Algo Lines (New): red D1, Option Liquidity: -2 ~ 15, Heavy Volume Today: 120 ~ 500, Stock < Prior Day Low
@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?
Superpantz wrote: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?
@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
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
@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.
@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 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 to the T
@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.
@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 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!
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
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?
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.
@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 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
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).
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
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.
@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.
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.
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
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?
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
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!
@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)?
@Russ you’re right I got cst and pst confused – but yes, or when you saw the HA reversal at 1:40pm (est)
Question Is there an expectation for what comes after a doji sandwich?
Question Is there an expectation for what comes after a doji sandwich?
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?
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?
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.
@Dave W @Hariseldon How do you know where to exit on a stock that is at all time high… with reference to FREY here
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.
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.
@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 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.
@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 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!
@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.
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.
@owensd that sounds like a great approach to getting paid on a day ike today
@Fox been employing it all month – best month trading so far!
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.)
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?
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?
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?
@ican was it an issue with position size?
@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.
@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.
@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
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
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
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.
@owensd are you currently shorting a stock up $9? Just checking is all
@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.
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!
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!
@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.
@st0rm if you find it, please link it here – thanks!
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.
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
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.
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.
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.
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).
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.
how do you set profit target for stocks at ATH or ATL
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.
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.
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.
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.
@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?
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
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.
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
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
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.
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.
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.
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
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?
Next time you are halfway to your profit target, increase your position by 50% – that will solve your issue
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.
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.
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.
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?
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.
Pete discusses legging out of bull put spreads in this video: How To Leg Out Of A Bad Spread
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?
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.
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?
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.
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.
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.
should it be 75/2.0 for each of the those 3 months or on average across 13 weeks? Because I am EXTREMELY close
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.
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
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 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.
There is no asset manager in their right mind that is looking at this market and thinking, “Yeah, I should buy here”
of course they all arent in their right mind
And that right there is the entire problem with the rational actor model – there just aren’t enough rational actors out there!
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.
@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)
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
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.
@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).
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.
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?
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.
@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.
@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
@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.
@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.
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
@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
@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.
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.
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.
@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.
@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
@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.
@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?
@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.
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
@Hariseldon But I’m special and different
@Ruddiculous lol, yup – everyone thinks they are –
@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
@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
@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.
@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.
Question How does one confirm when it is a breakout or a headfake?
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?
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?
Harry48 wrote:Harry didn’t we discuss this last time? Always go with weeklies if you can
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 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 setupsDave, 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.
@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?
@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.
@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?
@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.
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.
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.
@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
@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.
@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 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
@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.
@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.
@Auto not losing money is making money
@Auto not losing money is making money
@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
@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?
@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.
@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 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.
Learning and trading well is not a straight line up, there are many many setbacks along the way
@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.
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.
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
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
@MTrader can you identify why?
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 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.
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 ?
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.
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).
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.
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.
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.
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.
What is Profit Recycling?
The PR / RR trades all expire within 2 weeks
HOG looks really strong
the 40.50ish resistance on the D1 chart isnt a turnoff?
The break of the 2/10 ALGO line is more of a turn-on
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
That is generally priced into the stock – otherwise it would be pretty simply to always short the stock the day before
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.
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.
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.
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
@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.
@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
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
@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.
@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
@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!
It is very tough skill to master @Mister-Bin
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
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.
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?
Earning keeps the price stay high
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
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.
[…] 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.
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.
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.
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
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
Burn this into your brains – most M5 candles are just NOISE.
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.
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?
@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.
@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.
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.
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?
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.
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.
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.
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.
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.
AMAT again, I got too jumpy on the 100sma cross
@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
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
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.
@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.
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.
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.
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?
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.
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.
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
you really need to be able to just look at the ENPH 5 min and daily chart and see a tremendous setup
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.
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.
i just dont trade momo stocks meme or otherwise
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
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.
if you knew what caused the drop what would you do differently than you would by just watching the market
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
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
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.
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.
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.
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.
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.
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
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.
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.
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.
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
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
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
@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.
@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
@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
MCD holding very well
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
@AwkwardAlien anticipating based on fear will not have a good outcome
@AwkwardAlien I’m smacking you from the road that’s how much you need to be smacked
@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.
@TuckChat Made $1.78 for every $1 lost.
was this you trading the system on your own or mostly following others to learn ? just curious
Thanks Pete. In your trading do these divergences cause you to trade smaller or with even more confidence?
@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.
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 .
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
@DnJoe96 there’s sections in the wiki on taking spreads vs stocks vs straight options
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 great attitude and approach!
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
Question is there a working index for the articles at oneoption.com?
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
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
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?
Can someone give me an example for a CDS please and explain the purpose?
@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
@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, I sure paid the price for selling; this really is a learning experience
@Collin there you go….perfect
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.
Question @Hari what is difference between scalping and trading ? (newbie question)
@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
@TuckChat on TDOC you could let this weeks short calls expire worthless thus keeping that premium and holding the long calls for a bounce
@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 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…
@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
@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
@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
@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
@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
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?
Jared B wrote:Volume –
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
After hours (and perhaps after the earnings frenzy) I would like to hear from everyone what they think will improve this chat room – tonally – I 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.
@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.
@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
@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
@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
@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.
@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
@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
@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.
@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.
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.
@ExpatTrader i think because your main motivation is to trade which needs to be replaced with the motivation to be profitable
@ExpatTrader you need to have faith in the market direction – particularly when there is a reason behind it (strong earnings) –
@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
@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
It is all about whether or not the movement is in line with the expectations set by the option pricing
@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
@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.
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?
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”
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.
@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.
@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?
@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
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.
Hariseldon wrote: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.
@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”
@mSquare a bit, but CVS did not have an exaggerated drop from WMT, it was dropping prior to that
@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!
@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
@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?
@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.
@Kelly G have you read the Wiki?
@Kelly G the WIKI IS this system
@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
@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.
@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.
@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.
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
Just use more caution on these. They can look great one minute and the rug gets pulled out the next
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).
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
@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.
@RAK You can go long on a call or put and then make a spread later to “lock in profits”.
@drluke you need to have options approval to create spreads with your broker.
@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
@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
@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 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?
@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 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.
@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 sorry I meant Dave. Made the same mistake yesterday haha
@st0rm The setup on the daily chart has no bearing on the stock price movement after earnings are released
@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 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
@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
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.”
@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.
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
@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.
@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.
@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.
@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.
@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.
@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).
@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: 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?
@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.
@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
@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
@TuckChat You can mess around with the compression in/out check box on the OS scanner.
@BennettN I believe that’s covered in the mindset section of the Wiki, no?
@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.
@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…
@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.
but some times those stops are really far from your entry
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
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?”
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?
@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.
@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.
@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
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.
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 Downward Spiral – An Upspoken Mindset Issue
@Joao Custom Search is an excellent way to find Lottos
@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?
@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
@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…
@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.
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?
@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.
@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.
@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 is your stops usually below the compression zone that you entered the break out on? for longs I mean
@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?
@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 –
@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.
@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.
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?
@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.
@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.
@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
@Snakebight HOW TO TRADE EARNINGS CALENDAR SPREADS
@Snakebight HOW TO TRADE EARNINGS CALENDAR SPREADS
@Snakebight HOW TO TRADE EARNINGS CALENDAR SPREADSPete – 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?
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.
@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 Is it possible to trade after hours through OS? Or do we need to go direct to broker?
@Harry48 CC’s on a stock like TSLA should be weekly, and .10 delta or lower, but never on an earnings week
@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.
@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.
@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.
@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
@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.
@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
@SimonM there are posts on that in the Wiki
@SimonM let me know if you find the answer there –
@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
@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.
@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
@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.
@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
@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
It is almost draconian in the boot-camp nature of it – and that rubs people the wrong way
@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 Thank you… makes sense, you see multiple A+ setups and you get in…
@Andreas a good win-rate but bad pnl suggested you are staying in a few trades that are losers for far too long?
@Andreas and you have tried the swap method?
@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?
@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.
@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?
@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
@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/
@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
@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
@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 ?
@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
@Jared B correct sometimes only 3-4 weeks
@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
@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 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?
@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 Thanks did not realize that you are managing your buying power.
@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
Only time spreads are the endorsed method here for earnings – Dave and I were just showing a rare case
@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.
@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.
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.
@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
@Ruddiculous I use the RS indicator that takes ATR into account
@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.
@Ruddiculous This is a very important note about that bar and I am pretty sure this is how Hari found the trade
@Pete yes, that is exactly what I did
@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 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
@AriS on Monday when the price went over $43.72 which is the High from Thursday, was there a reason you held?
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
@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?
@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
@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.
@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.
@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
@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.
@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
@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
@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
@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 @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…
@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.
@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…
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 What are you looking for?
@Amaya_trade What are you looking for?
@Amaya_trade What are you looking for?
@Amaya_trade What are you looking for?