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Locking in a Profit Without Day TradingDay trading can be a quick way to capture intraday profits. However, not all accounts are suitable for day trading or can afford the pattern day trader requirements. If a trader has already completed three day trades in the past five trading days, it leaves them with two options when they have a profit on a newly opened position. 1. Either close the position, take the profit, and trigger a pattern day trade label or 2. Hold the position until the next day and hope the profit is still there. There is a third option that locks in a profit while still avoiding a day trade. This is done by legging into a debit spread. Legging into a Debit Spread A vertical debit spread is created when an investor buys-to-open (BTO) one option and sells-to-open (STO) another option further OTM. Both legs are opened on the same underlying equity and use the same expiration. However, both legs do not need to be opened at the same time. An investor can instead buy-to-open (BTO) the long leg first and then setup a sell-to-open (STO) order for another option further OTM. The STO order should be placed for a credit greater than or equal to the debit paid for the BTO leg. This is called legging into a debit spread. Example: BTO September 200 put for $10.00 of debit. Instead of placing a closing order for the 200 put, place an order to STO September 195 put for $10.00 of credit. When the STO order fills, this will create a September debit spread with a net debit of $0.00. (BTO for $10.00 debit - STO for $10.00 credit = $0.00 net debit) The risk on the trade is $0.00. The maximum risk, or potential loss, from a vertical debit spread is the net debit (cost basis) of the spread (BTO leg debit minus the STO leg credit). The potential profit is $5.00. The maximum profit that can be earned from a vertical debit spread is equal to the width of the spread minus the cost of opening the spread. No further action should be taken on this spread until the next trading day. Even placing a closing order the same day opens up the risk of being filled and tagged with two day trades. The next market day, a closing order should be placed to STC the entire spread for a credit. This order can be placed in premarket or at market open. Regardless of when the order is placed, it should be worked until the position is closed. When locking in a zero cost basis, the current value of the spread is the profit. Example: Holding a legged into debit spread with $0.00 cost basis. STC the spread for 3.40 of credit. The spread was BTO for $0.00 and STC for $3.40 resulting in a $3.40 profit. The total profit on the position is $3.40 per share, or $340 per contract. Locking in Profits This strategy can also be used to lock in profits of a position that was initially intended to be held overnight. An investor BTO a TSLA call based on an upcoming earnings play. TSLA moves 50 points going into market close and the current position has $25 of profit per share. Instead of using a day trade to close the position, STO an adjacent strike to create a debit spread to lock in a profit. Then BTO a new TSLA call to realign the account for the same earnings play. Example: 7/21 13:15 PM ET TSLA trading at 1560. BTO Aug 1560 Call for $150 per share. 14:30 PM ET TSLA is now trading at 1610. The Aug 1560 Call is now worth $175, equaling $25 of profit per share. STO Aug 1570 Call for $170 per share. This creates a debit spread with a $20 net credit . BTO for a debit of $150, STO for a credit of $170 = $20 net credit . This is now a debit spread with a credit as the cost basis. Depending on your trading platform, this may be shown as a negative cost basis. This is because it is a credit on a debit spread. Max risk = $20 profit, no risk on the trade. Locking in a credit is a guaranteed profit on the trade. Max profit = $30: $20 of credit + $10 of spread width. BTO the Aug 1605 call for $157 per share. This allows the account to still be setup for an earnings play. Net risk of the two positions is $157 debit - $20 credit = $137 of risk per share. Next Market Day: 7/22 9:30 AM ET TSLA gaps open to 1679 due to earnings. STC the Aug 1560/1570 debit spread for a credit of 6.70. Total profit on the spread is the $20 net credit + 6.70 of credit to close = $26.70 of profit per share or $2,670 of profit per contract. STC the Aug 1605 call for $195 credit. BTO for $157, STC for $195 = $38 profit per share or $3,800 profit per contract. Total profit is $64.70 on a net risk of $137 = 47.2% return and no day trades used. Credit on a Debit Spread In the above example, the stock moved enough for the STO leg to have a higher value than that of the debit paid on the BTO leg. This legging in allowed for a credit cost basis when normally a debit cost basis would be held if both legs had been opened at the same time. When the credit received on the STO leg is higher than the debit paid on the BTO leg, this creates a credit on the spread. This does not make it a credit spread. It is still a correctly constructed debit spread because the STO leg is further OTM than the BTO leg, but instead of holding a debit and risk on the trade, the position now has a credit, no risk on the trade, and a guaranteed profit If a debit spread with a credit is held until expiration and expires out of the money, the “loss” on the spread is actually a profit equal to the credit held. When a strike is OTM at expiration, it no longer has any value to it. It has lost all time value and because it is OTM, it contains no intrinsic (ITM) value. Example: The BTO leg for $150 is STC for $0.00 = $150 loss. The STO leg for $170 is BTC for $0.00 = $170 profit. $170 profit - $150 loss = $20 profit per share or $2,000 per contract. If both legs of the debit spread are in the money at expiration, the profit on the spread is equal to the credit held plus the spread width. When a strike is ITM at expiration, it only contains intrinsic (ITM) value. It has lost all time value. Example: AMZN settles at expiration at 1580. The 1560 call is 20 points ITM. The 1570 call is 10 points ITM. The BTO leg for $150 is STC for $20 = $130 loss. The STO leg for $170 is BTC for $10 = $160 profit. $160 profit - $130 loss = $30 profit per share or $3,000 per contract. It is not recommended to hold ITM spreads on American style options until expiration due to risk of assignment/exercise. American vs European Style Options Most stocks and ETF’s are American style options. This means that if the buyer of an option chooses to exercise or assign their rights they may do so at any time prior to expiration. Indexes such as SPX, NDX, and RUT are European style options. This means that any exercise or assignment may only occur at expiration. Trading spreads on European style options, can alleviate the concern of early exercise/assignment. If both legs are ITM, they can only be exercised or assigned at expiration. For American style options, the closer to expiration and the further ITM the STO leg is, the more likely it is to be exercised/assigned. This is why building time into the position is beneficial by using an expiration at least 2-3 weeks out. Additional Information This strategy works best on long options, BTO a call or BTO a put. It is not recommended to be used to lock in a profit on an existing debit or credit spread. While you can use this strategy to leg into a credit spread, debit spreads tend to be more efficient as credit spreads rely on rapid time value decay so generally require sooner expirations. The legging in strategy works with any spread width. However, the larger the spread width the further the underlying will have to move for the STO leg to be at the same value or higher than the cost basis of the BTO leg. When legging into wide spreads if you can lock in a cost basis less than the current spread value you still have profit potential. Legging into a debit spread is an efficient way to avoid day trading but still guarantee yourself a position that can be closed the next market day for a profit. As long as the debit spread is not at expiration or extremely far out of the money, the spread should have value to it. A zero cost basis debit spread can be closed for a profit equal to the current value of the spread. While locking in a credit on a debit spread results in a guaranteed profit equal to the credit on the spread plus the current value of the spread.
SP:SPXEducation
by NewCycleTrading
4
Power Of Finding mini patterns and PracticeHello daytraders, intraday and swing traders! One of the best ways to make profits is to focus on the details of the graph. Find small patterns (like the 2 triangles and cup and handle pattern), define your target, and limit your stop-loss (I recommend 2%). Finally, think in terms of 100 trades and calculate your profit percentage, you may do 5 bad consecutive trades, but what you have to do after is to improve your strategy, trust it. Mastery comes with practice!
NASDAQ:TSLAEducation
by GlobalInvestFutures
2
GBPJPY H4 testing /1000%+ gain data for 1000+ trades since 2007 Hi All Pleased share some back testing results on the H4 timeframe across some xxxjpy pairs, mainly GBPJPY. By testing H4 we have access to more data in time, so this video shows testing from 2007 with over 1000+ trades , so a substantial back test in my opinion. Entry is clear - we just follow the entry on screen Exit is clear - 3 exit options - Stop Loss (all of our SL's are dynamic and based from ATR - so we take into account volatility on every trade - you can still risk the same amount!) - TP3 target based on 1:8 Risk to Reward or lastly, close and enter on a reverse signal if this happens before the other 2 possible outcomes. Regards Darren
Education
by pow_removetheguesswork
Trader's Guide to Vertical Debit SpreadsThe strategies and ideas presented in this guide have been designed to provide you with a comprehensive program of learning. The goal is to guide you through the learning experience so you may be an independent, educated, confident and successful trader. There are numerous variations of traditional options strategies and each has a desired outcome. Some are very risky strategies and others require a considerable amount of time to find, execute and manage positions. Spreads are a limited risk strategy. Spreads Spreads are simply an option trade that combines two options into one position. The two legs of one spread position could have different expiration dates and/or different strikes. Spreads can be established as bearish or bullish positions. How the spread is constructed will define whether it is bullish (rising bias) or bearish (declining bias). Different types of spreads can be used for the same directional bias of the stock. For example, if the stock has a declining bias, a call credit spread or a put debit spread could be opened to take advantage of the same anticipated move down. In this guide we will be talking about Vertical Debit Spreads, which are a limited risk strategy. Learning how to manage risk is as important as learning the details of a strategy. Vertical Debit Spreads A vertical debit spread is created when an investor simultaneously buys-to-open (BTO) one option and sells-to-open (STO) another option. The premium paid for the BTO is always greater than the premium received for the STO thus, creating a net debit from the trader’s account. Example: BTO a call using the May 180 strike for a debit of $7.57 STO a call using the May 190 strike for a credit of $3.42 Net debit for the spread is $4.15 The proper construction of a vertical debit spread is to BTO an at-the-money (ATM) strike and STO the strike that is 5 – 10 points further out-of-the-money (OTM). When opening a call debit spread, further OTM means a higher strike. When opening a put debit spread, further OTM means a lower strike. Both legs are opened on the same underlying equity and use the same expiration month. The Delta Ratio Delta is a factor in how profitable a debit spread may be. When the underlying stock moves, the value of the options will change at the rate of the Delta. Delta values will be different for different strikes depending on how far out-of-the-money or in-the-money the strike is. Look at an options chain for the current expiration month. Find the Delta of the at-the-money strike and compare it to the Delta of a strike 20 points out-of-the-money. The ATM strike will always have a higher delta than the OTM strike. This means that the value of the ATM strike will change more quickly than the OTM strike, as the underlying stock moves. When properly constructed, a debit spread is designed to take advantage of the Delta relationship between the long and short options. By STO a strike further out-of-the-money than the BTO strike, the long leg will increase in value more rapidly than the short leg. This is referred to as the Delta Ratio. Put debit spreads are used when the stock shows a declining bias. Puts increase in value as the stock decreases in value. In this case, the long put would increase in value creating a profit. The short leg would increase in value creating a loss. However, as we learned earlier, due to the Delta Ratio, the long put is increasing in value faster than the short put is creating a loss. This will create an overall position profit as the stock moves down. Here is an example: Stock trading at 520 and has a declining bias. BTO 520 put STO 510 put This spread creates a debit of $4.80 Stock declines to 510 causing the values of the puts to increase. The position can now be closed for a profit. STC 520 put BTC 510 put The value of the spread has increased to $5.80. Since the stock declined in value, the put options are more expensive. The spread was BTO for a debit of $4.80 and STC for a credit of $5.80 resulting in a $1.00 profit. Call debit spreads are used when the stock shows a rising bias. Calls increase in value as the stock rises. In this case, the long call would increase in value creating a profit. At the same time, the short call would increase in value creating a loss. However, as we learned earlier, due to the Delta Ratio, the long call is increasing in value faster than the short call is creating a loss. Stock trading at 500 and has a rising bias. BTO 500 call STO 510 call This spread creates a debit of $4.80 Stock rises to 510 causing the values of the calls to also rise. The position can now be closed for a profit. STC 500 call BTC 510 call The value of the spread has increased to $5.80. Since the stock increased in value, the call options are more expensive. The spread was BTO for a debit of $4.80 and STC for a credit of $5.80 resulting in a $1.00 profit. Risk and Reward on Vertical Debit Spreads Reward The maximum profit that can be earned from a vertical debit spread is equal to the width of the spread minus the cost of opening the spread. For a vertical debit spread to realize the maximum potential profit, both legs of the spread would need to expire in-the-money which means the position would need to be held until expiration. I do not recommend holding positions until expiration. Short term movements in the stock/index plus limited time value decay provide opportunities to close out positions for a profit of about 10%. If a position is profitable and the trader decides to hold the position hoping for a bigger profit or in an attempt to carry the position to expiration, there is a good chance that the profit will disappear and the position could turn into a losing position. This also will increase the risk of assignment/exercise if trading an American style expiration. A good way to lose money is to wait for a bigger profit Risk The maximum risk, or potential loss, from a vertical debit spread is the net debit (cost basis) of the spread (BTO leg debit minus the STO leg credit). Example: BTO 2765 call for a debit of $11.70 STO 2770 call for a credit of $8.30 Cost basis of the spread is $3.40 $3.40 is the maximum risk. A maximum loss will occur when both strikes are out-of-the-money at expiration. Learning how to properly adjust positions will avoid this. A trader establishes a bullish (call) debit spread when the chart indicates a rising bias. The breakeven point is the lower strike price plus the net debit. Referring to the example above, if the stock was at 2768.40 at expiration, there would be no loss and no profit. Example of breakeven point on above debit spread: Stock settles at 2768.40 at expiration The 2765 strike is $3.40 ITM, the value of the strike has $3.40 of intrinsic value and no time value. The 2770 call expires OTM worthless and you keep the 8.30 of credit as profit. Since you do not want to exercise your right to own the stock, you sell the 2765 back at the price of $3.40. This results in a $8.30 loss. $11.70 BTO – $3.40 STC = $8.30 loss You get to keep the original credit of $8.30 from the 2770 call. This netted against the $8.30 loss results in breaking even on the position. A trader establishes a bearish (put) debit spread when the chart indicates a rising bias. The breakeven point is the BTO (higher) strike price minus the net debit. Calculating the Return The profit percent return is calculated by dividing the profit by the risk. After all, if the trade lost 100% of the risk that is the amount the trader would no longer have. In the example above, the net risk is $3.40. If the debit vertical spread trade resulted in a $1.00 profit, the percentage return would be 29.41% ($1.00 / $3.40). Lower risk drives higher returns relative to capital at risk. American vs European Style Options Most stocks and ETF’s are American style options. This means that if the buyer of an option chooses to exercise or assign their rights they may do so at any time prior to expiration. Indexes such as SPX, NDX, and RUT are European style options. This means that any exercise or assignment may only occur at expiration. Trading spreads on European style options, can alleviate the concern of early exercise/assignment. If both legs are ITM, they can only be exercised or assigned at expiration, which allows flexibility to continue to hold the position rather than take action to avoid assignment/exercise as would be suggested on American style options. Opening a new Put Debit Vertical Spread The following steps should be referred to when opening a new put debit vertical spread position: 1. Review the technical indicators on your chart and confirm there is a consensus between multiple indicators pointing to a declining bias. 2. Select an expiration that is one to three months out. One month is generally the minimum time to expiration you want to use. Building time into the position is advised in case it needs to be managed. The sweet spot for opening new positions is two months to expiration. 3. BTO the at-the-money (ATM) put strike. BTO the strike that is closest to the money. When the stock/index is trading between strikes, BTO the first strike higher than the current price of the stock. 4. STO the strike that is 10 points further out-of-the-money (OTM). With a put spread, further OTM means a lower strike. BTO ATM and STO 10 points further OTM will create a debit. Generally, when properly constructed, the debit will be in the range of $4.00 - $6.00. 5. When placing the order, always use a Limit order. A limit order specifies to the market the amount of the debit you will accept. A limit order will be filled at the specified limit or lower. Market orders should not be used. 6. With some stocks and indexes, the difference between the bid and ask is quite large. The broker will usually give you a quote called the “Mark”. This is the midpoint between the bid and ask. It is the price you should start with when submitting your limit debit order. 7. Calculate the risk of the position. Cost basis of position is risk. So a position with a debit of $4.50 would have a risk of $4.50. 8. Use the risk number to determine the number of contracts to open. Risk x 100 = the investment required for each contract. With $4.50 of risk and one contract, the total investment would be $450 ($4.50 x (1 contract x 100 shares per contract)). 9. Once you know the total investment required per contract, you can decide how many contracts to trade based on the size of your portfolio. Generally, allocating 5% of the total portfolio to each trade is good risk management. Smaller account sizes may require a higher investment per trade but should not exceed 10%. 10. After the trade has been opened, place a Good-til-Canceled (GTC) order to close the position for a $1.00 profit. A GTC order will stay active until market conditions are such that the position can be closed for a $1.00 profit. GTC orders execute automatically and do not require you to be in front of your computer to take advantage of the profit opportunity.
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SP:SPXEducation
by NewCycleTrading
9
Your guide to success [Beginners start here]*************************** Getting started as a Padawan *************************** Learn about investing When you start you should be interested. There are many ways to learn about investing: Books/videos/the internet/Losing money trading for the first time. My first trades (both speculative and not) were Forex, but I really got started "full time" (still had a job at first but spent a good 12 hours a day in this) in Q4 2017 with the crypto bubble. I looked at charts by myself, I also watched hundreds of hours of videos on crypto, technical analysis, price action, markets, I read articles on the internet, I looked at alot of tradingview ideas (where I started to notice herd patterns just like in real life). Being able to filter out the garbage is on you, and you have to check by yourself every thing you learn. If you can't bother reading or hearing about monetary policies, the economy, charts, risk to reward, probabilities, now is a good time to quit. Pick markets you like more The "retail" markets are usually: Indices, stocks (especially us), forex, crypto, hard commodities. It's ok to go back and forth, and even when you pick say 1 or 2 main markets to look at, you can still take a peak from time to time at other ones, but careful, you only have 1 brain, and you might just end up losing money. My own experience: Forex (usd, eur, gbp, jpy, mxn, sek, aud, cad, nzd, chf), Commodities (Gold, Oil, NatGas, Copper). I sometimes look at other markets there might be something interesting and I might get something out: Bitcoin, Ethereum, Silver, Grains. I am a consistent loser in stocks and indices yikes. Not like slightly below breakeven. No, like 100% losing rate. Hey I got the holy grail. I dislike USDJPY, I love EURJPY, not sure about some trashpairs such as EURNZD. I like all USD pairs except USDJPY. In the crosses I like AUDCAD EURSEK GBPAUD GBPCAD GBPJPY EURJPY. Some interest in USDCNH sometimes. I look at USDZAR and USDTRY but never touch them. With time you get your favorites, your best and worse performers. Learn about that market specifics You may be shocked but different markets work differently. First of all different hours (fx = 24 hours a day 5 days a week, oil is open 23 hours a day, most cme agri have 2 trading sessions with 3 per-market, stocks trade 8 hours a day with a pre and post market, crypto is 247...). And then unlike what some people that have never made money say, sorry but they just behave differently. When you learn to trade penny stocks you can't be an all around jack of all trades that will be able to trade dirt in Kyrgyzstan. As I said I like (certain) forex pairs & commodities, and do best with those, one reason is because they trend on the timeframes I'm best at and prefer. FX trends for days, Stocks trend for months, and so on. The patterns are different, the trends are different, the valuation is different etc. Bitcoin had 3 bull markets, and they all lasted 1-2 years, going straight up, why would anyway look at a 4 hour chart? There is only 1 way to trade Bitcoin in those situation and this is buy and hold. You might have wanted to buy pullbacks and hold for each wave within the bull market in 2017, but that's still several months of holding. First 2 corrections were ok, maybe some multi day or week buy/sell there, the current one is absolutely disgusting except from a straight down in 2018 and straight up in 2019. Pick a timeframe I swear every one wants to either be: - A (lazy) passive investor that will get rich doing nothing, because people told them this is what works and always will (cough cough) - A (gambler) day trader that will get rich quick making 2% every day (hahaha), because this is how brokers make the most money the fastest 90/90/90 => 90% of traders lose 90% of their money in 90 days. This might be a little exagerated but that's the idea. Brokers know they'll all be gone in a few months so they push to day trade so these losses are as much as possible made via commission, rather than a few big bagholding losers that evaporate into the market in a few weeks. And as I said, different markets really work on different timeframes. FX (& Gold & Oil & so on) I think the best timeframes are H1 H4 D1, Bitcoin that would be the daily and weekly (during trends), stocks weekly and monthly I suppose (and daily during crashes). Keep in mind the lower the timeframe, the bigger the spread. If you want to day trade FX well I hope you enjoy having your reward to risk divided by 2. Other than the Dow Jones and Dax indices (and cryptos especially as MM on Bitmex) everything is really expensive to speculate on on very low timeframes. An exception: Ending markets. Gold in July 2020 when it went parabolic, Oil when it went negative, that sort of things. But why would you want to close a mighty winner at 5 pm and go watch tv when you should be staying in as long as the price is skyrocketing? A few more hours = a few more R. *************************** Getting ready to make money *************************** Have fun spending hours on statistics (backtesting) You heard people tell you what works and what does not. The stuff I hear... It's up to you to check if that 🎪 oversold RSI strategy works, and by looking at charts and taking notes, you will find out that it overwhelmingly does not. Forget about your dreams of building the perfect mecanical holy grail. You need to know what you are interested in at first (reversals, pullbacks, powerful breaks, buying highs & lows in sideways choppy markets and losing money...) and then look at that, have to start somewhere. If you try looking at everything then see you in the mental ward in 2 months. Just find what works, what does not. At least you should have a vague idea of where to enter, odds, etc. You can't just jump in blindly in anything because CNBC, because "cheap" and then as soon as it goes against you go "wow I have no idea what to expect and what to do" 😆. So typical. Pick a charting provider Most frustrate me to no end. I hate them with a passion. Is it that hard to let me freely scale and move my chart around? Really? You can put all those idiotic indicators to make sure day traders are as active as possible and lose as much as possible, but you cannot give us a simple measuring tool? Wow, just wow. TradingView is really good. I don't see what people could want more. Unless they miss a market idk the Kyrgyzstan stock market maybe, then I would say they have everything on the charting side. Use good news services Don't be a Scrooge McDuck and dish out that $24,000 for a yearly bloomberg terminal sub. Did you know they have 325,000 subscribers worldwide? We're obviously all poor and need to use what little money we have for essentials & risk capital. Under $2.5 million of risk capital I would not even consider it. You might think "oh no, I want to isolate from the news because hype because I want to not be emotional" or whatever. Now first of all you're crazy if you do because the hype & emotions are the best part and you are missing out on all the fun. And as we have seen I myself have a watchlist of 25 fx pairs (10 currencies), 4 commodities, plus a dozen or more other tickers I may be interested in. You want to only trade the price action, ok. You're actually going to carefully check 30 charts every single day? Wow. And not forget to check several dozen stocks indices etc from other markets regularly and be ready for a big move? Well congratulations rain man. The media & investor hype tells you what is interesting to watch. And I'm sure it helps your opinion and subconscious mind. In July the dollar crashed as it should, and accelerated in the second part of the month and then I kept looking for shorts and guess what I kept winning and had a monster month. Gold & silver went up back then but I was too busy, and I did join gold in August when it was past ath and there was some hype and the laggards were starting to buy. Deposit with a regulated decent broker that suits you You're all ready. Time to deposit on a good broker and promise yourself this time you won't blow your account. This time it'll work out. *************************** What you'll be doing for the rest of your life *************************** Look for ideas, "inspiration" That's when you look at charts and remember or tag or set an alert on the ones that seem interesting to you. And that's when the news in general can come in handy. "K what is undervalued" "K what is exploding up I want to join - er I mean fight the trend and get decimated". Price action or no price action, there is more to this business than just drawing lines on a chart and placing an order based on price action. Much more. Decide on what you want to see Say you have an interest in Oil, Gold, and the USDollar. It is required you see something to take action. A strong break followed by a small pullback? A double top accompanied by mainstreet euphoria, signaling a top? You are a sniper and you do not just rush to a rooftop and shoot at random passerbys hoping to get your target. This is what the USA did in the Obama era in Yemen with drones. You are not the USA. Have a plan before setting an order You shall NOT jump into something without a plan first, you are not Bud Spencer that punches first asks questions later. This is an order. The number of times I heard people go "Ok so I bought x. Price is going down. What should I do I have no idea? Please fast!". I heard, not from personal experience but from others, that even "pros" with at least months in a company, have been spotted asking those questions. You know who you are. Please don't do this. Hahaha I nearly cry when I think of this, is this a casino "Oh well I just went all in let's see what happens yolo". Trail your stop, at least bare min You're at 99% of your target, you're actually going to risk everything for that last little percent? Even if you don't care about missing out on additional gains, I do not get it. Why? At least move your stop 1/3 towards target when the price goes past 2/3. Myself I prefer to have something more evolved, where based on experience and backtested data I know approximately how much it should retrace and how much is 1- too much loss of my gains I am not willing to give away, 2- high probability or sideways or reversal. Log your last operation (in excel) Note everything you buy & sell in excel (or you can use something else I don't care I am a libertarian do what you want, except jump in with no plan, I am a german dictator for this, you are not allowed to do this). This will be very useful. Going to share my own "method", I now have an excel with 3 tabs (alot more with all kinds of stuff in, but let's focus on the 3). 1 Tabs is for "Trends" and I have 8 columns: Date, Ticker, Thing, useless, useless, R, Result (Win Lose Breakeven), Comment. So actually it is 6 not 8. I used to have over a dozen tabs but I gave up, they're not that useful and they're a pain to maintain. In "Thing" I write the "strategy" I used, for the tab "trends" I got 4 choices: Pullback, Pump (actually it's pullback in a pump), FOMO, Downtrend/UptrendFeeling (when I just go in without a clean rule because I want to). Pullback and Pump are the main ones. So ye, pretty simple. And the specific relevant details I want to note, I note them in Comment. Such as "got stopped at the top and then missed 25R" 😃. Well in that case it might cause some depression so I'm not sure this is the best idea, but you do not want that happening consistently. Important: Log the ones you did not take because you were a terrified little coward, and ended up going like a rocket in your direction. Thank me later. Analyse your past trades You'd better spend time looking at your past trades. I like to screenshot mine, I got a 25 GB HDD allocated to that. I already used up 10 GB but I also have some backtesting ones. Check your average R, winrate, look at comments (maybe put the most important ones in red). You can also on top of this use a broker service some provide analysis data, and also MOAR you can use tradingview where you posted ideas (public or pvt) and see what your thoughts were, and more. If you took some screenshots with your thoughts at the time, go look at this and wonder what was in your mind to take such a stupid trade amirite? Do stats on your operations & backtest to confirm 1 step further: After checking your history, and getting an idea of what you were great at and sucked up. There are 2 reasons you might be good or bad at something: You actually being good or bad at it, and secondly luck. You want to go backtest dozens of cases to check "ok is this typically good or bad", "wow this pattern sure appears often in this situation". And then go even further, as we like to say in France "above it is the sun", you are such a natural born speculator that you take all of your worse trades, and go "ok then, I will do the exact opposite". Revenge trading and fomoing has done so much for me. It made me immensly more profitable (because of so much more opportuinites). I could not believe my eyes at how often I won and how much R I got through revenge trading and fomoing... I did it intelligently thought, not a recommendation to go double down on a lousy trade and risk 10% at once. By revenge trading I hear "taking the opposite side with reasonable size after getting stopped twice". "While cursing". Combat your addiction to stats Ye at that point you'll always need validation from the charts & the stats. Feel down? Go make yourself feel good with some stats. Feel good? Go get a high by looking at some good stats. Worried a trade might not work out? Go spend a few hours on stats to reassure yourself. It can get pretty bad. It can take over. You sometimes might run home in a hurry to get your chart fix. At your job or someone house you will break at the urge and just jump on your phone "just to check that pattern a little bit". Oh wow I just realized I'm not even really joking. Well at least it is a useful addiction, and you do need to have the most information as possible. But know that you cannot know everything, and if you get paralysis from not being 100% sure then... I guess you are a coward and better quit :D Mental health is important, as well as being a winner and wanting to do MOAR WHATEVER IT TAKES TO WIN. This ain't a wagecucking 9 to 5 sit on your *** job. It is one of the most competitive activities in the world and you have to WANT to be the best, to be the best. You don't even care about the money, you just want to crush the competition and you are unhealthy-ly obssessed with it. But just as with lifting, sports at pro level, esports (lol), you do not want to suffer overtraining, burnout (lol what is burnout? Sounds like a loser word), or emm going completely bananas (too late for me :/). With speculative investing, every day is chart day. And news day. And monetary day. And economic lesson day. And... How about rest days? Yes it is important to know when to rest. Know when you'll get plenty of refreshing rest? WHEN YOU DIE. Oh well this paragraph did not turn out how I intended it to. Improve your strats rr or build a new one even In my opinion the easiest best way to improve performance is to improve the risk to reward. Prices bounce on levels a certain % of the time. You cannot change that. You cannot make the trend go further more often. But you can learn what the best areas are, allowing you to slightly improve your stop and enormously your payout. Imagine you have a 0.25% SL, 1% tgt, and you notice the price always goes a little against you and not a single winner gets very close to your stop. You enter slightly later and have a slightly tighter stop, without being over greedy. SL is now 0.20%. You went from a RR of 4 to 5 with the same WR, this is huge! say with your wr you had an average payout per trade of 1.5 (winners*wr - losers*lr), now it is increased to 2.5! you are 2/3 more profitable. It is not that hard and you increase your profit by so much. Do not be worried to give up a bit of winrate if it tremendously will increase your payout. *************************** Emm bonus or something *************************** Constantly accumulate knowledge Every single day. In permanence. The more you know the better you'll be. Not to mistake with being drowned in information. Heard of MOBAS? Over 100 playable character with several different abilities. You cannot know them all at first, but the big nerds that play 10 hours a day end up knowing not only all the abilities, but they also know what all abilities do under other abilities, their effects, the time they take, their mana cost, how the abilities work with different items & builds (these games have magic and physical damage which are different for example, as well as true damage, also magic and armor pen), the interaction with other champions and abilities. It quickly gets overwhelming, there is a huge amount of info, and that's just for 1 video game. If you know LOL you'll have to learn DOTA from scratch, it will go faster that if you were a complete noob, alot of things are similar, but you will have to relearn everything. NOW IMAGINE THE MARKETS THAT ARE SEVERAL ORDERS OF MAGNITUDE MORE COMPLEX WITH MILLIONS OF PARTICIPANTS AND THE WHOLE WORLD INVOLVED MONETARY POLICIES GEOPOLITICS VARIOUS OPINIONS AND AGENDAS AND THE DOZENS OF MARKETS THE THOUSANDS OF STOCKS AND BONDS ALL HAVE SPECIAL INTERACTIONS AND INFLUENCE EACH OTHER AND IF YOU WANT TO HAVE DECENT OPPORTUNITIES YOU NEED A WATCHLIST OF MAYBE AT LEAST 10 GAMES (TICKERS) HAHAHAHAHAHAHAHAHAHA 💥. You don't have to be smart to do well they say, oh yes of course, memorising and understanding the thousands of patterns, the billions of interactions, the billions of trillions of variables, and DYNAMIC probabilities in a highly complex highly abstract activity with non stop conflicting info, dogmas every one believe in that go against the truth, disinformation, competing with the best in the world, does not require any intelligence at all, sure, makes a lot of sense. Intelligence is far from being sufficient, yes this is very true. It does not mean it is not sufficient lol imagine not being able to tell the difference between necessary and sufficient conditions and trying to give advice to people we found out why these guys sell hopium courses to new traders 🤣 Work on psychological failures Anger is a sign of weakness. Regret is a sign of weakness. Fear is a sign of weakness. And the weak shall fear the strong. Obstacles are designed to make you stronger, only the weak avoid them. And the gods have no obstacles. Jesse Livermore said: "If you cannot sleep because of your stock market position (you are weak), then you have gone too far. Reduce your positions to the sleeping level." Man is oftentimes weak-minded enough to be caught in the snare of greed and heneyed words. Listen to Gandhi, best warrior in India (am I allowed to say this was his caste or is it unwoke? xd), he won a war without fighting. Don't get greedy & keep a rational mind as opposed to trading throught feeling because someone said "the price will collapse" and it scared you. Giving up is not a sign of weakness but a sign of strength. To know that you can't win a particular battle is wisdom. => Very important. Are you a genius like Napoleon that retreated from Russia, or an idiot politician that thinks he knows warfare like Hitler that insisted and led to millions of dead and lost WW2? Do not short Tesla you cannot win (well actually now shorts got wiped out maybe it is possible but I'd wait for a downtrend). Cut your losses what is the point of holding bags? Swag? Don't try to defeat the market and don't get married to any commodity or idea. Fail, lose money, and quit Hey this can happen too. How many is it? 90%? Day traders are overrepresented here. According to fxcm data traders that had a reward equal or greater than 1 times their risk were making money at 53% (over 1 year in 2014-2015), versus traders with a RR under 1 (but why? xd) of which only 17% were profitable. The people that made most money were those the less leverages, while big size "get rich quick" clowns got absolutely wiped out. They do not show data for day traders versus long term ones, they're a broker they make money off commissions so they won't show this UNLESS it shows day traders making more, so you just know they're the ones getting decimated the most and the longer term ones are the ones cleaning house. It is a certainty. I've looked at plenty other data and you had such numbers, with over 1 year 83% people losing money, 88% over 2 years, 94% over 5 years, and so on (it tops logarithmically of course). People smart enough to trade with high (but not greedy huge) reward to risk, and on higher timeframes, are the ones doing best. So it's not all that bad, if you put in the hours and have a working brain (intelligence is important I said but you don't need to be an absolute genius to just be in the green). It's clearly possible. Making money does not mean making millions! It does not even mean outperforming the SnP. It does not even mean outperforming inflation. Few people outperform the SnP. Alot manage to make some money but not enough for it to be a viable business. But even if people end up quitting they did not waste their time, they learned a valuable lesson: Do not try to stand up to MrRenev. Nah I'm just messing around. Even if one does not outperform the SnP, he can use what he learned to: - Continue trading short term for diversification & to reduce portfolio volatility - Not miss out on generational moves (USO, Oil contango, Gold, Bitcoin...) - Use knowledge to manage risk or whatever - Use a fraction of their net worth to speculate with large size (but not casino large) to have more volatility and more returns - And plenty more... consolation prizes
Editors' picks
Education
by MrRenev
88
Meet Percy - 'YOUR' new Trading E-Mentor - he's cool......Percy is a great guy... he can be a girl too and you can call him or her whatever you wish. I just chose the name Percy, I think its quirky. :-) BUT .... Percy can help you like he helps me - Let me introduce you to him. He tells me when to enter a trade, when to close a trade, what lot size to use - he helps me stay on track when I feel like closing early (Percy hasn't closed so I shouldn't) he helps me ignore them voices of increasing my risk. Percy works incredibly hard, he has back tested over 4200 trades to help me identify my edge in the market. Percy is simply a legend, I trust him, I have confidence in him and I follow his lead. Get a Percy. Regards Darren
Education
by pow_removetheguesswork
3
Common TradingView Mistakes and Friendly TipsIn this video idea, I share some common mistakes I see people make when looking at and interpreting strategies and indicators on TradingView that may impact their profitability when trading. I also share some helpful tips on how to avoid falling for other people's mistakes by getting sucked into public strategies that seem too good to be true, and also how to use some of the more undervalued features on TradingView to help improve your experience.
OANDA:SPX500USDEducation
by BigBitsIO
5
GBPUSD 1:2 RR - Whats your edge in the market?Hi, I have just recorded this video to demonstrate the effectiveness and ease to find your edge with our strategy. Any funded traders, attacking a challenge - you need to watch this too! A 1:2 RR requires a 33% win rate and above, here you can see 100%+ gains YTD risking just 2% per trade on your account. Simple trade with no bias and no emotion to any specific trade outcome - simply follow the strategy - trading can be mechanical, simple and emotionless. I hope this video helps demonstrate how we trade and how we ensure we have an edge in the markets. Drop us a DM, let us know what you think and if you have any questions. Regards Darren
Education
by pow_removetheguesswork
1
NZDUSD - LEARN DOUBLE SUPPORT BUY TRADE SETUP - 100% WINWe have explained every point of this trade setup on the chart. What factors affect the trade are also explained here. NZDUSD remains in a strong uptrend since April after a big downfall during a pandemic breakout. We have marked three support zones which give us potential buy entry to trade the pair. Currently, price is moving around 0.66300 levels which is a strong support line to target 0.6700 levels but if price pressure ables to break below support zone we can exit the trade immediately as stop-loss hunting setups start.
Education
by DragonCaptain
9
What Is Options Assignment Risk?What is the options assignment risk? Trading options is a very lucrative way to make money in the stock market. Using the same methods that I teach in my trading PowerX Trading Strategy, I was able to turn a 25k account into a 45k account in 2 months! 25K to 45K in 2 months? This sounds too good to be true… and I would like to tell you that it is NOT too good to be true, but there are some inherent risks associated with options trading. ONE of the biggest risks, and possibly the MOST common risk associated with trading options are options assignment risks. As you may know by now, options contracts expire. When you purchase an options contract you have the right to exercise the contract, and buy or sell the underlying asset for the agreed-upon price. If you allow the contract to expire in the money (ITM) you run the risk of being assigned the 100 shares of the underlying stock. This is known as an options assignment risk. Specific Examples of Options With Different Expiration Dates In the example we’re going to discuss today, we’re going to look at how options expiration or the length of time to expiration can affect your options assignment risk. To illustrate the relationship between options assignment risk and options expiration, we’re going to look at trading a 315 call options contract on Apple (AAPL) with 7 days left until expiration. The current strike price of AAPL is 318. This options contract is currently trading for $6 , but only has $3 of intrinsic value. If you were to exercise the option, you would be able to purchase the AAPL stock for $315, and you would capture $3 of profit. If you sell the option, you’ll earn twice that, because the options contract is selling for $6. The difference in the cost of the intrinsic value ($3) of the option and actual value ($6) of the option has to do with time decay. As the option contract gets closer to its expiration date, time decay erodes the value of the options contract. In our next example, we’ll look at trading the same options contract with a $315 strike price, but with 0 days to expiration. As you can see in this image, the same contract with zero days until expiration has only $3 of value. Time decay, otherwise known as theta, has slowly eaten away the value of the contract so that now there is only the intrinsic value of the option left. On a side note: Selling Theta is a very powerful way to make money while trading. I have taught thousands of traders to use Theta, or the time decay of options, to produce income while trading options. Options Expiration As an options contract nears expiration, the risk of options assignment increases exponentially. When an options contract has been purchased, it can usually be sold before expiration to prevent an assignment. However, options contracts that have been sold pose the opposite risk. If you have sold a put contract for example, and the options contract is in the money at expiration, you must either buy back the contract BEFORE expiration, or risk options assignment. In this next example, we will look at selling a put contract on Herts (HTZ) . The current price strike price of HTZ is $2.87. If you were to SELL a $3 put option on HTZ , the option would have the intrinsic value of .13 cents! Meaning if you chose to exercise the option, you would only make .13 cents per share. If we look at this option with 1 week out until expiration we can see that it has more value because time decay has not eroded the value. To Exercise or to Sell, That Is The Question As you can see, there’s WAY more profit when selling a contract vs exercising a contract when there is time to expiration. In summary, it’s very unlikely that someone will exercise an options contract when there is time remaining before expiration. There is usually more profitability when there is less time decay or Theta decay in the contract. When should you worry about options assignment risk? Some traders are under the impression that IF the stock price moves below or above your strike price (depending on whether you sold a put or call) you risk assignment immediately. This is NOT true. You risk assignment the closer your contract gets to expiration.
DJ:DJIEducation
by rockwelltrading
1
Using the Strategy Tester to Evaluate a StrategyThis video idea explains how to use the strategy tester on TradingView to evaluate the performance of your strategy. We go over all of the data presented for you regarding your strategy, and if we make mistakes along the way you can always check out the TradingView help section that is specifically for the Strategy Tester. I highlight the overview of your strategy, dive into the details of the performance summary for your strategy, and show how we can review all of our trades including our commission paid. Finally, we show how changes to the strategy can alter your Strategy Tester results and how accounting for commission(fees) and selective testing windows can alter perceptions on strategies.
Editors' picks
COINBASE:BTCUSDEducation
by BigBitsIO
23
Day trading and Scalping Example NIFTY July 8I use multi time frame analysis very heavily. I always establish context for trading before I start the day. For context and levels, please check the following posts prior to July 8 *** Links Below I am always fascinated by day trading - not because of the lure of quick money. But I think it is extremely hard for me. At least it is hard for my personality. It is always said there are two kind of traders 1. Traders who can think very fast 2. Traders who can think very deep I always see myself comfortable in category two - deep thinker. But to put myself out of my own opinion's prison - I day trade. Though day trading is hard, it teaches many things to me as a trader. 1. Emotional Control and Money Management - I don't have time to adjust , reflect back and somehow prove to myself that I am on the right side. I better quickly exit of my positions with great emotional control. 2. Relentless Planning - Since I don't have lot of time, I have to plan insanely - thinking of all possibilities and my actions. 3. NO to laziness - I cant afford to relax during the day session. I need to have extreme clarity of thought throughout the trading session. Now, one may think that all these learning can be from any time frame trading. That's true. But when you have a ticking clock next to you and market presenting you 1 of n possibilities every single candle, that changes you for good. It makes you fast. Then you can adjust to larger trading styles easily. Below is my example live thought log for the day. I escaped the day with approx Rs 34 / lot profit. Not a bad hunt after crazy price movement! ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- NIFTY chart is extremely positive. Market looks prime for 11000, but global clues soft. Typically, such setups if bullish do not give chance to enter, starts with gap up. If there is no gap up it may be contra indication for sideways movement for the day. Since it is Wednesday , 1 day prior to weekly expiry, it is better to sell options and scalp premium. Risk : large volatile movement. Stop Loss, opening ranges of 1 st hr. Close positions starting from 1:30 PM. -------------------------------------------------------------------------------------------------------------------------------------------- 1. Expectation was rally. But flat opening. Global markets are soft. Hence I sold 9300 CALL. Idea is to cash in Theta loss for the day in case of sideways movement. It is a risky trade. 2. Candle at 9.30 starts confirming this movement. Let this movement complete. 3. Any close below Previous day High, position can be added to. 4. As yesterdays high shows support around 10800, 10700 PUT is sold as well. Again Idea is to get benefitted by sideways movement and theta decay. 5. Overall position entry is now 33+30.30 = 63.30 Rs. 6. Since breakout failed, now NIFTY likely to stay in the range. So 10800 CALL sold 68.05 Rs. 7. So far trade is going ok. definitely signs of consolidation. BANK NIFTY broken out, NIFTY lagging. 8. Position 10700/10900 Strangle : 66 Rs (3Rs loss) Position 10800 Call : 74 Rs (6 Rs loss) -------------------------------------------------- 9 Rs Loss 9. Position 10700/10900 Strangle : 65 Rs (2Rs loss) Position 10800 Call : 56 Rs (12 Rs Profit) -------------------------------------------------- 10 Rs Profit Going as expected. On breakout of the opening range Another short added 10800 CALL 56 10. Opening range breakout failed. 10750 PUT sold, Now look for opportunity to reduce position on 10800 CALL as breakout failed. 11. Usually NIFTY may jump around after 1.30. VIX did not decrease so far. So NIFTY players sense uncertainity at these levels. Closed 10800 1/2 position. Position 10700/10900 Strangle : 56 Rs (10Rs Profit) Position 10800 Call *: 62 (6 Rs Loss) Position 10750 Put : 46 (3 Rs Profit) * Position 10800 CALL : (68-61) (7 Rs Profit) -------------------------------------------------- 7 Rs Profit / 7 Rs Booked Profit = 14 Rs 12. The price range is getting tighter. NIFTY advance decline is 25 to 24 Neutral. 13. As Expected move started. How strong the move to be seen. 10800 PUT sold as initial direction of the move crossing the range. VIX started cooling off 14. Break above range is not showing strong follow through so expansion attempt is not rapid. That is a good sign for my trades. Position 10700/10900 Strangle : 50 Rs (13Rs Profit) Position 10800 Call : 74 (18 Rs Loss) Position 10750 Put : 31 (18 Rs Profit) Position 10800 Put : 50 (4 Rs Profit) * Position 10800 CALL : (68-61) (7 Rs Profit) -------------------------------------------------- 17 Rs Profit / 7 Rs Booked Profit = 24 Rs 15. NIFTY is showing many indecisive moves. It is above previous day high. Essentially, the morning down move can be negated and fresh up move possible tomorrow. It is 2.20 PM so 1 hr to go in trading. Priority will be to close short positions first. Then Long ones. Closed 10800 Put : It was latest and more prone to loss. * Position 10800 Put : 49 (5 Rs Profit) 16. NIFTY dipped below Previous day Low. Now NIFTY can again go to 10800 17. Actually large moevement at 2.30 PM. Closed the positions. Final tally is Position 10700/10900 Strangle : (63 - 45)(18 Rs Profit) Position 10800 CALL : (68-61) ( 7 Rs Profit) Position 10800 CALL : (56-55) ( 1 Rs Profit) Position 10750 PUT : (49-46) ( 3 Rs Profit) Position 10800 PUT : (54-49) ( 5 Rs Profit) ------------------------------------------------------ 34 Rs Profit ------------------------------------------------------------------------------------------------------------------------------- Retrospection : -ve's 1. Position of 10800 PUT sell was not a good position to take, it was more like a balancing previous position. Better option would be to just square off 10800 CALL position for loss. 2. Entry for 2nd position on 10800 CALL could have been better. Also it was not correct with original sideways assumption. +ve's 1. Traded as per the plan. 2. I was able to close everything fast enough before the volatile move. Reference Monthly Analysis Weekly Analysis July 7 Log
NSE:NIFTYEducation
by Observe_Think_Act_Think
1
Trader's Guide to Credit SpreadsThe strategies and ideas presented in this guide have been designed to provide you with a comprehensive program of learning. The goal is to guide you through the learning experience so you may be an independent, educated, confident and successful trader. There are numerous variations of traditional options strategies and each has a desired outcome. Some are very risky strategies and others require a considerable amount of time to find, execute and manage positions. Spreads are a limited risk strategy. Spreads Spreads are simply an option trade that combines two options into one position. The two legs of one spread position could have different expiration dates and/or different strikes. Spreads can be established as bearish or bullish positions. How the spread is constructed will define whether it is bullish (rising bias) or bearish (declining bias). Different types of spreads can be used for the same directional bias of the stock. For example, if the stock has a declining bias, a call credit spread or a put debit spread could be opened to take advantage of the same anticipated move down. In this guide we will be talking about Credit Spreads , which are a limited risk strategy. Learning how to manage risk is as important as learning the details of a strategy. Credit Spreads A credit spread is created when an investor simultaneously sells-to-open (STO) one option and buys-to-open (BTO) another option. The premium received for the STO is always greater than the premium paid for the BTO thus creating a net credit to the account. Example : STO a call using the 120 strike for a credit of $5.20 BTO a call using the 130 strike for a debit of $3.80 Net credit for the spread is $1.40 = 5.20 credit - 3.80 debit The ideal construction of a credit spread is to sell-to-open (STO) an out-of-the-money (OTM) strike and buy-to-open (BTO) the strike that is 5 – 10 points further out-of-the-money (OTM) using the same expiration. When opening a call credit spread , further OTM means a higher strike. When opening a put credit spread , further OTM means a lower strike. Both legs are opened on the same underlying equity and use the same expiration month. Call credit spreads are opened when there is a declining bias and will be profitable if the stock moves down. This is because a call credit spread is opened for a credit and since the value of a call option decreases as the stock goes down, at some point the spread will be bought-to-close (BTC) for less than it was sold-to-open (STO). Here is an example: Stock trading at 500 and has a declining bias. STO 510 call BTO 520 call This spread creates a credit of $4.80 Stock declines to 490 causing the values of the calls to also decline. The position can now be closed for a profit. BTC 510 call STC 520 call The cost to buy back the spread is only $3.80. Since the stock declined in value, the call options are cheaper. The spread was STO for a credit of $4.80 and BTC for a debit of $3.80 resulting in a $1.00 profit. Put credit spreads are opened when there is a rising bias and will be profitable if the stock moves higher. This is because a put credit spread is opened for a credit and since the value of a put option decreases as the stock goes up, at some point the spread will be bought-to-close (BTC) for less than it was sold-to-open (STO). Here is an example: Stock trading at 520 and has a rising bias. STO 510 put BTO 500 put This spread creates a credit of $3.60 Stock rises to 530 causing the values of the puts to decline. The position can now be closed for a profit. BTC 510 put STC 500 put The cost to buy back the spread is only $1.80. Since the stock went up in value, the put options are cheaper. The spread was STO for a credit of $3.60 and BTC for a debit of $1.80 resulting in a $1.80 profit. Time decay is a positive factor in trading credit spreads. Since the position is opened for a credit, money comes into the traders account immediately. As time value decays, combined with a favorable movement of the stock, the value of the position will decrease allowing the trader to buy-to-close (BTC) the position for less than it was originally sold-to-open (STO). Risk and Reward on Credit Spreads Reward The maximum profit that can be earned from a credit spread is equal to the net credit received when the spread was opened. For a credit spread to realize the maximum profit, both legs of the spread would need to expire worthless which means the position would need to be held until expiration and be out-of-the-money at expiration. It is not advised to hold positions until expiration. Short term movements in the stock plus time value decay provide opportunities to close out positions for a profit of, generally, about 10%. If a position is profitable and the trader decides to hold the position hoping for a bigger profit or in an attempt to carry the position to expiration, there is a good chance that the profit can disappear, and the position could turn into a losing position. A good way to lose money is to wait for a bigger profit. Risk The maximum risk, or potential loss, from a credit spread is the difference between the two strikes minus the net credit. Example: STO 120 call for a credit of $5.20 BTO 130 call for a debit of $3.80 Net credit for the spread is $1.40 The difference between the strikes is 10 points. $10 is the max risk less $1.40 credit = risk of $8.60. The maximum profit is equal to the net credit, $1.40. Losses occur when the short strike (the STO leg) is in-the-money at expiration. This is because the trader has sold to someone else the right to buy the stock at the short leg strike. Since the trader does not actually own the stock, they will need to buy it and sell it at a loss. A maximum loss will occur when both strikes are in-the-money at expiration. The breakeven point on a bearish (call) credit spread is the lower strike price plus the net credit. Referring to the example above, if the stock settled at 121.40 at expiration, there would be no loss and no profit. Example of breakeven point on above credit spread: Stock trading at 121.40 Buyer exercises the right to buy stock from you at 120. Since you do not own the stock, you buy it at the market price of 121.40 and sell it at 120. This results in a $1.40 loss You get to keep the original credit of $1.40. This netted against the $1.40 loss results in breaking even on the position. The breakeven point on a bullish (put) credit spread is the higher strike price minus the net credit. Calculating the Return There are two ways to view the percentage return of profits from a credit spread. One is to divide the profit by the difference between the strikes. If the difference between strikes is 10 points and the trade resulted in a $1.00 profit, that would be a 10% return ($1.00 / 10). The second approach is to calculate the return based on the amount of capital that was at risk. After all, if the trade lost 100% of the risk, that is the amount the trader would no longer have. So, the profit percent is calculated by dividing the profit by the risk. In the example above, the net risk is $8.60. If the credit spread trade resulted in a $1.00 of profit, the percentage return would be 11.63% ($1.00 / $8.60). This approach shows the importance of managing risk. Lower risk drives higher returns relative to capital at risk. Opening a new Call Credit Spread The following steps should be referred to when opening a new call credit spread position: 1. Review the technical indicators on your chart and confirm there is a consensus between multiple indicators pointing to a declining bias. 2. Select an expiration that is two to four weeks out. Two weeks is generally the minimum time to expiration you want to use. Building time into options positions is advised in case it needs to be managed. The sweet spot for opening new positions is three weeks to expiration. 3. STO an out-of-the-money (OTM) call strike. 4. BTO the strike that is 5-10 points further out-of-the-money (OTM). With a call spread, further OTM means a higher strike. Generally, when properly constructed, the credit on a 5 point spread will be in the range of $1.20 - $1.80. A 10 point spread will generally be 2.50 – 3.50. The closer the strikes are to the current price, the higher the credit, while this reduces the overall risk of the position, it also increases the chances of the position moving in-the-money (ITM) which can result in an overall loss. 5. When placing the order, always use a Limit Order . A limit credit order specifies to the market the amount of the credit you will accept. A limit credit order will be filled at the specified limit or higher. Market orders should not be used. 6. With some stocks and indexes, the difference between the bid and ask is quite large. The broker will usually give you a quote called the “Mark”. This is the midpoint between the bid and ask. It is the price you should start with when submitting your limit credit order. 7. Calculate the risk of the position. Difference between the strikes – credit = risk. A position with a credit of $4.50 and 10 points between the short (sold) and long (buy) strikes would have a risk of $5.50. 8. Use the risk number to determine the number of contracts to open. Risk x 100 = the investment required for each contract. With $5.50 of risk and 1 contract, the total investment would be $550. ($5.50 x (1 contract x 100 shares per contract)). The total investment on 4 contracts would be $2,200. ($5.50 x(4 contracts x 100 shares per contract)). 9. Once you know the total investment required per contract, you can decide how many contracts to trade based on the size of your portfolio and personal risk tolerance. 10. After the trade has been opened, place a Good-til-Canceled (GTC) order to close the position. A GTC order will stay active until market conditions are such that the position can be closed for a profit. GTC orders execute automatically and do not require you to be in front of your trading platform to take advantage of the profit opportunity. Place the GTC for a limit debit price based on your desired profit target. One example is to set a GTC for 50% of the credit you received when you opened the position. With a credit of $4.50, a GTC would be placed to buy to close the position at $2.25 allowing a $2.25 profit.
SP:SPXEducation
by NewCycleTrading
3
Bollinger Band Snaps (BBS)Bollinger Band Snaps (BBS) Timing of options trades are elusive, especially during dynamic price trends. There is one technique, however, that reliably and consistently allows you to time trades. The Bollinger Band Snap (BBS) signal occurs at very precise moments during a bullish or bearish trend, and vastly improves timing of both entry and exit. The chart of Chipotle (CMG ) is highlighted with three examples. The first occurred in late February, when price moved below the lower Bollinger band for two sessions. The move then “snapped” back into range, which is predictable. Price rarely remains outside of the Bollinger Band range for long. The second event occurred in mid-March, when price moved below the lower Bollinger band. In this case, the expected retracement (snap) happened the next market day. The final incident was the longest of the three, from mid-May into end May. Price traded above the upper band for six consecutive sessions before snapping back into range. The signal is reliable because a retracement back into the Bollinger Band’s two-standard deviation range is inevitable. It can take a longer or shorter period, but it eventually occurs. The signal provides both an entry flag (when price moves outside of the band) and an exit flag (when it moves back into range). Trading this signal is also apparent at the time it begins to develop. A move outside of the Bollinger trading range generally is going to snap back within a few sessions in each instance. In the February case, price was approximately $755 per share. With the expectation of a snap back into range, a bull credit spread could be opened with puts. Buying one 735 put and selling a 740 put would have set up a small credit. Using the weekly expirations ensures rapid time value decay. In the second example, price was approximately $465 per share. A call could be opened using 4 – 6 weeks to expiration and opening an at-the-money strike. The credit spread strategy could also be applied in mid-May when price began advancing above Bollinger’s upper band at $998 per share. Buying one 1030 call and selling a 1025 call for a credit. In all of these instances, the entry point is easy to identify. It is seen where price moves outside of the two standard deviation range marked by the upper and lower bands. The exit point then occurs when price snaps back into range.
NYSE:CMGEducation
by NewCycleTrading
3
Using the strategy tester to prove WTD performance!Use the strategy tester with our strategy to check the weekly performance, use it also as a trading journal - you simply need to follow it at least! We can see all of the trades for the week and the profit and loss. Strong gains this week with a 20% gain risking 1% per trade - even more on some 30 minute entries. A great week, catching big JPY moves in particular. and holding them! This is NOT just an indicator, its far more than that as you can hopefully see. These gains do not include the 300+ pip move on Gold or indices, etc. Regards Darren
Education
by pow_removetheguesswork
1
Scalping opportunity on the 1m/3m/5m timeframes .....Those that like to scalp or want to learn can using our strategy. Its very clear to see how to follow price as shown - also our members can test using our strategy tester and hone in on the settings and parameters even further. However, this video is just showing standard settings. Either follow price or use the labels for SL and TP targets. Part close at TP2 and leave TP3 until the reverse signal or SL to entry, could work too. Lots of different ways to manage the position once you are in - even taking 15 pips a time would have worked a treat. Regards Darren Blue FX
Education
by pow_removetheguesswork
4
Blue FX Strategy v3 - letting winners run is key!An explanation into V3 and the differences that are designed to help you the trader, in execution, convenience, efficiency, trading psychology and ultimately profitability. Improvements made; Lot size calculator Pips in brackets Back testing functionality Customisable settings Stop loss and Take Profit labels visible on all time frames and more! Its all there - explained in the video traders. Thank you. Regards Darren
Education
by pow_removetheguesswork
Blue FX Trend Strategy V1 - how does it work?Video explanation on V1 - how it works and how to use it. We will next explain V2 and V3. We have developed the initial strategy very quickly and these videos will explain the changes and help you the trader, find the right tool for you. There is no one size fits all approach, but fundamentally our strategy is based on you being the right side of the market and to encourage you to let your winning trades run. Cut losers, let winners run. Sometimes the best trade to take is the one you are already in! Learn to spot a ranging market and have patience in your execution on a break out and you will vastly improve the statistics here too. Full back testing functionality on just trend following - BUT scroll left and test easily too with a Fixed Stop Loss (SL) and Take Profit (TP). Custom settings can improve or decrease performance across all pairs. Regards Darren
Education
by pow_removetheguesswork