Options In Play – Earnings On The Radar Week Of 4/30/21
This will be the biggest week of earnings this quarter and it is absolutely packed with huge reports. The Tech titans will lead the pack but expect steady news from each sector.
Continue Reading -->Why I Like Apple
Jump in and find out: Why Sami actually likes Apple (AAPL) now How he feels about Facebook (FB) The interesting setup in the QQQ’s When a buy setup triggers How a head & shoulders pattern works Whether IWM can break out… or break down Which major ETF might start leading And more!
Continue Reading -->Options In Play – All Eyes On SPY
While leading the charge higher this past month, SPY has moved through the top of a long-term channel. Now, after a small retracement, the big question is what comes next.
Continue Reading -->Options In Play – A Sympathy Trade Week
Earnings season kicks into gear the next few days but it’s still hard to determine whether options will get rewarded. That’s why sympathy trades will be in focus.
Continue Reading -->Two Trading Mistakes That are Holding You Back
So you think you’re doing everything right but STILL can’t boost your P&L? It doesn’t matter how well you read charts, understand market trends, or how many newsletters you read, you’ll never be successful if you keep making these two mistakes. When I started trading, I had to learn these things slowly, the hard way. Now I’m sharing them with you so YOU don’t have to. You make choices based on what you think should happen In 2007, I quit my job and started trading full-time. That year, the market tanked and continued to be bearish for almost two years (this is probably the reason I like to short rather than play long). To me, Radio Shack was the most obvious stock to short. I thought it was outdated and overpriced. For proof, I needed only look at my local Radio Shack, which was always empty. I thought this would be easy money. The market didn’t agree with me: No matter how bullish the stock looked, I thought it had to go down. Eventually, in January 2014, the stock did turn bearish: I went short at 80 cents, thinking the stock had to go to zero. Then — just a few weeks later — I saw the stock triple off the lows and I had to cover my position. My preconceived beliefs about what should happen COST ME MONEY You could be the smartest person in the world, but if you come to trading with preconceived ideas about what should and shouldn’t happen, you will lose your shirt. This is especially true if you’re like me, coming to trading from a successful career in finance and thinking you understand market trends. Look at all the people who got burned over the years shorting Tesla because the company was losing a million dollars per car. They thought there was no way Tesla could make it. Now, they’re the fifth largest company in the US. The choices you make in the market should be based on what the market is telling you, regardless of your internal monologue. To become a better trader, do away with notions of what should or shouldn’t happen. You don’t understand your personality Not Everyone should take the Same Strategies! Too many new traders think that, to be successful, they just need to understand chart patterns. Chart patterns are a dime a dozen. You can Google them for free. Here are sixteen: Your goal shouldn’t be to recognize these different patterns. Your goal should be to recognize which of those patterns work best with your personality. I talk about gaps, climactics, breakouts, pullbacks. These strategies make the most sense for me and my personality. You need to discover which work best for you. “In trading, as in archery, if there is effort, force, straining, struggling, or trying, it is wrong.” – Jack D. Schwager, Market Wizards Jack Schwager started as a struggling trader who could never get his account above $100,000. So, he decided to interview the world’s best traders, assuming they all traded the same way. He came to realize that no two of them traded alike, but they all traded in line with their own personality. The best traders in history play to their strengths. Learn what kind of trading YOU like, what kind of trading YOU are good at. Do you like to day trade or swing trade? Trade with the trend or counter-trend? Do you like to scalp or hold all day? It took me a long time to find out which strategies best suited me. Once I did, I never deviated from it. You have to find a way of trading that suits you.
Continue Reading -->How to Write the Perfect Trading Plan
When the market turns unstable, what do you do? Panic sell? Seize the moment and start gambling? If you want to wade through the treacherous waters of a volatile market and come out with your P&L — and your dignity — intact, you need a trading plan. Creating a trading plan can help you reset so you can take advantage of market volatility. I can’t guarantee that a trading plan will make you successful. But I can guarantee that you’ll fail if you don’t have one. This is an ambiguous topic that a lot of people struggle with, including myself in the beginning. In this article, I’ll show you how to make a trading plan that will work for you. HOW TO WRITE THE PERFECT TRADING PLAN Most people are terrified to make a trading plan. Once you commit to a plan, YOU are responsible for the results. As humans, we prefer to avoid taking responsibility when things don’t go our way. But when you have a plan that tells you what you can and cannot do, you have no choice but to take responsibility. In this process, your ego will get bruised and you’ll have no one to blame but yourself. This is required for growth. A plan is ESSENTIAL to boosting your P&L long term. Having a plan will allow you to move forward systematically. You’ll be able to notice what is working and do more of it. You’ll also notice what isn’t working and eliminate it from your trading. As you look over my trading plan, keep these things in mind: This is a template to create your own plan Start conservatively. Set easy, modest goals and create simple rules. Tweak your plan as you gain experience My Trading Plan Table of Contents: GOALS AND OBJECTIVES To start your trading plan, define your goals and objectives. “Goals” are your overarching intention. “Objectives” are the criteria you need to establish so you can meet those goals. My Goal: Trade well by finding setups that strictly meet my strategies (as outlined in my trading plan), and execute them flawlessly. My Objectives: Batting Average: >= 60% Sharpe Ratio >= 2.0 Risk to Reward >= 1:2 # of Trades/Day: 7 * Batting Average – Number of winning trades divided by total number of trades * Sharpe ratio – the average winning trade divided by the average losing trade * Risk – the difference between entry price and stop price * Reward – the difference between entry price and target price You can tweak these objectives to best suit your lifestyle and reach your goals, but I find it’s best to avoid improving one stat at the expense of the others. There are four things that make money: The frequency of your trades The risk per trade The sharpe ratio Your hit rate Below are some examples of how altering just one of these factors can drastically impact your P&L: In example 1, by hitting those four metrics in one year, you can make over half a million dollars (gross). In example 2, if your risk per trade doubles, your gross profit doubles. In example 3, by reducing your number of trades per day from 6 to 4 (by only jumping on the “perfect trades”), you see a 33% drop in your P&L. In example 4, if the sharpe ratio changes from 2.0 to 1.5, P&L is again severely impacted. In example 5, if the batting average is lowered from 60% to 50%, P&L again drops by one third. By even slightly messing with these four metrics, your gross profits can be altered dramatically. Step by step, set goals for yourself to see if you can improve these metrics over time. MONEY AND RISK MANAGEMENT This is what keeps the account safe. These are rules that tell you when you need to quit. My Goal: 2R’s per day, or 10R’s per week Figure out how you are going to protect the majority of your gains for the day. When unrealized gains (gains on open positions) reach 2R’s, I trail to protect gains to break even. ex: If I am up 5R’s, my stop goes up to 3R’s I also have rules for realized gains ex: If I am up 5R’s, I protect 4R’s I have rules for Open Exposure, rules for Maximum Loss for day and week, and what to do if they are reached. In the past, when I maxed out for the day or week, I would “escape,” not wanting to face the music and take responsibility. Now I have rules in place to prevent me from experiencing maximum losses and help me get back on track if I do. ENTRY REQUIREMENTS In order to enter a trade, I look for: A trade that fits a strategy in my trading plan and has a clear setup ex: if i have a gap strategy, that doesn’t mean I can trade anything that gaps. I have to have a clear setup. A stock that has hit the entry price (unless it’s a base breakdown or the stock is on an uptick). NO RE-ENTRY unless it’s a Climactic Buy or Climactic Sell Setup. Most people are better off not trading the same positions because they end up “revenge trading.” Instead of taking a small loss, they end up taking a huge loss. Decide for yourself what will make you pull the trigger on a trade. What does the chart need to look, feel, and smell like? ENTRY TACTICS/STRATEGIES The bulk of my trading plan is made up of three strategies that best suit my personality. Gap strategy for the morning session. 15 min Strategy to plan certain strategies off the 15 minute chart. I chose this strategy because it’s the perfect length of time for trading in the afternoon. Stops and patterns don’t hold on shorter time frames later in the day. Climactic Buy Setup I use for late morning and early afternoon. List any and all
Continue Reading -->Buyers Beware
There is nothing about the market that isn’t bullish right now. Sami says that the market looks like it will continue higher for the time being, but that potential buyers should still be careful. In this video, Sami explains: – The prediction that he got right about IWM – Where to find a 1-2-3 entry in DVAX – Which problem GEO and FGEN both have – Why GDX is a long term play – The breakout that can be found in KHC and MDCA
Continue Reading -->Options In Play – Playing Short Expiration And Long Expiration on The Same Stock
Sometimes I like to have a combination of near-term options and long-term options on the same stock. To me, it gives flexibility and allows me to work around a swing trade.
Continue Reading -->Options In Play – Options Debut On New IPOs
The COIN listing today drew a ton of attention and now everyone is wondering when options begin trading. There are a few requirements that need to be met first.
Continue Reading -->Options In Play – The Minimum Risk To Reward For Spreads
There is an absolute minimum risk to reward I use when designing spreads. This holds for at-the-money, out-of-the-money, earnings or even swing trades.
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