc.  At some point, if you were to become a full-time trader, you don’t have the luxury of saying, “Nah, not going to trade today”, at least not very often – but while you are learning you absolutely have that option.  Whether or not you take it is a matter of mindset, not knowledge.  It is knowing yourself and limitations.

Dave W
16:03:39

Learning and trading well is not a straight line up, there are many many setbacks along the way 

Hariseldon
16:06:21

@Dave W is absolutely correct.  I do not know what your expectations were/are but as I have been saying – it takes minimum 2 years – the real question is – How much tuition will you pay during those two years?  If you follow the ten steps I laid out, exactly the way I laid them out, then you aren’t paying that much “tuition” at all – but if you are using a fully loaded account while learning, then yes, you can expect to lose a lot of money during those two years.  So that is the first thing.

2022-08-15
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Pete
08:06:41
AwkwardAlien wrote:

Question Does anyone monitor the various sectors for price action (i.e. HA reversals/cont, BB expansion, 3/8 EMA cross) and RS/RW.  Then drill down to those sectors top performers for trade ideas.  I have been toying with an idea of setting alerts for this so I can track when sectors rotate in and out.  I know with the current system we track the net % change for the day and B/S but I was thinking of something more immediate.

Answer  It is good to set alerts on the market, the sector, group or the stock. Alerts at key price points are always good!!! RS/RW is the key to everything we do and there is no substitute for it. Just because a sector or group has a 3/8 cross with expanding BB does not mean it is the best sector to trade. It could be dragged higher by its hair in a market rally and there will be other sectors that are leading the charge. We will start doing more sector and group analysis in the next month and stocks will be categorized according to sector, group and industry, but we will use RS/RW as the basis.

2022-08-15
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Hariseldon
12:11:34

Once a stock has come to your attention – the daily chart should be the FIRST thing you look at – not the M5. And unless you are looking for a very quick move – the daily chart should be your focus AFTER you make the trade – otherwise you will be trading based on noise

2022-08-15
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Russ
12:45:09
Hide your P&L if it is going to influence your decision making. I do not look at my P&L until the end of the day after all my trades are closed, and I stop myself from calculating it in my head when I’m tempted to check (partially successful on that last part lol).
Russ
12:45:34
If you struggle with this, slap yourself in the face every time you check your P&L

Pete
15:25:04
You do not have to trade constantly to make money. You can, but you do not have to. The key is to be very selective with your entry points. I did not feel the need to take early positions because I did not trust the action on a Monday in the middle of Aug when the volume has been light. Bullish specs who piled in on the gap fill had to take some early heat. For me, the better entry was to wait for support to be tested and confirmed. That was a great entry on the first bullish cross today. The second entry point came a little more than an hour ago. 
Hariseldon
16:03:34
That seems to go back to something Dave said awhile ago – about how our job is not to make trades but to make money.  @MTrader  & @Russ  so did you both feel that given the limited time you had that you had to make some trades or you would be missing out on this “run up”?
TheSwoleTrader
16:05:10
I was thinking about the trades vs making money debate. Only putting 1/20th of my account size (starting small) on any one trade – a 25% win nets me 1/20th of my monthly salary. So if I increase position size when my win rate increases, i could feasibly make 1/4 of my salary in one win. It really isn’t about the quantity of trades at all. Rough calculations of course
Hariseldon
16:08:37
TheSwoleTrader wrote:

I was thinking about the trades vs making money debate. Only putting 1/20th of my account size (starting small) on any one trade – a 25% win nets me 1/20th of my monthly salary. So if I increase position size when my win rate increases, i could feasibly make 1/4 of my salary in one win. It really isn’t about the quantity of trades at all. Rough calculations of course
I can only tell you what I do and don’t do – I do not think I have ever thought about what percent of my account is going into any trade – looking back it seems there are times when literally 100% of my entire account went into a single trade and other where it is less than 1% –  I look at my stats and know what 10 trades a day will net me, roughly – The only time I think about how much of my account should go into a trade is when I notice buying power getting low and I want to make sure I have enough there in case a really good set-up comes a long.

2022-08-15
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MTrader
16:00:52
I found today challenging for some reason
Hariseldon
16:01:16

@MTrader can you identify why?

MTrader
16:01:37
Might have been similar issues to what Russ just said, I missed the morning and was kind fomoing into things
MTrader
16:05:12
Ya, in my case I definitely had that feeling, like shoot, I missed the morning lets see if I can still make some trades
Pete
16:08:55
MTrader wrote:

Ya, in my case I definitely had that feeling, like shoot, I missed the morning lets see if I can still make some trades
From roughly 30 minutes into trading to 3.5 hours into trading there will be an excellent move 90% of the time. That is when you make hay. If you miss that move you have to be very, very, very careful. Especially on light volume days when there is little pace. If you can’t resist, don’t turn your screen on. In the afternoon the ranges for the stocks and the market are set and you do not get big moves. Sure you can find a stock or two that are moving, but in general, most of the action has played out.

MTrader
16:11:19

@Pete Ya, you are definitely right, I was trying to make something out of nothing and then when they did go against me (even briefly) I didn’t have the confidence to stay in it.

Pete
16:18:09
MTrader wrote:

@Pete Ya, you are definitely right, I was trying to make something out of nothing and then when they did go against me (even briefly) I didn’t have the confidence to stay in it.

The last part of the sentence is critically important, “I did not have the confidence to stay in it.” The market had already staged a great move and the first little dip spooks you. 1OP will temper your excitement. If it is in a bearish cycle, wait for it to run its course. As it is doing so, find a stock that is holding up well. Make 100% sure that you have the market lining up before you take an afternoon trade.

2022-08-15
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Pete
17:26:40

Amaya_trade wrote:

Question I have an issue like on trending day , royal flush has lots of symbol , all look good , and I become overwhelmed , don’t know which one I should choose ( too much to choose ) . Do you have suggestion for this issue ?  

1. Stock needs to be > prior day high. 2. Stock needs to clear D1 resistance on HEAVY  volume. 3. Stacked green candles with little to no overlap early is a bullish sign. 4. Stock needs to hold strong during a market pullback. 5. No long red candles, small retracements. 6. Watch the price action during a bearish 1OP cycle for the stock. Very small pullback or bullish div is ideal. 7. Look for nice steady price action (orderly) using M5, M15, M30. 

Pete
17:28:19
If I am going to buy a stock I will not even look at it if it can’t clear the prior day’s high. That is a bare minimum requirement for me. It should blow thru that resistance very early in the day
Pete
17:29:41
I honestly don’t think many of you use 1OP (for the stock) to help you time your entry on stocks. You should!
Pete
17:54:30
As you are flipping thru stocks, add 1OP and look at the stock using that indicator. Just like with SPY, when it is moving and making nice swings, it will give reliable signals. Today most stocks had nice crosses early, but in the after noon the action died down
Pete
17:56:55
By all means, if you have 1OP getting over-extended (spiking) for SPY and for the stock, do not buy!
Pete
17:59:46
Take a deep breath and know that the market and the stock will both still be there 30 minutes later. You can calmly evaluate both during the bear cycle. If both hold up well, your chances of a good entry for a long go way up  and so does your confidence level because you have watch them

Hariseldon
18:26:25
what have we learned over the course of the summer?  (1) the US economy isn�t as fragile as one may have feared a few months ago … I continue to marvel at US nominal GDP, which should clock in at +9% y/y; (2) Corporate America remains in great shape … and is still making a large claim on all of that nominal growth; (3) inflation has meaningfully inflected lower … while it remains a huge and ongoing problem, for the moment both policymakers and stock operators can breathe a bit easier.  I don�t want to go too far with all of this — as I�m not breaking news and it�s not lost on market participants — but, relative to the Fed-induced hard landing fears of Q2, the directional narrative is clearly more balanced today.   
Hariseldon
18:26:48
what are the bulls saying?  the soft landing hypothesis — which has felt like such a narrow outcome — is more or less taking shape: inflation has peaked (if tentatively) and underlying growth is durable (if below trend).  said another way: the data set of the past few weeks has featured less �stag� and less �flation.�  when coupled with a conspicuous absence of length held by the discretionary trading community, and local demand from non-discretionary funds, you have enough bullish ammo to grind higher.  also, M&A is totally respectable, if booming 
Hariseldon
18:27:05

what are the bears saying? you can have your peak inflation relief rally, but don�t kid yourself, we�re still a very long way from 2.0% core PCE and the Fed is still very far offsides.   why?  the building blocks of inflation are going to be an ongoing problem (link) and the Fed will need to beat back this easing of financial conditions.  when coupled with a tactically overbought market and low quality internals (e.g. the most shorted basket has led the rip), you have enough bearish ammo to set fresh trading shorts.  also, Quantitative Tightening is set to double come September.   

Hariseldon
18:27:28
what about market technicals?   the skew is positive for the next few weeks.  it�s pretty easy to identify the marginal buyer; it�s pretty difficult to find the marginal seller.  on the former, the systematic trading community — CTA, vol control and risk parity — remain on the bid (while noting this impulse will wane as we move past August).  alongside this, one should expect that stock buybacks will be in the mix every day, in good size, for another month.  furthermore, if one assumes that households are holding onto what they own, again it�s hard to identify who will make a sale (other than blocks and follow-ons, which have been well absorbed lately).  
Hariseldon
18:27:45
what is the discretionary trading community doing?  amidst ongoing skepticism, there has been begrudging demand.  the past week saw significant buying, while noting almost all of it was short covering (link).  to be sure, we haven�t seen a full-throated capitulation to the bullish side, but some forced risk adjustment given the rip in low quality exposures.  remember the starting point: we came out of a brutal Q2 with the net and gross running at the lowest level since March of 2020; now there�s an open question on whether this cohort will need to attend to right-tail risk should the market keep running.  
Hariseldon
18:28:16

what about market sentiment?   consistent with a divergence in positioning, you can see a clear disjunction between households and professionals.  on the former, note that traditional measures of retail sentiment — e.g. AAII bulls/bears or CNN fear/greed — have moved into neutral territory.  on the latter, in our most recent Quick Poll survey of sentiment across professional traders, the ratio of bears-to-bulls was still 3:1 (link).    

 
Hariseldon
18:28:26

How do the seasonals look?  see the first chart below.  the rest of August should be fine, but the history book tells us that you need to be wary of September, particularly the back half.  all else equal, when taken together with the prior three points, this leads me is to think that market forces are on the side of the bulls until early September, then quickly swing in favor of the bears.

where does fundamentally leave me?   the good news: the US economy — anchored by the all-mighty service sector and a strikingly strong labor market — is still generating a huge amount of nominal growth, and we can finally breathe a bit easier if the upside boundary of inflation has been marked.  the ongoing challenge: we�re still in a cat-and-mouse game where the Fed needs to pull the hard yards and maintain the fight against still-super-high inflation.  so, while the fundamental backdrop and the technical setup is locally better for the bulls, I think it�s too early to call for an all-clear as problematic inflation lives on.  in the end, I�m inclined to believe the market will grind higher over the rest of the month … then, the winds shift come September … and the broad pattern of 2022 continues through Q4: a big, turbulent range trade (that does little for one�s self-confidence).  as always, I�m a taker of feedback. 
Hariseldon
18:28:55

one more directional comment: if it sounds like I�m trying avoid getting sucked into the rally at this end of the range, you�re right.  more so than that, I�m trying to avoid the linear trap.  the market is doing the CPI relief rally — a break from over 9% to say 5% means something, and the market has rewarded that.  if it hangs out around 4-5% for a while longer, however, it will be met with a restrictive Fed and I just don�t regard that as an overly friendly outcome for risk. 

 
2. what about the Fed?  I thought this was a very good check-down from GIR�s David Mericle on the big issues: link.  conclusion: �the July FOMC meeting made it clear that the Fed leadership planned to slow the pace of tightening in line with our forecast for a 50bp hike in September and 25bp hikes in November and December.  the July CPI report likely keeps that plan on track for now.  but we see upside risk to both the near-term pace and our terminal rate forecast of 3.25-3.5% from the recent easing in financial conditions, the robust pace of hiring, and signs of stickiness in wage growth and inflation.�
Hariseldon
18:29:24

is this a better environment for carry?  a bit subtle, but I think the dynamics in carry strategies have improved.  even if there�s still a lot of ground for the Fed to cover, relative to the unknowns of a month or two ago, the path of the hiking cycle should be less volatile now, which should truncate the tails of market distributions.  the dividend trade referenced below is an equity version of this.  so, too, would be vol compression strategies.  I�ll defer to the experts on the Fixed Income plays to run — those I respect advocate letting some line out.

 
4. I don�t want to get bogged down in a discussion of market valuation.   I find it�s a topic on which people have ironclad views which border on religion — if more sporting than spiritual — which I do not share.  I will admit to one thought, however, which I can�t believe I�m thinking.  as mentioned before, the market multiple in 2022 has largely been the photographic negative of real interest rates.  note that from early March to mid-June, US 10-year real rates ripped over 100 bps in a straight line.  while I think it�s highly likely that real rates rise further from here, and while noting that stocks have locally run ahead of this pattern, my guess is we won�t face a reset of that intensity again.  
Hariseldon
18:29:41

with the preface it�s convenient to have a weak currency at the back of your exporters, two simple observations … by definition, both in the context of local FX: (1) as European power and gas prices push to awfully high levels, I�m dumbstruck that SX5E has barely underperformed S&P YTD; (2) don�t look now, but NKY has just gone positive on the year and enjoys the G 10�s easiest financial conditions.   

from Mike Cahill in GIR: NFIB asks small businesses what is their single most important problem.  67% of firms answered something having to do with an overheated economy — inflation (37%), quality of labor (21%) or cost of labor (9%).  by contrast, only 4% report that their biggest problem is poor sales — essentially a cyclical low:

Shark
12:40:07
Just want to explain some of the lingo I use in here when im refering to PR, RR on a trade. 
Shark
12:40:11

What is Profit Recycling?

What is Risk Recycling?
PR- using profits from a position to create another leg in the position for a credit > the position debit.
RR- using profits from a position to create another leg of the position for a credit = to the position debit.
Shark
12:41:41
Mainly used to secure profits or reduce risk on a position that has more potential, also great for PDT accounts. that’s all carry on. Happy Sunday. 
Shark
20:44:53

The PR / RR trades all expire within 2 weeks

Hariseldon
12:50:51

HOG looks really strong

AriS
12:51:52

the 40.50ish resistance on the D1 chart isnt a turnoff?

Hariseldon
12:52:47

The break of the 2/10 ALGO line is more of a turn-on

2022-08-11
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Crux
11:19:08

Is anyone familiar with how the last day to buy in before the dividend payout is related to the stock price falling after that day? For example, COP last day to buy is tomorrow and that makes me wonder if the stock will then weaken there after

Hariseldon
11:29:34

That is generally priced into the stock – otherwise it would be pretty simply to always short the stock the day before

2022-08-11
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Hariseldon
13:31:06

I however will comment on stops, because, well, I am me…..I don’t use hard stops, never have, never will – but I get why traders use them. However, many traders ignore the market and only set their stops based on the technical set-up of the stock. When you are in a choppy market your stops will get triggered far more often only to see the stock bounce back. The choppier the market the wider those stops will be – stocks will test and even break through levels of S/R specifically to trigger those stops and then head back to where they were. So please take the market into account.

2022-08-11
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st0rm
14:15:40

Long BOIL (hope an ETF is ok), fantastic rs on the m5, recent cross of 100 and 50sma and very high atr, more than other oil tickers.

Russ
14:17:24

That is a commodity ETF and RS/RW to SPY does not apply to it. Stock ETFs do work for RS/RW but commodity ETFs are based on futures contracts of the underlying commodity. Leaving your post up for awareness to others.

2022-08-11
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Mister-Bin
16:58:13

Question: does anyone here have or have had trouble staying in a trade longer after their initial target? I’m talking about going past that $1 (or $1.05) target and wanting to stay in a trend longer. Has anyone had success with riding a trend (even the whole day)? I’m sure there’s RDT post there out there…trying to find it

Hariseldon
16:59:51

@Mister-Bin Yes, in fact doing that is one of the primary ways to become profitable. Hence the walk-away analysis. The issue is doing it with options, far easier with shares.

Mister-Bin
17:05:19

@Hariseldon yeah I think the issue is for me is that I always add to my winners, hence if the trade goes against me (or is just a mere pullback), I tend want to take profits quicker as my exposure is 1.5x to 2x larger. I know a lot of people like to use the 8EMA as a guide, so maybe that’s something that keep me more focused on adding on pullbacks vs wanting to take profits quickly. Maybe instead of adding when I get halfway to my $1 target, I only add on pullbacks that touch the trend guide (example: 8EMA)? Seems like I have to get that $1 target out of my head to ride longer

Mister-Bin
17:10:27

I think the $1 target is great, but I’m only trading minimals shares at the moment (1-10), sometimes (20-30), which is a very small fraction of my account. I understand the $1 target if I’m using up all of my buying power, but I’m not ready for that yet. So I’ll test that out starting tomorrow, giving the market more time to pick a direction and finding stocks with nice tight trends to enter

Hariseldon
17:12:15

@Mister-Bin $1 is arbitrary – set your target based on the chart – I tend to take trades that have more than $1 of room before any technical point for an exit, so I usually just take profits there unless I feel it can continue.

Hariseldon
17:14:53

@Mister-Bin Hit on the glaring issue within trading – we exits trades when they are working. If you think about it, when a stock is doing exactly what you thought it would is also the time you leave the trade, even though stocks tend to follow Newton’s first law

Mister-Bin
17:20:26

@Hariseldon makes sense, that’s something I will focus on for the new few weeks. It won’t be easy, because I believe there’s a lot of conflicting ideas in my head in terms of trade management: “Take profits when profits are given to you” vs “Sell into strength” vs “Let the winners ride” all while taking into context the market, because sometimes the market doesn’t have enough tailwind to get my stock to that target. But I think the first step, as you mention, is set the target based on the chart, and if the market permits, ride it until it gets there. Thanks for the advice!

Russ
17:22:29

It is very tough skill to master @Mister-Bin

Mister-Bin
17:23:22

I’m starting to realize it all goes back to the market: no market tailwind, take profits early; yes market tailwind, ride it baby. @Russ very much so, and I’m learning every day from the you and the master traders here

Russ
17:24:16

In my opinion, the two points in time where you make or lose all your money is 1) Trade selection – when you decide to enter a trade – @Dave W is the master of this and 2) Decision making when you have a trade – deciding to exit, stay in, or add to a position – @Hariseldon is the master of this.

Hariseldon
12:25:08

Btw – tough question – but anyone that gets it right will get an award – I chose TGT as the main trade for the challenge account today – obviously it has RS – but there is another reason I bought the call for this stock instead of others – can anyone tell me why?

JTD
12:25:47

Earning keeps the price stay high

Hariseldon
12:29:37

In the PDT account I am forced to swing these trades, so I need to look for every edge I can get – there were around 20 different really good trades out there – TGT broke compression, has Relative Strength, in the gap – which groups it with around 5-10 other stocks – so I needed something else – Earnings was that extra thing – it keeps the option pricing higher and mitigates against a drop. This is what you need to do to find the highest probability setups

Hariseldon
16:51:10

I don’t like taking profit on BPS’ until the very end – they work because of the statistics – it is a 25% ROI, which means you need to take full profit more than 80% of the time for it to work – Let’s say 85% of the time at expiration they are worthless, and 5% of the time you can leg out with the same profit – that leave 10% that you are losing. If you start taking 50% profit when they are up then your win rate needs to be over 95% for it to work in the long run.

2022-08-10
Mark As Read

Hariseldon
17:53:09

[…] over the last 20 years the staffing and resources at the IRS fell by over 40%, and as a result the amount collected in taxes by the wealthiest Americans also dropped significantly, along with the number of audits. So there was a huge increase in people worth over $100 million and a huge decrease in the amount of tax revenue collected by people making over $100 million.

The new bill also now introduced a tax on large corporations – where if they report more than a billion in revenue, they get taxes – so no more Amazon paying $0 in taxes for instance. What happens when the Federal Government loses their revenue? Programs get cut and the tax burden falls on the working/middle class as taxes get raised on goods and services to compensate for the lack of money brought in by those that control over 90% of the wealth.

However, this can’t be done at the current staffing and resources – so this Bill gives the IRS the resources to finally collect the taxes from those that have been avoiding paying them.

It will be a huge benefit to the middle class – the government does not care about making sure they get that additional $150 from Joe/Jane tax-payer that wrote off $150 to charity but don’t have a “receipt” , they want the $30 million that someone like Mark Cuban did not pay because it was written down as a “loss” when it was actually not.

In general – as a rule – don’t listen to anyone’s explanation of a piece of legislation if they have a bias in giving that explanation. The Inflation Reduction Act will not reduce Inflation, but it is a catchy name. It will however reduce the deficit, it will help lower Health costs, and it definitely will provide financial incentives to business and individuals to use/produce more climate friendly products. It won’t raise the taxes on the middle class, and it won’t result in someone making $100K being more likely to get audited, but it will make it far more likely that the CEO of the company that person works for gets audited and it will make that company pay its share of taxes.

Will this have a trickle down impact? Perhaps – although due to the tight labor market Corporations will find it difficult to save money on overhead or salary reduction, there are just too many jobs and too few people looking for them – will they raise the prices on their goods and services to compensate for the money they now need to pay out? Again perhaps and there are various articles out there from Economists that debate the point. Read those. But if someone from MSNBC or CNN or FOX or Washington Post or Wall Street Journal, etc is telling you what something is….don’t even listen to it. There are plenty of actual sources to get your information.

This actually an important distinction/discussion – for the past 15 years at least I have been surrounded (either through occupation, social or both) by extremely wealthy / successful people and during that time I’ve been able to get a sense of the attributes they have in common, which is how I was able to write that post on the “Insidious Nature of Wealth.”

Because I am from the media industry and so are most of them, we are all very much aware of how slanted/tainted the information is that gets reported out to the public. So it is pretty much burned into our brains to ignore everything on Social Media, MSM, etc and always just go to the source and any academic/well resourced analysis.

Hariseldon
15:16:06

As a note – do not freak out on these Bullish Put Spreads if they are down a bit – they will go back and forth – I do not even look at the intraday on my BPS’ unless there is something major – all that matters is that the short strike is staying above the Support levels, that’s it.  It will balance out in the end for you as long as that price remains above.

2022-08-08
Mark As Read

Hariseldon
17:34:44

you know how I time my entries? “Hmmm BLUE still looks strong – daily chart is good, volume is good again – nice Relative Strength. Ok, I am long BLUE.” Done. That’s how.

Dave W
17:37:15

try not to complicate your trading . What Hari just posted is exactly how i enter. I am not trying to get the exact entry if i like a stock long i want to be in. I do try to do it out of compression but i dont try to get too exact

Dave W
17:47:52

i think something a lot of traders miss is the larger picture of the chart starting with the daily. That is where the decision to take a trade needs to start. Without that you can get whip sawed around with no idea whether to stay in the trade ot not because you are so focused on the minutia on the 5 min chart

Hariseldon
17:49:43

Burn this into your brains – most M5 candles are just NOISE.

Hariseldon
17:50:39

Yes you look at the M5 to see the trend and if the stock is strong or weak on the day, especially against SPY, but to make a decision off any 1 or couple of M5 candles is a recipe for over-complication and bad trading.

2022-08-08
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Jerson
17:52:26

I have seen a lot of indicators for RS/RW to SPY as well as RVOL and RS/RW to Sector. I do not use any of these, I straight just eyeball RS/RW on the ticker and check if it had a good D1 and volume moving it. I really try to keep it simple, maybe I’m keeping it too simple? Should I rely on these indicators in trading?

Russ
17:54:56

@Jerson Personally I think doing what you are doing (focusing on price action and volume) is the best approach. I use the indicators as an easy filter to say “move on from this”, but I always look at the price action before entering a position.

2022-08-08
Mark As Read

BennettN
18:01:34

@Hariseldon I often struggle with taking trades overnight even if they are still a good setup into the close because SPY seems so unpredictable from close to open and it can really affect those overnight positions. Are SPY’s overnight moves actually unpredictable like I think and so it is up to the stock’s strength to hold it up, or does this mean I am just not great at reading SPY yet? Clearly you’re killing it in the PDT challenge, so it is absolutely an obstacle that can be overcome, but I don’t think I am thinking about it the right way.

Hariseldon
18:07:27

If you notice my portfolio is generally balanced, for example right now I have shorts on OXY, META, JNJ and DASH – all different sectors, I have Longs on SAVA, BLUE, SPCE, AU, SBUX and BA, also different sectors. What I can depend on is chop, which means at one point my Bearish positions are going to be doing well, and I will take profit when they are, and then if I wait, my bullish positions will also do well. I am depending on SPY being erratic and choppy.

BennettN
18:15:18

That makes sense. Is the fact that D1 SPY has been in a lower volume compression around the 100SMA your reason for expecting chop? And do you also just expect to take some losses on one side when SPY finally exits the chop and chooses a direction?

Hariseldon
18:19:55

It is because earnings season is over, and there isn’t any spark that should get SPY above that 417.5 resistance level, probably not until September. But inflation is improving, earnings overall were decent (at least better than expected) and the economy remains strong so it looks like we may avoid a recession, and that should keep SPY from cratering (at least for the moment, I do think there is more downside risk here). All of that equals chop to me, I don’t even need to look at a chart to construct that story.

Hariseldon
17:29:06

This weekend I encourage all of you to look through my trades (I will put up the updated journal soon) and look through Dave’s trade this past week. Study them – and don’t just focus on the entry and exit, don’t just look at the check boxes – but zoom out, look at the larger picture – see why we took the trades we did. Way back during the time I refer to in that quote @Big-Bear put up, when I started to really learn – whenever someone would ask what I am doing for the weekend my answer was – “Studying” and that is what I did – every free moment I had I went to my computer and studied. I wanted to start each week more knowledgeable than the week before – and back then I had nobody to ask questions to – so I made a list of those questions and spent the other half of my times searching for answers. If you are going to become a full-time trader than you are seeking one of the most enviable jobs in the world. Pure financial freedom, nobody to answer to, everything is in your hands – and to get there means intense hard work.

AriS
16:40:39

Mainly for discussion: Win Rate and Profit Factor…Which is more important? I know the two should go hand in hand but I feel like if I can get my win rate up then move on to focusing my entries and exit I will be a better trader. I have a small issue with a higher win rate though because if you are not skilled at your entries and exits then the win rate is meaningless because you will be constantly leaving a lot of money on the table. My goal, like many others, is to maximize the profitability of each trade.

Hariseldon
16:54:40

Win Rate is the most important thing you can work on – Trading is about mindset – it doesn’t take long to learn the rules and methods, but the mindset is what makes the difference – Staying above a 75% WR gives you confidence in the set-up/strategy, and it is that confidence in those statistics that you will need to overcome your emotions. Plus, there is a psychological boost to not losing. Once you get WR up then you work on PF. And of course in the end you need both. In fact once you have the method/strategy down and confidence in it, one can be successful with a 50% WR, but that is not something one should get to until they have managed to get the WR and PF to a good place.

Russ
16:58:54

I think win rate is more important when starting out (agree with Hari here). That said, they are two metrics assessing very different things and focusing too much on either can be detrimental – if you focus exclusively on win rate, you may take large losses because you are stubborn about taking losses. If you focus too much on profit factor, you may try and take a lot of small losses on trades that would’ve turned into winners, or you will become too selective trying to be a “perfect” trader. I would focus more on win rate and look at the consistency of your profits at the end of the day. If you see small green days sprinkled in with some huge red days, then you know you must focus more on cutting your losers earlier. But that has to be combined with your walkaway analysis.

2022-08-03
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st0rm
14:58:32

AMAT again, I got too jumpy on the 100sma cross

Dave W
15:05:48

@st0rm when a stock goes thru a moving avg resistance i think it is better to wait for a retest and move back to the upside many of those shallow breaks fail

2022-08-03
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Hariseldon
18:00:34

Trading automation is difficult – in my former life when I did predictive modeling it was just the beginning of ML models and they are far more advanced now thanks to improvements in computing power than they ever were but they still aren’t anywhere near what they need to be – consider this – Ask Suri/Google/Alexa any question with complexity and you won’t get a valid answer – and that software is some of the most advanced AI around. Also consider this – run a back-test on a simple 3/8 EMA cross-over and you will get an over 80% win rate – but we all know that doesn’t translate to an 80% win rate in real life. The problem is inherent in something we mentioned a week or two ago – You need your checklist, yes – but you can’t trade off your checklist. You have to be able to read price-action – there are just too many intangibles to be able to program in to an automated system

Harry48
18:25:45

Hariseldon wrote:”You have to be able to read price-action – there are just too many intangibles to be able to program in to an automated system” About 30 years ago, I programmed probably the first successful automated residential mortgage approval system. I am very temped to ask for the data from the red traders in this room and try emulate that success. Given what my strengths and weakness are ,I have more confidence in the programming endeavor than I have in my ability to learn to day trade.

Hariseldon
18:39:25

@Harry48 consider this – every day hundreds if not thousands of new traders come in, just like you and see patterns in the market, just like you – they also have some programming and modelling knowledge – also like you. I am sure many are less knowledgeable than you are in this field and I also sure that many are more knowledgeable. Some have few resources at their disposal, while others have an immense of computing and programming power to rely on. All of them have the same goal that you do – automate trading using a set of rules. Now – knowing this – and knowing that if that is every day, that every year the number of people that attempt this is immense – I would challenge you to go find one success. One example of someone that has automated trading and come up with a system so successful they can prove it. And not through some scam or youtube video selling you their wares – but where there is actual proof of this program putting out profitable trades publicly in a consistent manner. You will not find one. You will find sub-reddit and forums dedicated to it, but amongst all those claims and people, not one real example of it actually working. So the first thing you would need to believe is that you can manage to do it where everyone has failed, because they have failed.

Russ
18:54:31

Our edge is in our ability to be discretionary traders and not algorithms. We need to develop the ability to see the forest from the trees. We all have a limited amount of time and energy to put into learning the art of trading and all the time we spend looking for shortcuts actually lengthens our development process. It’s the same thing as looking for the magic indicator that prints money. One day – if you keep at this – you’ll finally get to the you can print money and it will be from the time you spend doubling down on the basics again, and again, and again, and again, and not from the time you spent focusing on the obscure and abtract.

Russ
18:57:38

Everything you need to be a successful trader is outlined and I guarantee none of you have gone through it all twice (I know I haven’t yet). The Wiki, every post on this website, Pete’s YouTube channel, Hari’s YouTube channel, the recommended books. If you haven’t done that yet that’s what you should be focusing on. This is just as much a post to remind myself of these facts as it is to the room, because I’ve fallen for the distraction traps myself.

2022-08-02
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BennettN
08:43:22

How much does SPY’s behavior and close on one day hint towards its overnight move and next day open? If there is no big news, will a close near HOD point to stronger action overnight and a close near LOD point to weaker action, or is it not very meaningful?

Pete
08:43:22

I have tried to find correlations between the close and the open and I have not found anything tradeable. If you have a longer term bias, hold overnight. The market is very fluid and it trades 24/7 so it never really closes.

TheProfessor
09:01:49

I agree with Pete. The futures trade 23 hours a day. The market tends to do the opposite of what is most logical many times. Unless you have a very good picture of the Micro and Macroeconomics and understand how that correlate to the overall market, stick to price action, RS/RW – that is really your only edge, otherwise you are playing poker with better players than you.

2022-08-02
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Hariseldon
10:49:30

One of the benefits of an OTM Bullish Put Spread (which used to be a bread and butter in this room during more bullish times) is personified in a stock like ENPH – if I was just bullish on ENPH with Calls or Stocks, then I most likely would have exited with a loss when it was down $17 this morning – but with a BPS, I am still well above the short strike and the spread is fine

Dave W
12:21:53

you really need to be able to just look at the ENPH 5 min and daily chart and see a tremendous setup

Hariseldon
12:25:00

Here was my thinking this morning – I am in a PDT account for the challenge – but ENPH has an incredible set-up. Perfect for day trading (and I did day trade it), but do I trust the market for a swing? do I trust the sector? That led to the thinking (by my wife who found the trade) of – what type of trade protects me from sector rotation, let’s me lean on support levels, but still profit from the bullish move in the stock? An OTM Bullish Put Spread with a 25% ROI does that. Thus the 260/255 BPS for a $1 Credit. This is how you need to think of your trades, especially if you have to swing them.

2022-08-02
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Hariseldon
12:55:18

Here is the danger of AMTD – you go long at let’s say $9.80…it drops $9, but you hold because this thing can jump to $15 out of nowhere, it hangs around there for a bit and then jumps back up to $9.80 – you consider exiting for a scratch but don’t want to miss the big move, then it drops to $8.50, but you hold again since hey it just jumped back up before, it will again….bell rings, you’re hoping for after hours action and you get it, but it drops down again – it’s now at $7.10 and you are screwed, at this point, you have no choice but to hold, right? By the next morning it is at $6.50 pre-market and you can’t take it anymore, so you exit for a $3.30 massive loss. Market opens – it goes $11.50 – you start drinking, heavily.

Dave W
12:57:24

i just dont trade momo stocks meme or otherwise

Hariseldon
12:57:47

I am not proud – at this point I am practically begging GS to give me shares to short – they just laughed and laughed and laughed

2022-08-02
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Pete
13:40:40

When the market is in a news vacuum and the trading volume is light, you can expect moves like these. Everything will look great and then out of no where you will see a giant move. Those are often recycled news reports. I don’t know if this is legit or not, just want to warn you in advance.

Dave W
13:41:46

if you knew what caused the drop what would you do differently than you would by just watching the market

Hariseldon
13:47:00

Knowing the source of the drop would: a) give me a sense if it is transitory – i.e. from recycled news or more substantial – knowing this might cause me to rethink some swing, b) if I know it is due to China, for example, I might hesitate before day trading a stock like BABA which is bullish today, but could be more susceptible now to a negative headline then previously, c) make me feel super smart

2022-08-02
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Pete
17:43:22

There are some stocks that you can and should chase. Some of the cloud computing companies, EV, biotech, cryto… These were not stodgy old companies with boring products. They are cutting edge and often they don’t even make money. Investors and traders start foaming at the mouth and when some of these take off, sure you can buy those breakouts. The difference is that you know the nature of the company and you can see sustained price action on M5 with stacked candles and heavy volume. Those are the “tells”. I should provide some clarity. I am not saying you should chase the stocks I referenced now. There was a time when the sky was the limit on them and they were “HOT”. They made their run and they were bought up like they were the next AAPL. COIN, UPST, ZM, AFRM, LCID, QS… the list is long. If you see a flier, take a look at the StockER and find out what they do. It will help you gain some perspective

2022-08-01
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JohnB
13:04:29

Question How current is the data within the 1OP “Pre-Earn Options” tab, specifically the IV when comparing this week to next? Looking at CAR for example, 1OP shows a .33 difference whereas TOS shows closer to .55.

Pete
16:52:03

We use end of day options data to calculate the IVs and expected move. Typically the difference if any will be minor. The historical calculations use the IV just before the close the day of the earnings announcement for the historical calcs for expected moves so they are spot on. When you are placing the trade, always look at the current values in the options chains. This will give you the most accurate reading.

2022-07-31
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DnJoe96
00:07:29

I know it’s been talked about before here and in the subreddit, but its hard to deal with the judgement you get from people when you tell them about this place and what you’re trying to learn to do for a living. The only friends I have supporting me are people who don’t understand the stock market at all, and everyone else thinks it’s the dumbest thing ever. “Not a real job”, “gambling”, “you’ll lose everything”, etc.

DnJoe96
00:07:48

It really does put a lot of added pressure on what is already a very mentally exhausting thing to do. To top it all off, I believe I am currently sliding down the dunning-kruger effect slide as I have recently learned what all the talk of mentality issues are actually about. It almost seems like doing this is much easier when you have no experience and have never had a big loss before lol.

Dave W
00:12:17

It is important to have a partner or significant other that supports you with your trading. You will have to ignore or avoid the naysayers who have no idea what they are talking about. If they arent supporting you they dont deserve your attention.

2022-07-31
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TheSwoleTrader
10:58:54

Do you sometimes need to give RS/RW a chance to start up again? I’m on mobile so don’t have the exact samples to show but I’ve found a stock will look bullish technically in addition to having RS, spy climbs and i enter the stock, and it can sometimes take 10 mins for the stock to react. If the stock never breaks down I hold for 10 mins regardless, but is this normal? My gut tells me yes as it’s usually successful but would like a pros 2 cents

Pete
17:59:43

Yes it can take a stock a while to regain its bid. Especially if the stock surged higher and it has to work off some profit taking. In the context of a strong stock with lots of D1 and M5 checkboxes marked, if the market is making a nice jump you do want to see at least some upward movement in 10-15 minutes if it is a day trade. If the market is in a bull trend day, you can give it a bit longer, but if the market is rangebound and choppy, you should start thinking about an exit.

2022-07-31
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ExpatTrader
11:15:38

I know Pete doesn’t like to trade in the afternoon unless there is something extremely compelling. What would that look like at the bare minimum? Right now I’m thinking 40min+ compression as a bare minimum, that could keep me out of trades whose move has already started attracting profit takers.

Pete
18:10:24

Bullish Trend Day Scenario: I would want heavy volume during the day, a nice D1 SPY breakout above the prior day high and a nice run with at least a few stacked green candles during the morning session. I want to see evidence that a bullish trend day is unfolding. I will be looking for a bullish 1OP divergence for confirmation. Bullish Range Bound Scenario: If the market is range bound (“inside day”) and there is nice movement from one extreme to the other I would look for a drop to the lower end of the range. I would want to see a higher low double bottom or other signs (tails under body, bullish hammer, bullish engulf) off of the low of the day and it could coincide with a bullish 1OP cross. If the price action during the morning is choppy without any nice runs, lots of overlapping candles of a mixed color on low volume and we are caught in the first hour range, I am not likely to trade in the afternoon. This is all in the context of SPY. On any day there could be a hot stock or group we can trade.

Pete
18:16:54
Pete
18:24:33
Pete
18:29:24
Pete
18:35:54
Pete
18:40:59

These are some examples from the last two weeks. It all comes down to checkboxes. Each day has its own personality. Wait for your windows to set up and know the patterns you are looking for. If you get nice runs with stacked candles and volume, those will always be your higher odds days. Nice clean (not a bunch of mini crosses) bullish and bearish 1OP cycles are also a good sign that you will have good price movement

2022-07-31
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Dave W
15:26:12

if you try to define every specific detail of why you took a trade there will be too many to objectively analyze. You might want to try general strategies like PBO (pull back opportunity) which would cover pull back to 8 pull back to VWAP etc (each would require confirmation – a bounce to enter) another could be momentum continuation another could break out of compression or Break out of resistance this will give you a pretty good overview of the strategies you are using and how successful they are. Bull flags wedges etc would all be classified as a break of resistance, so there would be other specific conditions that also could occur as part of the overall strategy. Just an idea; I guess since generally i only use rs or rw stocks and they always align with the daily chart setup i dont note them since those conditins are understood as being part of

Dave W
12:18:01
Every scan result has to be viewed on a chart to look at the total context of the price action and technical setups.  Scans are meant to get you prospects that you can then make a decision as to how close it is to a trade you will take or perhaps watch or set am alert. There will always be some subjectivity based on your technical analysis skills, your ability to read overall market story and if there are currently better prospects. If you try to make the scans to exact you will be making perfect the enemy of great.

Dave W
12:09:10
Trading only the highest probability setups is very important and takes patience 
Dave W
15:21:24
@DnJoe96 it is extremely rare for me to go all day without 1 trade even in a choppy low probability market. Finding 1 or 2 highest probability trades every day is normal even on a terrible trading day. Since one of the criteria is trading rs/rw those that meet that criteria as well as the others i outlined (dynamic compression break, trade with the trend of the stock – no counter trend trading, HA reversal setup, BB width expanding and institutional buying or selling driving the trend)  will have a extremely high success rate. In a choppy market taking profits early is important since rs/rw can wane in a stock and with no market direction there is no need to go for home runs.
Dave W
15:23:17
Remember, making money is our prime objective, not making trades so most of my trading day is done scanning and searching while watching the market

Hariseldon
15:22:22
Jerson wrote:

A question for the Pro’s, I have been dabbling with the idea of trading the SPY directly options/futures BUT following 3-month paper trading and then 3 month of 1 contract until I can achieve a 75% win rate with a PF of 2.0 doing so. The system seems to prepare you to trade the SPY eventually because we are always putting market first
That question is asked monthly – there are a bunch of posts and articles on the topic but to bottom line it – there’s no edge in just trading SPY, your edge lies in RS/RW.  Is it good to learn SPY, the 1OP, and how to read the ETF in general? Yes, of course – but it takes years of experience to learn the subtle patterns.  

2022-07-30
Mark As Read

Hariseldon
16:17:54

@flowbee IV Crush is specific to earnings.  There are several factors that go into an options price.  Let’s say you have $95 calls expiring in a week for a $100 stock,  that means you can buy the stock at $95.  So technically this should cost $5, right? But instead it’ll cost like $7.50ish.  Well a big part of that is Theta, or time decay.  Let’s say every day is worth .20 cents.  So with 5 trading days left – that’s $1. Ok that gets you to $6.  The next biggest is usually Vega – or Volatility.  The more volatile a stock is projected to be, the more you pay.  Why again? Because if a stock is going to make big moves you could profit a lot (or lose a lot), and you’re paying for that chance.  Right before earning IV is very high, which inflates an option pricing.   So in this example let’s say a full $1.25 of that $7.50 is from IV right before earnings.  But once earnings comes out, it’s not so volatile anymore, after all the big move already happened.  So IV drops , a lot…now instead of contributing $1.25 to the pricing it only contribute .25.  

Hariseldon
17:36:17

@flowbee Only insomuch on whether the option is overpriced, I buy ITM options.  If I’m trying to use options as a proxy for the stock I’m looking for .9 or higher delta , if I’m looking for a straight trade it’s .65 or higher.  If I’m holding for a few hours IV will stay consistent, so I’m not concerned except for the cost dragging my buying power.  If I’m buying before earning and selling before earnings then I’m counting on IV staying up to keep the price stable.  So I’m either using it to hold up the price or avoiding it so it doesn’t drain buying power, but I’m never holding over a major event which can crush it 

Fox
04:05:41

@flowbee I will defer to Terry’s permission to repost it. It is very similar to Hari’s recommended steps for preparing RS/RW candidates and then entering the RS candidates on bullish 1OP cross and RW candidates on 1OP bearish cross. The aim is to build muscle memory of preparing to getting ahead of the next anticipated 1OP cross

Pete
10:24:43

Pete
12:03:27
Show me that stock that is up on heavy volume today, through an algo line D1, above the prior day high, on a buy signal M5 and that has good option liq. Here is the kicker, it is also in M5 compression
Pete
12:03:56

Pete
12:49:57

Pete
12:50:29
Glad you mentioned AAPL Dave. Top of the list. You know you can use the Algo (new) on any time frame
Pete
12:52:01
Using M5 and Algo (new) is an alternative method to using compressions. You can add heavy volume M15 as well. AAPL was on that search as well. Then you know you have the algo breach and volume
Pete
09:03:13
The video does not use Option Stalker Pro. That disappoints me because OSP does all of this. That in turn motivates me to make OSP better. I am going to spend the back half of the year adding studies and making the display better (color coded bars). Group/sector analysis is already in the works.  When any of you decide to do a video, I want OSP featured, not because I am asking you to use it, but because it is what you want to use.
Pete
09:04:02

Pete
09:04:34
This search finds those same stocks
Pete
09:04:59
1OP would help you enter INMD from the video
Pete
09:05:18

Pete
10:08:23
“Pete, what is the difference between today and yesterday? Why are we buying early?” Yesterday we had a possible reversal after the FOMC. That has happened often and we needed to make sure that was not going to happen. We also had neg earn from META. This morning we knew that factors were resolved favorably because the market rallied the entire day. In doing so it also confirmed the tech breakout above the down trendline. Yesterday 1OP was declining into the open and it was to our advantage to see what that cycle brought. This morning we are on a beautiful 1OP bullish cross and that set us up with a nice tailwind. The market did not gap up very much so we did not have to feel like we were chasing. The early green candles  after 15 min were the sign that we needed to act quickly
Pete
10:10:18
It does not happen often, but when the checkboxes are marked and you get all of these factors lining up, you have to be more aggressive on the open. 
Pete
10:16:43
Jerson wrote:

MCD holding very well
Right now you do not want a stock that is holding up. You want a stock that is exploding higher

2022-07-29
Mark As Read

Hariseldon
10:41:09
If last month you did not remove profit from your account then you should be following these rules:
Don’t Short a stock when SPY is in a bullish trend
Don’t Short a Stock that is Green and don’t go long on a stock that is Red
Don’t trade a stock that doesn’t have at least 1 million in volume
Don’t trade a stock that is under 1.5 in Relative Volume
Don’t trade any momentum-based stocks under $10
Don’t trade a stock without RS/RW on the M5 and D1
Don’t trade a stock without a strong corresponding D1
Don’t trade against the 1OP Direction on the M5
If you follow these rules it will save you a lot of pain

2022-07-29
Mark As Read

Pete
11:41:09
Shiv wrote:

Question @willbeing & @Pete – In future updates to OS Pro, have you considered a feature where we can have the D1 and M5 for a stock linked so that we can quickly see both charts side by side? Right now I look at the D1 chart and then switch back to M5 for an entry provided D1 is good. Thank you

Already exists. Click the chain icon in the chart to link them

Pete
12:16:17
Every day there is a tug-o-war in the market. The good thing is that you get to see all of the players on each team and you get to decide which one you want to be on. Sometimes they will be balanced and you can join either. Sometimes the choice is obvious. You don’t have to be in every battle. There is little question that the long side is stacked right now. 
Pete
12:18:04
The players are your technicals and they all favor the long side here. Yes there will be rounds of profit taking and you want to avoid those battles. The does not mean you join the other team. I just means that you have to wait for your team to recover. 
Pete
12:20:05
In that spirit, you know that buyers are engaged. You take some longs you ride them as long as you can and you take gains. For most of you, you patiently wait for the next entry for longs. You do not trade the short side. That is the losing team.
Pete
12:20:54
If you are a pro trader, you can try the short side and you can do well. 
Pete
12:24:53
Dustin Johnson goes for the pin from 240 yards out and water surrounding the green. I don’t have enough balls in my bag to attempt that. I go with a much shorter shot that I know I can make and I stay within my game. When the market gives us longer term momentum that we can lean on, it is wise to only trade from that side. 
Pete
12:27:16
If the market does not set up for a long – OK. Don’t trade and be good with that. If the bottom drops out and you missed some good shorts… that’s OK too. What you do NOT want to do is to start getting cute by taking shorts against a strong market. You are not likely to recognize the warning signs and you will take a beating
Pete
12:28:41
Look at the D1 SPY chart right now. Is there anything that says short? No. Might the 100-day MA provide resistance? Yes. That does not mean short. 
st0rm
14:35:52
@AwkwardAlien Look for them for Monday, build up your master list. It’s interesting to see what’s weak on the greenest day in recent memory 
Dave W
14:36:16

@AwkwardAlien anticipating based on fear will not have a good outcome 

Hariseldon
14:38:35

@AwkwardAlien I’m smacking you from the road that’s how much you need to be smacked 

Fox
14:03:15
key lesson for trading options — liquidity is everything. without it, just numbers ona screen. have a PANW call butterfly 500/505/507.5c from 0.55db showing 1.25cr now but cant get out for even .90cr

TuckChat
16:04:53

@st0rm – everyone is using the term “Profit factor” – I just want to make sure I’m right on this. Does 1.78 mean that your average winner was 1.78 x your average loser.

Hariseldon
16:05:52

@TuckChat Made $1.78 for every $1 lost.

st0rm
16:08:30
TuckChat wrote:

@st0rm – everyone is using the term “Profit factor” – I just want to make sure I’m right on this. Does 1.78 mean that your average winner was 1.78 x your average loser.

Yep what @Hari said, total profits from wins divided by total losses. It’s a nice stat because it encourages you to keep the losses small.

terryO
16:09:49
For the people that are transitioning from paper to $ trading.  DOn’t get cocky and skip the one share at a time segment.  One thing the paper trading doesn’t exploit as much is emotions in your trading.   The 1 contract/share excercise will give you insight on how $ trading differs from paper trading with out the big exposure.  There are differences.  Keep your paper trading results to compare with your $ trading results.  Often times it will show how much emotions play into it.

Hariseldon
16:25:38
Klinton wrote:

was this you trading the system on your own or mostly following others to learn ? just curious
Think of this place and RealDayTrading on Reddit as a University – there is a proven method taught, mindset and process – it takes time (roughly 2 years) but the goal is to get one to become a full-time trader with financial independence. Everyone follows the method/strategy taught .

Pete
16:29:22

KatersTraders wrote:

Thanks Pete.  In your trading do these divergences cause you to trade smaller or with even more confidence?
I get more aggressive with the divergences because I have confirmation of trend strength. Today the divergence came late in the day and it was near a major MA so I scaled in slowly and got confirmation along the way. In general I trade smaller late in the day and I am more cautious. 

Pete
16:33:13
In the first half of the day when I get nice stacked consecutive candles I get aggressive on heavy volume and D1 tech breakouts. I will take some of the position off on a 1OP M5 bear cross and let a bear cycle start. I get confirmation that trend is still intact and then start adding back. I am expecting a bull div and I am expecting a bull flag formation.
Pete
16:39:14

@KatersTraders Patience is critically important. Let the marginal trades come and go. Save your money for the really good  stuff. If you ever get all of the tumblers lined up (market momentum D1 plus all the rest) you can get more aggressive. Don’t do that until you get your win rate up.

2022-07-29
Mark As Read

Pete
16:48:58
All of you have been  training in tough market conditions. Many traders have failed to make the cut, but you are still standing. When the market finds support there will many days like the last 3 and you are absolutely going to CRUSH IT!!! Just remember the lessons that got you here. 
Pete
16:50:53
This tough market has taught you to respect it. You are much less likely to fall victim to it because you know what to look for and how to patiently wait for your windows

2022-07-29
Mark As Read

Pete
17:06:21
Amaya_trade wrote:

Question For day trading,  is there any specific rule to close position for profit/loss ? Because I work full time, usually some of my profit position turned into loss such as AMZN . Any suggestion ? Thank you all . 

My suggestion is… don’t day trade. You have to focus more on swing trading. I am not a fan of placing bracketed OCO orders. If you are going to day trade you have to be engaged all day. The alternative is to enter the position knowing what your trading window is… I have 1 hour. The stock had better make the move in that time. If not – get out!

2022-07-29
Mark As Read

terryO
17:32:31
Fox pointed out what I was trying to convey.  I ,too watched alot of lottos expire worthless while the more experienced walked away with big winners on the same ticker.  Delta is one part, gamma is another.   your return increases significantly once the price goes in the money itm.
terryO
17:36:30
Your stock selection and entry timing were spot on.  I wasn’t trying to infer you did anything wrong or that Dave made a better trade.  It was a “live” example where you could see for yourself how the different strikes react to price movement.
terryO
17:37:33
hope that makes sense
terryO
17:40:32
I like the 5 units approach for lotto management.  By 5, sell 3 at 100%, 1 at 200% and try to max the last one.

Pete
17:45:06
DnJoe96 wrote:

Question Hi everyone, so my question is this: When do you decide whether to enter a verticle spread versus a single or just straight stocks? I’m trying to learn more about options and verticle spreads seem like a great way to limit your losses 

The first part of that decision comes from your win rate. If it is > 75% for a couple of months you are ready to consider trading options. If it is not, you still need to work on the win rate. Options are a way to leverage your capital. That is a double edge sword and it means you will lose money more quickly if you have a poor win rate. In your question you state that verticals are a great way to limit your loss. If you trade 100 shares and you do a 1 contract vertical spread that would be true. However, most traders don’t do 1 contract verticals. They do 10. Why? Because they can afford to. In that instance the vertical spread is not safer because you are overleveraging. The best advice I can give anyone is don’t trade options until you have the win rate. 

Pete
17:48:43
I prefer to day trade stocks. I don’t need the leverage and 4:1 is plenty. I love the liquidity of trading stock. For swing trading I prefer options. 
Hariseldon
19:29:53

@DnJoe96 there’s sections in the wiki on taking spreads vs stocks vs straight options

Hariseldon
20:33:44
I’m not sure how many but there are a lot of testimonials of people who quit their jobs.  The process takes two years – and many trade for a long time before they actually start down the road 
Hariseldon
20:39:10
One of the biggest issues is impatience – people don’t realize that they really do need to take two years , they need to hit the milestones paper trading and hit them again trading 1 share, they need to learn everything along the way and change a mindset that is often deeply entrenched.  Instead they rush in, start trading and then wonder why it’s not working after months of losses.  
TomServo
20:56:19
Hariseldon wrote:

One of the biggest issues is impatience – people don’t realize that they really do need to take two years , they need to hit the milestones paper trading and hit them again trading 1 share, they need to learn everything along the way and change a mindset that is often deeply entrenched.  Instead they rush in, start trading and then wonder why it’s not working after months of losses.  
This is me. I came in guns blazing in Jan and Feb and got my ass handed to me. I stopped finally and went back to paper trading. I’m now taking only the best setups (still on paper), and and working my win rate and paper PF up.  In a couple months if I can get my numbers high enough, then I’ll start the 1 share 1 contract step.  I have been watching and learning from all of you. My day will come, and I refuse to give up because I love doing this.  Thank you Hari for your trading grit, your devotion to this community, and your video rants! Thank you Pete for an amazing OS platform, your market commentary and building this community from scratch.  Thank you Dave Wyse and your stoic patience taking on the best trades since I’m now doing the same. 

Hariseldon
21:02:27

@TomServo great attitude and approach!

willbeing
22:41:23

mSquare wrote:

Is there somewhere on the site where one can get link to the various videos posted by @Pete and other Red traders? Perhaps ‘last N’ videos by poster & date Question
Hi mSquare, all the latest videos can be viewed on their YouTube channels:
willbeing
22:47:28
Harry48 wrote:

Question  is there a working index for the articles at oneoption.com?

Hi Harry48, oneoption.com/blog is a good place to start exploring Pete’s writings from over the years. He has articles about RS/RW dated as far back as 2006. While we don’t have a full index yet (I’ll put this on my to-do list – it wouldn’t be bad to have!), from the blog you can explore articles by category, view ‘All Articles’ via the large blue button, or click the category badges (the blue text above article titles) to view category-specific pages.

2022-07-29
Mark As Read

Pete
15:24:55

That is a failed beakout on ROKU D1; ROKU $459.25 was previous resistance and now support. stock is below that; i would like to see ROKU give up half of that long green candle on D1

2022-07-29
Mark As Read

Pete
15:25:10

SNAP for me is in a bull flag on the daily. It would need to break above todays high for me to take a bullish swing type entry

Hariseldon
10:46:07
ollyman wrote:

Question When trading algo line breaks, you  sometimes have a series of pivot highs or lows that are close in price.  Take META for example, I see an upward sloping algo line starting on 6/23 making a series of higher lows. If META breaches this algo line, is this a lower probability play because of potential support along each of those lows, and the better trade is to wait until a break of support around $154?

I think you have more faith in pivot highs and lows as areas of S/R than we do 

Fox
08:17:46
R.Trader wrote:

Can someone give me an example for a CDS please and explain the purpose?
There is an article on it in the RDT wiki. The exact mechanics that we use here are… unique and will set you up for the highest probability of success as long as the stock pick is good and market plan is not horribly wrong

Fox
08:24:52

@Collin put credit spreads worked amazingly well in 2020 and were enough to build a whole trading book on. But as market conditions changed so did the probabilities & pricing dislocations. For Put Credit Spreads, Call/Put Debit Spreads, and Calendar Spreads i can attest that the exact mechanics as Pete Dave & Hari lay out here will outperform almost every other retail execution model of them. If you go deep into Euan Sinclair/Nattenburg super nerdy option pricing models, you will find Pete Dave & Hari have “stumbled” onto the most desirable executions in practice. Just think… if OneOption is your first learning port of call you just saved years of reading quanty books on pricing models

Fox
08:34:33
the main point is that we use a methodology to get our win/selection rate 60-70%, when combined with structural edge of option spreads, then they become more reliable because those outsized 3-4x losses are way more rare than the probabilities dictate @Electric Surfer 
Fox
08:57:43

@Electric Surfer for me in 2020 Q3-Q4 took 18k sub PDT to 27k on spreads alone using OneOption swing scanner & methodology + credit spreads only. market conditions changed in 2021, vol dropped & options premiums decreased so it made more sense to start using debit spreads long premium than selling premium with credit spreads. there is an element of buffer built in to credit spreads so that your entries dont need to be so accurate as long the stock or long prmium.

Hariseldon
11:55:35
Collin wrote:

@Hariseldon, I sure paid the price for selling; this really is a learning experience
What specifically did you learn?

Collin
11:57:03
Hold strong positions longer rather than pay attention to noise. 
Hariseldon
11:57:27

@Collin there you go….perfect

Hariseldon
11:58:41

There is scalping and there is trading – if you are trading but exiting like it is a scalp it will never work – if you are scalping and exiting like you are trading it also won’t work – you can’t do both.  

Hariseldon
16:29:15
Amaya_trade wrote:

Question @Hari what is difference between scalping and trading ? (newbie question) 

Excellent question – Scalping is entering a trade with the intentional of a very short time-frame.  That doesn’t mean a scalp can’t turn into a “regular trade”, it can – but you don’t want it to – your stops, whether mental or hard are usually much tighter and you are basing your decisions on the immediate price action, not the longer time frame charts/trends.

Pete
16:29:26

@st0rm Exaggerated moves will usually present an opportunity to trade in that direction the next day. It becomes a stock trade just like any other except that the stock is on your radar already

Dave W
16:33:02
on time spreads if you use calls and the price moves above your short calls you have to be aware of assignment so it is trickier to trade than if your short calls or puts are oit of the money
Dave W
16:34:26

@TuckChat on TDOC  you could let this weeks short calls expire worthless thus keeping that premium and holding the long calls for a bounce 

Hariseldon
16:35:02
ROKU you let the short calls expire worthless and then hold the long calls for next week looking for a bounce to cover the difference.  For AMZN it is more difficult, I will try to close the trade at break-even.  With both AAPL and AMZN exceeding estimates on their earnings I would wage tomorrow will be a bullish day – so I would not count on your time-spread that has gone up to pull-back much
Dave W
16:39:42

@st0rm as s suggestion when the stock is so far out of the money especially near the expiration day just let them expire worthless  otherwise you are adding to tour loss. If you think the stock will get above your lo9ng calls price by current weeks expiration than that would be a reason to buy back the short calls otherwise let them expire

Dave W
17:43:11
TuckChat wrote:

@Dave W do you mind sharing your TDOC time spread. ? I entered the 41 calls at about .35, and had to sell for .10. I never really saw the spread get much higher than .10 today. I’m trying to figure out what I’m missing on this…

i actually exited the trade yesterday. Put it on early thinking that maybe the volatility created by the fed announcement might benefit the time spread which it did and i got out for 27% profit without holding it overnight into earnings. If i was in it i would let the short calls expire worthless tomorrow and hold the long calls looking for a bounce next week especially if TDOC gets over the 50 sma 

Dave W
20:11:23

@BennettN I dont know if TDOC will bounce or not but since if you already have next weeks calls you want to hold them to see what TDOC does in the next day or 2. If it gets over the 50 sma you hold the calls and perhaps add some lower strike itm calls as well. If it heads down then sell next weeks calls and buy puts 

Dave W
20:13:17
last earnings season TDOC gapped down to $29 and recovered to $40 4 days later 
Dave W
20:36:12
that is a middle ground strategy. You can sell next weeks 41.5 call for about .15. If the stock doesnt recover you have cut your loss by .15 and capped it at .50 if TDOC moves up 41.5. 
Dave W
20:43:19

@Harry48 I exited TDOC time spread the same day i put it on for a 27% profit. My thinking was to put it on early on the fed day to see if the volatility created by the fed would move the TDOC time spread up in value as the bid ask widened. I was prepared to hole overnight but as it turned out i was able to exit for .46 after entering for .36 

Dave W
20:44:53

@BennettN The 50 sma that it bounced back up to is a consideration as well as the bounce last earnings report after a big drop as well as the decent move it made up today. I would just be holding my calls until i see the price action tomorrow 

Dave W
20:47:46

@Harry48 i usually set an exit for a profit of 20% to 30% and have it working when earnings are released then i evaluate the price on the spread as well as the price action on the stock. The price action after earnings can either move your premium on the time spread higher or lower and that needs to be evaluated 

Dave W
20:50:57

@TuckChat no i just try for near the mid point. On time spreads the price you get in at is not a specific % as it is in debit spreads 

Dave W
20:55:22
depends on the stock price and the IV 
Hariseldon
20:59:41
Remember if you sold a call at $1 and bought a call at $1.50, and you’re short call goes to 0 , and your long call is at .10 because of a big drop, you only need that long call to go up .40 to break-even.  At .10 you’re at a delta around .25 , so that means an increase of roughly $1.50 in the stock (not $1.60, because of Gamma).   
Now if it’s the last day and you see the stock is bouncing with RS and you think it can hit that amount you hold, if not you take the loss.  But if you have more than one day you have a decent change at a small rebound to break-even.
Dave W
21:38:44
AMZN & ROKU are different  AMZN has short calls in the money so assignment comes into play. Roku you can just let the short calls expire worthless and pocket that premium then decide what to do with the long call
Hariseldon
21:47:27
Yes with ROKU – short call expires worthless, and I’ll hold long call until it hits break-even or above.  AMZN – if it’s very bullish I might buy back short call and ride long call until I’m in profit. Or I’ll sell it for a loss on a pull-back.   Depends on the market and the market 

2022-07-28
Mark As Read

Hariseldon
16:38:29
Jared B wrote:

Question  I’ve picked up on some reads by Pete such as candles getting smaller when approaching resistance, mixed candles and wicks above/below body. But are there other ways to spot weakening price action that might warrant an exit?

Volume – 

Pete
16:39:58
Hariseldon wrote:

Jared B wrote:

Question  I’ve picked up on some reads by Pete such as candles getting smaller when approaching resistance, mixed candles and wicks above/below body. But are there other ways to spot weakening price action that might warrant an exit?

Volume – 

1OP cycle for SPY and the stock M5. Just like I posted today. Stock getting extended in 1OP cycle, take a little off

lilsgymdan
16:51:46
profit target based on a d1 support/resistance
1op cross out of bull on stock or SPY (for long)
price action showing RW if very close to entry
Any of those
terryO
16:54:39
OK, good, sometimes I get, “when I feel like it stopped going up”  One practice that helped some in here was using the HA candles.  Once you get a tail, look to exit your long.  
terryO
16:55:33
It’s not 100%, you can get a big move down before that tail shows, so you need to monitor the traditional chart, but it has helped others
terryO
17:00:32
yes, color change is a “big wick”.
terryO
17:04:39
a big thing I struggle with is getting right back into a ticker that is strong.  I have some voice telling me not to. “Dont give your money back”  Bullshit.  If it’s a good setup, get back in.
terryO
17:19:57
Careful not to beat yourself up too much about early exits.  Use the time to find the next good setup.  Work on developing your exit skills.  When you get more confidence in your setups, you’ll naturally stay in the strong trades longer.

2022-07-28
Mark As Read

Dave W
15:23:44

Since we trade off rel strength & technicals those elements are missing (umless you consider technicals on 1 minute chart) so what do you trade off for IPO’s hope and gut feel. Not prudent

Hariseldon
12:08:39
I don’t know who asked that question it was gone before I could read it fully but I will answer it – NVDA is what I consider a “safe trade” it gapped up above its’ SMA, there is strength in Semi’s in anticipation of the bill passing, it has over 205% the RV of SPY and I do not see a lot of downside for the stock, I have an out at the SMA and a lot of room go – happy holding it and happy taking $2-3 profit as well.
Hariseldon
12:10:51
As long as it is slow – questions like that are fine to be asked – if I don’t answer I don’t answer (because I am trading), but I want people to be able to feel they can ask questions during downtimes – I will do my best to answer (as I am sure will Pete, Dave, etc.) just don’t be offended if you don’t get answer to your question right away.
JohnnyBGD
12:14:57
Hariseldon wrote:

After hours (and perhaps after the earnings frenzy) I would like to hear from everyone what they think will improve this chat room – tonallyI want this to be a learning environment.  This is Pete’s community, and I am helping him because I believe strongly that this place benefits traders – the only thing I get out of it is to see you all succeed.  So as long as I run this chat room, I want to make sure it is geared toward that goal – so please think of whatever you feel can improve your learning experience here.
I think you encouraging us all to define our reasons for entering trades has made a giant difference so far

Hariseldon
12:16:46

@JohnnyBGD yes, I agree it is great to see.  To be perfectly honest, I struggle at times with trying to articulate why I am taking a trade – I read price action and saying, “I just see it” doesn’t really help anyone.  But to put into words what it is I “see” can be very difficult at times, so bear with me if I can’t exactly describe the reason.

Hariseldon
12:32:13
Remember – form your story.  This is what I see – the market is bolstered by some rare optimism here – earnings season has kicked off much better than expected, especially among Tech.  As usual the issue with SNAP is an issue with SNAP and not a harbinger for the rest of the sector (when will they learn that SNAP is just run like shit?) – Atlanta GDP numbers were revised upward (which may strengthen the resolve of the FED on rate hikes) and there is signs that inflation is beginning to wane – which makes guidance for these companies even better – The FED may screw things up through the sheer force of Powell’s charm and devilish smile, but at the moment all that money on the sidelines is beginning to find a home with some equities. 
Hariseldon
16:25:49

@AriS not much to add there – I was bullish on the market and on the Semi sector – I liked NVDA and felt the profit taking did not do much except give me a good entry for it – the volume on the pullback was also lower than on the bullish side, NVDA can move a lot and I also wanted something I could take profit on before the FED – so it fit a lot of criteria

Crux
13:21:51

@Hariseldon If we are considering this a slow part of the day I have a question… after adding to a winning trade, if it goes against you with the bigger position size are you more likely to exit for a scratch before letting it go against you further and relying on the D1? or is the answer completely market dependent

Hariseldon
13:23:29

@Crux depends on how much it goes against me and the market – NFLX went against me quite a bit (almost $11) and if I stayed with it one more day it would have been profitable – I exited when I shouldn’t have

Hariseldon
13:26:49

@Dave W perhaps you can weigh in since you are still in the TECK spread  @Joao’s position is the lack of decline in volatility is to due to “extreme” price movement in the stock – however, my position is that the price movement in TECK is actually less than anticipated by the option pricing and the issue is the lack decline in IV in the second week.

Hariseldon
13:28:06

@Joao the Options priced in a move of +/- $3 on the stock – it has moved +/- .80  it is not the price volatility because that is less than expected, not more

Dave W
13:28:50
i dont see any extreme volatility in price today in fact i see hardly any volatility in price  the IV’s should have been crushed as they usually are the only thing i see looking at the daily chart is the big gaps that are common  that may be what is keeping the IV elevated 
Hariseldon
13:35:43

@Joao well unless both Dave and I are wrong – your assessment is off – there is not extreme volatility in the price for TECK – there is actually the opposite 

Hariseldon
13:49:39

@Joao please stop arguing – once again both Dave and I corrected you here – TECK’s price movement was priced into the options the expected movement was +/- $3 and the actual movement was much lower than that.

Hariseldon
13:50:16
One thing I will not have in this chat room is incorrect information – and this one is not a matter of opinion – the price volatility on TECK is lower than expected.
owensd
13:52:30
There was news on TECK this morning: https://finance.yahoo.com/news/teck-ceo-lindsay-exit-miner-104923384.html – just speculating on why IV might still be up.
owensd
13:58:32

@Joao TECK’s normal volatility is  4.21% 4.96%, within the range of today’s price movement. So there’s nothing special about it. Also, the ATR is 1.7, still less. That’s Hari and Dave’s point. The price movement isn’t interesting.

2022-07-27
Mark As Read

Fred
13:37:47
ExpatTrader wrote:

Sitting here for 5 hours and not really doing anything is a real test of willpower. The FOMO when the market isn’t producing good tailwinds, you’d think it would be easy to avoid, but there is a real internal conflict that goes with days like this.
Summons your zen energy!

Dave W
13:38:53

@ExpatTrader i think because your main motivation is to trade which needs to be replaced with the motivation to be profitable

Hariseldon
13:59:05

@ExpatTrader you need to have faith in the market direction – particularly when there is a reason behind it (strong earnings) – 

Hariseldon
16:29:13

@TuckChat I just put in the price I want and wait to see if it fills – like for META I did not want to pay more than $1 so I put it in for .95 and got filled at .92

Hariseldon
16:33:09

@st0rm the size of the movement doesn’t matter – it could make a huge move and the time spread will work or it could make a small move and it will not work

Hariseldon
16:33:23

It is all about whether or not the movement is in line with the expectations set by the option pricing

Hariseldon
17:12:52

@ollyman it is always important to think about the reason for what you are paying – the difference between the credit you are getting for selling this week’s call and the debit you are paying for next week’s is primarily pure premium, time decay is always going to be include and is fairly constant, the main driver of the difference is the IV – the IV of this week is higher, and that should reduce the amount you are paying – so if I am paying $1 for the spread, that means I want a $1 or more to be drained from this week’s call’s from IV that won’t be from the next weeks – But there is no constant number like with Debit Spreads

Hariseldon
18:41:16

@Collin @lilsgymdan one can certainly use Time Spreads as a source of income, however – there are only so many you can do and it really only applies during earnings season – so that leaves a huge gap of time where you have no income coming in.   As for Credit Spreads they are actually one of the best R/R plays you can make – if you take an OTM Put Credit Spread on a stock with RS, a good D1 and the short strike of the PCS has 2 layers of support above it, you are entering into a very high probability set-up.  The credit you receive for these spreads needs to be a minimum of 25% ROI – which translates into 20 cents for every dollar in the spread – thus a 50 / 49 strike spread would give you a .20 credit whereas a 50 / 45 spread should give you $1.  If you are getting a 25% ROI , you need to win these trades more than 80% of the time.  Around 3 years ago we compiled over 300 of these spreads and members here all put them on – during that time the win-rate was over 94%.  And on the ones where the stock fell below the spread strikes, around half the time we were able to leg out of them successfully and either have no loss or get full credit.  

Hariseldon
17:42:03

mSquare wrote:

Question  How will the just passed deal between Schumer & Manuchen to reduce deficit, have minimum 15% corp tax, rid crried-intrest loophole etc. do to markets in near future?

Obviously the stock answer is “Trade what is in front of you and don’t try to figure out the market!” But I hate stock answers – so this is my take – It is very difficult to know how much of that deal was already priced in – consider this, large Institutions have entire divisions devoted to the impact of political activity – which means they already had this on their radar and a percent likelihood it would pass or not , they have contacts on Capital Hill and lobbyists that feed them info we as retail could never get – so a week ago a bump up in SPY could have been from an algo that implemented the chance of this passing, or it may not be priced in at all – and that is the problem.  We could say, “Yeah, that bill should help the market and businesses” but that doesn’t mean that SPY will go up, like I said it may have already gone up.

Dave W
15:21:14

I have been doing this for 12 years what do you think i am doing right now? studying charts […] I have said this before but perhaps some have not heard this. When my wife is asked “how did Dave get so good at this?” Her answer is “He eats, sleeps and craps charts”

Hariseldon
18:05:52
Gehrman wrote:

Question Meant to ask this earlier but I was at the gym – Hari you were asking for feedback on the chatroom and policies etc. My question is, do volatility plays fall within the RS/RW purview? I haven’t been posting my SPY strangles (on FOMC and direction-less chop days) here or in the reddit chat, but they’ve been consistently profitable, and I know some traders here do them. I would like to learn more about trading volatility and see how others do it.

Good question – this is my thinking on it and tell me if you (or anyone) disagrees – While RS/RW is the foundation of the strategy here, I think underlying rule really is about having a proven strategy that is profitable – Members need to know that when they see a strategy or trade posted here that it isn’t just something thrown against the wall or that someone saw on YouTube but that is has been proven to be consistently profitable.  And from that perspective I don’t personally care what it is – as long as it is proven.  @Dave W has done hundreds of time spreads and shown a clear win-rate over 90% – to me that is something members should see.  OptionStalker was even augmented to include data that helps in identifying these trades.

Gehrman
18:10:43

@Hariseldon One thing I believe in is learning a strategy or technique to give context to others. For a brief time I studied scalping and practiced it – to be honest I did not like it, too exhausting – but it helped me understand how the trading we do is very similar, but on a different time frame, so I started looking at larger time frames in different contexts. It also helped me understand that often times, red traders will take a trade on a very different time frame from what many of us new traders are looking at. I’m a big fan of different perspectives because it really aids learning, so long as the techniques are proven. Trading context is an issue, though. So something that would help others see the context of a posted trade, without bogging down the chat or burdening a busy trader, would be very helpful.

Gehrman
18:12:15
I should clarify that before I practiced scalping, I went back into the wiki and found posts/comments where it was suggested that you must still use RS, but you are entering/exiting very quickly, which helped me grasp it better.

2022-07-27
Mark As Read

Hariseldon
20:25:35

veralam wrote:

 @hariseldon, or anyone that can help. This might be a really elementary question, but is there a specific advantage of using the Log chart when looking at charts and their RW/RS to SPY?
Log is better at identifying trends.  On an arithmetic chart the change from 50 to 60 it $10 and the same as 60 to 70, whereas log is %.  Small difference but better imo

2022-07-27
Mark As Read

Dave W
15:21:14

I have been doing this for 12 years what do you think i am doing right now? studying charts […] I have said this before but perhaps some have not heard this. When my wife is asked “how did Dave get so good at this?” Her answer is “He eats, sleeps and craps charts”

Hariseldon
18:05:52
Gehrman wrote:

Question Meant to ask this earlier but I was at the gym – Hari you were asking for feedback on the chatroom and policies etc. My question is, do volatility plays fall within the RS/RW purview? I haven’t been posting my SPY strangles (on FOMC and direction-less chop days) here or in the reddit chat, but they’ve been consistently profitable, and I know some traders here do them. I would like to learn more about trading volatility and see how others do it.

Good question – this is my thinking on it and tell me if you (or anyone) disagrees – While RS/RW is the foundation of the strategy here, I think underlying rule really is about having a proven strategy that is profitable – Members need to know that when they see a strategy or trade posted here that it isn’t just something thrown against the wall or that someone saw on YouTube but that is has been proven to be consistently profitable.  And from that perspective I don’t personally care what it is – as long as it is proven.  @Dave W has done hundreds of time spreads and shown a clear win-rate over 90% – to me that is something members should see.  OptionStalker was even augmented to include data that helps in identifying these trades.

Gehrman
18:10:43

@Hariseldon One thing I believe in is learning a strategy or technique to give context to others. For a brief time I studied scalping and practiced it – to be honest I did not like it, too exhausting – but it helped me understand how the trading we do is very similar, but on a different time frame, so I started looking at larger time frames in different contexts. It also helped me understand that often times, red traders will take a trade on a very different time frame from what many of us new traders are looking at. I’m a big fan of different perspectives because it really aids learning, so long as the techniques are proven. Trading context is an issue, though. So something that would help others see the context of a posted trade, without bogging down the chat or burdening a busy trader, would be very helpful.

Gehrman
18:12:15
I should clarify that before I practiced scalping, I went back into the wiki and found posts/comments where it was suggested that you must still use RS, but you are entering/exiting very quickly, which helped me grasp it better.

AriS
10:29:02
Hariseldon wrote:

AriS wrote:

Short AA  $46.81

I don’t get this trade?

below all SMA, downward trend on the D1, except for the first 10 min of the market it has been downward sloping trending on the M5

Hariseldon
10:30:11

@AriS the last two weeks has AA in an upward trend on the D1and it broke into the gap – I wouldn’t say I am bullish on it, but I am definitely not bearish

Hariseldon
10:30:27
Nor is the stock Relative Weak

Hariseldon
11:38:13
I am not saying the LOD is in – but one does have to ask….Is there any reason to breach the SMA 50 before the FOMC comes out?  Now last time there was a similar question it was with the CPI release, where the SMA was breached before the number, but there were also persistent false rumors that factored in – Typical major support or resistance is not breached before a major economic release.
Pete
11:39:40

Hariseldon wrote:

I am not saying the LOD is in – but one does have to ask….Is there any reason to breach the SMA 50 before the FOMC comes out?  Now last time there was a similar question it was with the CPI release, where the SMA was breached before the number, but there were also persistent false rumors that factored in – Typical major support or resistance is not breached before a major economic release.
You reminded me of an excellent point. Beware of recycled news and rumors when the market action is dull. That is when they love to circulate that stuff.

Hariseldon
11:42:48
Pete wrote:

Hariseldon wrote:

I am not saying the LOD is in – but one does have to ask….Is there any reason to breach the SMA 50 before the FOMC comes out?  Now last time there was a similar question it was with the CPI release, where the SMA was breached before the number, but there were also persistent false rumors that factored in – Typical major support or resistance is not breached before a major economic release.
You reminded me of an excellent point. Beware of recycled news and rumors when the market action is dull. That is when they love to circulate that stuff.

100% – People tend to make the assumption that the Market Makers, Major Institutions, et.al all know what they are doing.  And in large part, they do – but they are also ALGO run primarily – and those ALGO’s do not differentiate very well between old new and new news – so recycled reports can have an impact simply because the ALGOs pick-up on the key words in the release

Pete
11:43:22
Often on these bounces off of this pattern you will see a release to the upper end of the trading channel. Then the downward momentum stalls and you form a horizontal trading range. 
Hariseldon
11:43:47
It is very likely we go from trend to chop
Pete
11:43:59
We have a bullish 1OP cross so the timing for all of this seems like it is lining up.
Hariseldon
11:47:59
During the horizontal chop that is most likely to emerge from SPY Support holding you will see RS forming on various stocks that are far in the Red – this is where corrections to any over-reactions occur – for example, I would look at DLTR as an example of that in a bit.
Hariseldon
11:53:04

@el_brento no there was no over-reaction in RBLX – I am talking about stocks that had an over-reaction to the WMT news will tend to correct during horizontal chop if that is what we get, that correction will look like RS, but the stock will still be in the Red and shouldn’t be considered for a long. DLTR is an example because it is brick and mortar retail, but WMT’s main issue was apparel, which does not impact DLTR, also DLTR is the store that would benefit from consumers looking for lower prices….hence it might “correct”

Hariseldon
11:58:21

@mSquare a bit, but CVS did not have an exaggerated drop from WMT, it was dropping prior to that 

Hariseldon
15:40:36
it is times like these knowing how to read price action is so important.  It is hard to rely on the D1 when all the D1’s are crap – Hard to lean on Support or Resistance when things are so news driven the stocks just blow right through the levels.  These are temporary conditions – difficult, but temporary and during these times it is price action that matters a lot.  Hence why I got out of ABBV when I did, or anticipated the pop in NFLX just before – that is reading Price Action.
Hariseldon
15:49:30
I traded my thesis earlier which was that there was no reason for the market to go below the SMA 50 before big earnings announcements and the FOMC – so it was no going to go too far from it – since we were at the LOD, I traded a high probability of a bounce back up – there is no indicator for that, – it is just reading the story of the market and sticking to your thesis that lies at its’ foundation.

Hariseldon
12:08:57
ABBV is a type of trade we don’t discuss often – typically when you have resistance above you do not take the trade, right? You wait until it breaks through.  However – there are times where resistance is just far enough away to make the trade worth it – for example there is about .85 of room on ABBV.  What this does is give me enough upside, but also a natural stop – if it doesn’t break through, and retreats, I take profit (around .50), if it does break through I increase the position once it confirms.

Dave W
16:10:40
ollyman wrote:

@Dave W earlier you pointed out D1 resistance at 78.5 which it ended up bouncing right off of. Could you explain how you found this? Thanks!

6/16 candle bottom of body and bottom of 6/17  that is an area of 79.50 to 79.90 so there was some play in there, The price wont usually stop at an exact price but i figured it was close which should negate entering a trade near that level 

Dave W
16:21:19

@ollyman again the horizontal support or resistance is not a point but an area so it is more a crayon type “line” as opposed to a narrow line. When you know you are close to the resistance area it is best not to enter a trade and if you are in look to take profits when the momentum wanes 

ExpatTrader
05:32:05
I think I see what @DaveWise was talking about with TWLO. It wasn’t about a specific support point in this case, it was more about the fact that it was stretching into the afternoon, the stock was already beyond it’s ATR and slowing down, and it was getting close to the support area from the D1. I like to use specific numbers for my support/resistance early in the day on a strong mover, but it makes sense that if something is slowing down in the afternoon and nearing that support/just passed that support on the D1, it should be off the table or looked at with caution.

Pete
17:16:45
Have you read the eBook and the articles under The System? Lots of content right on the website in Start Here
Pete
17:19:15

@Kelly G SNOW  was on Heavy Selling all day and you can see the traders who nailed it. At what point today was it too late to short SNOW?

Pete
17:21:22
You have to look for those D1 technical breakdowns on volume. Those moves are sustained
Pete
17:24:24

@Kelly G Work I 100% understand. You might want to focus more on swing trading. If you are busy at work please don’t attempt to day trade /ES. That is a losing proposition for you.

Hariseldon
17:25:41

@Kelly G have you read the Wiki? 

Hariseldon
17:37:20

@Kelly G the WIKI IS  this system

Hariseldon
17:41:16

@Joao are you referring to the question you asked yesterday on SIGA?  First, I just saw it now, sorry I do not have an alert that tells me when a question is asked, I get to around 90% of them – but I apologize if you are offended that I somehow missed yours.  However, I did answer the question in my general comments today – my entries on SIGA yesterday was based on the price action – and there are various posts on that topic

Hariseldon
17:47:45
Around 11am yesterday the red candles that dropped SIGA were of very low volume – I entered when it went above the closing price of the 7/18 which represented an ATH for the stock – so when I see a stock that has a strong daily chart in compression then break that compression to the upside with heavy volume, and then the pullback is of low volume, I entered the trade – there was nothing fancy of about reading that price action – 
Hariseldon
17:50:07
I really hope you are all trading on a paper account – many of these questions and trades you’re all posting show a lack of knowledge around the basics, let alone the system – I say again and again – Read the Wiki – follow the 10 Steps listed there – I can tell you with virtual certainty that if you do not follow those steps and instead jump ahead you will lose money and will not be consistently profitable.
Hariseldon
17:50:40

@Henrik there is one system here – it is taught in the Wiki, taught in the sub-reddit, in the chat room and in all of the videos and posts that Pete puts up.

Hariseldon
17:51:21
It is all the same system – same method and strategy.  You are focused on scanner settings, you should be focused on learning the strategy which is why those ten steps are there – they are straightforward and easy to follow
Hariseldon
17:54:11

@Henrik that is not a method or strategy, that is just scanner settings – finding the stocks is the easiest part – hell they are listed right there in OS in the built-in scanners, if you want to use the Custom Scanner that can give you even higher probability results, but overall they are right there.   For example today, no matter what scanner you used, COIN and UPST would have shown up as shorts.

Hariseldon
17:56:51
For example, go now to Red Royal Flush on OS – the first stock you;ll see is COIN, then SNOW – if you shorted those today, pretty much whenever you entered, you would have made money
Hariseldon
17:59:52

@Henrik ok, so you know today is a bearish trend day, so you look at the Red Royal Flush, and you see COIN, SHOW right on top – you look at those charts and see both of those tickers broke below their SMA 50’s , they are Relatively Weak to SPY, have good volume – bam – grab ITM Puts for a week out with a .65 or higher Delta and ride them to profit.  Done.

Hariseldon
18:06:54
I just made $20 off $50K starting balance in a month (while trading my other account at the same time) using the strategy/method we teach here and in the Wiki – I am now going to do it again with a PDT restricted account – why would anyone want to try a different strategy unless there is verifiable proof it can beat those results?  I am doing this so there is indisputable proof that a) one can do this and b) this method works – to my knowledge there is not any other evidence of any method/strategy out there.  The closest thing I have seen is Ross with Scalping and that is extremely difficult to do, I would say maybe 1 out of 100 manage it.

Dave W
18:04:26
@Zander entering debit spreads using 5 min chart compression break and HA reversal is a good method. Your entry point is likely to give you a move in the stock in the direction you want and even a profit on the debit spread quickly

2022-07-26
Mark As Read

Pete
15:22:12

Typically stocks that are going to report after the close or before the open are more difficult to trade. The action is more random as traders square up positions before the number. FYI

Pete
15:23:12

Just use more caution on these. They can look great one minute and the rug gets pulled out the next

Pete
10:54:23

Pete
11:06:19
“Pete, you say to buy dips on CALM. How do I do that?” Use your alert tool. Set alerts at levels where the stock would still look attractive, but that are below the current level. Lean on prior candles. You could also lean on EMA (8) or VWAP… what ever technique you want to use. If you are not alerted, no trade. If you get the alert, monitor the price action and see if buyers are still interested. You can set upside alerts after that as well. Pick the top of a recent candle . 
Pete
11:06:55

Pete
11:09:57
On days like this you should spend MUCH more time setting alerts than trading. Alerts do not have to be managed like a position and they will help you enter at attractive price levels. While you are waiting for alerts to be triggered, market conditions could change and you might not want to take the trade. The character of the stock could change and you might not want to enter
Pete
12:50:31
MOS has a little strength today along with other basic mat. D1 down trendline breach also. Nothing super strong, just some nice rotation into the group. It could be setting up on M5 so here is what you want to do
Pete
12:50:50

Pete
14:21:39
There is a difference between being bearish and not being bullish. There were some Reddit comments asking about how the lack of volume makes me bearish. It doesn’t. The lack of volume recently makes me question the recent market bounce. That lack of volume tells me that there is a low level of conviction and while the price action looks good, there is no substance behind it. These low volume moves can easily be reversed (but it does not mean they will be reversed). If the market rallies on heavy volume from here, we are all good and we can get behind it. My point was that without that volume, it is too early to be loading up on bullish positions. I wanted to make this clear to all of you in case there was similar confusion.

Hariseldon
15:38:21

As much as I would love to close out the first month of the $50K Challenge and start the PDT Challenge (going to alternate every other month) – I am going to hold $NFLX and $CVS overnight (good daily charts, just a weak market).

I plan on closing $TBLT before eod.
Hariseldon
15:53:34

Btw – look at the drawdowns I took on NFLX and CVS but did not close the trades – remains to be seen tomorrow, but I am trading the daily charts here, not the P&L

owensd
16:09:10

@RAK $20K margin is going to be vastly better than a $5k margin. So many more options available to you, and while you have the same day trade limitations, you can effectively lock in option gains with spreads in that size account, or just burn a few day trades. I’m guessing Hari will be above PDT in about 3 days.

owensd
16:23:13

@RAK You can go long on a call or put and then make a spread later to “lock in profits”.

owensd
16:26:52
you can free up buying power the same way, and you also don’t have to worry about good-faith violations, especially problematic if you want to trade stocks.
owensd
16:29:49

@drluke you need to have options approval to create spreads with your broker.

Mister-Bin
16:27:28

@Jerson if I may: you are anticipating, trade what’s in front of you, NEM was weak after earnings, with a breakdown of the D1 chart, with a picture perfect example of M5 RW. There’s no reason for you to go long at all

Pete
16:36:51
Jerson wrote:

@Dave W, I noticed today you played NEM all day, a Gold materials ticker, I was inclined to go long today and was wondering if shorting NEM was like a proxy for going Long since typically when market goes up, precious metals like Gold and Silver typically go down. Did I overthink your plays? thanks
You over thought it. If gold ran contra to SPY then it should be making a new high for the year – right? At least very close to it. 

Dave W
18:25:25

@Jerson I went short NEM today several times simply based on the NEM 5 min chart and big drop on earnings. It had a highest probability criteria setup several times today. I never considered going long the market and that didnt enter my trade on NEM 

Pete
11:30:24
“Pete do always ignore the last 15 minutes of trading when drawing these channels?” No, but those last minutes are noise filled and if I take those out the trend has a nice orderly pattern to it. I do look for close to parallel lines when I draw them.  
Pete
16:40:21

rrathk1 wrote:

@Pete in regards to the end of day rally, was the midway point of the 3:25 red candle falling a good signal to go long SPY given the days action?  or would you have liked to have seen a 2nd test/bottom (had there been enough time in the day) prior to taking a long position?

I typically do not like trading the last 30 min of the day. I might hold a position that is working, but I do not enter new day trades. The market did not have any pace and the last 30 min can be filled with moc imbalances. There will also be some position squaring ahead of the FOMC and that can increase the likelihood of some wacky moves close to the bell

Pete
16:41:36
If that move has unfolded during the day, I would be more excited by the 3:35 candle than the 3:25 candle. That was a nice long bullish engulf that finished above the 3:30 bar
Pete
16:43:14
Sorry. I was referencing the wrong candle. The 3:25 was the red candle. Yes the 3:35 candle erasing it was a sign that buyers were in control. Again, I would suggest not day trading the last 30 min.

Dave W
00:06:21
there is no likely direction 
Hariseldon
01:27:07

@st0rm The profit comes from the IV differential, not in getting the direction right.  If for example you had a NEM Put Time Spread, you would be in equal shape, if not worse, at least will the call spread you get the full credit for the Short Calls and next week can ride Long call up, 

Pete
16:52:41
st0rm wrote:

@Pete curious how you handled your NEM calendar spread today. I had a similar play and I bought back the short side and will ride out the long since the value dropped so fast.
I did not trade the NEM calendar spread. I am not currently trading because I am focused on education and on adding features that will help us all. That said, once NEM showed  it hand this morning it was pretty easy to see that it was going down and you just had to position yourself short the stock.  

Hariseldon
16:53:40

@st0rm both Dave and I were/am in that spread – I bought back the short side at .04 and I believe Dave bought his back at .03

Pete
16:54:25
There were a couple of really good entry points for shorts on that stock. It was rel weak the entire day with no major bounces.
Pete
17:03:48

Pete
17:04:33
These are just the M5 checkboxes. D1 chart for stock is nasty
Pete
17:05:20
st0rm wrote:

@Pete sorry I meant Dave. Made the same mistake yesterday haha
It’s ok because all of us should be able to look at the same chart and reach the same conclusions. We are all trading the same system.

Pete
19:32:44
You are looking for stocks that historically do not exceed the expected earnings move using the Pre-Earn Options stats in Option Stalker. We want a nice difference in the IV between this week’s exp and next weeks exp. If the stock does not make the expected move you unwind the spread for a gain. If it makes a greater than expected move the stock is likely to continue in that direction and you trade the stock. As with any strategy, learn and observe, then try it small. The most you can lose is the premium you paid for the spread. There will be a ton of plays this week that you can monitor., 
Dave W
23:19:46

@st0rm The setup on the daily chart has no bearing on the stock price movement after earnings are released 

Dave W
08:58:52

@st0rm When you calls or puts go deep itm assignment risk comes into play  when you are otm you have time to mitigate the trade with no assignment issues 

Pete
17:12:54
When you see consecutive stacked red candles like that the stock is going down. That is one of the most reliable patterns you can trade. I advise you not to trade the first 45 min so in that spirit, you would evaluate the market and the stock and trade the compression breakdown. You could also have avoided shorts since the market was going up. That would be wise as well (the market rally was not very strong today so it would not have spooked me). Once you had the SPY bearish cross at 1:15 and the M5 broken uptrend for SPY you would start considering shorts. Then you would have looked at the NEM compression breakdown later in the day. There were a number of you who took that trade. 
lilsgymdan
17:24:23

@Pete Would NEM’s cousin AEM been a valid chart to look at as well? It wasn’t as bearish overall but might have provided some better SPY timing opportunities around 1:40 or 2:20

Pete
17:49:02
Yes. All of the gold stocks were hit hard today. I did not look at the news on those stocks, but it makes sense that they would be weak. Gold has been trending lower and these producers have higher extraction costs (fuel for mining equip). 
Pete
17:49:49
I used to watch a show called Gold Rush and the amount of fuel they burn is crazy. 

2022-07-25
Mark As Read

Crux
19:54:27

@TuckChat im not at a computer but it’s in the same row as Chart, Market View, etc… I’m pretty sure…on the upper right 

Crux
19:55:09
Read the manual on the website if you need more assistance it’s all there
Dave W
21:36:12
that tabs shows only earnings for after current days close and before the open  the list will be packed the next 2 weeks

2022-07-25
Mark As Read

Hariseldon
15:25:50

don’t you just love the skeptical questions you get on Reddit? Like, “Wait a minute….theta decay is higher for that ITM call…” or “How do you know what percent to close at??” It is as if they are always trying to catch you in something. Meanwhile you are sitting there thinking, “I have been making money consistently on CDS’ for years….what. the. hell.”

Dave W
15:26:52

@Hariseldon yes it is pretty amazing when the greeks theorists tell you that a strategy that has been working for years cant work. That is the problem with taking the theory as gospel when the theta they are looking at is a very small part of the trade. Tradervue gives me real world results that prove that when done correctly it is a hugely profitable strategy regardless of his theta issue.

Dave W
15:27:59

It is like the traders who put on credit spreads based on delta alone without looking at strong support and resistance levels and the 25%+ roi on the spread. If you have strong support above your short strike on a credit spread and you can get 25%+ roi deltas dont matter

Hariseldon
15:28:45

@Dave W yes, I never quite got why they even look at delta there – all that matters is the credit you are getting. If you can get a 25% ROI where the short strike is far enough OTM to allow for strong support above it, the deltas do not matter. But yet, they have all been taught that at Delta of .2 means a 20% chance of success, and that is all that can think about.

DanielF
11:45:42
@Harry48 https://oneoption.com/options/calendar-spreads/
Dave W
12:46:33
that is my reddit post on using time spreads over earnings 

LooktotheLeft
12:35:05

@Henrik RS is relative strength to the SPY on any / all time frames chosen. It is always to the SPY. If you have a SPY chart up 1OSI will be a flat line because it is attempting to measure RS to itself.

LooktotheLeft
12:38:30

@Henrik Also, not a MA crossover.  Strictly a comparison of an instrument to the SPY on the given time frame. This should be spelled out in several places in the learning area.

LooktotheLeft
12:59:42

@Henrik Those are buy / sell signals on that time frame,  for stocks or SPY.  Pete has a rundown of it somewhere.  I’ve read it, but the exact calculation is proprietary I believe. 

Hariseldon
13:16:56

@Henrik The red and green at the top of the chat is an strength meter on SPY – it shows heavy volume when the circle is bordered, as for what measures the strength, that us SPY itself, which is a measure of SPY’s overall movement during those time periods.

Hariseldon
13:19:11
I believe, but not 100% sure it also takes the 1OP indicator into account.  Either way – looking at now SPY was weak on an M5, M15 and D1 basis .  
Hariseldon
13:19:54
And volume was strong on an m15 basis.  
I would need Pete to confirm all this though.
Joao
13:29:17

@Henrik I don’t know more than @LooktotheLeft for sure but from what I understand you are simply mixing buy/sell signals for SPY with the Relative Strength indicator, 1OSI, which is an orange line that compares RS/RW of stocks relative to SPY (page 13 of the Option Stalker Manual pdf).

Hariseldon
13:37:44

@Henrik The buy and sell signals are based on several factors including the 1OP and RS/RW, the volume ring around the circle is just providing additional information.  Which isn’t to say that volume isn’t included in the signal calculation, just that it’s a separate piece of info.  The nature of the buy/sell for stocks is different (I believe) than it is for SPY.  Pete would have to weigh in for further clarification though 

Pete
17:58:21

Henrik wrote:

Pete: I asked this question before but you were not here, could you elaborate on how the strength of SPY is calculated (the red/green lights on top). I understand that RS is measured against SPY, but against what do you compare SPY itself? Other indices for example?
The green and red dots are not measuring rel str. They are buy and sell signals based on our trading system for the SPY. it is the benchmark against which all other assets are measure for rel str/weakness

Pete
18:03:07

@Henrik If you look at an SPY chart (or any stock chart) you will notice green and  red arrows. Those are the buy and sell signals. For SPY the red and green dots at the top of the chat correspond to those arrows on the charts. The dots are just an easy way for us to know where the SPY signals are across multiple time frames. 

BennettN
00:06:01

@Henrik He says that you can use regular compression zones instead of the dynamic ones his software creates and that institutional activity is best gauged by RS/RW if you don’t have the software

Dave W
15:25:14

@ollyman Depends on where resistance is, market strength, strength of momentum. I will take some trades after the breakout has occurred but the further the stock is away from the break the higher the probability of a pullback

Dave W
18:16:38
generally i  use a dynamic compression zone that can occur several times during the day you are using the break of the initial 30 min hi and low i think, as your compression break 
Dave W
18:19:05
I am also using institutional activity driving the trade. I think yours will work 
Jared B
21:16:24

@TuckChat You can mess around with the compression in/out check box on the OS scanner. 

Jared B
15:54:19
Same issue for me sometimes and probably experience is the answer. I think the overall market context + deciding whether this is a day trade or a swing trade first, effects the decision. A day trade your stop can be below the swing low, or VWAP, or whatever the intraday says. But the swing will be below an SMA or D1 level that’s usually further away. Often times I fool myself into swinging, when it really should have been a day trade and I was simply just wrong. Then since we lean on the daily, I justify staying in my losing trade. Like “the market is pulling my RS stock down and I expect the market to rebound tomorrow” is different than “My stock lost all strength and market has no direction so I’ll lean on the daily”. Just an amateurs opinion. I took two large losses last week on Friday due to leaning on the daily of bad picks.
Hariseldon
16:33:24

@BennettN I believe that’s covered in the mindset section of the Wiki, no?

Joao
16:35:09

@Zander @Jared B I join just to add that I’ve cut losses purely on daily stops this past week, since a bigger loss still has the effect on me that @BennettN refers to, and this way I am more confident letting winners go longer (I follow the stock or update hard stops) and also I sometimes reenter trades after being stopped out if I think I’m finding another entry level, that doesn’t bother me much. I think this might be a problem when I increase position sizing or try to trade more underlyings at the same time, and also when I try swinging, since this looks too much like scalping. Appreciate thoughts on whether this is not also a question of personality and how that in itself should be incorporated into trading.

Andreas
16:54:16

@Joao I think alot of the issues is buying power on mindset… When managing a small account, you’re low on BP, you tend to let losers run longer because you don’t have alot left in the ammunition bag… it’s happened to me, so i’m sure it’s happened to others…

Hariseldon
19:19:06

@BennettN it’s the age old question of – Am I holding losers too long or am I exiting too early and not letting the trade breathe.  

“Well where are your technical stops?”
Hariseldon
19:19:24

but some times those stops are really far from your entry 

Hariseldon
19:20:52

and this is where the trade off lives – if you are sized correctly you can withstand the drop to support.  But usually that size results in smaller gains, which in turn leads to holding longer and the cycle continues 

Hariseldon
19:21:37

in the end – it’s mindset insomuch as “how much faith do you have on your story of the market and set-up of the trade?”  

Hariseldon
19:26:12

let’s say you are long at $50, minor levels of support are 49.50 and $49.  Major support is $45.  The stock drops to $48 – now if you had a 30k account, and did 1000 shares, you’re down $2K.  Are you ok holding to see if $45 holds? Probably not.  You exit.  It bounces.  You lost when you didn’t need to.  What about 500 shares? How about 250? At 250 shares you’re probably good – but now you need a decent bump to $52 to get a decent return.  See how it all goes together?

Hariseldon
22:19:02

@BennettN I think there is a difference between letting a loser run way too long and a poor exit.  Going back to the example – if you got in at $50 with 500 shares and did not exit at the breach of $49 or $48, and then held it overnight and the market thesis changed, but you still held, and wound up exiting at $44 three days later with a $6 loss.  That is one example.  Entering at $50 and exiting at $48.50 three hours later is another. 

thiencly
22:44:26

@BennettN I am still learning and I have the same issue myself.  How I am managing that issue now is this:  Enter trade at $50, but only 1/4 size.  If you’re right and price moves higher, then add 2/4 size and finally full size if price keeps proving you’re correct.  If you enter at $50 and price drops below the minor support, you can still hold until the major support. If it breaks major support then take the loss, but its only 1/4 size so you can handle it.  If it drops near major support but makes a higher low compared to major support and the market is still in your favor then you can still hold OR add 1/4 size.  If price breaks this new higher low then take the loss, still 1/2 size loss so not too bad.  If price keeps moving up and goes pass the minor support then keep adding.  If price makes a lower high and never makes it pass that minor support then you can scratch or make a minor win on the trade. 

Hariseldon
23:43:46

@BennettN The method of adding as you go up is in the Wiki, particularly in the mindset section.  Everything you’re asking about is definitely covered and mapped out – just an fyi 

WoodyNature
00:11:09
My best advice is to read those articles and use the replay function on your charting platform across various tickers. Look for said set up and replay a couple mins leading up to that play. What was SPY doing? How were the HA candles printing? Look at how potential entries were looking (easy in hindsight yes but now you know what you’re looking for and how it sets up).  Now do this everyday after hours, paper trade the strategy or 1 share/contract it whatever. It’s honestly pretty straightforward and Dave couldn’t lay it out any easier if he wanted, it’s an easy step by step. I like the strategy a lot because it’s simple and I feel like I understand it. I’m not the sharpest tool in the shed, not by a long a shot. Market 1st, strong/weak stock, apply everything Dave writes, and your chances of success increase a lot.
WoodyNature
23:53:18
Henrik wrote:

Can anyone point me to a resource that explains HA candles in context of the strategies mentioned here? I know what they are but they are discussed in the chat a lot and I want to learn the benefit of using them instead of standard candles. On first sight, they are confusing because they can draw red candles green and I don’t get why some HA patterns aren’t translated to “normal” candle patterns.
If you know what they are then everything should be straight forward. HA patterns are delayed by nature. Hence why they dont translate to normal candles. This article by Dave W is a fantastic resource. It’s helped me tremendously since posted 3 months ago. https://www.reddit.com/r/RealDayTrading/comments/ulavyw/how_i_trade_heiken_ashe_reversals_with_criteria/

Jared B
23:54:08
Pete also has some videos in the tutorial section on HA patterns
Joe H
06:35:29
Henrik wrote:

Thanks, yes, I have seen that one when I scrolled up before. This setup (cross of HOD with momentum) seems reasonable to me. I was just wondering where the benefit is in expressing the pattern as HA. I will read more first, I am too clueless about this particular topic.
The use of HA is due to the fact of that it is easier to spot a trend change. Stock breaks to high of day pulls backs consolidates and now wait for a HA reversal pattern ( Bullish ) flat bottom ( should be of greater size that previous candle(s) go long. 

Hariseldon
21:11:55
As a general practice I’m typically opposed to adding any additional indicators and try to keep my charts as clean as possible.  I’m not against anything that has additive value but I find that most don’t.  What does Supertrend show you that HA candles do not? 

Hariseldon
15:04:19
And here is your short covering bounce – and @ck just draw a line – if it is mainly horizontal and jagged – chop, diagonal and mainly straight – trend
ck
15:40:48
Thank you for that chart @Pete, took notes for next time.
Would it be fair to say that the long red candle at 11a was the “tell” since it wiped out most of the earlier long green candle (which wouldve been the “tell;” had we moved to the upside) and also because the two smaller green candles were not able to take out 50% of that long red candle?
Pete
15:41:42
The 11:20 bar was more of a tell because it took out the lod. 
Pete
15:42:26
The 12:35 bar was also a good tell because it erased most of the long green candle telling you that it was a “solo”.

Pete
15:08:53
Not a great set-up for lottos. Market compressing here, light volume day. We need that market tailwind and we are not getting it. tiny candles. We could go either way. 
Pete
15:09:47
I would have preferred a bearish cycle, lod preserved. Then we had a chance for a closing bounce. Instead, the bullish cycle continued, not much movement and tiny bodied candles. Far from ideal
Hariseldon
17:09:54

@Joao Custom Search is an excellent way to find Lottos

Hariseldon
17:10:37
GOOGL I found just by looking at it – the chart was already up, I knew that with a bounce GOOGL would get over $108 – so I took the lottos for .15 and sold them for .45 about 30 min later
Pete
17:17:09
Joao wrote:

@Hariseldon I was looking for lotto options today when you suggested MU. Do you have a method for finding options that are cheap or do you evaluate that on a case by case basis?

Follow this path. The Edge/videos/Tutorials/ Powerful Search Combinations/Option Lottery Trades

Hariseldon
17:23:56
Remember when you are looking for lottos, and when I say “lottos” I mean it in the purest sense of getting the options an hour or less before close – it doesn’t matter if stock is down or up for the day, you are zooming in for a micro-view – Market drops – this stock did not – it either held or went up.  That is your first criteria – so you need a market pullback and you need to find a stock that had good RS during that pullback (obviously if you are looking for Put Lottos it would be the opposite).  Then you want to make sure the stock has a strong enough ATR to actually get you where you want to go – there is no point in take $50 strike lotto calls for a stock at $49.80 with great RS if that stock moves around 5 cents an hour.  Finally you need to see that the market is turning around – so you need the market at your back.  Then you get the ATM options as cheap as possible .

2022-07-22
Mark As Read

Pete
16:04:23

@ck Option Stalker. Enter SPY for the chart, click M5, add 1OP. Hit the home button on your keyboard. Advance one bar at a time and do not advance until you have decided if a trade is warranted and how you will know that it is time to exit. This is akin to flipping cards to get good at card counting for Black Jack 

Hariseldon
16:35:00
An issue I noticed that many of you seem to be have is what I will call the “Not with Three Barrels He Can’t!” problem. This disbelief that a stock can not continue to drop after a sizable decline or keep going up after it already jumped.  Take SNOW – at 11:25 it had already dropped roughly $10 from its’ high of the day – and was at roughly $150.  At this point SNOW is an excellent short – there is no support until $141, SPY was going up and SNOW stalled – showing RW, and the volume was above average.  If you felt hesitation shorting in a situation like this it is usually because you begin to think it can’t drop anymore…that it will pause or even rebound.  This is also the point where many losing traders try to pick a bottom and go long on a stock like SNOW after the 11:25 candle.  However, the profitable trader will initiate a short position there.

Hariseldon
17:00:24
The only true sign that you have been able to master trading that I have seen is simple – can you consistently take out profits at the end of each month and reliably count on the amount your are taking out within a reasonable range of error.  That is it – no matter what – unless you can do that you can not become a full-time trader.
Hariseldon
17:49:26
The number one reason traders lose money is because they do not maximize the potential of their winners, they do not like them run and do not add to them – the second reason traders lose money is because they hold on to their losers for far too long.  
Hariseldon
17:56:10

@Joao all depends on the person – it really just requires you truly understanding what that means –  We believe that buying things on sale is good – but with stocks you want the stock that cost more today than yesterday – everything in us says to take profit or the market will take it away, but what you should be doing is adding to your position most of the time,  everyone wants to hold on to their position and hope it turns around rather than take the loss, but it is all about deploying capital – etc…etc…

Hariseldon
17:59:55
You go long AAPL at 150 (example), it goes to 152! Great, you take $2 profit, but the next day it is at $154, and the day after that it is $156 – but nobody stays in the trade for the additional $4.  However, you go long AAPL and it drops to $148, you hold it – and the next day it is $146 – you still hold – finally you get out with a $6 loss at $144.  People are much more likely to do the second thing than the first and that is part of the problem.
Hariseldon
18:31:21

@Marinus and there are two types of “fear of loss” there is “Fear of Losing” and “Fear of Loss” – Fear of Losing is not wanting to take the L – this can cause someone to take profits early because they want the W and want to avoid the loss, and it can cause someone to hold on to a losing position as well. Whereas “Fear of Loss” is usually monetary in nature and you don’t want to lose the money on the trade.   

Hariseldon
18:31:33
In the Wiki I have solutions suggested for both of these issues 
Hariseldon
18:41:10
One of the other concepts that traders have a very hard time internalizing is that of “baked in” – This is more applicable to Swing Trading than Day Trading but a trader will look at NFLX and immediately craft an opinion based on their own anecdotal observations as well as whatever they might have read – The notion that if any of their conclusions actually had merit it would have already been uncovered and thus baked into the price is very difficult for people to grasp.  
Hariseldon
19:52:25
jjtrade wrote:

Like money that at least hits you in your face and makes you reconsider what you’re doing wrong I mean. Can you really learn this with an “ego” while paper trading?
Think of Paper Trading as “batting practice” – if you do well in batting practice does that mean you will do well in the actual game? No – of course not.  But if you can’t hit the ball in batting practice you definitely won’t be able to hit in the game.

Hariseldon
16:53:27
With Options you get the benefit of leverage but the payment for that is a ticking clock – It is less about the 1 for 1 dollar for dollar advantage of using stocks and more that you have no limit on hold long you can wait until your trade works
Hariseldon
17:09:34

@Snakebight that is usually when I am using options as a surrogate for the stock – look at the delta on the same week options, they are typically .9 or higher.

Dave W
20:44:52

@jjtrade Along those lines, each time i try a new strategy i take at least 100 trades (usually more) and then analyze the results. It that series of trades does not produce a win rate of 80% then i discard the strategy.

Dave W
00:16:06
yes  usually the break out of compression will create a bb width expansion but waiting for it is fine. I have the candles color coded in TC2000 so i know if the bb width is expanding by the color of the candle
Dave W
11:20:03

@BennettN HA reversals require an HA candle with a flat top for bearish or a flat bottom for bullish. The candle color is not as important. You can go from a green HA candle with a wick and or a tail to a green HA candle with a flat bottom and that is a bullish HA reversal

Dave W
14:37:07
remember for the highest probability trade criteria the HA reversal candle needs to be near ( at or right before or after)  the break out of a dynamic compression zone and the bb width should also be expanding and the trade should be in the direction of the stocks trend. No counter trend trades 
Dave W
15:07:33
just normal compression breakouts like oneoptions compression out check box on the scanner. TC2000 allows you to write formulas for compression breaks. Also lust use horizontal lines connecting tops or bottoms of candles with similar price levels 
thiencly
15:19:56

@Dave W is your stops usually below the compression zone that you entered the break out on? for longs I mean

Dave W
15:28:56
yes if i am only day trading the position. If the daily chart confirms with the trades direction and the daily chart has a HA reversal and has plenty of upside room and if it is also breaking out of a daily dynamic  compression zone then i have to make a decision as to holding for a bounce intraday, take a loss and look to reenter or just plan on holding at least overnight.  Depends how soon earnings will be announced and how much time to expiration. As with any exit decision a lot more can go into those decisions where the entries for the highest probability trade setups is pretty clear cut with very little subjectiveness.
Dave W
21:17:51

Dave W
21:19:01
SNOW short yesterday  pretty easy to see the compression break with the bearish HA reversal candle (pink indicates bb width expansion)
Dave W
21:20:11
short was a continuation of trend, institutional selling was confirmed as well
Dave W
22:29:08
of you are taking too many trades and seem distracted because of that, try only taking the highest probability trades setups  each day, there are not a large number of them. If you dont know what the criteria are i have a reddit post on it it in Haris reddit site
Dave W
22:59:48
GOOGL set up short several times today as did SNOW 
Dave W
23:02:00
you dint have to have D1 compression breaks (if there is one it adds even more probability to the trade) just a 5 min compression break
Jared B
23:04:48
Good to know for Monday! So I really can use horizontal break out or SMA break + M5 compression break for a high probability play. IF it’s also a D1 breakout then that’s just A++
Dave W
23:07:14
11:05    1:05    GOOGL HA reversals out of compression institutional selling RW 
Jared B
23:12:00
I know it’s pending market conditions, but if you happened to miss the first HA reversal candle. Do you ever just skip a play because maybe the confirmation happened 15-20 minutes ago? or maybe wait for the next compression for another opportunity?
Dave W
23:13:31
i wait for the next one or look for another prospect 
BennettN
23:43:14

@Dave W On the high probability setups, say all the criteria are met and you have an HA reversal candle close above compression BUT the bandwidth doesn’t yet indicate a break out of compression. Is it okay to wait until the first candle with increasing bandwidth and then enter?

Jeff1383
00:45:10
I assume you read it, but to me it sounds like Hari’s reddit post top 5 mindset issue with maybe either of both of 2 issues applying:  Uncharmed Life and/or Lack of Confidence:  https://www.reddit.com/r/RealDayTrading/comments/v23nis/top_5_mindset_issues_and_the_solutions/
Jeff1383
00:50:54

@thiencly You’re very welcome.  I read a lot, especially about psychology – I’m confident that most of our adult issues stem from really young childhood experiences. It’s really tough to confront them as they are painful, but if can come to terms with them, it’s really life changing. I speak also from experience – 

Jeff1383
00:53:09
Look back and you’ll probably make a connection on why when you’re successful, you feel lucky and not confident…
Hariseldon
01:33:41

@thiencly From what I know there’s primarily one of two potential reasons for an issue like that: 1) self-sabotage – some people suffer their biggest losses (in life and trading) right after doing really well.  They simply cannot handle their own success, so they find a way to screw it up.  Aware of this issue these people tend to start feeling that every day they don’t just blow the whole thing up is ….lucky, 2) Imposter syndrome – no matter how much success one has they always feel like a fraud deep down.  That when you pull back the curtain it’s all smoke and mirrors.  This person begins to deny their own skill and attributes their victories to chance, knowing that someday soon , their luck will run out.

Hariseldon
01:34:29
I don’t know if either apply to your situation, but identifying the cause of the issue is crucial in finding a solution 
Hariseldon
01:53:33

@thiencly I’d suggest to first make sure that it isn’t in fact, luck.  Look back at your trade, identify the set-ups, and acknowledge the skill required to be in those positions.  Chances are you biggest mistake was an early exit.  Next you also need to acknowledge something else – even though you may have some history with self-sabotage, you also clearly don’t want to do it either (otherwise you wouldn’t be so cautious as to exit early and think yourself lucky).    But those are just band-aids – self-sabotage or a history of blowing up a good thing, typically has deep roots.  

Pete
07:19:23
Jeff1383 wrote:

I see some people give probabilities – like for tomorrow 45% move up to at least close gap / 25% range bound between today’s high and support / 30% drop to D1 downward sloping support line – Is this a good way to think about it?
DaveW and Terry are correct. My percentages are based on the current patterns I see unfolding on a longer term and shorter term basis. It is like playing chess. You do know what your opponent is going to do, but you are able to determine which moves are most likely and how you will respond. You also know which outcomes you would most like to see. That is what we have to do as traders. It does not mean that we will get the outcome we want. For instance in a D1 downward tending market, an up gap and go would be the least desirable. It forces us to act quickly and to trade against the market down trend. The rug can get pulled out quickly at any moment and those moves run their course quickly and then stall out. In a downward trending D1 market one of the best scenarios is a wimpy gap up on the open with mixed overlapping candles. That is a weak bounce and it will give us time to find attractive shorts. We look for stocks that have rel weakness and we would be more aggressive with our position sizing because our odds favor this scenario. I will be writing about this in the articles.

Pete
10:09:33

terryO
16:11:18

@Snakebight   today had time spread on NUE that moved up past projected move.  Ended up closing the spread for a loss.  But we took a separate NUE call and made 1/2 the loss back.   

terryO
16:17:41

@TraderGT   have been able to take profits before the actual earnings report (or end of day) on some tickers.  As far as entering at a better price earlier in the day, I don’t think there is much advantage.  I think that is a study in progress, somewhat.

Dave W
16:18:11

@Snakebight Pete will post an article on it  what i did on NUE today was take a loss on the time spread and bought calls and profited more on the calls than i lost on the spread

Pete
16:18:31

@Snakebight HOW TO TRADE EARNINGS CALENDAR SPREADS

Hariseldon
16:38:53
Pete wrote:

@Snakebight HOW TO TRADE EARNINGS CALENDAR SPREADS

Pete – question on this.  In the article you not that one wants the price of the underlying to stay quiet and not move too far from the strike price – Don’t Time Spreads profit as long as the Stock moves within the estimate range that option pricing gives?  So for example if the ATM Options on TSLA indicate a potential movement of $50  + or -, and TSLA moves $45 up – the time spread will profit.  So while it is always good for their to be little movement , you do have a range of movement allowed for by the option pricing, no?

Pete
16:50:18
Hariseldon wrote:

Pete wrote:

@Snakebight HOW TO TRADE EARNINGS CALENDAR SPREADS

Pete – question on this.  In the article you not that one wants the price of the underlying to stay quiet and not move too far from the strike price – Don’t Time Spreads profit as long as the Stock moves within the estimate range that option pricing gives?  So for example if the ATM Options on TSLA indicate a potential movement of $50  + or -, and TSLA moves $45 up – the time spread will profit.  So while it is always good for their to be little movement , you do have a range of movement allowed for by the option pricing, no?

You are correct. I should rephrase that. Dave and I also spoke about the selection process. The stock range pre-release is not as critical in the selection. That expected range is the most important aspect and as long as it stays inside of it the trade will work

Pete
17:35:40

Abie wrote:

Hey @Joe H, i appreciate you trying to help out, but my question wasnt why it was when. The reason i ask is bec for me often times t i learn more from losses than i do from winners bec one of my personal sticking points is trade management and sometimes i suck at taking losses. It is also completely okay if he’d rather not answer as i know talking about losses can be sensitive.
We can  wait for Dave’s response, but your question should be. “When should I have bought calls on NUE.” The goal is to have you make those decisions on your own. When we are busy trading (and today was a great trading day) we are all busy trying to take advantage of the move. I will post a chart. NUE was a pretty easy long. 

Pete
17:36:48
NUE.  right out of the gate a post earn gap and it went above the 200-day MA and never fell below it when the market probed for support. That was your first clue. 
Pete
17:37:06
Bring up the D1 and you will see that.
Pete
17:43:59

Pete
17:46:37

@Abie Even if you did not have an NUE  calendar spread on, the stock set up nicely for a long. That is the mentality you need if you are going to do calendar spreads. This is not a strategy where they are all going to work out. There will be times when the stock moves out of the expected range. The good news is that when it does move out of the expected range, it is likely to continue in that direction. It surprised everyone

Pete
17:47:04
That is when you go into stock trading mode. 

2022-07-21
Mark As Read

Pete
16:47:52

Billy wrote:

@Pete Is it possible to trade after hours through OS? Or do we need to go direct to broker?

The brokers have after hours settings. With IB if the settings are configured in their broker API in TWS you can route trades through IB. The same should be true of Ameritrade and Tradier. As long as your account is permissioned for it you should be able to

Hariseldon
19:01:39

@Harry48 CC’s on a stock like TSLA should be weekly, and .10 delta or lower, but never on an earnings week

Hariseldon
19:02:32
And there is no way for Pete or anyone to answer your question without knowing your cost basis on the stock, your strike price, etc…and even then it is a hard question to answer
Hariseldon
19:26:44

@Harry48 the option is up roughly $45 since you sold that call, but your shares are up over $80ish – so if you bought back the call at a $4,500 per contract loss, you would still be up overall, correct?  So the only question is whether or not you think TSLA will stay above $815 for the next 3 weeks or so and there is absolutely no way of knowing that.

Hariseldon
19:32:14

@Harry48 and you aren’t shelling out money – you get assigned at that price – doesn’t matter if TSLA is at 1,500 or $820….either way you don’t get anything over $790, you already booked the 24.04.

Hariseldon
19:37:04
In fact, the only reason you would buy back that call now is if you feel there will be a lot of gains in the next three weeks you will miss out on – it will be less out of pocket for you to buy it back the day of expiration without any premium on it.   TSLA can go to 1,500 and the net amount to you on the buyback is the same (you buy it back at 564 but you gain that amount in the stock, net zero).  So unless you feel TSLA is going to go up more in the next three weeks than the premium you will be paying for the buy back (which is around $40), you hold the CC.  So that is your decision – If you think TSLA goes up more than $40 in the next 3 weeks, you buy back the CC.  If you feel it won’t you hold it.
Hariseldon
19:41:36

@Harry48 – again – If you think TSLA goes up more than $40 in the next 3 weeks, you buy back the CC. If you feel it won’t you hold it.

Hariseldon
19:44:02

@Harry48 you could do that either way  – it comes down to – it will cost you about $40 in premium to buy it back right now.  If you buy it back and TSLA goes up more than $40 in the next three weeks than you come out ahead buying it back.  On the other hand, if you wait that premium melts away and you either buy it back for its intrinsic value or you get called away

Hariseldon
19:46:45

@Harry48 just remember, never, ever hold Covered Calls over earnings – and when you get the type of premium TSLA gives you – sell those CC’s weekly, at very low Delta’s.

Hariseldon
19:51:29

@Harry48 “stupid and greedy” should be printed next to the TSLA ticker – I am pretty sure there isn’t a single trader out there (except probably Dave) that hasn’t gotten stupid and greedy with TSLA

Pete
08:20:24

Pete
08:36:02

Pete
08:36:55
These are damn good search variables right now. Use them and bring up the charts. 
Pete
08:37:40
You can see the breakout D1 and it is just happening now. 
Pete
08:40:47
Run that search during the day and add Compression (In) as a variable. Hey, wouldn’t it be nice to catch one of those babies when they are coming out of the compression? YES! If only there was a way to get a pop-up alert. Drop those dang alert lines at the top of a horizontal compression or if possible drop a downward sloping one if it is dipping so you can catch a bull flag.
Pete
08:43:24
You can keep pounding thru the same canned searches or you can use one of the most powerful search engines. Nothing wrong with the canned searches, but you can create better. Instead of pounding thru my lists, you can be pounding My Searches with your own custom search variables. 
Pete
08:44:48
Keep running those searches and looking for new stocks that are popping up. Keep dropping alert lines. After a while it will be like popcorn. The alerts will be coming in left and right. 
Pete
08:47:31
The worst thing you can do is to just camp out on a favorite stock hoping and waiting that AAPL will do something magical. Actually, the worst thing you can do is to camp out on a loser and lament about it. You are doing psych damage by reminding yourself of the mistake, you are consumed with hopium and you are letting opportunity slip by every minute.  
Shiv
09:11:40
Another method is to run these custom searches and drop the tickers in the “Custom Alerts” so that once they pop you can get right in!

Hariseldon
16:06:21

@SimonM there are posts on that in the Wiki 

Hariseldon
16:07:15

@SimonM let me know if you find the answer there – 

Hariseldon
16:08:43

@SimonM you need to think of it in reverse – if you are ready to trade than you are not missing out on profit, you are missing out on losses – there are only a few people that are consistently profitable here – and if you jump in too early you will quickly find that the FOMO was very misplaced

Hariseldon
16:16:03

@DnJoe96 sounds like a mix of two issues – position size and entry point.  You should never have a position size so large that it impacts your decisions on staying in the trade.

Hariseldon
16:28:09

@DnJoe96 try this – as you know once you have the Market right and the Stock right everything else is secondary – that includes entry – So instead of obsessing on the details of it, see it as simply – “Is this a good entry or bad entry?”    If it is good, and it meets the other criteria, then enter, if it is bad and meets the other criteria, wait

Hariseldon
16:28:23
That will stop you from looking for the “perfect” entry
Hariseldon
16:28:33
Which you will never find
Mister-Bin
20:07:44

@BennettN yeah so it seems the root of the issue is the position sizes. What helps me is that I always start with a small size when day trading and only adding to winners, occasionally I’ll average down (going long) or up (going short). By starting small, if the stock immediately goes against me, I can confidently swing it because it’s at such a small size, it won’t affect me emotionally. Now let’s say you added to winners, everything looks good, and now you’re in the red with a larger size, what do you do? You’re confident the D1 is solid, but you know you can’t handle the bigger size. Simple, scale out. Scale back down to the smaller size, swing the smaller size and then on days where the stock is relatively strong (or weak), scale back in again.

Mister-Bin
20:14:01

@BennettN unless the stock has absolutely and completely changed its trajectory, the only reason you’d jump out is because of 1) emotion or 2) buying power is tied up. What helps both? Reducing your exposure. That needs to happen at the time of entry and while you continue to manage it

Dave W
16:21:57

@Snakebight it depends on the price action  if i am down on a time spread using calls and the price dropped below the call price i will try to let the current weeks short calls expire and keep that premium and hold next weeks calls if i think the price will recover giving me a profit in the long calls. If the price gaps over the call price i have to weigh assignment risk as well so it isnt a black and white answer

2022-07-20
Mark As Read

Hariseldon
16:55:20
You are all also seeing one of the reasons why it is so difficult to learn how to really trade for a living – because you need that laser focus that Will mentioned – and you need people to put egos aside.  It is almost draconian in the boot-camp nature of it – and that rubs people the wrong way – it is almost impossible to maintain.  Everyone wants to think they can give advice and teach others – and in this room you actually have a chance to do that – post your trades, if you are a winning trader, trust me, your name will be in red very quickly.  But again, people don’t do that.  So it becomes very difficult to keep up the environment needed to successfully learn in – if it wasn’t me in this role, it would be someone else – but no matter what, it is necessary.
willbeing
17:02:11
Hariseldon wrote:

 It is almost draconian in the boot-camp nature of it – and that rubs people the wrong way 
100% Hari – I can attest to my perspective shifting after being marginally involved in the difficult job of management for a short time. Some measures can seem unnecessary to the passive observer, but when responsible, it is clear that they are absolutely the correct thing to do. 

 
Personally, I believe that the more invested we as members become, the more understanding we will have. It truly is all done for our benefit, and we are so fortunate to be a part of this. There is a lot that our participation can do to continually improve the conversation. Perfection is ultimately unattainable, but we can always move in that direction.
Hariseldon
17:36:55
Once again – this is your weekly reminder – if you have no achieved 75% or higher win rate with a PF of 2.0 or higher three straight months paper trading, and then have not duplicated that same feat for 3 straight months while trading 1 share – you should not be trading.  One day you will all look back on this and think to yourself, “yeah, that was the most true thing anyone said in that whole thing”.  

Hariseldon
17:25:35

@Georgy I can’t speak for the other red traders or Pete, but I have my thesis (which I tell everyone what it is) and trade that thesis – now news-related events can change that obviously, but usually most of the candle-to-candle price action you see is just noise and doing a play-by-play of it isn’t helpful.    It is the thesis that is helpful and as long as the room outlines that you should be good. 

Mister-Bin
17:32:57
Andreas wrote:

@Mister-Bin Thank you… makes sense, you see multiple A+ setups and you get in… 

Additionally, as you become more experienced, your market theses and game plan become more detailed based on the price action in front of you. The first run should’ve given you more confidence than usual to go long and to add on your way up, based on yesterday’s action, wimpy 50SMA attack, stacked green candles, etc. The pullback in the market allowed you to go short, but keep a tight leash, the move down was wimpy as @Pete called it, only short A+++ RW stocks. Once we began to attack the HOD again, you could go long, but maybe not with the share size, hold length as the initial move because we were close to HOD and nearing market close

Mister-Bin
17:35:52
Once you get the market down (market first, market first), find those A+ stocks based on RS/RW, you trade following your market thesis until it’s absolutely been broken. What has helped me was to physically write out my market thesis, my game plan that supports and to stick to it until I find a reason to write down a new market thesis and game plan

Hariseldon
17:56:25

@Andreas a good win-rate but bad pnl suggested you are staying in a few trades that are losers for far too long?

Hariseldon
17:57:50

@Andreas and you have tried the swap method?

Mister-Bin
18:08:34

@Andreas have you done the walk-away analysis? How many of those losers were eventually winners in the next hour? 2 hours? 1 day? 2 days?

Mister-Bin
18:37:14

@Andreas I see, at that point, yeah you’re focusing too much on the money, and not a balance between your win rate and profit factor. At the end of day, you’re probably looking at the money you made and thinking to yourself, “fuck yeah, I did well today because I made X amount”, but in reality, as a newer trader, we should be thinking “Fuck yeah, I traded only A+ setups today and only had winners today”. Your profit factor will come. Of course, that doesn’t mean you shouldn’t let a winner keep running, but you have to have a reason to: strong/weak market, relative strength/weakness on market pullbacks/bounces, etc.

Mister-Bin
18:38:51

@Andreas or if blows past your profit target, set your stop there, let it run, move up your stop. A win is a win, and the worst case at the point is “aw shucks, I made only my profit target” – is that really all that bad?

2022-07-20
Mark As Read

Pete
19:05:37

@faktorviii Don’t listen to CNBC. They will justify every wiggle and jiggle with a news story. It keeps viewers engaged and it keeps ad revenues up. There are many macro events taking place right now and that news is relatively minor. Earnings and the FOMC a week from now are the bid market drivers

Pete
20:08:41

@Izzy In the article I wrote on MAs, they mean nothing when the underlying is chopping back and forth on both sides of it. https://oneoption.com/the-system/market-first/long-term-technical/moving-averages/

Dave W
20:47:24

@Joao on the NVDA call out at 11:55 it was breaking compression with a HA reversal candle seemingly getting back into the uptrend from earlier today. That was the confirmation. Getting in around 10 am would have been better but i didnt see it then. The market pulled back pretty hard starting at 12:15 and took most stocks with it. NVDA did recover when the market bounced and became profitable. The fact that NVDA had a good daily chart as well gave you some staying power in the trade. The setup at 11:55 was perfect for a breakout and i would take again given the market at that time. of course nothing is 100% but the trade became profitable so i consider it a successful trade. It takes patience and belief in your strategy to not get shaken out of a trade like that 

Dave W
20:51:10

@Jared B If a stock has broken its D1 breakout and then compresses and sets up with the highest probability trade criteria i still treat it as a highest probability trade setup. In some ways it can be better than the original D1 break because of a pullback and or compression and another compression break. Not every one works but most do and you still have to follow the market for the best entry 

terryO
20:55:44
I’m big on checklists.  For those having issues with non consistent entries try using a checklist (yes, a physical piece of paper you need to put  checks on) that has your trading plan points listed.  (I assume you all have a written trading plan?)  I use Dave’s 5 points.  Market momentum, BBandwidth expansion, Heiken Ashi reversal, compression breakouts, and Institutional activivty.  3 checks=I dont trade, 4 checks=permission for me to take the trade, 5 checks=almost demands me to take the trade.
Hariseldon
21:46:13

@Dave W I have a question actually – obviously being in a qualifying trade gives you additional faith, allowing you to hold with a much wider range of price fluctuations.  This means you hold the position during potentially large drawdowns because of the high standard to begin with – however we are also in a somewhat “news driven” market and chop can quickly become a reversal or trend.  So do you find yourself maintaining the same wide parameters for cutting a trade and taking profit, or have they narrowed ? 

  

Dave W
21:51:41

@Hariseldon Depends on the strength of the daily chart and if i have options how much time on them. If the daily is mediocre my intraday take profits and stops are tighter now 

Dave W
21:52:30
If the daily chart is strong i stick to the daily support or resistance levels 
Dave W
21:54:16
Using itm options also helps with the drawdowns. If there is a news event specifically impacting a stock i have i still wait till near the end of the day because there are so many over reactions to news 
Dave W
21:55:47
Patience in general is a huge benefit to my trading but there are times when it works against me 

Dave W
22:02:31

@Jared B correct  sometimes only 3-4 weeks

Dave W
22:04:12
I use a lot of debit spreads as well for current weeks expiration and if earnings are near there is no point in going out to far perhaps i week after earnings to build some IV into your premium that wont be stripped out by time and sell prior to earnings 
Dave W
22:05:07
TDOC has earnings 7/27 so going out past 7/29 is just adding cost to the trade for no reason 
Dave W
22:07:40

@Zander usually but depends on the overall market, some times i will exit for a small loss below compression and look to enter after it it breaks back up. It also how many “swing” type trades i have on. In this market i dont like to be holding many swing positions

Dave W
22:12:47
I have specific criteria for entering a trade but exiting a trade is not so easily defined because of all the context of the stock and the market 

Russ
22:32:34

@tf2 The best probability setup will have both the 1OP for SPY and the stock line up, but it is worth noting that divergences are more frequent on stocks because they have a tendency to trend more than SPY. So, if I see a strong market, and a strong stock, with a SPY bullish 1OP cross but the only ingredient I am missing is the stock 1OP cross, I will often take it.

Hariseldon
16:39:52
BennettN wrote:

@Hariseldon Hey Hari! When you are trading straight calls or puts, how do you go about setting your targets? Is there a particular amount per contract that you have in mind ahead of time, or is it like with shares where you don’t necessarily have a set target?

It all depends on the type of market we are in – lately I have been taking profits rather quickly because there is no trust in a constant trend / direction .  I am usually looking to take roughly $500 to $1000 on a trade in the $50K Challenge , but the price action and the market will have me exiting sooner if conditions do not look like they warrant that level of target.  Position size is fairly standard – on cheaper stocks I am around 1,500 to 2,500, I tend to add , on stocks like AAPL I am between 500 and 1000 and for stocks over $300 I am around 200-500.  On Options my standard size is 10 contracts, and I will go up or down from there

Hariseldon
16:47:18
For me it is all about Buying Power – As a trader I tend to use all my buying power throughout the day.  If I have $72K in the account that means I start the day with $288K in Day Trading Buying Power….and $72K in Option Buying Power – so it becomes a question of how will I use that?  If for example I wanted to go long NVDA, short JNJ, but also long MARA…well if I went long MARA first, it would drain the Option Buying Power .  So I would first get the options on NVDA and JNJ and then go long MARA.  
After that it becomes a questions of – best use of capital.  Is my money being deployed in the best way possible? Now there is a fine line with this and FOMO, right?  For example, if I am in positions and all my buying power is being used – but then I see META looks great and I really want to go long….well in order to do that I would have to close out my shares, getting the options and then go back into less shares of whatever I was in.  Or Let’s say I am in MARA but I notice EVGO looks better – I can either reduce MARA and get both, close MARA and get EVGO or ignore EVGO – you don’t want to go hopping around from one trade to another, but you also don’t want your money in a losing position when it could be deployed in a winning one.
Hariseldon
16:57:55

@BennettN if I have 2,000 shares and a stock move .25 cents that is $500 – if I have 500 shares the stock would need to move $1 for that return – in bullish scenario, a stock like NVDA moving up $1 is similar to a stock like MARA moving up .25 cents

Hariseldon
11:44:49
I hope you are all noticing how I am using options as a surrogate to the stock and then using my buying power for stocks like MARA or EVGO 
Hariseldon
11:49:00
Harry48 wrote:

@Hariseldon Thanks did not realize that you are managing your buying power.
Day trading is in large part the ability to manage your buying power and use it fully every day

Hariseldon
11:49:52
Traders have this weird thing in their heads about not using their full amount of buying power – or only using a certain % for each trade – I don’t know where that came from but it definitely came from people that don’t want you to succeed because it is absolutely wrong
Hariseldon
17:56:27

@Crux you’ll notice that ZIM eventually not only got back to the entry but went into profit – I exited for buying power reasons and I found a better use of capital, but the trade was still good, the daily chart was good – there was no reason to exit unless you needed the capital

Hariseldon
12:03:14
When you see a long green bar like that on M – wait until the next bar – if it drops you want half the green bar to hold, if it doesn’t that put it on watch, but don’t enter, if it holds you can go long with the halfway point of the green bar as your exit – in the other scenario if it goes up, you go long with the top of the green bar as your exit.

Dave W
14:43:59
Pop out of box is a compression break of price action that has been in a rectangle for multiple candles  
Hariseldon
14:44:49
Note – you can set your scanners to find stocks that “pop out of the box” – you can also use Compression (IN) on Custom Search to find them and set alerts, or Compression Out to find likely candidates immediately – use Heavy Volume with that search as well.

Pete
16:06:14
Sorry snakebite. No earnings trades. Calendars are the exception because they are very neutral and DaveW has consistently proven that there is an edge to the method and it has been documented in the articles
Pete
16:08:01
We do not hold over the number – ever. That is one thing I highly discourage all of you from doing. I have spent a decade trying to find an edge. It is a 50-50 proposition and why would we settle for that crap shoot when we can hit 75% win rate without the overnight/event risk
Hariseldon
16:08:09
I (and I assume Dave) took profit in the strangle because when you have decent profit in a play like that, you take it – nothing more complicated.  I re-entered the strangle because I still like the trade and was able to re-enter close to my original price, so the profit was just extra.  Note – Strangles on earnings rarely work – it only works when the option pricing does not match the expected result – that disparity can be taken advantage with a strangle if you structure it correctly.
Dave W
16:08:47
except in very special cases strangles and straddles over earnings are losing propositions 
Hariseldon
16:08:48

Only time spreads are the endorsed method here for earnings – Dave and I were just showing a rare case 

Pete
16:14:46

@Jinkeys In Pre-Earn Options tab you can see that NFLX has exceeded the expected move 13% of  the time in the last 3 years. 

Pete
16:16:16

@Jinkeys Not commenting on the trade, just informing you of a resource you can use to find how the stock moves vs the expected earn move.

Dave W
16:28:28
a note on time spreads i have been monitoring time spreads with fairly low IV differences between this weeks and next weeks and the results have been very good i just dont know why they are working so well

Pete
16:31:49

Pete
16:33:11
Shiv wrote:

My question as a newbie is this – are there any custom searches that the pros in here would like to recommend other than the ones provided in the scanner? I have created ones based on @Pete ‘s videos but can’t seem to find some of the call outs made by the pros for e.g. – CAT, STNE etc.
I can’t say for certain that this is how Hari found CAT, but these basic variables would get you there. Then you could add Heavy Volume M15 or other criteria at that time and it would have reduced the results.

Hariseldon
17:31:54

@Ruddiculous At that point NVDA had RS on the RRS indicator – it had just gone above the previous day high, was above its’ algo line and SMA in a sector that was strong, on an upward trend with good volume and is known to be a fast mover

Hariseldon
17:33:56

@Ruddiculous I use the RS indicator that takes ATR into account

Pete
17:47:55
Ruddiculous wrote:

@Hariseldon Do you mind me asking what you saw in NVDA? It seems like you sensed a breakout before it happened. it looks like you entered at 1:10, which on the chart is a doji near the bottom of a bearish engulfing candle. It seems to be at the bottom of a compression zone when you entered. The 1OSI is hovering near zero.

What do you notice about the 1:10 bar on NVDA?

Pete
17:52:46

@Ruddiculous This is a very important note about that bar and I am pretty sure this is how Hari found the trade

Pete
17:53:42
No. I am pretty sure he set an alert at the prior day’s high. If you are not setting alerts all day, you are missing the boat in a very big way
Hariseldon
17:53:56

@Pete yes, that is exactly what I did

Pete
17:54:06

Pete
17:55:21
Set those alerts. If a stock is interesting to you now, it will be even more interesting if it can get through a resistance point

2022-07-19
Mark As Read

Hariseldon
17:55:11

@Amaya_trade Put Credit Spreads are based the daily chart, they should be OTM, with the short strike having at least two areas of strong support above it, and you need to get a 25% ROI on the credit for it – plus you need to be in the right swing trading environment (which earnings season definitely is not).

Pete
18:32:20
Amaya_trade wrote:

@Pete  during trading hour , you mention about buying dip in strong stock. Are stocks with double higher low good for PCS during this bullish sign ? Thank you 

Yes they can be, but you would want that higher low to be considerably above the lod like in the NVDA chart I posted. You want to have nice strength to that point, not something that has been floundering around in a strong market

Hariseldon
18:57:13

@AriS on Monday when the price went over $43.72 which is the High from Thursday, was there a reason you held?

AriS
19:09:15

Hariseldon wrote:

@AriS on Monday when the price went over $43.72 which is the High from Thursday, was there a reason you held?

Simply bc I didn’t want the loss.  The stock has been tanking on the daily and my overall market biased is still bearish.  At this point i can hold and wait it out Or closes it out and move on.   Psychologically the big red in my P/L isn’t doing my mindset any good.  I have been on a consistent run of wins    

Shiv
19:12:57
@Aris – if the market keeps trending higher you will feel more bad about your position with each passing day because it will get more in the red. Also it is psychologically affecting you as you stated. 
If I were you I’d cut it and focus on moving forward than having it looming over your head. Not a pro but that’s my advice 
Hariseldon
19:26:26
Without knowing your financial situation it’s impossible to say if you should hold the position or not.  I can say that there is nothing in either chart (TTD or TSLA) from a technical perspective that suggests one should hold.  And if you weren’t already holding it, I’m sure you wouldn’t enter it now.  But there may be fundamental reasons or long term market reasons for either.   Still, both are impossible questions to give a definitive answer 

BennettN
20:33:53

If stocks are reversing right after you enter than you are most likely catching them at the tail-end of a bullish run – so identifying those stocks earlier would be key

@Hariseldon You were helping someone yesterday and said this and I just remembered now. So I know we don’t want to say an uptrending stock is “overextended” or “it can’t go any higher,” but is it accurate to say that the further you enter from the breakout, the higher the risk of entering directly into a pullback or compression? Not that the trend is ending but that that particular leg up in the trend is ending. In other words, how do we know if we are at the tail-end of the bullish run as it is unfolding?

Dave W
20:37:40
that is why one of my criteria for entering a high probability trades is a break out of a compression zone 
Dave W
20:53:31
yes  and entering on a compression break (which usually work when the other highest probability trade criteria are also present) limits your downside since a break below the compression zone (or above for a bearish trade) would indicate you should take a loss
Russ
20:59:10

@Dave W I read your post in detail and actually just got done reviewing each of the posted trades as well. On the compression break out, it’s very clear that you are looking at that on the daily chart for your entries. Are you generally always entering on M5 compression break outs as well so that you are breaking out of a compression on both timeframes? Or just daily?

Dave W
21:03:07
I use 5 min dynamic compression zones on the 5 min and if there is a dynamic compression zone break on the daily i may enter if the 5 min dynamic pression zone has already occurred a few candles ago.
Dave W
21:04:36
again i need all of the highest probability trade criteria to be present (market trend only if one exists) 
Dave W
21:05:11
i dont take 1 or 2 criteria in isolation
Dave W
21:39:40
fyi  es just had a compression break with an HA reversal candle break out with the trend (bullish) and institutional buying was confirmed 
Dave W
21:40:35
also had a pop out of the box signal
Dave W
22:13:41
9:34 HA reversal candle break out of dynamic compression bb width expanding  took 4 points 
Dave W
22:26:22
I us HA reversal candles for entries and use standard candles when i am determining whether and when to exit
Dave W
22:36:00
the reason i use HA reversals for entries and regular candles for exits is HA candles are inherently confirming because they are made up of 2 candles and regular candles for exits is exiting on HA candles will miss the best exit because the reversal happened 1 candle before 
Dave W
22:37:00
it is more complex than that of course but that is the basics 
Dave W
22:44:44
any entry i take on a break of s/r or algos etc is based on an HA reversal being present
Dave W
22:45:34
identifying continuing trends is one of the big advantages of HA candles 
Dave W
22:48:38
i try to enter on the close of an HA reversal candle that closes over the dynamic compression zone 
Dave W
22:49:04
must wait for candle to close for confirmation
Pete
08:03:15
Following up on compressions. I hope all of you are aware that Option Stalker Pro measures these. We can display them and we can search for them. Here is an example of Dave’s STNE trade late yesterday. Market first: Market had been strong and 1OP bullish cross pending and D1 > 50-day MA. No major pullbacks all day. Favor the long side. At the time of the trade you had that strong market tailwind. STNE had a bunch of checkboxes marked. Nice upward trend, no big pull backs, D1 breakout, 1OP preparing to cross M5 for the stock, on a buy signal, 1OSI > 0, Compression out, > prior day high, new hod….
Pete
08:03:39

Pete
08:05:59
Hi probability trades mean you have lots of checkboxes marked. 
Pete
08:11:17
If you are looking to buy, you do not have to wait for a green dot. That just means it is a big breakout. A gray dot after a yellow dot can be more effective because the stock is coming out of a compression, but it has NOT jumped higher

Hariseldon
16:48:50

@DnJoe96 if you get the market right, and then get the stock right – the entry and method used (stock/options) has far less meaning.  Yes, you can get better entries, but sometimes waiting will result in the opposite as you miss the breakout.    If stocks are reversing right after you enter than you are most likely catching them at the tail-end of a bullish run – so identifying those stocks earlier would be key 

Hariseldon
16:52:58

@Amaya_trade The best thing to do is not to trade in those environments – if you do trade it you need to be either nimble or patient, but you can’t be neither and it is hard to be both at the same time.  

Hariseldon
18:19:00
SMA’s on the Daily are used by Institutions and Retail traders alike, they have been shown time and again to offer clear lines of S/R  – SMA’s on the Weekly are less often used, but have also been shown to offer S/R – however, despite what anyone says there has never been any evidence that SMA’s on lower timeframes do anything.
Hariseldon
18:22:07
VWAP matters – clearly.  A cross of the 3/8 or 4/9 or whichever combo you use on the EMA is simply a confirmation of the trend – that yes the average price of the stock in the last three time periods is higher than it was in the last 8, meaning the price is trending up – that is all that is, which is why it is so flexible, it is just a matter of what you want to see – on the five minute chart do you want to see if the price action in the past half hour is strong than the past two hours? Then use 6/24 EMA cross.  It is just there to confirm a trend.  Now the 8EMA however does have consensus value (meaning it has value because a large number of people use it) and stocks that trend away from the slope of the 8EMA tend to regress back towards that slope.

Dave W
20:24:16
Patience is the hardest trading attribute to master i believe. Seeing all the trades being posted and thinking “I am a trader, i need to be trading” is very difficult to overcome. All the posted trades coming at you causes FOMO along with’  the grass is always greener ” syndrome.  That is why i keep saying and posting our objective as traders is not to trade but to make money. It is kind of like looking for pearls in oysters. If they all look the same its a lot of work and many empty (losers) oysters. If the oysters with a pearl are marked with a colored dot then it is easy. In this case the colored dot is the high probability trade setup. Any analogy you can relate to that helps you not to take non high probability trades
MystrE
20:34:37

@Jared B

Just speaking from my own experience and I’m not a pro trader by any means. Still in the 1 share/contract phase. I started muting everyone in the chat except the featured traders and sometimes even have to mute Hari as he posts so many potential opportunities to help dial down my fomo. It’s tough for me to leave it that way but when I do I spend much more time looking for my own setups and less time feeling like I’m missing so many opportunities. Just my experience

Dave W
20:40:57
I look at all of Haris trades because i know what he is looking for and i know how good he is at interpreting the chart story. They wont all align with my needed criteria but many do and they give me more potential highest probability trades setups than if i was just finding my own. The important point is only take the ones that meet your strict criteria so you are trading on your strategy, not someone elses
Dave W
20:57:59
I have posted my criteria for the highest probability trade setup criteria. It is really not very complicated and easily identified when they occur (which is usually only a small number each day). Learning to read the  story the chart is telling you is much more difficult and can only be learned through a lot of experience reading charts and price action. Hari can identify exactly what he is seeing in the chart for THIS SETUP., but every chart is different and learning to read chart patterns, price action, total context of the chart and its corrolation to the market at the time is much more difficult. The reason i try to quantify my highest probability trades setups is so newer traders have a blue print to take trades that will be profitable very frequently so they can become profitable as they learn the more complex nuances of trading 
Hariseldon
22:51:36
By all means mute me because I am an ass but not because there are too many trades, that is like saying that you have this great scanner that constantly gives you great set-ups to either trade or learn from but you can’t handle the FOMO so you shut it off.   Learnings to A) Deal with FOMO and B) Identify which trade to take and which one not to take , are two extremely important lessons you are removing from your learning experience.
Hariseldon
22:57:14
You need to be able to see a trade posted, looked at the chart and set-up, understand why it is being traded, and then decide if it fits your criteria or not – the more stringent your criteria, the less trades you make and the higher probability those trades are when you make them.  Once you get confident that your high probability set-ups do in fact become profitable a high percent of the time, you can then increase your position size – but if I post 10 trades – and 2 of them qualify, you still learned something from the 8 that didn’t.   Today I called out MRVL, MARA, and TGT – MRVL and MARA I called out extremely early in the day.  All three of those were extremely high quality set-ups to use.
Hariseldon
23:01:53

Zander
12:23:39

@ican I don’t think there was an actual article on it, but my understanding is that the sector/stock relationship can be interpreted very similarly as the market/stock relationship, due to the fact that market participants buy and sell exposure to a total sector just as they buy and sell exposure to the total market. A stock having relative strength to it’s sector is bullish for the stock, but a weak sector can still pull down your strong stock and a strong sector can act as a tailwind for your strong stock. If you search for comments by Russ in the chat with the “sector” keyword he talks about it a lot, and hedging against sector rotation and market movements by going long on stocks strong to a sector and shorting stocks weak to that same sector. The best setup for a directional trade is market bullish, sector relatively strong to the market, and stock relatively strong to the sector (and to the market by nature), and vice-versa for shorts. 

Zander
12:28:28

@ican https://www.reddit.com/r/RealDayTrading/comments/t569fm/how_to_use_this_sector_rotation_to_your_advantage/ also not sure if you saw this but it’s helpful 

Zander
12:32:47
I’ve found it really helpful to periodically check the D1/H1/M5 1OSI of the major sector ETFs to both help me manage current positions and know when I should stay in and lean on a strong sector vs reduce my exposure to a weakening sector, and also to generate new trade ideas when I see a sector ETF gaining relative strength /weakness or making a significant move on the D1 chart 
Fox
12:34:04
re sectors it can also help to do a bit of the same analysis that you’d apply to stocks, to the sector ETFs. So before I get overly bullish on a swing timeframe on say BAC or WFC (which i daytraded on Friday as they were in play), I’d want to see XLF break and close above its 20ma and ideally 50ma before consider swinging long

Dave W
22:51:35
The prospects i put on my watch list are  stocks that are breaking out of compression on the daily chart, have the bollinger bandwidth expanding, have a HA reversal candle(s) have institutional involvement, have momentum and have RS/RW. That gives me the highest probability list. Then i may just look for HA reversals with momentum.
Dave W
22:53:06
Same criteria i look for intraday on  the 5 min chart. If any of those prospects meet the same criteria on the 5 min chart the next day you have a extremely high probability intraday trade that can be taken overnight
Dave W
22:53:30
the overnight watch list is only looking at daily charts 
Dave W
22:54:55
Make sure to look for support and resistance. You dont want them too close or you will limit your profit 
Dave W
23:03:14
you are trying to pick a top it is not a high probability setup   look at MRVL SWKS ADI ULTA  those are high probability setups.  MRK would be a stronger candidate to the upside if it breaks above 6/28 high
Dave W
23:18:02
yes  i prefer to usually wait for confirmation. It could have been day traded and held if it closed near the high of the day but waiting will make it a higher probability trade even though you may have given up some profits by waiting 
Russ
23:44:49

@Andreas One tip on the daily charts is to not just look at the candlestick patterns but focus on medium/longer term strength. So, for example on MRK, with a stock that is in the upper right hand corner of the chart when SPY has been weak, I would not consider shorting it even if I saw what I thought was a “great” setup on the M5 chart. By only longing stocks with very strong daily charts and only shorting charts with very weak daily charts you increase your probability of success and give yourself staying power in a trade. You may have to adjust this based on market conditions, right now there are some stocks with weaker daily charts (middle of the chart or even lower end of the chart) but you still want them to have relative strength to SPY on a daily chart basis. One way to do this simply is only go long on stocks with 1OSI > 0 on the daily chart and only short stocks with 1OSI < 0 on the daily chart.

Dave W
23:46:16

@Abie A lot of the option expiration i take depends on if i an looking to trade intraday or potential swing. On intraday trade i will go out to the following week if potential swing maybe 4 -6 weeks. So as usual it depends 

Dave W
00:22:05

@Jeff1383 RPRX   is trying to break out  needs to clear 44.75  however it does not have bollinger bands expanding so there is a chance it may be going to compress 

Dave W
00:22:48
so it is a good setup but not the highest probability setup
Dave W
00:33:30

@Jeff1383 on TC2000 i color the candle a different color if the bb bands are expanding so i dont need the bb on the chart

Dave W
23:56:39
for bandwidth expansion it doesnt make much difference both 10 and 20 will expand on a breakout but i use bb 10 2 

Dave W
10:51:35

@Crux Andreas is correct with his explanation of the algo line on NFLX. Mine was incorrect because i didnt connect to the 6/8 candle but the starting point on 4/22 is correct. After the earnings candle on 4/20 the wick on the 4/22 candle (and 4/21) has no price level near it except for the earnings candle which cant be used. Candle tops or bottoms that stand alone from nearby price action are used for algo line starting points and with higher volume makes them more likely to be used .

Dave W
10:51:35

@Crux Andreas is correct with his explanation of the algo line on NFLX. Mine was incorrect because i didnt connect to the 6/8 candle but the starting point on 4/22 is correct. After the earnings candle on 4/20 the wick on the 4/22 candle (and 4/21) has no price level near it except for the earnings candle which cant be used. Candle tops or bottoms that stand alone from nearby price action are used for algo line starting points and with higher volume makes them more likely to be used .

Andreas
12:14:33

@Dave W @Fox After Hours yesterday, NFLX hit the algo line twice and rejected…  I’m concentrating on finding high probability setups, to go along with training myself to read price action better… For Example, If the market is weak Monday, would NFLX be a good short setup because of this algo line rejection?  And vice versa, if the market is strong, the setup would be a break of the Algo line with volume before going long?  I’m only asking because it’s finally getting through that I can’t just go off of EMAs anymore, those setups are not nearly as good as Algo/Trendlines…

Andreas
12:14:33

@Dave W @Fox After Hours yesterday, NFLX hit the algo line twice and rejected…  I’m concentrating on finding high probability setups, to go along with training myself to read price action better… For Example, If the market is weak Monday, would NFLX be a good short setup because of this algo line rejection?  And vice versa, if the market is strong, the setup would be a break of the Algo line with volume before going long?  I’m only asking because it’s finally getting through that I can’t just go off of EMAs anymore, those setups are not nearly as good as Algo/Trendlines…

Dave W
12:53:34
My highest probability trade setups nearly always have breaks out of compression in the direction of the stocks trend for the day. The also usually have HA reversal candles and trade with the market trend that day if there is one. I also need confirmation of institutional trades driving the trend as well as relative strength or weakness.
Dave W
12:53:34
My highest probability trade setups nearly always have breaks out of compression in the direction of the stocks trend for the day. The also usually have HA reversal candles and trade with the market trend that day if there is one. I also need confirmation of institutional trades driving the trend as well as relative strength or weakness.
Vendor
13:08:20
@Dave W Without your software is our best bet for identifying institutions going to just be the addition of substantial volume?
Vendor
13:08:20
@Dave W Without your software is our best bet for identifying institutions going to just be the addition of substantial volume?
Dave W
13:35:09
Without the software the best bet for identifying institutional involvement is RS/RW
Dave W
13:35:09
Without the software the best bet for identifying institutional involvement is RS/RW
Crux
18:11:58

@DaveW back to the conversation earlier, could you give me insight on NFLX why you would use the 4/22 candle to start the algo line. To me I just see a random candle chosen, its not a high/low or anything special. What is the reasoning here? NFLX had a brief stall at the 6/8 – 7/8 line today at 12:55 ..downtrend…algo…not really sure what you should call it. I still have a hard time differentiating between the two.

Andreas
18:58:40

@Crux Cause it’s the high candle with above average volume after the release of earnings on the 20th that gapped it down… can’t use the 20th, it was an earnings candle… the new relative high candle if on 0421 so connected line  to 06/08 and beyond…  To me, NFLX hasn’t breached the algo line yet, and it sits just under it at closing today… maybe i’m wrong with my algo line charting, but that’s what i see…

Pete
13:58:54
Custom Search will find ANYTHING. You just have to know what you are looking for and you have to learn the variables. DaveW gave you the pattern. 1. Look for a stock that is moving higher. If it is > prior day high, it is moving higher. 2. You want institutional participation. Heavy volume is a sign of that. 3. You want a compression. If you want to find stocks before they breakout, use Compression (In) M5. Drop alert lines above the compression since you are looking to trade in the direction of the trend. If you are looking for something that has broken out, use Compression (Out). 5. You want HA candles that are just starting you can use HA ContII. 6. Strong vs SPY M5 will give you stocks with rel str
Pete
13:58:54
Custom Search will find ANYTHING. You just have to know what you are looking for and you have to learn the variables. DaveW gave you the pattern. 1. Look for a stock that is moving higher. If it is > prior day high, it is moving higher. 2. You want institutional participation. Heavy volume is a sign of that. 3. You want a compression. If you want to find stocks before they breakout, use Compression (In) M5. Drop alert lines above the compression since you are looking to trade in the direction of the trend. If you are looking for something that has broken out, use Compression (Out). 5. You want HA candles that are just starting you can use HA ContII. 6. Strong vs SPY M5 will give you stocks with rel str
Pete
13:59:30

Pete
13:59:30

Pete
14:02:56
This is a starting point. If you want a stock with liquid options, add that. If you want a stock that has D1 momentum, add the algo breakout, ADX or more time frames for Strong vs SPY
Pete
14:02:56
This is a starting point. If you want a stock with liquid options, add that. If you want a stock that has D1 momentum, add the algo breakout, ADX or more time frames for Strong vs SPY
Amaya_trade
14:04:16
Pete wrote:

This is a starting point. If you want a stock with liquid options, add that. If you want a stock that has D1 momentum, add the algo breakout, ADX or more time frames for Strong vs SPY
@Pete for algo breakout , shoud I use Algo Lines ( New) or Algo Lines ? 

Amaya_trade
14:04:16
Pete wrote:

This is a starting point. If you want a stock with liquid options, add that. If you want a stock that has D1 momentum, add the algo breakout, ADX or more time frames for Strong vs SPY
@Pete for algo breakout , shoud I use Algo Lines ( New) or Algo Lines ? 

Pete
14:29:08

@Amaya_trade What are you looking for?

Pete
14:29:08

@Amaya_trade What are you looking for?

Pete
14:29:45
How do you plan to use the variable?
Pete
14:29:45
How do you plan to use the variable?
Amaya_trade
14:30:34

Pete wrote:

@Amaya_trade What are you looking for?

stock breakout algo line D1 , heavy volume , RS 

Amaya_trade
14:30:34

Pete wrote:

@Amaya_trade What are you looking for?

stock breakout algo line D1 , heavy volume , RS 

Pete
14:32:31
You can apply your question to any of the variables in Custom Search. should I use Trade Signal or Trade signal (new). Should I use HA II or HA Cont II+, Should I use Compression In or Out?
Pete
14:32:31
You can apply your question to any of the variables in Custom Search. should I use Trade Signal or Trade signal (new). Should I use HA II or HA Cont II+, Should I use Compression In or Out?