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Why 90 Percent Of Traders Lose MoneyYou might have heard this, “90% of traders lose 90% of their money in the first 90 days of trading.” This is known as the 90/90/90 rule. I don’t even know if this is true, but it seems that a lot of traders are losing money. So this is why today, we’re going to talk about what causes most traders to lose money. Then I’ll give you practical tips on how to avoid it so that you can be part of the few that actually make money with trading. What Do You Need To Become A Successful Trader? There are three things that you need to really become a successful trader. If you’re missing even one of these things, you already have a big problem. So let’s start, with the first thing you need. This is the most important thing that a trader needs and this is a trading strategy. Now, there are traders out there who are trading without a strategy, and the number one reason that I see traders fail is they don’t have a trading strategy. A trading strategy tells you what to trade, when to enter, and when to exit. So as you can see, a trading strategy doesn’t have to be super complicated, but you need to know what to trade. Here is what I see many traders doing since they don’t have a trading strategy. They are going for the flavor of the day, and the flavor of the day might be something that Jim Cramer is saying, something that Cathie Wood, the famous, or infamous hedge fund manager of Ark Investments is saying, or maybe something that they read in the news. This is the worst thing you can do. I’ve been talking a lot to traders, or not really traders, but people who are getting started in the market, and I ask them, “what are you trading right now?” They usually just name the most popular stocks that are being traded. These are stocks like TSLA , AAPL , AMZN , and NFLX . Then recently, as you know, with the GME hype, the GameStop hype, a lot came up there. But you see, if you’re not trading with a strategy, you are not a trader, you are a gambler. Now the second important piece that you need as a trader is that you need to have the right tools, and I can’t stress this enough. Here’s the deal, if you want to compete in what they call the game of games, if you want to really make it as a trader, you need to have professional tools. Think about it this way, if you only have a strategy without a tool, it’s like trying to win NASCAR riding on a lama, right? I mean, it doesn’t work this way. So it is super important that you have the right tools. You can’t win a car race on a lama or on a donkey, you get the idea, right? The third thing you need to be a successful trader is having the mindset. So you see, you can have the best strategy, you can have the best tools, but if you don’t have the right mindset, you will lose money. You see, in fact, I see it all over. Sometimes people think all they need is the right tool, and they will be successful traders. Or they think all they need is a trading strategy and they will be a successful trader, but that’s not the case. The reason why traders fail is not having the right mindset is because they let emotions get the best of them. The two main emotions that we have as traders are greed and fear. I mean, obviously, we are greedy. We want to make money this is why we get into this game of trading in the first place, at least that’s why I started trading. But then there’s also the fear, the fear of losing money, but you got to be able to control these emotions. We will talk about losses in a moment, but one of the challenges, because of greed, traders will often trade too often, meaning that they are overtrading. Have you ever been guilting overtrading? It happened to me at the beginning of my trading career. I remember when I was still a young trader and new to the whole trading game somebody told me, “if you want to make it as a trader, you have to take at least 100 trades a day.” This person was probably a broker because I tried this, and it is impossible. I traded on a one-minute chart, tried to make 100 trades a day, and I found it just didn’t work this way. Then there is revenge trading. Revenge trading is something that I did in the beginning because I thought, after I took a loss was the time for me to make back the money that I lost. Something important that you need to understand is that the market doesn’t owe you anything. Sometimes the markets give, and sometimes the markets take away. So this is why revenge trading is something that you need to avoid at all costs. The good news is in the long run, usually, the market likes to give, at least to those who are serious. You must understand that losses are part of our business as traders, and it is sometimes really easy to become overconfident. However, whenever you think that you have the markets figured out, is when the market is going to throw you a curveball. There will be always surprises and situations that you have never encountered. Some call these black swan events. Often what I see is that many traders who are new to trading simply focus on the wrong things. Most young or new traders focus mostly on the entry. They think if they can just time the entry, this is when they’ve figured it all out. Well news flash, money is made and lost when you exit a trade. So timing the exits is almost more important than timing the entries. Sometimes traders focus on just having a strategy with a high winning percentage, but this is another mistake. You don’t need a high winning percentage. In fact, you can make money with trading even if you’re wrong half of the time. The magic happens actually when all three things are coming together. So how can you do this? I want to share a little bit with you about what I am doing. Well, first of all, let’s talk about trading strategies. The Trading Strategies First of all, what you need to understand is that there is no “best” trading strategy. It amuses me actually when people argue with me about this. People will ask me what will you do if this or that happens. Well, you see this is where I’m not saying that you should trade my trading strategies. I show you what I personally do, and how I’m making enough money to trade for income to trade for a living, and let you make the decision if it’s right for you. I can’t tell you if my strategies are right for you or not, but I can tell you there is no “best” trading strategy. Either a trading strategy is making money or it doesn’t, right? So if a strategy is making someone money, I would never, ever criticize anybody who is making money with that strategy. Who am I to say you’re doing it wrong? When it comes to the strategies I use, sometimes people ask me, “why do you do it this way? Why don’t you do it the other way?” and I’ll be happy to explain to you why I do certain things. It’s always interesting to see that some people feel that I need to become a better trader, and I appreciate your concern for me, but I’m actually doing pretty good. A trading strategy must fit YOU. It must fit you in terms of capital requirements. There are some trading strategies that you can start with as little as $5,000. There are other trading strategies that require more money. So you need to make sure do you have enough money for this particular trading strategy. The other thing might be time requirements. Some trading strategies require you to sit in front of the computer all day long. Now, this is not for me. I personally like to watch the markets for 10 or 15 minutes before they open, and then for 30 minutes after they open. So personally my own trading is usually just 45 minutes in the morning. Now, fortunately, I don’t have a job, I have nothing else to do but watching the markets, this is why I do it. However, some of the trading strategies that I trade, actually don’t require you to watch the markets at all. So there are time requirements to consider, there are capital requirements to consider, but then also possible drawdowns you need to keep in mind. Without risk, there’s no return. No risk, no reward. See, if you don’t want to take any risks at all, and make sure that you never, ever lose any money, then you should put your money into a savings account. In a savings account your money will be safe, right? But it also earns only about a quarter percent right now. So if you want to make more money with trading, then you have to risk some money. So there’s a fine line regarding the risk and rewards ratio. So you need to be aware of the risk, and the more risks you’re willing to take, the higher the rewards will be. But keep this in mind when you’re looking at a trading strategy, there are a few things where it might make sense for you to trade the strategy or it might not make sense for you to trade the strategy. The PowerX Strategy There are two trading strategies that I like to trade, and the first strategy is the PowerX strategy. Now, for the PowerX strategy, there are a few criteria here according to whether or not it's the “best” strategy. So, first of all, the PowerX strategy is great for a trending market, and it doesn’t really matter if the market is trending up or down as long as it trends. It does not perform well in a sideways or in a choppy market. This is what we are having right now, and this is why right now I am not trading the PowerX strategy as much as I used to last year when we did have trending markets. Now, trading with the PowerX strategy requires a minimum of $5,000. So if you have five to $10,000, that’s actually perfect to get started with the strategy. If you have less than this, I don’t think that this strategy is for you. Honestly, I don’t know a trading strategy that you could trade with less than $5,000. This is where I’m not claiming that I have the best trading strategies. I have trading strategies that I personally have traded for many, many, many years that have stood the test of time and that are proven to make money, at least for me. Now the PowerX Strategy is perfect for growing a small account, and here is why. With the PowerX strategy, you can apply money management, and money management is the turbo boost in your account. It can help you to take your trading to the next level. Now in terms of time requirements, when we talk about this, it takes around 15 minutes per day and you can do this absolutely while the markets are closed. So if you have a demanding daytime job that doesn’t allow you to step away and look at the markets, then actually The PowerX strategy is perfect for you. Again, it does have some limitations so it doesn’t work all the time. So you need to know when to use this strategy. The Wheel Strategy The other trading strategy that I like to trade is The Wheel Strategy. So the Wheel Strategy is perfect for a market that going up, going sideways, even when it is choppy, or when the market is slightly going down. It is not good for a bear market where the market is going down. So you need to know when to apply what strategy. This is where, in the same way as you have multiple tools to fix the home, you need to have multiple trading strategies. So here, when you’re trading The Wheel Strategy, it is an options trading strategy only. Here specifically, you are selling premium. So this is where you could have a large drawdown, which is possible if you’re stuck in a position, as I am right now. I am stuck actually in two positions. So let me show you the two positions that I’m stuck in. One of them is AAPL , I bought it at 133. Right now, it is trading at 120, so I’m losing $13 per share that I own and I own 800 shares. So the question is, are we in a bear market? No, we are not in a bear market right now. Not at all. We are somewhat in correction territory, and correction territory is when a market is going from the top from the recent high to down more than 10%. That is how a correction is defined. According to the Nasdaq, we’re clearly in a choppy market. Since the beginning of the year, we have been grinding higher, coming back, going up, going sideways. In fact, year to date, the Nasdaq is down .37%. So pretty much haven’t moved since the beginning of the year, but we are not in a bear market. So you could have a large drawdown while you’re stuck in a position. Let’s talk about the other position that I’m in. The other position that I’m in is RIDE , and RIDE is not doing well at all. So I’m flying a rescue mission here right now. I bought RIDE at 21.50, and right now it is trading at half of what I bought it for. So obviously that’s not good at all, right? So what I need to do right now, is work my breakeven all the way down by actually doing dollar-cost averaging. Right now, I sold some more puts trying to bring down my cost basis from 21.50 to 18.70, then to 16. What I’m hoping for, and this is part of this strategy, is that I am getting a quick bounce. Now, absolute full disclaimer. What happened here with RIDE, to be honest, why I got into this is because I was getting greedy. This is where trust me, I’ve been trading now for more than 20 years, even after this, I love money. I saw a lot of premium on RIDE and I got blinded by the premium. This could be the one trade out of, I believe, now close to 150 trades where I have to take a loss. So it happens. Losses, as I said, losses are part of the business, and never let greed get into your way. So you could have a large drawdown. So here with this strategy, you need a minimum of, I would say, $10,000 in cash and you have to put it into a margin account so that you get $20,000 in buying power. If you’re trading an IRA, you need at least $20,000 in your IRA because in an IRA you don’t get any buying power. Time requirements for this strategy also require about 15 to 30 minutes per day. I think the best time to trade this strategy is during the open. So this means from 9:30 to 10 a.m. Eastern Time. If you have been following me for a while, then you know, I’m not standing here and telling you, “You have to trade this way. My trading strategies are the best.” I would never do it because they may, or may not fit your style, which is absolutely fine. The Best Trading Tool, The PowerX Optimizer However, if you choose to trade these trading strategies, this is where I believe that I have the best tool in the world for trading the strategies. I’m absolutely biased, but the tool that I have here is the PowerX Optimizer. Here is why I think that this is the absolute best tool for it because this software has been programmed for these two strategies specifically. Now, if you look at any other tools, for example, like TradingView, it is software with which you can do some backtesting and has a bunch of indicators built-in. So first of all, this software, I feel is very complex to learn because you have multiple functions. And it basically allows you to trade any trading strategy whether you use a moving average strategy, you can trade with it, or you’re using a MACD strategy, you can trade with it, or you’re using Bollinger bands, you can trade it with it. But you see, especially with the PowerX Optimizer, it has been designed to support the PowerX and the Wheel Strategies. This is where it shows you exactly the three things that you need to know when you have a strategy. It tells you exactly what to trade, it tells you exactly when to enter, and it tells you exactly when to exit. I’m using this tool every day, and I wouldn’t want to trade without it. I want to be absolutely honest. If you would take PowerX Optimizer away from me, even though I know these two trading strategies inside out, it would be super difficult to find the best stocks to trade. The other super important thing that PowerX Optimizer does is that it actually tells me what would have happened in the past if I had traded this particular stock group on here for example, according to the rules of the PowerX Strategy. This is important to me because it gives me more confidence. The trading report basically tells you if you had followed the rules of the PowerX Strategy, what would have happened over the past year if you had traded a stock. The summary it shows me actually the ROI, it shows me how many winning trades and losing trades I would have had, what is the winning percentage, the profit factor, the average win, and the average loss. This here is based on a $10,000 account. So see if you have a $10,000 account, and your average loss is $122, I mean you’ll be fine, right? You’re not wiping out your account. What is important to me in a tool? So first of all, what I want to have is a powerful scanner, because what the scanner does, a scanner tells me what to trade. Now, the second thing is I want to see what would have happened if I traded this stock with this strategy. This for me is super important. Then, of course, I want to get all the important data for trading. This means I want to know how many stocks or options should I trade, when to enter, and when to exit. So these are the important things. This is, of course, combined with what can I expect from this trade. It’s so important that I also see the risk and reward ratio. So here, for Groupon, I can expect to risk a dollar and trying to make $2.33. Now let me ask you, does this sound good? It sounds pretty good to me. With the PowerX Optimizer, I also have The Wheel Calculator and The Wheel Scanner. The Wheel Scanner shows me what are the best candidates for The Wheel right now. I’m actually super excited because we are about to release version 2.0 of The PowerX Optimizer. Within the software with the new update, we distinguish between the PowerX Strategy and The Wheel Strategy.
TVC:NDQEducation
by rockwelltrading
1
When To Take Profits on Options I’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. Options trading is really fascinating, and it’s a great way to make money, and I think it is very important to know when to take profits, especially if you like trading The Wheel as I do. So the question is, when should you take profits when trading options? How exactly do you figure this out, is there a formula for it? In this article, I’ll share some guidelines for how and when you should take profits on an option trade. We will answer the question of whether you should let options expire or take profits early. I will show you some very specific examples of two trades that I have going on right now (at the time of this writing on March 17th, 2021). One of them, I took profits today, and the other one I’m still holding on and I will show you exactly why. ]How To Calculate Profits On Options Firstly, let’s talk about how to calculate profits on options. In order to address this, there are two types of options traders. One type of options trader are ones that are buying options, and the other, which I feel is very lucrative, and this is what I’ve been doing for a long time, is selling options and collecting premium. I want to actually talk about selling options and receiving premium, because this is, as I said, what I’ve been focusing on recently with trading The Wheel Strategy. My year-to-date profits on this account so far are more than $54,000 selling premium on options, and I’ll show you exactly how to do this. So when selling options, you’re receiving premium, and for me, the most important metric here is the so-called premium per day or PPD. MARA Example The first example that I want to give you is my position with MARA. Looking over my transactions with MARA over the last 30 days. I sold puts at a strike price of 20, and for this, I received $0.28 in premium per option that I sold. Now options come in 100 packs, so this means that per option I made $28. Now, in this specific example, I sold 50 options total, so this means that I’m receiving a premium of $1,400. I put this trade on March 10th, and these options expired on 3/19. This is $1,400 in premium in 9 days. This comes to $155.55 in premium per day, or PPD. Now this includes weekends. My rule is I’m buying back the option when I can get 90% of the maximum profits, but there’s an exception to this rule. First, let me tell you what that means. So again, I sold each contract for $28, for $0.28. The idea is to buy back the option at $0.03, and this is exactly what I did today (March 17th). So we have another two days to expiration. So today, I bought back a total of 50 contracts at $0.03, and by doing so I made $0.25 in profits on MARA. Now, this is where again, we’re looking at 50 contracts, times $25, so this is $1,250. I was in this position for 7 days. So $1,250, divided by 7 days, means that I made $178.57 a day. Let’s just round to $179 per day. As you can see, $179 is more than the $155.55 that I planned per day. Now let’s think about it. If I would keep MARA right now, if I would keep this option until expiration, but what would happen? I would make an additional $150 in three days. This means that now my premium per day is only $50 per day. This doesn’t make sense to me because this here is actually bad, because my plan was to make $156 per day, and I was able to make $179 per day by buying the options back. If I would hold on to this trade and let it expires worthless. So this is where here, and let it expire worthless, right? This is what would happen. I would make an additional $150 in three days and the premium per day would only be $50. That does not make sense to me at all. This is why here in MARA, it made sense to buy back the put option because by doing so, it frees up buying power meaning that now I can sell more puts. So the idea here is that I’m selling more puts and making more money on the new puts than I would make holding on to MARA. DKS Example Let’s go over another example with a position I have right now with DKS . I sold the 66 strike on March 10th. I sold 15 of them and I received $75 in premium. 15 contracts times $75 comes to $1,125. So let’s do the math right now and see if it makes sense to close this trade today (March 17th) or if we should keep it, and we’re using very similar logic here. So we sold the 66 put expiring March 19th, and we received $75 per contract for it, $1,125 total. We then divide this by 9 days to get to our premium per day, which is $125. So right now, on March 17th, let’s see how much DKS is still worth. Right now, the bid/ask for DKS is $0. 05 over $0.10, and that’s really interesting because I want to buy it back at $0.07. Let’s say right now, if I would place an order right now, I could buy it back at $0.10. Should I do it? If I did this, I would make $75, minus $0.10 ($10 per contract), which is $65 per contract. For all 15 contracts, I would make $975. We find our PPD by dividing $975 by 7 days, which comes to $139. So if I really wanted to, and if I needed to free up some buying power, I could do this. But let’s see what happens if we hold this for a few more days. So if we hold DKS until expiration, we can make an additional $150. It might actually make sense to close it out because $150 over the next three days does not make a lot of sense. When I looked at the option earlier, DKS suddenly jumped from 78 to almost 79. This is a 10% jump in 30 to 45 minutes. When we opened this morning, first, we went down, and then we went a little bit up, and then we were hovering right around where we opened. Earlier this morning, the DKS put was trading at $0.25. So the question is earlier this morning, would it have made sense to close it? Earlier today on March 17th, I could have bought it back for $0.25. So that wouldn’t have made sense, right? Because then if I’m buying it back for $0.25, I would only make $0.50. So this here, $0.50, this is then $750 in seven days, and if we divide $750 by 7 days, this is $107 premium per day. As you can see, the $107 premium per day is less than what I expected. If I would hold DKS to expiration, we can make an additional $0.25, $25 times 15 contracts is $375. Now, if you take the $375 in 3 days, that would be $125 premium per day. So when I’m getting $125 premium per day, this is when it does not make sense to sell it just yet. Should You Take Profits Early? So this is the important thing because the question always is, do you take profits early, or hold until expiration? Well here’s my formula for this. So I want to give you a very specific formula that you can use if you want to. If the current realized premium is a premium per day, PPD, is larger than the planned PPD, this means close it out early. If the remaining premium per day is smaller than the planned premium per day, close it. Only if the current realized premium per day is smaller than the planned premium per day, in this case, hold it. If the remaining premium per day is larger than the planned PPD in this case, you want to hold it. Summary This is why today I wanted to show you my formula for when to take profits on options, especially when you are an options seller. You see, selling options and receiving premium is what we do with The Wheel Strategy, and the most important metric here is the premium per day (PPD). This where using the PPD, you can actually get down to a formula of when exactly you should buy or sell. This is where it’s just a good rule of thumb if you don’t want to do all these calculations. So the rule of thumb is I close a trade when I can realize 90% of the maximum profits.
NASDAQ:MARAEducation
by rockwelltrading
3
Options Trading For A Living In this article, I’m going to show you how I made $52,138 in 8 weeks by trading options (at the time of writing this article March 12, 2021). The key question that I’m always asked is, “Is trading for a living possible?” For me, this is a resounding YES! I’ll break down all the steps from how to trade like a pro, where and how to find great trades, how patience is extremely important when making money, and more. What Do You Need? You might be thinking, “How the heck does anyone make that much money doing something so risky?” The answer is simple. You need: Number One a solid trading strategy, which we will discuss in this article. We will talk about the trading strategy that I personally used to make more than $50,000 in the past two months, and I’ll show you how to do this step by step. Number Two you need the right tools. You will see why that is so important, and I’ll show you the tools that I’m using. Number Three you need the right mindset. I know that mindset is probably the most boring thing to talk about it, so I will not spend a lot of time on this, but having the right mindset is important if you want to trade for a living. Now, there’s one more thing that you need, and this is money. I hate to break the news to you, but if you don’t have any money you can’t put money into your account, and you won’t be able to make money. And yes, I made more than $52,000. Before we talk about the trading strategy, let me just add a very, very important disclaimer. No, these results are not typical. Yes, I am very good at this, and I’ve been doing it for over 20 years. If you start trading this strategy, do not expect the same results. I will talk about this later, but it is super important that you start paper trading on a simulator first. How Much Money Do You Need To Trade Options? The key question that you might be wondering is, how much money did I need to put into this trading account to make this much? For this account, I deposited $250,000 in cash. This is a margin account, so this gives me $500,000 in buying power. Let’s dive in. The Wheel Strategy If you have been following me for a while, you know that I like to trade using The Wheel Options Trading Strategy. There are three steps to this strategy. Step Number One , what we are trying to do here is sell puts and collect premium. When selling options, I typically like to go with expiration dates 1 to 2 weeks out. The idea here is to collect a “weekly paycheck.” I’m putting this in quotation marks because this is where some people say you can collect weekly paychecks with no risk, and that is simply not true. When trading there IS risk. You want to make sure that you trade only the best stocks. What do I mean by this? Well, currently in my account I have positions with companies like AAPL, AMD, DBX, DKS, GDXJ, HAL, HAS, IBM, and JWN. These are all super solid stocks. These are not fly-by-night stocks. You will not see any GME, AMC, BB, BBBY, or any of these meme stocks in my account. We’re talking about super solid stocks, stocks that you have to be okay with owning if you’re assigned the shares. So let’s look at DKS , which is Dick’s Sporting Goods. They are a solid retailer. The idea here is that we are selling puts at a strike price that is at support. Here I looked at short-term support. You want to see at what price level did prices touch several times and then bounce back. They were at the 66 level, so I sold a 66 strike. If DKS closes above then I keep the premium, if it closes below, we would get assigned. Now, another stock that I am trading right now is SNAP , Snapchat. Here we are looking at a strike price of 49. Again, this is where you want to pick super solid companies. I don’t know about you, but do you have kids? My kids live on Snapchat. They’re not on Facebook, Twitter, or Instagram, but they’re on Snapchat. I believe SNAP it is a super solid company. We see that we had support four, almost five times. So this is where I sold a strike price at 49. You want to make sure that you’re only trading the best stocks and that you always look for support. The support that I like to see is a support level that held at least over the past 8 weeks. So, again, step number one is where we’re selling puts and collecting premium. The basic idea here is that we are buying stocks at a discount, or as many people would say right now, “buying the dip.” This is something that has been working really, really well. It’s a tactic that Warren Buffett has been using for many, many years to scoop up stocks at a discount. Step Number Two is where you may or may not get assigned. This means that if the price at expiration of the stock is below the strike price that you sold, then you have to buy the stock at the strike price you sold it. In this case, if this is happening, then you would go to step number three, which I will share with you in just a moment. Now, if the price is above the strike price at expiration, then you don’t get assigned. You just keep the whole premium and you would go back to step number one. This is why it’s called “The Wheel,” because we keep doing this, right? Step Number Three is when we are assigned, we will sell covered calls and collect more premium. This is the strategy in a nutshell. As you can see, it is not really complicated. The trick is to trade only the best stocks with solid support levels in case you are assigned. Using The Right Tools The second thing that you need is powerful tools. Let’s talk about the tools that I personally use. If you have been following me for a while, you already know that the tool that I use is the PowerX Optimizer. Now, here are the two things for me personally that are super important when we are picking the right tools. First of all, I want to have a scanner built-in. A good scanner not only finds the best stocks to trade, but also tells me what strike price to trade, and at what expiration. When it comes to expiration, I already told you in broad strokes, I’m only trading one to two weeks out. But should I trade this week’s expiration or next week’s expiration? This is super important, and this is where a tool helps me. The second thing, which for me is super important, is that the tool has a calculator. With this calculator, it tells me exactly how much premium I should get, how much risk is involved in this trade, right? These are the important things you need to know. Then, of course, a calculator should tell you how many contracts should I trade based on my account size. When trading options, you know the important things are, that you know what is the underlying stock, what is the strike price, what expiration, what is the minimum premium you want, and of course you want to know the risk. So let me show you exactly how I am finding these stocks. So here we see the PowerX Optimizer. The scanner actually gives us a bunch of symbols that are candidates to consider right now. Now, one of the things that we need to do is we need to make sure that we only pick the strong stocks, and that we only pick those that have a good support level. So one of the examples of a stock that I’ve traded recently is NIO . The scanner actually shows me in the data window what strike prices I should consider right now. It also shows me what premium I can get, and how much this would be annualized. What PowerX Optimizer told me is that right now I could sell at a strike price of 36. And I would get some decent premium for this. Now, we always want to go back over the past few weeks, and if we look over the past 6 to 8 weeks, we see the support see, it touched the level three times. So it looked like there was strong support at 36. Now, the next thing is, and this is where PowerX Optimizer helps you, that you see exactly here how much premium you can get, especially if we are looking at it annualized, right? For me, the minimum option premium that I should get to get at least 30% annualized. For me, that’s what I want to do. This is how I was able to make more than $50,000 thus far this year, and it is only March 12th, and I started on January 11th. Now I also want to know how many options should I trade based on my account. How much in premium would I collect, and what is the premium per day that I would make? So how much money per day do I make when trading this? This is where we go back to why it is so important to have a tool that shows me all this because let me ask you, how else would you find all this out? I mean, if you tried to do this manually, I don’t know, I mean, for me, this is almost impossible to do it. So and believe me, no professional trader does this with only a calculator or a cell phone in his hand. You must know your numbers. Trading is a numbers game, and if you don’t know your numbers, it will be really, really difficult for you to make money. Another key question is, if you don’t have a tool, how else would you find these trades? I mean, every single trade that I did in this account here, that you see over the past eight weeks, that have yielded $52,000, has been taken from this scanner. I mean, if you would force me right now to trade without this tool, I couldn’t do it. This is where I believe that having powerful tools like the PowerX Optimizer is giving you an unfair advantage. Think about it, when trading you are trading against other traders, but you don’t have to be the best trader in the world, you just have to be better than the other trader. You just need to have an edge, and this is where I must say this tool is actually giving me an edge. If you want, you can even say that it is not only an edge, you could call this if you want to, an unfair advantage, but when it comes to trading, you need to play every ace. You don’t want to show up with a knife to a gunfight, you’re trading against the smartest traders in the world. Traders Mindset Now, this brings me to the last point here of how to trade for a living, and this is having the right mindset. This is something that many traders underestimate because they think, “Hh, you know what, that’s fine, I just need a strategy and I need a tool and I will just be fine.” Having the right mindset is important, especially if you want to trade for a living. You must be focused on what I call SRC profits. This stands for systematically, repeatable, and consistent. So this is what SRC stands for, and this is why this so important. You see, as a trader, for me, at the end of the month, I’m wiring money out of my account, out of my trading account into my personal account. I mean, it's great when you have windfall profits. If recently you participated in the GME hype, and you double, triple, quadruple many maybe 10x your account, then good for you. Congratulations, and I really mean this. However, can you do this again this month? What is the next stock that is going crazy like this? Or if you were able to capture the Tesla ride all the way up, good for you, but what happened when Tesla went from 800 to 500? Did you take a hit in your account? See, this where it is super important to have these SRC profits. When it comes to trading for a living it is also important that you have patience, and here’s what I mean. You’ve got to grow your account systematically. So, and how do you grow your accounts systematically? If you don’t have a trading strategy, this is why it’s so important to have a trading strategy that produces these SRC profits, the systematically, repeatable, and consistent profits. So you see how it all comes together. I mean, this is why there’s these three pillars, the trading strategy, the tools that are supporting your trading strategy, and the mindset. Now, the other thing is that when you are trading, patience means that you can’t panic. You see this is where recently, people started talking about these diamond hands, but I think the way how some people talk about diamond hands is just holding on to a losing trade. No, this is not the case. It basically means you let the trade play out. How do you let the trade play out? You follow your plan, but to follow your plan, you must have a plan. So this is where it goes back again to having a trading strategy. Summary To sum things up, first of all, is it, is it possible to trade for a living? The answer for me is yes because that’s what I’m doing. Now, does it mean that you can do it? Again, this is why it’s so important that you practice on a paper trading account first. So you’ve got to have the right trading psychology. For the trading psychology here is that you are aiming for SRC profits and not the YOLO-windfall every now and then profits. To start trading for a living, what are the things that you need? You need to have a strategy, you need to have the right tools, you need to have the right mindset. Now, if you are looking for a strategy, today I presented to you The Wheel Strategy, which I think is a great trading strategy because it’s simple to understand and it gives you an edge, right? You also want to have the right tools, and for the right tools, I might be biased, but I think PowerX Optimizer is the best tool not only for trading this strategy but also for trading the PowerX Strategy here.
TVC:NDQEducation
by rockwelltrading
1
The Wheel Options Strategy: 29 Things You MUST KnowI’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. Those of you who have been following me know I love trading The Wheel Strategy, in fact, with my $500,000 trading account that I’ve been trading on since mid-January, I just $50,000 in REALIZED profits for the year. The Wheel Options Trading Strategy is a powerful trading strategy that can be fairly low risk IF you know what you’re doing. This is why, in this article, I wanted to give you a complete squad of trading tactics for trading The Wheel Strategy. I look through all of the comments on my YouTube videos & the questions that I get in my live streams, and I have compiled a list of the questions I get most often. So today we’re going to talk about the 29 things you must know when trading the Wheel Options Strategy. The Wheel Strategy Overview So let’s briefly talk about the basics, and the basics of the Wheel Strategy, are actually pretty simple. So let me just tell you the three steps that we need to do when trading this strategy. Step Number One: We want to sell put options and collect premium. Step Number Two: Here, we may or may not get assigned. Step Number Three: If we are getting assigned we will sell covered call options and collect more premium. If we are not assigned, then we will just stay at Step Number One, and keep selling put options to collect more premium. So as you can see, it’s really not that complicated. I mean, wouldn’t you agree? Now I divided this into 3 sections: The Basics, then Picking The Right Stock, because there’s a lot of questions about this topic, and then we will also talk about Selling Calls After Getting Assigned, as well as What To Do When a Trade is in Trouble. The Basics 1.) I have around $30,000 in my Interactive Brokers account. Is it enough to start trading the Wheel? Here is my recommendation. You should have at least $10,000 in cash so that you can get $20,000 in margin. I highly recommend that you are trading a margin account. If you have less than $10,000 in cash, I do not recommend that you trade with the Wheel Strategy. Now, if you have a smaller account, I recommend that you do a maximum of three positions in your account. As your account grows, you can go up to five positions in the account. 2.) What is the best expiration date when selling options? What I personally like to do is go 1 to 2 weeks out, so this also means that I like to trade weekly options. So I’m looking for a really short fuze here because I believe that this is where you have the most control over the prices here. The idea is actually to collect so-called “weekly paychecks,” and I put this in quotation marks because it always sounds so glamorous, right? However, it’s really important that you know what you’re doing here. Now, the next question that I receive all the time. 3.) Should I use margin to increase my buying power? My answer to this is yes, absolutely. I highly recommend this, however, keep in mind that margin is a double-edged sword, which can work for you as well as against you. 4.) How do I know if I have enough capital if I get assigned? It’s easy. So let’s say that you are selling a 100 put, which means a put with the strike price of 100. This means that when you’re getting assigned you have to buy 100 shares at $100 each totaling $10,000, so this is how much capital you would need. So all you need to do is basically just take the strike price that you are selling of the put, times 100 because options come in 100 packs, and multiply this number by the number of options that you’re selling. Let me give you an example. I recently sold 8 put options of Apple at a 133 strike price. So how do you know whether you have enough money in your account? Well, this is where we are taking the strike price, 133 times 100, times 8. This means you would need to have $106,400 in your account. So please make sure that you are sizing your account appropriately. The good news is, if you do have the PowerX Optimizer, which is the tool that I’m using, it will show you exactly how many shares you can trade. So what you need to do here is that you are actually filling in your buying power, and again, your buying power might be different. How many positions you want to take, and this is where I said if you have a smaller account fill in three, if you have a larger account you want to fill in four or five. Then based on the strike price that you are selling here, it will tell you exactly how many options you should trade, and based on how many options it also tells you how much money you need, and how much margin is required if you were to get assigned. I highly, highly, highly recommend that you do use a tool, because you see, if you do all the math in your head, it can go horribly wrong. The tool that I personally use is the PowerX Optimizer. Many of you already have the tool, many of you are familiar with it. 5.) Is there a certain percentage you buy to close at? Some people say 50% profit is best statistically to close. I like to close a position at 90% of the max profits. So as an example, this morning (March 10, 2021) I sold puts on DKS, Dick’s Sporting Goods, and I sold them for $0.75. So this is where right now I have a working order in there to buy this back at $0.07, which is 90% of $0.75. So, yes, if I can get 90% of the max profit here, this is when I want to exit. 6.) So is there a rule of thumb of what percentage this account is tied up with the strategy? It really depends on how many trading strategies you use, right? So right now I trade two strategies. I trade the PowerX Strategy and The Wheel Strategy. The PowerX Strategy is perfect for a trending market, but the markets right now, are far from trending. They are super choppy going up and down, so, therefore, right now I’m dedicating all of my money in the account to the Wheel Strategy. Once I start trading the PowerX Strategy again, this is where I would just decrease the buying power here and say instead of using the $500,000, I might just use, let’s say 400K, and use 100k for the Wheel Strategy. 7.) What screening criteria does the PowerX Optimizer use for the Wheel Strategy? The PowerX Optimizer has a built-in scanner to find the best candidates for the Wheel Strategy, and there’s a conservative scanner as well as an aggressive scanner. For my criteria, we are looking for stocks between $5 and $300 here. We are also looking for stocks that have a down day because when you’re selling put to collect premium, you want to make sure that you’re selling when the market is going down. We are also looking at the implied volatility because want to make sure that there’s enough premium there. Then most importantly, we want to make sure that the annualized premium is actually at least above 30%. There are a few other minor criteria. First of all, we only look for stocks that have weekly options. This is what I explained briefly a little bit earlier, I’m not interested in trading stocks that only have monthly options. 8.) What can I expect? 30% yearly annualized based on what capital? The capital here this would be based on is the buying power. So in my account, I have a $500,000 buying power. This means if I’m looking for 30% based on the buying power, so this would yield into 60% based on the cash that I put in the account because the cash that I put in the account was $250,000. So when I’m talking about the 30% yearly annualized, it’s based on the buying power. If you don’t trade with margin, then this would be based on your cash. Picking The Right Stock: 9.) Do you have a defined universe of stocks that are your “good list?” Well, first of all, I want to make sure that I’m trading the stocks from the PowerX Optimizer Scanner, and then I just look for stocks that I like overall. These are some of the stocks I've traded thus far this year: There's been DBX, DKS, GDXJ, HAL, HAS, IBM, JWM, LL, MARA, MNST, NIO, RIDE, RIOT, SNAP, and many more others. These are stocks that I really like to trade, and as you see, most of them are very well-known names so I’m not trading any exotic stocks. You also will not find meme stocks like GME or AMC on this list here. 10.) Is there a certain level of IV, implied volatility, on a stock that you won’t go to? I’ve traded some 200% plus of IV is that too high? Just as a rule of thumb, the higher the IV the higher the risk. This means that now stock can really swing back and forth. So for me, what I feel is a sweet spot, I like to see at least 40% IV, but no more than 100%. Sometimes I do take trades that are higher than 100 but honestly, for me, the sweet spot where you find most trades that are fairly safe is anywhere between 60% to 80% implied volatility. This is where I don’t have hard rules here, but I need to like the stock. 11.) Markus, have you changed from your “When I started I just wanted to know the symbol. I did not want to know anything about the company, as it might cloud my view. Trade what you see, not what you think” mentality? My answer is NO, for the PowerX Strategy. I absolutely do not want to know anything about the symbol. However, for the Wheel Strategy, the answer is YES because when trading The Wheel Strategy I only want to trade super solid stocks. 12.) So I noticed that some of the stocks on your list for the Wheel have very illiquid weekly options. Do you watch for options liquidity or just the credit limit and hope to get filled? For me, I don’t care about open interest and volume, and here’s why. I am selling premium and I’m fine letting the option expire worthless, so I don’t need to buy it back. If I can buy it back I will, otherwise no. So this is where here I don’t care about the open interest. But again, it really depends on the strategy. I mean, if you’re trading a different strategy, open interest and volume might be very important to you. For me, it is not. 13.) Besides technical support/resistance levels, how do you objectively decide which are the best stocks? Do you take into account any fundamental analysis to filter out which underlying to trade? No. So here is what I do, and this is it’s pretty subjective, so I don’t have objective criteria here. I must like the company, because the point is, you must be OK owning this company, and I must like the story of the company. Yeah. This is where I always use Peleton as an example because I know that many are trading Peleton and it has lots of premium in there. But you see for me, Peleton, it’s a company that I believe can easily be ripped off, and at some point, a major competitor might swoop in. So I must like the company and the story of the company. This is fairly subjective here because the key is that you must be OK owning that stock at the strike price. 14.) Since you are suggesting not to sell puts on leveraged ETFs, why are they then included in the Wheel Scanner? You know what? This is a great question and we actually might exclude them in version PXO 2.0. So right now I thought you’re all adults, and as adults, you can do whatever you want. I did not want to restrict you, so but we might exclude it or, we might add an asterisk as a warning sign. It’s a good suggestion, and I know that some get blinded by premium on leveraged ETFs. So I do not trade leveraged ETFs, anything that has 2x or 3x in the description I stay away from this. 15.) Why do you select growth stocks only instead of a mix of value and growth stocks? Seems that growth is in trouble due to interest rates. Growth stocks offer attractive premiums, but value stocks rarely do. I want to give you a very specific example here, and let’s actually go to IBM, because IBM is one of the value stocks that I have traded. I traded IBM after a massive drop where I sold the 117 strike. Usually in IBM, you won’t find enough premium in there. The implied volatility lately, is usually around 34 or 29. So this is the very simple reason why I’m going for growth stocks because I’m looking for a minimum of 30% annualized in premium. Selling Calls After Getting Assigned 16.) If you sell a call lower than your original put strike price can you still make money? This is actually super dangerous, and here’s why. So when you sold a put you got assigned, and you had to buy stocks at the strike price. I’m using an example of AAPL, and I was assigned Apple at $133 per share. Now, if I’m now selling a call, it means that I have to sell stocks at the strike price, so if I’m selling, let’s say a 125 call, it means that I have to sell the shares for $125. Now here’s the challenge with this. I bought them for $133 and now I’m selling them right now for $125. This means that I’m losing $8 per share. Now when you’re trading options, they come in 100 packs. So this means that you would lose $800 per option. So this is where you need to be careful when you’re selling a call lower than your original strike price. If you do this, make sure that it is above your cost basis, and we’ll talk about the cost basis here in just a moment. 17.) Why are covered calls more profitable in your experience than cash-secured puts? Are you targeting a different percentage return? No, I do not. Here’s a rule of thumb for what I do. Let’s jump to PowerX Optimizer and go to the Wheel Income Calculator. Here is something that I did today (March 10, 2021) where I sold calls on RIDE. Yes, and let me, let me quickly double-check before I do this, what did I sell on RIDE? So on RIDE I sold calls that expire March 19th, and I sold them for $0.35, and the calls that I sold were at 23. So by doing this, this actually gave me an annualized return. By default, I am not going as many strikes out, because all I need here right now is a rise in 7%. So if you are rising seven percent here, then I will be able to make money not only on the premium that I collected, the 16.45, but also an additional $7,000 on the stock, right? So this will be a total of $8,500. It’s just the nature of the beast because when you are selling calls you’re usually closer to the strike price, and therefore, usually higher premium for a higher ROI. This is why I keep telling you, I’m always looking forward to getting assigned because selling calls is actually more profitable. 18.) When you sell calls to reduce the cost basis, do you also include the premium received from selling first the put to reduce the cost basis? Yes, I do include the premium. 19.) Is there a risk of the portfolio becoming nothing but stocks and not being able to sell covered calls out of the money (OTM) to hit your targets? The answer to this is absolutely yes. When trading there’s risk, and there is a possibility that you own a bunch of stocks and you cannot sell calls against. So you have to hold on to these, and so for a few weeks, it could absolutely happen that you’re not making any money. I was recently assigned shares of AAPL, and have not been making any money with them because I have not been able to sell calls. But you see, even though I have one dud in my account, it’s only one of my positions, and I still have been able to make almost $51,000 in about 8 or 9 weeks. So, therefore, it’ll even out. So is there a risk? Absolutely. When trading there is always risk. If you are not willing to accept the risk when trading, do not trade, because there’s always the risk of losing money. 20.) Markus, if you haven’t sold a call against the Apple 103 strike price haven’t you been missing out on money? Not really, and here’s why. Right now, if I would try to sell a 133 call on Apple, that is, for example, expiring this week, I would get $0.01. I’m not missing out on any money, right? $0.01 translates into $1. So, no, I’m not missing out. Even if I would go out next week and I’m looking at the 133, I would only get $0.14. That’s $14. For me, it’s not worth it, and again, everybody’s different, so you might have different rules. For me, however, it’s not really worth it. 21.) When running a rescue mission on margin, how does one sell a covered call? My broker requires cash for any call that I sell. If this is true, change the broker immediately, and here’s why. So I own Apple shares, and if right now I want to sell calls against these Apple shares, let’s say 8 calls, it would not have any effect on my buying power. It’s the opposite So here I highly recommend you change the broker if this is true. Your margin requirements should be reduced when selling a covered call, this is how it works. 22.) Why not still sell calls at your cost basis after the stock drops? Because sometimes there’s not enough premium. If there is enough premium, I will do it, but sometimes there is simply not enough premium and then you are sitting on your hands. This is why I said I have this, the one dud in my account, AAPL, is not making me any money, but everything else IS making me money. I was able to sell calls against GDXJ and RIDE. With DKS, MARA, and SNAP, I sold puts. So everything else is making me money. I mean can’t change the wind, I can only adjust my sails and this is what I’m doing here. What To Do When A Trade Is In Trouble 23.) What do you mean by “rescue mission” for those who have not heard it before? But a “rescue mission” is where you have been assigned shares, and now the trade is going against you. You sell more put options below the assigned strike price. By doing this you collect more premium. If you are assigned, you lower your cost basis, making it easier to get out of that trade. You only should consider flying a “rescue mission” if the stock is down at least 30% from your assigned price. 24.) Why not still sell calls after your stock drops? Because there might not be enough premium in there. So very simple, right? If there is, we will do it, if not like with AAPL for me right now, then it is what it is. 25.) What happens when you run out of buying power and can’t sell calls at your target? So first of all, you can always sell covered calls, because you will not run out of buying power for selling covered calls. What they probably meant is what about not being able to sell puts, and there are two things that you can do. Number one, you can either wire more money into your account, which is probably not always feasible. Number two, you can simply close some positions to free up some buying power. 26.) Is it possible to buy options rather than sell options because selling options is supposed to be very dangerous? Well, of course, and that would be the PowerX Strategy. So with the PowerX Strategy, you are buying options if this is what you prefer to do, and if you’re trading the Wheel Strategy, this is where you’re selling options. So pick your poison. I mean, you got to do one thing, either you’re buying options or you’re selling options. So I have a strategy for each of these. 27.) Any point in waiting to make sure that the market has stopped dropping before flying a rescue mission? Yes! You don’t want to try to catch a falling knife. Wait until you see that the market or the stock is stabilizing here. 28.) I understand starting the rescue mission when the stock drops 30%, how do you determine the new put strike price to enter? The next support level? Yes, absolutely. This would be the next support level that you’re looking at. I got assigned at 21.50, and the next possible support level is right around 12,13, so this here it would be a strike price of 12–13, so this is where I would do it. If we go to Apple, which is another stock that I have, I did get assigned here at 133 and the next support level is around 108, right? So I would probably be most interested in selling the 108 strike price. 29.) It’s hard to make money on a small account unless you get assigned. Yes, it is hard to make money on a small account, period. I know that many want to start with a smaller account, like $500 or $1,000, but honestly, it is super, super, super difficult to make money on such a small account. In order to do this, you would have to trade this account way more aggressively, which means that you are basically risking a whole lot. So if you want to try to double a $500 account, you basically have to risk the full $500. This is what many Robinhood traders and these YOLO’ers do. It’s all-in and maybe it doubles or you lose all of the money. So, yes, it is absolutely difficult. So this is why the capital requirements, I highly recommend that for the PowerX Strategy if you want to trade it, that you have at least $5,000, and if you want to trade the Wheel Strategy, that you should have at least $10,000 in cash, which gives you $20,000 in buying power we talked about this at the beginning of the show here. So this is super important. If you do have smaller accounts, there might be trading strategies for you. I want to be honest with you though if there are, I don’t know them. When I started trading, I started with an $8,000 account and I saved until I had $8,000. Now, I shredded that account into pieces, down to $1,600 and then I saved money up again. Then the second account that I was trading was $16,000. Now that one, I also lost more than half. So I lost, I traded this down to $8,000 and this is when I put some more money in, brought this up to $12,000, and this is when it finally clicked. So again, if right now you have a smaller account, good luck, there might be strategies out there. I wish I had some for you. I promise, if I knew how to grow a $500 account I would tell you. If right now, if all I had to trade was with $500 to trade, I wouldn’t do it. I would probably find a way to save money or make extra money with Door Dash, Insta Cart, or something like this until I have at least $5,000. I wish that I could tell you something different, and unfortunately, I can’t. I’m not saying that it is impossible. All I’m saying is that I’m not the right person to teach you these strategies because I don’t know them. Summary If I didn’t cover a question here in this article that you may have, I promise I’m reading through all of the questions that you have, and I will answer them in one of the upcoming Coffee with Markus episodes. I hope that you enjoyed this article because I love talking about trading. Anyhow. Have a fantastic rest of your day and I’ll see you on the next one.
TVC:NDQEducation
by rockwelltrading
Why trading with Pine script can give you an extra month a year!I've spent around 9/10 years trading with technical analysis. I used to spend 2/3 hours on a weekend and easily 1/2 hours each day on the screen - that doesn't include the amount of times I'd be checking from my phones on and off throughout the day too! So add that all up - its 620-700 hours per year. Frightening. We trade for freedom and time - not to spend that time looking at a chart. Well, in my opinion anyway. A month is 720 hours - so pretty much an extra month a year. Crazy right? Fed up, I created a systematic approach. This video highlights how my systematic strategy works vs. how you would see the markets technically on the last GJ sell. Pinescript makes all this easier too, I have data at the click of a button! Any questions feel free to drop me a DM. Thank you, Darren.
Education
by pow_removetheguesswork
8
How To Lose Money With CONFUSION (timeframe mixing) The issue for many new traders is understanding the correlation between timeframes. We often get caught up in indicators, news hype, chat room posts, and various other things. One of the biggest challenges I see when talking to new traders is simply the lack of "experience" in reading multiple timeframes. This causes confusion and even self-doubt. The issue with the internet being so vast is there is a lot of info - but what do you go with & why? In this post I have tried to "dumb it down" - the simple idea is to pick your timeframes based on your trading style. Now if work gets in the way and you need to trade end of day or even swing (Longer-term) then really, you shouldn't stress so much about a 15 minute candle. A lot can happen throughout the day. But on the opposite side of the spectrum, if you are sat in front of your screen every minute the market is open. (scalping) then trying to work out what the monthly is doing whilst you hold a trade for an hour is not going to affect your trade (in general). To give you a great example of this - I trade COT data as it's swing, with Monthly and weekly bias. I will have a mentee say something like "COT is a buy, but the price has dropped". Yes if you're looking at the 4-hour candle. If you think what institutional players can manage in terms of drawdown, especially using hedging techniques. It's far greater than the guy investing £5k of savings into Bitcoin. If a hedge fund buys Bitcoin at 45k and the price drops to 22.5k - the likelihood is they have a hedged position & will be buying it all back at fair value. Whereas Mr £5k has lost some sleep & half of his capital - bailed, only to see the price shoot back up above his original entry. You think of someone like Elon Musk - if his entry of a Billion Dollars was at 40k (example) and price drops to 20k, he has a paper loss of 500m for sure, it will hurt. But again if the Tesla share price drops from 800 to 700, he has a paper loss of (say 20 Billion) - a 500m loss on paper is less of a concern. *** You get the picture. Investors & traders know that things don't just moon! they have dips, impulsive moves and so on. So take the charts into account - You have an idea of what timeframes to pick based on your own personal availability or your style you have already identified. As a scalper it's easy to use 4 hour or even a 1 hour candle for your bias - a 15minute for a local area of interest & an entry on a 1m - 5m chart. (example only). If you trade swing trades (depending on the overall time & expectations) a weekly bias, a daily interest and a 4hour trigger could be what you look for. Here are some examples; In these examples - all I have done is used 1 tool. This is only to show the idea - If stochastic is up then I want to be Bullish, if down I'll consider Bearish moves. Keep in mind this could be anything from above/below a moving average, a key price level or a magnitude of other things. Even other tools like RSI for example. Example of step down The idea is this gives you a directional bias. Then we look at the area of interest. And finally - we want to look down on the next timeframe for the trigger (entry) Traders can easily get confused with one timeframe saying one thing and the next timeframe up or down saying something else. If you can treat it like a tick sheet, you can step down with confidence and work on a strategy favouring your directional bias & that's in confluence with the time period & your expectations. This really is an oversimplified breakdown. Just to give a general idea. Have a great week! Disclaimer This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Education
by Mayfair_Ventures
10
A Quick intro to Moving Averages (Beginners) I have recently had some questions on some of the basics such as moving averages. First of all, there is some great free content out there via sites such as Babypips I wanted to share some simple info to at least explain what a moving average is. Where it is used and what are the types of. Moving average is a simple, technical analysis tool. Moving averages are usually calculated to identify the trend direction of a stock or to determine its support and resistance levels. It is a trend-following—or lagging—indicator because it is based on past prices. They also form the building blocks for many other technical indicators and overlays, such as Bollinger Bands, MACD and the McClellan Oscillator. The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA). Moving averages are a totally customizable indicator, which means you can freely choose whatever time frame they want when calculating an average. The most common time periods used in moving averages are 15, 20, 30, 50, 100, and 200 days. The shorter the time span used to create the average, the more sensitive it will be to price changes. The longer the time span, the less sensitive the average will be. @TradingView has many of these tools to use under the list of indicators. A simple moving average is formed by computing the average price of a security over a specific number of periods. Most moving averages are based on closing prices; for example, a 5-day simple moving average is the five-day sum of closing prices divided by five. As its name implies, a moving average is an average that moves. Old data is dropped as new data becomes available, causing the average to move along the time scale. Then you have an Exponential Moving Average (EMA). reduce the lag by applying more weight to recent prices. The weighting applied to the most recent price depends on the number of periods in the moving average. EMAs differ from simple moving averages in that a given day's EMA calculation depends on the EMA calculations for all the days prior to that day. You need far more than 10 days of data to calculate a reasonably accurate 10-day EMA. Highlighting the difference between an MA & an SMA - The Smoothed Moving Average (SMMA) is similar to the Simple Moving Average (SMA), in that it aims to reduce noise rather than reduce lag. The indicator takes all prices into account and uses a long lookback period. Then how it can be used and applied, *** There are many strategies out there, the most basic starts with above or below a level (above = buy, below = sell) And then it steps into two moving averages crossing for example. Also as I mentioned above - other indicators use a form of moving average to calculate their plot. Another simple strategy - Investopedia This moving average trading strategy uses the EMA, because this type of average is designed to respond quickly to price changes. Here are the strategy steps. 🍒Plot three exponential moving averages—a five-period EMA, a 20-period EMA, and 50-period EMA—on a 15-minute chart. 🍒Buy when the five-period EMA crosses from below to above the 20-period EMA, and the price, five, and 20-period EMAs are above the 50 EMA. 🍒For a sell trade, sell when the five-period EMA crosses from above to below the 20-period EMA, and both EMAs and the price are below the 50-period EMA. 🍒Place the initial stop-loss order below the 20-period EMA (for a buy trade), or alternatively about 10 pips from the entry price. 🍒An optional step is to move the stop-loss to break even when the trade is 10 pips profitable. 🍒Consider placing a profit target of 20 pips, or alternatively exit when the five-period falls below the 20-period if long, or when the five moves above the 20 when short. I hope this helps - Please feel free to add more info below. Any suggestions & comments to help new traders, always appreciated. Disclaimer This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Editors' picks
BITSTAMP:ETHUSDEducation
by Mayfair_Ventures
97
❗ What to look for when I post an idea - Check the Trade Log! ❗A quick video running through how my ideas work and why they're different! Trading for me is all in the detail and the planning now. Know your numbers and your data and you can plan properly. You know if your strategy or system works or not and you can ensure your risk management is in line with probability. Rule number one is... You cant run out of money, else you're out of business, right? You can even run out of money with a profitable strategy, if you risk to much and hit a losing streak - even if the strategy is profitable! Trading is a long game, not about retiring off that one lucky trade you might hit over the course of a week. You'll also give the profits back with interest anyway. Talking from experience! Have a great weekend, any questions - feel free to reach out vis the DM. ------------------------------------------ I try and share as many ideas as I can as and when I have time. My trades are automated so I am not sat in front of a screen daily. Jumping on random trade ideas 'willy-nilly' on Trading View trying to find that one trade that you can retire from is not a sustainable way to trade. You might get lucky, but it will always end one way. ------------------------------------------ Please hit the 👍 LIKE button if you like my ideas🙏 Also follow my profile, then you will receive a notification whenever I post a trading idea - so you don't miss them. 🙌 No one likes missing out, do they? Also, see my 'related ideas' below to see more just like this. Interested in access to my strategy so you can be in these trades the moment they're valid? Drop me a DM . The stats for this pair are shown below too. Thank you. Darren
Education
by pow_removetheguesswork
29
Why Most Traders Lose Money — Here Are The Top 3 ReasonsI’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. Anyone that has been around the markets and trading for any period of time has probably heard that most traders lose money. In fact, there’s actually an old trading adage that says: 90% of new traders will lose 90% of their account within 90 days. So after reading that, before you reach for your broker’s phone number to wire out all of your money… how about I let you in on a little secret: If you follow some simple rules and avoid these 3 mistakes, you can be in that minority of traders that actually make money consistently in the markets. And if you are currently making one or all of the mistakes, I’ll also show you exactly how to fix it. So let’s dive in! 1) Most Traders Enter A Trade Too Late The first thing on my top 3 reasons why traders lose money is: Most traders get into trades WAY too late! There are a lot of reasons this happens, but most commonly it’s because new traders are basically gambling. They’re buying stocks or options based on news, or a hot stock tip, which really isn’t what I would consider a strategy. So let me give you a great example with a company I’m sure you’ve heard of: Uber Technologies (Yes, enemy #1 for taxi drivers worldwide.) Last year UBER , known for its popular ride-sharing and food delivery services, IPO’d in May (2019). With the disruption this company caused, their IPO had a lot of hype surrounding it, bringing a lot of investors to the table. On the day of their IPO, UBER opened at $42/share and people poured into the stock. For a few weeks, the stock had a turbulent, roller coaster of a ride all the way to as high as $47.08/share, a little over a 13% increase since its IPO. And around this new high, more and more inexperienced retail traders piled in thinking that it would continue its bullish run with dollar signs in their eyes. The mainstream media was continuing to hype it and more and more and investors and traders gobbled up more of the stock. Looking at the image below, you’ll see after that high of $47 things got UGLY fast, with UBER falling day-after-day, week-after-week. It wasn’t until November of 2019, about 7 months after their IPO that UBER found a temporary bottom at $25.58, down more than 45% from its high of $47.08… and I would bet there were a LOT of people who bought near or at the highs and were still holding at that point. So what did retailer traders do when UBER made a bottom? Yes, once again most (losing) retail traders didn’t get in at, or even around the bottom… once again, they piled as UBER neared its previous highs. And as you’ll see yet again, UBER rolled over on its way to making another new all-time low this past March 2020 going all the way down to $13.71/share. That’s more than a 70% decrease from its ATH and yes, I’m sure some investors rode it all the way to the bottom. Now I want to share a second example with you, so let’s take a look at Amazon AMZN . So as you know, AMZN is a HOT STOCK and last year it has a crazy move where it crossed $2000/share…. and yes, just like our example with UBER , inexperienced retail traders piled in at the very top. Once again, in the weeks that followed, AMZN’s stock tanked leaving those who’d piled in dazed and confused, now holding onto sizable losses. So as you can see, the first of my top 3 reasons most traders are losing money is simply because they’re piling in way too late in a stock’s move, generally near a high. Now on to reason number 2: 2) Most Traders EXIT Too Late Yes, as you can imagine if people are getting in too late, well, they’re also typically getting out too late as well. So let’s talk about why this happens. Why do retail traders tend to hold onto trades way too long, either turning a small loss into a BIG loss or sometimes even more painful, turning a winner into a loser? Let’s take a look at another example with an UBER competitor, LYFT . Like UBER, LYFT also had its IPO in 2019, opening up at $87.24/share… but that didn’t last long. In less than two months, LYFT went as low as $47.17… and what do you think those who bought during the IPO are saying right about now: “Oh, I’m holding it because IT WILL TURN AROUND!” This is generally where I see traders get religious Instead of ‘taking their medicine’ and getting out when the trade moved against them, they held on and are now pleading and praying the stock will turn around. I hate to be the one to break it to you, but ‘hope’ is not a strategy… at least not one with a winning trading record. Now on to number three in our list of top reasons why most traders lose money: 3) They Don’t Have A Trading Strategy As you’ll see, I’ve saved the best for last as this one alone can help fix or eliminate the other two we just discussed. So first, let’s answer this question: What Is A Trading Strategy? Well, a trading strategy gives you three key pieces of information you need before ever entering a trade: 1) It tells you WHAT you are trading. Is it stocks, options, futures, cryptocurrencies? This is answered in your trading strategy. 2) It answers when you ENTER a trade. 3) It answers when you EXIT a trade and that’s exiting with a profit or loss. Now, let’s take a look at an example here using TSLA on how I make trading decisions. I like to look at three different indicators, that when in alignment, give me a clear signal to go long or short a stock or ETF. As you can see on the charts, back in December of last year (2019) my indicators gave us a long signal on TSLA at around $370/share. And the indicators told me we were good to go until around $850/share. All I had to do is let the indicators tell me when to get in and when to get out… no guessing, hoping or praying. Summary So as you can see, there’s actually no big secret to why most traders are losing money. It’s actually pretty simple to see and correct, but it takes a plan and a little bit of discipline. If you’re brand new and not sure where to get started, I’ve written The PowerX Strategy, a book that outlines my EXACT trading strategy for trading stocks and options.
TVC:NDQEducation
by rockwelltrading
1
Why S and R works so good - Spring & Upthrust WyckoffWelcome Traders to a new Educational Posts. Today we will have a deeper look at Support and Resistance. One of the most popular chart techniques out there, but the question?! Do they really work? Absolutely YES. But probably not like most of the traders think they do. That simple Break and Retest Strategy. NOOO! I would like to introduce you to the extended version of Support Resistance. The Wyckoff Spring and Upthrust. Wyckoff Spring and Upthrust In other words they are simply the Fake Outs at Support and Resistance Levels. The idea behind it is to get an entry exactly there where most of the trader will put their SL. -> WHY?! because of the LIQUIDITY The whole market is based on Liquidity (Supply Demand). The bigger fish will always win. Those who have the bigger amount will always dominate here. Just FACTS . So how do you want to position yourself in the market. Exactly there were 95% of the Retail Traders will put there SL? Or do you want to change your perception on how you view the market. This will completely change your view on the Forex Market. Supply Demand What I also do is I use my own style of Supply Demand to identify exactly those areas where most of the trader will put there SL and I will place exactly my Entry there with a very tight SL to get bigger Risk Reward. Of course I will not have that much of valid entries for my setups as they do not occur as often as Support Resistance Setups but the Total Risk Reward is a complete new Level. WHY? Example Upthrust Because you are rocking the market with the market movers. You are always clearing with these entries both sides. #1 Sellers at Resistance because of Upthrust #2 Breakout Trader(buy) because of Upthrust Sell is the right decision in this case but most of the Traders will lose that Trade due to SL hit. Everybody is placing the Entry and SL different but the majority is losing this trade. Spring Example This was the bigger manipulation as the price did a strong move to the downside through the level of Support. This level was a very interesting level for Retail Traders to buy. Doji occured for Price Action Confirmation but the price dropped down to the level of Demand. Why? -> Liquidity. All SL were located there so Market Movers had there buy limit order placed exactly there. Conclusion With this Post I do not want to judge Retail Traders using Support Resistance. Maybe you found a nice Strategy with that and you are profitable. I am also using Support Resistance but simply in a different way as you can see. I just wanted to share with you my thoughts behind Support Resistance and how I use them to be profitable Please leave a LIKE if you found this Post useful and share your thoughts below!
Education
by DariusFxTrading
3
Trading The Wheel Options Strategy — 3 Reasons Why You’d Lose MoI’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. So, as you know, I love trading the wheel options trading strategy, and this past week was a roller coaster for this strategy. Friday morning I woke up and my account was down $25,000. Now I’ve been trading a larger account. It’s two hundred fifty thousand dollars in cash, five hundred thousand dollars in margin, so $25,000 is not that much, but still. So in this article, we are going to talk about the Wheel Options Strategy. We will talk about the three reasons why you would possibly lose money with this strategy and also how to avoid these mistakes. So here we'll talk about my account. As you know, this show is about real money and real trades, and at the time of this writing, I am still down about eighteen thousand dollars. So it has gotten a little bit better since this morning, but down eighteen thousand dollars. So we’ll take a look at these trades in detail. But first of all, let’s talk about the three reasons why you would lose money with this strategy and then also how to avoid them. 3 Reasons You Would Lose Money So there are three big mistakes that you can make when trading The Wheel strategy. So the first is panicking. If you are somehow trapped in a position and you say, what the heck do I do now? I often see traders who say, “What do I do now?” So solution number one is don’t panic. Easier said than done, right? But not panicking is so important. This is what one of our members posted in our community. “It’s not a loss if you don’t sell.” so the worst thing that you can do going back to this is panicking and closing your positions at a loss. Don’t do this. Don’t close your positions, & evaluate what’s happening. The second mistake is not having a plan. Mistake number three is not having the right trading tools. So, now I will go through my positions that I had and then I will show you how I handled them with my plan. Then we will also talk about the third mistake in more detail, and then some more solutions. My Positions So five positions that I had in my account were (On February 26, 2021): AAPL AMD DBX GDXJ RIDE So let’s start with AMD first. If AMD were to stay above 83.50 until the remainder of the trading session (at the close that day), I’d make money. Everything that happens with my positions, I write this down, and I recommend you do the same thing so that you know of what’s happening to your positions. You will know which ones are actually in trouble and which ones are good to go. So if AMD closed above 83.50 nothing would happen, and I would keep the whole premium. For this trade, this was $576 in premium for the week. Not bad at all. The second position is DBX which is Dropbox. So Dropbox needs to stay above 21.50 and it was trading at 22.85. So it seemed that we were pretty good there. You might be wondering why I am talking about the positions that are OK? You see, in order to stay calm and to make sure that you’re not panicking, focus on the positive first. I know if you’re taking a hammer and you smack one of your fingers, what do you focus on? The finger that hurts. Right? But you have four other fingers that are absolutely fine. So it’s important to focus on what’s going right for us. So if DBX stays above 21.50, which is very likely. So I sold 47 of these options for $13 totaling $611 in premium, so not bad at all. So what’s happening with GDXJ? So the week prior I got assigned because it expired below my strike price. So I got assigned 2,100 shares at $48. Now, here’s what I did with this. So let’s forget these shares for just a moment and let’s again focus on the positive of what’s working well for it. I sold covered calls at the 49 strike price, and I collected premium. So how much premium did I collect for these calls? I sold 21 contracts for $75 each. So I collected for this trade, $1,575 in premium. So we are OK there, and I still have the shares, because they expired worthless. So the next position is RIDE. So if it stays above 21.50 I just collect the premium and nothing else happened, but the price stayed below. I got assigned 4,700 shares at $21.50 so this position is in trouble, we will deal with that at some point, but here’s the good news. I still collected $1,974 in premium. So the last position here is AAPL, and I did get assigned these shares a week prior. So I have 800 shares and I’ve not been able to sell any calls against it. So here I have 800 shares at 133, and also these shares are in trouble because Apple right now is trading at $124. So I got assigned and now AAPL is down. Not good. I still collected all this premium and it all added up. So because overall, it was a pretty darn good week, collecting $4,736 overall. I don’t know about you, but this is not bad at all. And I know you might be saying, “oh my gosh, you’re talking about making some money here, but what about all of these red positions?” Why You Shouldn’t Worry About Being Assigned We’ll take a look at these starting with RIDE This is where it goes back to what is the worst thing that you can do? Panicking. Like if I were to sell for example. If I would sell these shares instead of collecting the premium that I have here, I wouldn’t have made any money on RIDE, I would have lost $8,272 instead. I don’t know about you, but I would rather keep the premium of $1,974 instead of losing $8,272. For me personally, I will not worry about it. So here is where it goes back to. What do we do? Follow your plan. So you got to follow your plan, and this point I’m about to make is very important. I’m actually excited to get assigned, and in a moment you will see why. Your reaction should be, “Yes! I am assigned because I want to own the stock.” I’m really, really happy about this. I’m happy about having stocks. Or your reaction might be this where you say, “oh my gosh, what have I done?” If this is your reaction, then you violated the number one rule of “The Wheel Club,” and here’s the number one rule of the wheel club: "Don’t sell puts on stocks that you don’t want to own". OK, wrong movie, but you get the idea right? So let’s take another look at my positions. Am I happy to own AAPL stocks? Yes, I am. Am I happy to own GDXJ and RIDE? Yes! Would I have been happy to own AMD stocks if I was assigned? Of course! Absolutely! OK, so let’s take a look here at the stocks that I’ve traded thus far year to date. And as you can see, my profits year to date, around $43,000. Take a look at all the stocks. These are the stocks that I would not mind owning at all, and this is really the number one rule of The Whale Club. So Apple, AMD, DBX, GDXJ, HAS, IBM, LL, WYNN, ect. All of these are good, solid stocks that I wouldn’t mind owning. So let’s talk about what do we do with RIDE. Why am I so excited to own it? This is where it goes back to having a plan. So my plan is just to follow The Wheel strategy, and this means that after assignment, I will sell covered calls and collect premium. Very, very easy. This is where we go back to mistake number three, not having the right tools. I use the PowerX Optimizer and I will show you right now how to use it and why it is so important. So PowerX Optimizer supports two separate strategies. The PowerX strategy as well as The Wheel strategy and part of the PowerX Optimizer is the real income calculator. I set my buying power to $500,000 because that is the buying power that I have in the account. So the stock I want to use as an example is RIDE. Let’s plug in some numbers and see what our premium is on this one for if I get assigned these shares, and start selling calls. So getting assigned 4,700 shares at 21.50. Now, the option strike price that I’d try to sell would have to be at the price that I bought at or above. The last traded price was $0.43, so let’s assume we’re selling the shares at that same price. So I’m using the strike price here of 21.50 and I’m selling calls for $0.43. If I did this I would get $2,021 in premium! Wholly Cannoli, are you getting excited about this? I’m excited about this. Now you see why I’m excited to get assigned. If you add this with the premium I’ve already collected on RIDE from selling puts, which was $1,974, that’s almost $4,000. You get the idea right? So I would not make any money on the stock but that is OK. So is this stock really in trouble if I make 4000 dollars in two weeks? I don’t think so. So one trade that I had last week that wasn’t doing so well was AAPL. I got a signed AAPL at 133, so I need to see if I would get enough premium to sell calls. This is why it is so important & I can’t even stress this enough, how important it is to have the right tools. Having the right tools help you make the best decisions instead of panicking. Back to AAPL, I was assigned 800 shares at $133. How much premium could we get for selling calls? So right now, if we sell calls with expiration for the end of this week, at the 133 strike price, we would only get about $0.13, and I would only make about $104 which is nothing. So out of all these positions, Apple is the only one that right now is kind of in trouble because I not yet able to get enough premium when trying to sell calls, but that is OK. All I need to do is just be patient and wait until AAPL goes up. Summary In the meantime, I do believe that Apple is a solid company, and I don’t mind owning the shares. This is where we go back to rule number one of The Wheel Club. “Don’t sell puts on stocks you don’t want to own” because if you do this, then you probably sitting there today, like, what have I done? But I hope this helps you see how to deal with being assigned and that you also see, how to handle things when a trade is in “trouble.” Just sell covered calls, and collect premium. If there isn’t enough premium available to sell calls, just wait until it bounces back, it’s really not a big deal. I am absolutely OK making $4,736 last week with the potential to make another $3,000 this week. Not bad at all, as you know. My goal is to make $15,000 per month. If I can make $7,000-$8,000 in two weeks. I’m well on my way.
NASDAQ:AAPLEducation
by rockwelltrading
1
Granolabar's Gap Down Guide (my own style)Introduction Within the past week, AMEX:SPY has become increasingly volatile, with massive gap ups and downs followed by all day runs extending more than 3% in either direction. This is apparent with a cursory glance at the following chart. With this volatility comes uncertainty, especially for those who are swing trading on the timeframe of a few days to a few months. However, we can use this increased volatility to our advantage. i am going to introduce my way of trading these days, particularly the ones involving gap downs. Identifying the Setup Identifying the setup is relatively simple, but there are a variety of factors that can improve your chances of success. Firstly, the stock needs to have gapped down overnight. This one is quite obvious and easy to identify; look for a literal gap in the prices going from after hours to premarket, like those identified in the following chart of SPY. Secondly, there are a few things that can improve the chances of this strategy playing out. For example, if the stock recently hit a supply zone and rejected, the gap down is more likely to be followed by more downside as the stock is already in "pullback mode." Additionally, trendlines are another great thing to keep in mind. For example, SPY recently hit a nearly 4 month long strong trendline and rejected. Generally speaking, the larger the timeframe that the trendline is identified on and the more "touches" it has, the stronger it will be. I often find it useful to work my way down from the 1 month or 1 week chart down to the hourly to identify trendiness that I need to keep in mind. Trading the setup To trade this setup, I like to primarily stick to the 5 minute chart. The one minute chart has too much noise, while the 15 minute takes too long for confirmation that you would miss a sizable amount of the move. Once you are on the 5 minute chart, draw a horizontal line at the bottom of the premarket low, as shown below. This will be the critical value to watch. Theoretically, you want to enter when that line breaks , BUT there are often fakeouts around these critical levels. To know when to enter the trade, I watch the candle sticks. First, there must be a 5 minute candle that closes below the premarket low. Then there are two possible scenarios from here. Scenario 1, the next candle immediately pushes below the low of the first candle. In this case, you would take puts or sell short as soon as the second candle breaks the low. My reasoning for this is that if the movement is strong, the second candle would not hesitate to make a new low. It is better to enter on the break than to wait for the candle to close and miss out on potential profits, which are often pretty sizable when things are moving quickly. Notice in the below example that had you waited for that candle to close, you basically would have missed half of the entire fall, which lasted 4 5 minute candles. Scenario 2, the next candle does not immediately push below the low of the first candle. In this case, you would wait until there is a candle that closes below the low of the first, instead of merely making a new low. My reasoning is that if the momentum is not strong enough for the second candle to immediately make a new low, the confirmation candle to enter needs to be more definitive. The play is not invalidated because the first candle closing below the premarket lows indicates that there is downwards pressure. In this way you minimize the likelihood of shorting a bear trap while also capitalizing on the fall. Let's Talk Take Profit and Stop Losses Now that you have successfully entered the position at an optimal place, the next thing to consider is where you want to exit, whether that is to secure the tendies you just made or protect yourself from further losses. Note, this part is completely up to you and your risk or reward tolerance. Assuming that it all goes to plan the the stock starts to fall: I typically trade weekly options for this kind of play, as it is a short term play. Because options premiums move quickly in both directions, I will take profit at 25% with about half the position if the candles are getting smaller, indicating that the trend may be weakening. Then I will set a stop at open, meaning that I will sell the remaining portion of the position if the contract goes back down to my purchase price; this guarantees that ultimately the play is profitable. However, if the candles stay rather large, I will hold the position until the candles do start to get smaller, and sell half the position there, often around the 50%, 75%, or 100% profit mark. If the option does hit 100% profit, I will almost always sell half, with very very few exceptions. This ensures that even if the other half of my position expires worthless(worst case scenario), I come out of the play completely unscathed. If the play does not go according to plan: Let's assuming that right after you enter based on the conditions above, the stock reverse to the upside. Now the question becomes, when do you sell to prevent yourself from taking major losses. For this I use my EMA clouds, or simply just EMAs with the region between the lines shaded in. I typically have a 5/12 EMA cloud (green) and a 34/50 EMA cloud (blue). As soon as one candle closes above the 5/12 green EMA cloud on the 5 minute chart , and the next candle closes above the first candle, that Is when I take the loss and move on. Often times, when playing this strategy, the price will come back up and retest the break line; do not panic if the position is immediately red, but also stick to the stop loss rules mentioned above. This cloud strategy also applies to closing the last half of the profitable position mentioned above. When you are left with half a position at 100% profits or more, I will wait for reversal to sell. The reversal tends to happen when one candle closes above the 34/50 EMA cloud on the 1 minute, and the next candle pushes past the first high. There are also many other ways to market the bottom, such as bullish divergence, engulfing candle, abandoned baby, etc. TLDR This is my way of trading gap downs that utilizes candle sticks and the EMA clouds to determine Stop loss or Take Profit places. Simply put, buy puts when the price cleanly breaks the premarket low, ride with the clouds until they suggest a reversal or hit a stop loss point. if you have any questions or comments, please feel free to let me know. I would love to hear other perspectives or criticisms. Also, the "clouds" are just EMAs filled in with crayons, but if you want the script, it's in my profile.
Editors' picks
AMEX:SPYEducation
by granolabar_trades
30
How I’ve Improved Productivity in My Trading DayI’ve been trading for a long time, and over the years, I’ve learned different ways to make the most of my time. Today, I want to talk about three ways I boost productivity in my trading day: - Using my PowerX Optimizer to quickly scan for long and short trading ideas. - Using my Wheel Income Calculator to find attractive premium collecting ideas. - Having a trading plan and following that plan. In this article, I’m going to break down each one of these and explain what they are. I’ll also explain how they help me streamline my trading. This gives me more time to focus on other things I’m interested in, like my business and real estate. 3 Pillars To Trading I always say there are three pillars to trading: - You need to have a trading strategy. - You need to have the right tools. - You need to have the right mindset. For me, I trade two strategies: PowerX and the Options Wheel. And I developed my own software tools to help me trade these strategies quickly and efficiently. The PowerX Optimizer software shows me what I should trade, when I should enter, when I should exit based on my preferred criteria, and my Wheel Income Calculator tells me which option strike has the best risk/reward. If trading software doesn’t show me this, it’s not allowing me to make the best use of my time. Let’s take a closer look at these software programs, starting with the PowerX Optimizer. PowerX Optimizer With my PowerX strategy, I’m looking to buy calls on stocks trending higher or buy puts on stocks trending lower. The PowerX Optimizer is a software I programmed for myself, my head coach Mark, and my son. A few years ago, we made it available to everyone. This software answers the three questions I’m looking to have answered when I’m looking for stocks - What to trade. - When to enter. - When to exit. The PowerX Optimizer will answer all three of these questions for you. Now, I had the software programmed for myself because I wanted all my criteria in one place. With the PowerX Optimizer, I can scan for my basic criteria that I set within the software. For instance, I want to see a 60% return on investment over the past year, I also want to see stocks that are between $5 and $200, and I want a profit factor higher than 3 and a risk/reward higher than 2. This is the criteria I use for trading this strategy. Your criteria may be different. The scanner finds the best stocks and options for me based on my criteria. I certainly don’t want to just stumble across a stock or trade everyone on TV is talking about. Worst case scenario, if nothing meets my criteria, I simply move on. Every day this scanner produces a list of stocks that I potentially want to trade — in less time than it takes to make a cup of coffee! Talk about a time saver! In the beginning, I would just use charting software like TradingView, and I would go through a bunch of stocks every day to see if they met my criteria. It got to the point where I figured there had to be an easier way, which is why I had the PowerX Optimizer developed Instead of spending hours and hours sifting through charts and doing the math, I’m able to find a handful of stocks to look through every day in just minutes. This frees up my time to focus on other things. The Options Wheel Calculator With my Options Wheel strategy, the idea is to “get paid to wait until you buy the stock.” So I’m looking to sell a put and collect premium, and I want to pick a strike that coincides with the level I would feel comfortable buying the stock. Ultimately, I want to get assigned, and then I’ll look to potentially sell covered calls on the stock. The tool I use to identify stocks and options I want to trade with this strategy is the Wheel Income Calculator. The Wheel Calculator pulls up stocks and tells me the minimum option premium I need to collect to make this trade work for me, and the risk/reward setup for each strike. I have set aside $500,000 in buying power for this strategy. That’s what works for me. It does work with smaller accounts if that’s what you have to work with. That’s why I love these tools. They have made my life so much easier. I’m not just picking a trade based on a gut feeling. Instead, I’m trading with a systematic approach that’s based on data. Remember, I like to trade for SCR Profits. SRC stands for Systematic, Repeatable, and Consistent. Trading Plan And that leads me to the last thing I want to talk about today: having a trading plan. You see, having a trading plan is key to having the right mindset to trade. There are three key parts of a trading plan that I’ve already mentioned, but again, they are: - What you’re going to trade? - When you’re going to enter? - When you’re going to exit — both for a profit and a loss. This is also where those limit and stop-loss orders I mentioned earlier come in handy. Limit orders allow you to tell your broker the price you want to get filled, and if you get that price, you move on. Same with stop-loss orders. You tell your broker what point you want to get out of the trade, and if the stock hits that level, you’re out. This allows you to not be tied to your computer, watching every tick the stock makes and opens up your day to allow you to focus on other things. I cannot stress enough how important it is to be prepared when you’re trading — and to have a plan before you enter a position. So, as you can see, by defining my strategies, I developed tools like the PowerX Optimizer and Wheel Income Calculator to help me find trades quickly and efficiently that work with my rules and my plan. I hoped this helped and I’ll see you at the next one.
TVC:SPXEducation
by rockwelltrading
1
What’s The Best Vertical Spread Option Strategy?I’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. What’s The Best Vertical Spread Option Strategy? You may have previously heard someone say, “ Vertical spreads are the same as getting weekly paychecks! “ Is that even true? We’re going to go in-depth on each strategy to discuss each of the pros and cons. I’m also going to discuss how each strategy should be used in any given market condition. Since we’ve previously discussed credit spreads and debit spreads, you’re probably wondering… what’s the BEST vertical spread option strategy? Let’s break down each of the vertical spread option strategies in detail and look at examples in Tasty Trade. Call Debit Spread What is a Call Debit Spread? A call debit spread is a position in which you buy a call option and sell a call option at different strike prices using the same expiration date. When should this strategy be used? This strategy is used when you believe the stock is increasing in price, but not a dramatic movement. What are the benefits of this strategy? Trading this position can potentially reduce the overall cost associated with taking on the trade. This type of strategy also reduces the break-even price of the trade. When does this trade lose money? When the underlying stock moves sideways or downward. What is the max risk for this trade? The max risk associated with this strategy is the cost of the premium paid to take on the trade. What is the max reward for this trade? The max reward for this strategy is the difference between the strike price of the two calls, multiplied by 100. Minus the premium paid to take on the trade. Call Debit Spread Example - Reduced Margin Requirement: $910 - Max Risk Reduced: $910 - Max Reward: $4090 Put Debit Spread What is a Put Debit Spread? A put debit spread is a position in which you buy a put option and sell a put option at different strike prices with the same expiration date. When should this strategy be used? This strategy is used when you believe the stock is decreasing in price. What are the benefits of this strategy? Trading this position can potentially reduce the overall cost associated with taking on the trade. This type of strategy also lowers the break-even price of the trade. When does this trade lose money? The underlying stock moves sideways or downward. What is the max risk for this trade? The max risk associated with this strategy is the cost of the premium paid to take on the trade. What is the max reward for this trade? The max reward for this strategy is the difference between the strike price of two calls, multiplied by 100. Minus the premium paid to take on the trade. Put Debit Spread Example - Reduced Margin Requirement: $910 - Max Risk Reduced: $910 - Max Reward: $2090 Call Credit Spread What is a Call Credit Spread? A call credit spread is a position in which you sell a call option and buy a call option as protection. These option contracts have different strike prices but have the same expiration date. When should this strategy be used? This strategy is used when you believe the stock is decreasing in price or trading sideways. What are the benefits of this strategy? Trading this position produces a credit from the premium received for selling the put option. Buying the additional call option provides protection, limiting the risk of the trade. When does this trade lose money? This trade loses money when the underlying stock moves up quickly past your strike price. What is the max risk for this trade? The max risk associated with this strategy is the difference between the strike prices, multiplied by 100. What is the max reward for this trade? The max reward for this strategy is the premium received for selling the call option, minus the premium paid for protection. Call Credit Spread Example - Margin Requirement: $965 - Max Risk: $965 - Max Reward $35 - Premium Received: $35 Put Credit Spread What is a Put Credit Spread? A put spread is a position in which you sell a put option and buy a put option as protection. These option contracts have different strike prices but have the same expiration date. When should this strategy be used? This strategy is used when you believe the stock is increasing in price or trading sideways. What are the benefits of this strategy? Trading this position produces a credit in the form of the premium received for selling the put option. Buying the additional put option provides protection, limiting the risk of the trade. When does this trade lose money? The underlying stock moves downward sharply. What is the max risk for this trade? The max risk associated with this strategy is the difference between strike prices, multiplied by 100. What is the max reward for this trade? The max reward for this position is the premium received for selling the put option, minus the premium paid for protection. Put Credit Spread Example - Margin Requirement: $837 - Max Risk: $837 - Premium Received: $163 - Max Reward: $163 How Do I Choose The Best Vertical Spread Option Strategy? I personally only select options that match my trading plan. You’ve probably heard me say it a million times if you’ve heard it once… There are 3 things you need to know to be successful at trading. 1.) You need to know which options to trade 2.) You need to know when to enter 3.) You need to know when to exit I use the PowerX Optimizer to help me execute these trades successfully.
TVC:NDQEducation
by rockwelltrading
Trading Stocks vs Options: Which Is Better? I’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. Stock Trading vs Options Trading Stock trading vs options trading, what should you trade? What is better? Is it better to trade stocks or is it better to trade options? That’s what we’re going to talk about today. I will also show you practical examples from trades that occurred today, so let me jump onto the desktop. Now, I want to use an account size of $20,000 as an example here where I’m comparing whether it is better to trade stocks versus options. Depending on your account size, just multiply the numbers that I’m showing you by whatever your account size is and you’ll get the idea. So the idea is, on a $20,000 account, we want to risk 2% of the account. This would be $400, nothing more. Comparing Stock Trading vs Option Trading Now, as we are comparing stocks and options, here are the things that I want to compare. First of all, I want to write down how much we are risking stock trading vs options trading. I also want to write down the reward, how much are we planning to make on the stock or the option. Based on this, I want to write down the risk/reward ratio, and also very, very important, the buying power. What is the buying power? The buying power is the amount of your account that you need to reserve for this trade. It is not the risk and you’ll see this in just a moment. Let’s take a look at some very specific trades that happened this morning. INSW Stock Trading vs Option Trading The first trade that I want to discuss is INSW . So this morning (at the time of this writing) on the PowerX Optimizer, INSW came up as a trade, as a buy to open. And the idea here is that we are buying 239 shares based on a $20,000 account at $22.84. Our stop loss was at $1.67 and I was trading 239 shares. I want to keep it a little bit easier for all of us with the math so let’s round up and call it 240 shares. What is our risk? Per one share, we are risking $1.67 and we are trading 240 shares, meaning that our risk is exactly $400.80. So here let’s just round it to $401. Now, what is the potential reward that we are looking for? Here we are looking for a reward of $8.62 per share. $8.62 times 240 shares, so we’re looking to make $2,069. So we’re putting this into our table, $2,069. So the risk/reward ratio here, PowerX Optimizer is calculating it, it’s 1:5.16 so let’s just say 1:5.2. Now for the buying power. Again, we are buying 240 shares, and the cost per one share is $22.84, so we need $5,482 in buying power. So this is how much our buying power will be reduced when we enter the trade. Now, let me ask you, is this making sense thus far? Just so that you know what happens when you’re trading the stock? And again, we are trying to risk around 2% of the account here, $401. Now, let’s take a look at the option here. So I prefer to trade the in the money, I’ll do another article on the difference between ITM and ATM. But here we are talking about the $22.50 call, and the risk was $172 per one option. So if we want to risk $400 overall, we’re dividing this by 172 and we can trade 2 options risking $344. We’re risking a little bit less and this is just based on the price of the option. In terms of the reward, we’re looking to make $6.80, it’s $680 per one option and we are trading 2 options, meaning that if this trade works out, we would make at least $1,360. Now, according to The PowerX Optimizer, we were making a little bit less. So let’s take a look at the risk/reward, the PowerX Optimizer calculated for us. So the risk/reward was slightly lower at 1:3.95. Now we’re rounding it up so it’s 1:4.0. So as you can see, the risk/reward ratio when trading the option is slightly worse but here’s the deal. What is the buying power that we need for this? The buying power that the broker will deduct from the overall buying power in the account is our entry price. So here we were trying to enter at $2.16, we can round it up to $2.20, and since we are trading 2 options this means that our buying power is $440. Can you already see what the difference is between stock trading vs options trading here? Your buying power is less than 10%. Now, keep in mind, the buying power is not what you’re risking. The buying power is just how much of your $20,000 is being held in reserve for this particular trade. So you can’t use this money anymore. If you trade the stock, you would still have around $14,500 left. However, if you’re trading the option, you would still have $19,500 left. Is this making sense thus far? TVTY Stock Trading vs Option Trading The other trade that I want to show you is TVTY . Here we wanted to trade 392 shares, so let’s just round it up to 400. Now let’s discuss the risk first. So the risk is $1.02 per one share. We’re taking $1.02 times 400 shares, meaning that we would risk $408, which is still within our parameters. We were planning to risk around $400 so here it would be a little bit more, it would be $408. Now, if this trade works out, here is what the reward would be. So the reward is $5.61, that’s how much we are trying to make on this trade. And if we take the $5.62 times 400 shares, we are trying to make $2,248. So the risk/reward, if we look at this, is 1:5.5. Now, here is the buying power that we would need. TVTY is trading at $11.30, so this is where again, $11.30 times 400 shares, we need $4,520 in buying power. Again, not a big deal if you’re trading a $20,000 account, it will be reduced and you’ll have less money to trade right now, around $15,500. Very, very, very important, this is not the risk. This here is the buying power that is needed. Our risk is $408. Our risk here per one option is $141. So if we want to risk $400 overall, we’re dividing it by $141, it’s 2.83. Now, in order to make it all a bit easier to compare apples with apples here, I am actually saying that we would trade 3 options, and $141 is what we are risking per one option, so $141 times 3. It’s a little bit more than our $400, but I think we are still OK here. So we would risk $423. Now the potential reward per one option is $444. So this is where we take $444 times 3, and again, this is where we are looking at $1,333. As you can see, the risk/reward ratio here is worse than if we would trade the stock. It is 1:3.15 so we are rounding it again to 1:3.2. Again, it would be better to trade the stock, but you’re using quite a lot of your buying power. For the option, all you need, all that is reduced, is your entry price, and the entry price it’s $2.47. So let’s say $2.50 times 3 is $750. As you can see you need less buying power, but you also have a smaller reward. But this is why I say usually on a smaller account, it makes sense to trade options instead of stocks. Now the other important thing, especially when you trade a retirement account, is that you don’t get a margin account. This means that you cannot leverage the money that you have in the account and you cannot short stocks. So in the US, in a retirement account, you cannot short stocks. However, what you can do in a retirement account is that you can trade put options, and with put options, you can bet on a falling market. So this brings me back to the question… What is better, stock trading vs options trading? Well, this is why I wanted to show you a direct comparison using a real-life example. This way you see exactly when it is more advantageous to trade stocks, and when it is more advantageous to trade options. Long story short, often for smaller accounts, since you use less buying power, it makes more sense to trade options. And now you have a direct comparison between stock trading vs options trading that will hopefully help you decide what is best for you.
TVC:NDQEducation
by rockwelltrading
The Poor Man’s Covered Call ExplainedWhat Is The Poor Man’s Covered Call? Questions we’ll answer in this discussion: - What is it? - Who is it for? - When to use it? The Poor Man’s Covered Call is a very specific type of spread. As you know, we’ve been covering option spreads for several Coffee With Markus Sessions. We’ve also covered the Covered Call’s strategy in-depth on our YouTube Channel. In this article, we’re discussing the difference between trading stocks, covered calls, and the Poor Man’s Covered Call. Trading Stocks Let’s take a look at trading stocks first. Let’s say that you’re bullish on a stock like Boeing BA . If you were bullish on this stock, you might purchase a decent amount of stock, let’s say 100 shares. At the time of the original writing of this article, this stock’s strike price was $180. If you purchased 100 shares of BA , at $180 dollars each, this would require $18,000 in purchasing power. If the stock increases by $10, to $190, you stand to earn $1,000 in net profit. So you’ve risked $18,000 to earn $1,000. If the stock price increases to $200, you’ll earn $2,000 and so on. This is pretty basic and you probably understand this concept. A profit picture is a sliding scale that moves to the right as the stock price increased. It is a visual representation of your profits. or losses depending on the movement of the stock. In this example, the price of the stock is increasing so the scale is moving to the right. Selling Covered Calls In this example, let’s say that you’re still bullish on BA . And in the short term, you expect an upward movement in price. Since you already own the 100 shares of BA stock, you can sell a $200 Call Option against these shares (again, this is based on the price of BA at the time of writing this article). If the stock price increases to $190 like you expect, you’ll earn an additional $450 on top of the $1,000 you’ve already earned. If we see a decrease in stock price, the covered call acts as a hedge. In this example, if we saw a downward movement to $170 you would lose $1,000. But because you sold a $200 Call option contract and received a premium of $450, your net loss would only be $550. Covered Calls VS Poor Man’s Covered Call Poor Man’s Covered Call When would you trade a Poor Man’s Covered Call? That’s easy! When you don’t have the $18,000 to buy 100 BA shares! And When do you trade a covered call? When you expect the stock to stay above the current price and move slightly higher. Instead of buying a stock, you would purchase a deep in the money call option at a later expiration. When looking for a call option deeper in the money, we’re trying to find one with a Delta of 0.95. his means for every dollar the stock moves, the call option is gaining .95 cents in value. Deep “In The Money” Calls For this example, We’re buying a deep ITM call at $71 which means the capital required to take this position is only $7,100. As you can see this is a fraction of the price to purchase the stock outright. At the same time, we will sell the $200 Call option. Similar to the covered call. But instead of owning the stock at a price of $18,000, we purchased the ITM call option and sold a $200 call option. if the underlying stock price moves from $180 to $190 you would make $1335 because the Delta is 0.95, which means it’s only increasing 95% of the value. The profit on this type of position isn’t as high as a covered call, but it’s much more than owning the stock outright, with much less risk and less capital. This sounds too good to be true right? The perfect strategy! BUT… there’s a downside associated with this strategy. Your profit is limited. If you see a huge movement in the underlying stock, you’ll only benefit from a portion of the total gains. In this example, if the underlying strike price gained $40, the stockholder would earn $4,000. The covered call would earn $2450, and the Poor Man’s Covered Call would earn $2,320. Many traders use this strategy because of the limited capital involved with taking on a position, and the limited risk associated with a potential downward movement of this stock.
NYSE:BAEducation
by rockwelltrading
2
Pattern Day Trader RuleI’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. Now I want to talk to you about the pattern day trader rule because this rule requires that you have at least $25,000 in your trading account if you are day trading. Here’s the tricky part. The tricky part is that you could trigger this rule even if you’re only swing trading, and not day trading, which is why it’s important that you are aware of what the pattern day trader rule is. I will give you examples of what can trigger it, even if it’s accidentally, and I’ll break down what then happens if you trigger it. Most importantly, I want you to be aware of how you can avoid it. What Is The Pattern Day Trader Rule? So what is the pattern day trader rule? According to FINRA, who set the rule, a pattern day trader is a trader if you execute 4 or more day trades in 5 trading days. So if you execute 4 or more day trades in 5 trading days, then you’re being flagged as a pattern day trader. This is not a good thing. So what actually is a day trade? A day trade is a trade that you open and close, during a trading day. So as an example, if you buy a stock at the open, at 9:30 Eastern Time, and then sell it before 4:00 pm Eastern Time, you are placing a day trade. Now, very, very important: this whole rule only applies to stocks and options. It does not apply to futures, forex, or binary options. It only applies to stocks and options. How To Trigger The Pattern Day Trader Rule How can you actually trigger this rule even if you’re swing trading? Well, it actually happened to me very recently. My head coach, Mark Hodge, and I, we were trading with our Mastermind members. I asked Mark to place a trade in my account, but he accidentally placed it in the wrong account. When something like this happens, I have a rule. “When you make a mistake, liquidate.” So I asked Mark to close the position, and when he did that counted as a day trade. So we opened the trade, realized we made a mistake and closed it right away. This lead to me having one strike in this account. And again, if we would get 4 strikes within 5 business days, then we are flagged as pattern day traders. Now, here’s another scenario. Let’s say that we enter a trade tomorrow and it hits the profit target or stop loss on the same day. So this would be another strike because now we are also entering and exiting during a trading day. So as you can see with this, even if you’re not day trading, it is possible that this could happen a few times. If this happens 4 times within 5 trading days, then you’re flagged as a pattern day trader. What Happens When You Trigger The PDT Rule? What happens when you trigger this rule? Well, first of all, if you have more than $25,000 in your account, nothing happens. This is because the pattern day trader rule says, if you are a pattern day trader, then you need to have $25,000 in your account. Now if you don’t have $25,000 in your account, then you will be restricted to trade on a cash basis only for 90 days. What does this mean? Well, see, as a day trader, you actually do need a margin account, and when you trigger the pattern day trader rule and cannot put $25,000 in there, this means that now you are restricted to trading with cash only. So let me give you an example. Let’s say you are trading the Wheel trading strategy, and you put $20,000 in an account. This means if you put it into a margin account, that you get $40,000 in buying power. So when you trigger the day trading pattern rule, you no longer get this buying power here, the 2:1 leverage. You are now basically going back to whatever cash you put in there when you trigger this rule. How To Avoid Triggering The PDT Rule? Now the question is, how can you avoid this? Well, and I want to give you three tips for how to avoid it. Number one, have $25,000 in your account because if you have $25,000 in the account, then triggering the rule won’t matter. What about if you don’t. Number two, you want to make sure that you count the number of day trades. Leave the date you placed a day trade on a sticky note, and count the number of day trades that you do even if it is accidental, so you can keep track of how many strikes you have. Number three, you can avoid it here by trading a cash account. So if you’re not trading a margin account, you don’t have to worry about it. Then, of course, if you are trading futures, forex, bitcoins, so cryptocurrencies, or if you are trading binary options, this is also when the day trading pattern rule does not really matter. Summary Now you know what the pattern day trader rule is, how you can trigger it, even if it is accidentally, what happens when you trigger it, and how you can avoid this. So let me ask you this, at this point, was this helpful at all? If so, feel free to share this video on Facebook, on Twitter, and I’ll see you for the next article.
NASDAQ:NDXEducation
by rockwelltrading
1
Backtesting retest Break of Market Structure on Multi TimeframeStrategy Create a zone from the order block which created break of market structure on 1D timeframe Wait for it to be tested on 4H timezone => which will create new 4H order block Trade the retest of that 4H order block Color coding & icon use Green boxes : 1D order block zone Yellow boxes : 4H order block zone Tick icon : Trade won on 4H Cross icon : Trade lost on 4H Circle with cross icon : Trade in breakeven Win / loss assumptions Win : 3R movement without breaking -1R Loss : -1R movement Breakeven : 1R movement, followed by -1R movement Risk Management 50% TP @ 1R 25% TP @ 2R 25% TP / Trade closure @ 3R RR achieved = 3R Net R achieved = 1.75R Strategy results Testing duration : Jan 2020 - Jan 2021 Wins = 16 Loss = 7 Breakeven = 4 Non-losers = 74% Absolute Winners = 59% Net RR = 21 Avg R/Win = 1.31R Avg R/Trade = 0.78R
Education
by makuchaku
8
Covered Calls For BeginnersI’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. Covered Call For Beginners For good reason, the covered call strategy is one of the first option strategies that new traders start trading. This is an effective strategy that options traders often use to provide income on stocks they already own. Questions to be considered in this article: - What Is A Covered Call? - Should You Trade It? - Specific Example Can You Do It In A Retirement Account, EG, IRA? What Is A Covered Call? A covered call is an options strategy used traders to produce income on stocks on long stocks held in their portfolio. This strategy is used by traders who believe that stock prices are unlikely to rise in the short term. A covered call strategy is defined as holding a long position in stock while simultaneously selling a call option on that same asset. This strategy can provide income to a trader who is long term bullish on stocks but doesn’t believe there will be a significant increase in price immediately. A covered call will limit a trader’s potential upside profit if there is a significant move in the price of the stock upwards. This strategy provides little to no protection if the asset price moves downwards. Covered Call Example For the specific example that we’re going to cover today, we’ll take a look at JP Morgan JPM . The price information reflects the price of JPM back in July at the original time of writing for this guide but is just being used as an example If you were holding JPM stock in your portfolio before the pandemic, chances are that you are currently underwater. DISCLAIMER ***For the purpose of full transparency, I do not own or hold any JPM stocks*** I typically only hold stocks between 5 and 25 days. Stock Price Movement Recap For this example, we’re going to assume that I own 100 shares of JPM . If I were to purchase 100 shares for $96 it would mean that the capital requirement for this position is $9600. You’re probably familiar with the way profits move in relation to stock prices… but just to be safe: - If the stock increased to $106, or $10, I would earn $1000. - If the stock increased to $116, or $20, I would earn $2000. - If the stock decreased to $86, or -$10, I would lose $-1000. How Does A Covered Call Work? Sell one call option contract for every 100 shares of the underlying stock in your portfolio. The contract selected would ideally have a short expiration date of 7 days. You would choose an “out of the money” call at a higher strike than the current price of the stock. When choosing this strike price, you would typically choose a price at least one standard deviation away from the current strike price. In other words, choosing a strike price that you do not believe the current strike price will exceed before the date of expiration. If you’d like to learn more about this options strategy, or options in general, I have an awesome Options 101 Course. What’s the benefit of having a Covered Call for the stocks in my portfolio? It’s simple really. When you sell a call option contract, you will receive a premium. This strategy generates income when you don’t expect to profit from the movement of the underlying stock price. In this example with JPM , I received a premium of $55 for selling a call option contract at the price of $116. Provided that the underlying strike price does not move above $116, the contract will expire worthlessly and I will keep the premium I collected by selling the options contract. Let’s take a look at how a covered call will affect your portfolio with the same stock movements. - If the stock increased to $106, or moves $10, I would earn $1000 plus the $55 - If the stock increased to $116, or moves $20, I would earn $2000 plus the 55 - If the stock decreased to $86, or moves -$10, I would lose $-1000 but keep the $55 for a total loss of -$945 Why does this work? If you take the entire amount of premium you received and divide it by the number of days between no and contract expiration, you come up with a number like this: $55 dollars in 7 = $8(ish) per day. This covered call contract is paying us $8 dollars per day. If you take the $8 dollars, divide that by your total capital investment of $9,600 it equals 0.08%. This may not sound too incredible, but… If we do some basic arithmetic and take 0.08% and multiply that by 360 trading days per year, you end up with a return of over 30%. This is in addition to what you earned from the growth of the stock. On some stocks, it’s possible to earn upwards of $20 per day. This could increase annual returns in excess of 40% to 50% Does this sound a little more exciting? YES! Should you trade it? ABSOLUTELY! BUT…. There is a risk associated with this strategy. If there is a large movement of the underlying stock price that surpasses the strike price of your call option contract, you will be forced to sell your shares at this price. This would limit your upside potential to the difference between the current stock price and the price of the call option contract. Example: If the price of the stock went up to $117 (past the $116 call option) and the options contract expires, your stocks will be sold $117. This means you would earn $1,100 + $55, or $1,155. In other words, you would lose $100 for every $1 the strike priced moved above your call option contract. The silver lining is that you can probably buy your stock back the next day if you wanted to hold them long term. This type of trade can be taken inside of your retirement account such as an IRA, which provides you with another way to grow your account conservatively.
NYSE:JPMEducation
by rockwelltrading
The Biggest Mistake I Faced In TradingLet's imagine you decided to become a trader. You are very motivated guy, study technical and fundamental analysis every day. Three months later you have learned a lot of information, know all about indicators and chart patterns. Using these knowledges you developed your personal trading strategy, backtested it and decided that it's profit and accuracy are appropriate for you. It is time to make money using this strategy. The strategy triggered to the current price action and you executed, for example, the long position, but.... the price started to move down and you see that your deposit is decreasing. You say: "Okay, it is normal situation", but subconsciously afraid of the potential loss. You are monitoring the price action and waiting for the price reverse in the appropriate direction, but the price continue fall down. You decided to close the position before it is too late. You did it. And the next moment the price started to go up. Later you found that your position could be closed in profit, but because of your fear you lost money. The fear is the worst enemy of the trader. Even if you have the best trading strategy you will lose your money due to your fear. It is not easy to do but just imagine that your trading sessions is just a game and there will no bad effects for you despite your trading decisions. You should believe in your skills and destroy the fear to make money. This is the biggest problem i faced in trading! DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.
BITSTAMP:BTCUSDEducation
by Skyrexio
6
Short Selling Put OptionsI’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. Short Selling Put Options When short selling put options, a question people ask me is, “Okay, Markus, how do you decide what strike price do you want to sell and whether there’s enough premium in there?” I made a put options calculator called “The Wheel Calculator” that I gave away as part of my recent class on selling put options (Theta Kings) that helps me determine just that. This calculator is now also integrated within The PowerX Optimizer Software as well. Using my put options calculator, I can enter a few different figures and it quickly lets me know if this stock makes sense to sell put options on. I started a small account with $25,380, and have continued to grow it substantially. This was all done by selling put premium using my handy put options calculator! So let’s take a look at a few examples using the airlines. Here’s how you can quickly compare if an option makes sense to sell. So United Airlines UAL , at the time of this is trading at $31.08/share. So I’m going to take a look at the April 24th expiration and the $20 strike price. I’m thinking maybe it would be a good idea to sell the $20 United Airlines UAL put option. So now that I have the strike selected that I would like to sell put options on, let’s take a look at the premium these options have. This will let us know if this trade actually makes sense. Right now, the Bid/Ask is $0.74 over $0.87. So I probably can get $0.80 for selling this option. This is all I need to enter in my spreadsheet, along with the expiration. With the needed inputs entered into my handy dandy put options calculator it tells me, “United Airlines can drop 36% and you’ll still be okay.” It has to drop 36% before we get in trouble. I think that’s pretty good odds in my opinion. The cool thing is that it also says that based on my account size, I should buy 17 options, and I would collect $1,320 in premium. So this means that per day I would get $110 in premium. That’s not bad at all if I can make $100 on just one position. And I like to have 4 to 5 positions in my account at any given time. So based on the number of positions I like to have, this means that you can make $400 to $500 per day collecting premium. I like this a lot because it means annualized I would make 87%! 87% is nothing to sneeze at, right? Short Selling Put Options — American Airlines So now let’s do this same thing with another airline, American Airlines AAL , and see how the numbers look. So like we did with UAL , I’m looking at what strike price in relation to where AAL is trading would it make sense to sell. For American Airlines AAL it looks like probably the $8 strike price would make sense right here. You always want to do it below the previously established low. So let’s take a look at American Airlines AAL . The price right now is $12.26. the options strike price, we said we’d probably have to look at is $8. Here we’re able to collect $0.35 per contract at the $8 strike price. And you see, I could actually, since American Airlines is so cheap, buy 41 options based on my account size. So 41 options and I would collect $1,444 in premium. This means I would get $120. That’s not bad at all. And you see, American Airlines AAL also can drop 35% and we would still be OK. We only get in trouble if American Airlines over the next 15 days drops more than 35%. Possible? Yes. This is why you should always be willing to own the stock. And this is why you want to make sure that you’re not getting in trouble. You need to adjust your position size based on your account. Here obviously, I don’t want to trade two airlines because if airlines are crashing, they probably all do. With that said, let’s take a look at Boeing AAL . Boeing Example I like trading Boeing. I'm looking at a Boeing AAL chart to see where might be a good level here to sell Boeing. Based on where AAL is trading at right now, it looks like $100 would be a good level to take a look at. Let’s first try a strike price of $100, shall we? For $100 we get probably a $1.55 right here, with Boeing AAL trading right now at $150. So if we were to sell the $100 put option on AAL , we are looking to make $1.55/contract. And you see, this means that Boeing AAL could drop 33%, so we’re good here. However, we can only buy three options. Why? Because Boeing AAL is really expensive. So if we would have to buy Boeing at $100, this is when it gets expensive, right? So you see, the strike prices here are much, much, much lower. This is where you see I would only trade three not to overextend myself. And that’s very important when you’re selling puts. You want to make sure that you’re not overextending yourself because otherwise, you’ll get margin calls. Margin calls are ugly. A margin call means that your broker tells you, “I want more money.” You want to avoid that at all costs! Because if you don’t have the money, you would have to sell the stock at a price that you don’t want. Usually, this is how you can wipe out an account. Anyhow, you see this is how we would only make $43 a day. Let me ask you, what would you rather make? $110 to $120 per day? Or $43 per day? I don’t know about you, but for me, these are better. So it’s very easy to quickly compare which options you should be trading when you’re selling puts. One of my favorite trading strategies right now is selling puts. This is what you have seen in the past few examples. My goal is to make $400 to $500 per day by doing so. The best days to sell puts is on a down day. On a down day, the VIX is usually shooting up and options premiums are higher. This is exactly what you’re looking for as a premium seller. For experienced options traders, selling put option premium in an environment like this can be a great way to consistently generate income, even if the stock doesn’t do exactly what you want. I hope this helps!
NASDAQ:UALEducation
by rockwelltrading
1