• Table Of Contents
  • Chapter 1

    Finding The Right Strategy For You

    Chapter 01

    Jeffrey Gibby | MetaStock

    Finding The Right Strategy For You

    Technical analysis methods have evolved since the early 18th century with Candlestick theory in Dow theory.  There are literally hundreds of methodologies out there ranging from simple to complex.  Some of these methods work, some don’t.  Some are profitable and consistent, others are not.

    Given the hundreds of indicators and trading strategies out there:

    • How do you know which to choose? 
    • Do you want a strategy that allows you to trade several times a day? week? or year?
    • What fits your risk tolerance? 
    • Are you willing to take larger drawdowns in exchange for larger possible returns? Or are you more comfortable with a “Turtle” approach?

    A core advantage of Technical Analysis is that the methods used should be objective.  The simple fact that they are objective allows you to take the guesswork out of trading.

    Let’s use an example, if you understand how Gerald Appel’s MACD is designed, you will know how it is used to measure trend and momentum. You’ll also know that MACD is simply the subtraction of a short-term moving average from a longer-term moving average.  This difference is then plotted (usually as a histogram) with an additional moving average (signal line) of the histogram.

    The simplest way to analyze a MACD is using its signal line.  When the MACD crosses below its signal line it enters a bearish phase.  This is a classic signal that you should take a short position.    Likewise, when the MACD crosses above its signal line it enters a bullish phase.  This is a classic signal to go long.  

    Figure 1 Chart Created with MetaStock.

    There are many ways to use MACD in trading, but I picked this because of its simplicity and its objectivity.  Not all trading methods are simple, but all of them should be objective.  Pure technical analysists will tell you that all know news and fundamentals are already incorporated into price.  The study of Technical Analysis is a short cut to understanding price.  

    What I personally like about using Technical Analysis is its objectivity.  Using Objectivity in our trading is paramount to trading successfully.  It allows us to ignore the “crisis of the moment”.  Our focus is on the underlying price action and make solid decisions based on what the price is telling us.  It also allows us to stop guessing about the “fixes of the moment”.   What the stimulus package will do, the bailouts will do, the tax cuts will do, etc.  This gives us objectivity and allows us to stop making decisions based on our gut feelings.  

    This objectivity also allows us to also treat trading as a business.  Just as in the MACD chart (figure 1) you can look at the trading signals MACD gave and figure out exactly where you would have made money, where you would have lost money, how often you would have traded, what drawdowns you would have had.  You could also look how MACD performed in up markets vs down markets.  You could know your winners versus your losers.  You could really understand your business plan.  

    This objectivity also allows us to compare MACD against other trading systems to see how it compares.  Quite possible MACD is not a good indicator, or maybe there are better indicators to give you guidance in the market.  With software (like MetaStock) you can learn how MACD compare to other indicators and methods.  Doing so allows us to focus on the methods  that work and ignore the rest.  

    Let’s walk through an example system test using MetaStock’s systems tester and the DIA ETF.  

    In this example, I take 58 of the built in Methodologies for MetaStock and am testing them against two years of historical data.  For the purpose of this test, I am starting with a hypothetical account of 10,000 and trading 75% of the available equity in the account.  Since I am testing only one stock against 58 different methodologies, I am doing a total of 58 tests.  MetaStock can test all the stocks against hundreds of methods--It’s quite powerful.   I’m keeping it simple.

    Here are the results of this simulation in MetaStock, sorted by profitability.

    You can see that while MACD was popular, it wasn’t even close to the best indicator for DIA over the last two years.  It wasn’t even in the top five.  

    The best performing system was a system built using Bollinger Bands.  Looking closer, you can see it gained 39% profit, traded six times, and had zero losing trades.

    For Comparison the MACD traded 48 times as much, lost 29 of those trades, and netted 9.66% profit.  

    Both methods returned a hypothetical profit during the last two years.  One method had a clear and demonstrable performance advantage.  An advantage you can clearly see with the benefit of Testing.

    As traders, it is nearly impossible to know how to use and implement the hundreds of indicators available.  Using systems testing allows us the ability to bypass the indicators that don’t work and focus on those that do.  Doing so, we come up with a battle tested business plan. 

    About the Author

    Author: Jeff Gibby

    Company: MetaStock

    Website: MetaStock.com

    Services Offered: Award winning market analysis software

    Markets Covered: Stocks, Futures, Forex, Options.  Coverage offers hundreds of exchanges.

    Chapter 2

    Predicting Favorable Options Trade Outcomes

    Chapter 02

    Matt Choi | Certus Trading

    Predicting Favorable Options Trade Outcomes

    It’s eight o’clock in the evening – the time of day when I am at my best.  My kid is sound asleep and my wife and I just finished dinner and a glass of pinot noir. With the U.S. markets closed and Asia yet to open for trading, it gives me a window of serenity where I can think about the markets without all the noise.  Crude Oil is trending up and I found a price to go long.  I put in my buy limit order, target, and stop loss and let the market come to me.  Looking at my open positions I find my bonds trade up two handles, and with FOMC minutes tomorrow I decide to take profits.  I am done for the night.  It’s time to catch the newest episode of Criminal Minds.

    It’s easy to understand why so many people are attracted to trading.  Unlike the typical job with many rules and guidelines, trading has no boundaries.  You have the freedom to set your own rules, you choose where and when you work, and you decide how much money you want to wager on each trade.  What else gives you such flexibility to make money with a click of the mouse?  What else is so simple where you can make money by just guessing correctly whether a stock, a commodity, or a currency will go up or down in price?  But if trading is so simple then why do most traders lose money and fail to achieve consistent and profitable results?  

    When I first started trading I believed that beating the markets requires perfect analysis. I spent hours and hours studying the markets trying to understand why it moves the way it does, hoping to predict the next big move.  Over time I felt like I knew more and more about the markets, but my trading results were not improving at all.  It wasn’t until a few years after I started trading when I had an epiphany.  I realized that the way we typically think makes it very difficult to achieve success trading the markets.  In fact, the mindset that we learned in school and from our work experience is opposite to what is required to become a consistent and profitable trader.  The bottom line is that although trading is simple, it is difficult to master because it is counterintuitive and paradoxical.  For the rest of the chapter, I will show you the 3 psychological mindsets I acquired to become a consistent and profitable trader, all of which you can adapt for your own trading if you have an open mind.

    1 – Accept Market Uncertainty

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    The first psychological mindset to acquire is to accept market uncertainty.  This means that you believe each trade you take is a random event, and the outcome is out of your control and has nothing to do with any of your analysis.  Think about it, there are millions and millions of investors, traders, and institutions betting on the markets each day, creating infinite combinations of buying and selling dynamics.  It is the cumulative action of all these participants that moves the markets up or down.  So unless you know why and how much each and every market participant is buying or selling, it is impossible to predict what the markets will do.  And because you can’t make such prediction, you must accept the fact that markets are random and uncertain.  

    Before I go any further, let’s circle back to examine why most people fail at trading.  As human beings, we are brought up to believe that there is a correct answer to most things in life – there is an answer to why a car wouldn’t start, why one has a heart attack, or even why gravity exists.  So when novices start trading, they also seek an answer to why markets move.  They listen to tips from TV anchors who make bold market predictions to increase viewer ratings.  They listen to advice from brokers who make a living off of transactional commissions.  And when all those fail, they spend thousands and thousands buying systems only to find they also don’t work.  Finally they start doing their own analysis, spending hours and hours ciphering through company balance sheets and reading charts, but still fail to achieve consistent profitable results.

    The truth is, no matter how much time you spend studying the markets, you will never know what all other market participants are doing.  There is no trading textbook that will tell you whether the markets are going up or down next week.  Novice traders often believe that trading success is directly related to how much you know about the markets, and such belief is reinforced when they get lucky and their analysis correctly predicts market direction coupled with a few winning trades.  This gives them a false sense of security that markets can be conquered strictly via analysis and knowledge.  However, trouble arises when they encounter a losing streak.  They begin to doubt their analysis techniques, and naturally they resort to doing even more studies on the markets but to no avail, and the more frustrated they become.  

    Don’t get me wrong – market analysis is important. You need to have an arsenal of tools to analyze the markets, and you need to be confident that these tools give you an edge.  My trading turned profitable when I stopped searching for new analysis techniques and started to believe in the tools I already have.  I started to accept that markets are uncertain, and as such in the short run I will have randomly distributed winners and losers.  However, in the long run I trust that my edge gives me a higher probability of winning than losing.  Believing in market uncertainty is critical in acquiring a trader’s mindset and lays the foundation for the next phase.

    2 – Focus On “Now”

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    “The only source of knowledge is experience” – Albert Einstein.  A child learns not to touch the stove again after being burned by the hot element, and a chef makes changes to his recipe after negative customer feedback.  We’ve all been conditioned to learn from our past experience, and for the most part it works because if we change our behavior there will likely be a different outcome.  The child won’t get burned if she doesn’t touch the stove, and the food will taste less salty if the chef uses less salt.  

    But in trading, it is detrimental to associate your trading decision with past results.  Recently a friend who just started trading asked me for help.  He had a setup trading gold futures that was generating winning results.  He had a six-trade winning streak, and he became so confident that he doubled his next bets.  Then all of a sudden, he had four losers in a row, wiping out all of his previous profits.  He then modified his setup thinking that his original strategy no longer works.  He took the next four trades with his new setup but only one was a winner.  He got very frustrated and is now taking a hiatus from trading.  Our minds are conditioned to associate with the most recent events.  After losing consecutive trades, novice traders develop fear that hinders their decision-making ability, which in turn causes them to change their strategy, deviate from their trading plan, or even worse create a perception that the market is out to get them.  On the other hand, when novice traders experience a few winning trades they become euphoric and overconfident, which in turn leads to over trading (i.e., not waiting for their edge) and risking too much money on each trade, which is how most traders lose their entire account.

    Professional traders understand that each trade is uncertain and random, and as such they look at each opportunity independently of previous trades.  This is a very difficult mindset to acquire because it is unnatural for us to wipe the slate clean each time we are making a trading decision without thinking about recent results.  After all, isn’t it natural to feel fearful and rejected when you lose five trades in a row? Or isn’t it natural to feel happy and confident when the strategy that you created gave you six straight winners?  Great traders only focus on opportunities that are happening NOW.  They have no emotions when trading because they see the markets as neutral and are simply giving out unbiased information.  When their edge appears they take the trade without hesitation.  There is no hesitation because there is no association from previous winning or losing trades.  Once you can fully accept market uncertainty and can focus only on opportunities that are happening now, you are ready to acquire the third and final psychological mindset to become a successful trader.

    3- Think Probability

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    By now you must be wondering that if markets are uncertain then how can I achieve consistent and profitable results?  Although markets are uncertain in the short run, long-term predictable results are achievable.  To illustrate this point, I will use blackjack as an analogy.  Based on the game rules, it is mathematically deduced that the casino has a 55% probability or edge of winning each hand.  That said, in the short run, any player can get lucky and have a five, ten, or even fifteen game winning streak and in doing so beating the house.  However, the casino understands that in the long run after millions of blackjack hands are played, the odds will play out and it will win very close to 55% of all hands.  And because they understand their edge and has the deep pocket to stay in business, the casino does not panic when some lucky player walk away with large winnings.  

    Similar to the blackjack game rules, your analysis, setup, indicators, and entry/exit rules give you an edge trading the markets.  You will have both winning and losing trades in the short run, and in the long run your edge will give you a higher probability of winning than losing.  When you encounter a losing streak you do not panic and continue to trade without hesitation when your edge appears, and when you are winning and making money you continue to risk the same amount on every trade because you know that a losing trade can be just around the corner.   Being able to think in probability also helps you become a more disciplined trader.  When you finally see trading as just a numbers game, you will no longer need to rationalize why markets move the way they do.  You won’t need to go on CNBC and listen to all the so-called experts tell you why the markets went up or down, because you know they don’t have the answer either.  You will be able to trade with less emotion and less stress, and this allows you to think more clearly and as a result make better trading decisions.

    Final Thoughts

    At the beginning of the chapter, I said that trading is simple but difficult to master.  I hope you now realize that trading is difficult to master because it is simple.  Most traders fail because they think the markets are solvable problems when in fact they are uncertain and random.  They fail to see that traditional education not only hinders, but also acts as an opposing force to acquiring a successful trader’s mindset.  As a result, they overanalyze the markets and wipe out their accounts looking for answers that don’t exist.  The good news is you will be able to see the markets in their simplest forms when you acquire the three psychological mindsets described in this chapter.  Not only that, you will also be able to compartmentalize your thinking to leverage these winning mindsets only when trading the markets.  I wish I discovered all this earlier in my trading career, it would have saved me tons of money and I would have become a consistent and profitable trader much earlier. 

    I will leave you with a few recommendations on how to acquire the three psychological mindsets so you too can become a successful trader.  First, you need to develop a few edges or strategies and apply them to no more than five markets.  My trading took a leap forward when my mentor suggested that rather than trading every market and being jack-of-all-trades, I should become an expert and trade only a few of them.  Second, after you discover what you want to trade and how to trade them, develop and stick to your trading plan with proper risk management.  The key here is to risk as little as possible on each trade.  I suggest no more than 0.5% of your account so you can preserve your capital while you master the trade.  The less money you lose on each trade the less pain you will feel and the more you can maintain the winning mindsets necessary to make proper decisions.  Third, you should get a mentor to help you develop your trading business.  While having a mentor is no guarantee for success, he or she can make sure you have the right mindsets and help you focus on your goals.  For me, I attribute my success to my own hard work, but at the same time I can honestly say that with my mentors’ help I was able to achieve success years faster than I originally expected. Finally, you must apply the three psychological mindsets at all times to keep trading simple.   If you can do all that, I assure you that you will see a breakthrough in your trading, and very soon you will become a consistent and profitable trader well on your way to achieve great success in life.

    About the Author

    Author: Matt Choi

    Company: Certus Trading

    Website: Certustrading.com

    Services Offered: Personal Mentorships, Video Courses, Trading Guides

    Markets Covered: Options, Stocks, Futures, Commodities, Forex

    Chapter 3

    Understanding Trading Statistics & Probabilities

    Chapter 03

    Michael Nauss | Trade-Ideas

    Understanding Trading Statistics & Probabilities

    Regardless of time frame, my thoughts about trading always remain the same. I have two main philosophies when it comes to trading, both of which are very science based in nature.

    1. Like testing a scientific theory, trading should have a systematic approach that can be testable and repeatable. Each trade does not matter just like each test would not matter. What should be of interest to the trader is a system that is created to be able to make money on the next 10,000 trades instead of worrying about the next one.
    2. The second is that the human memory is awful, and we are all very susceptible to confirmation bias. We only remember where a certain pattern works and forget all the other times that it does not.


    STEP ONE: STEP ONE:  Use the trade-ideas back tester to find what’s working in the market currently.

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    With the trade-ideas back tester you can test what you have seen in the market to make sure you’re not suffering from confirmation bias. After that you can build a trading plan around it and adjust it as changes in the markets inevitably happen.

    STEP TWO: Display all results that would have triggered that day into a top list so you can easily see all of the symbols that are meeting the current criteria.


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    STEP THREE: Bots and algorithms are great at looking at things en masse but not as good as a human when reading technical analysis. Things like news or how a stock trades with liquidity and past price action are best worked out by a trader.

    Scan your list each night picking stocks and entry points few them. I suggest setting price alerts in your Trade Ideas system so you will be alerted when things hit your price.

    STEP FOUR: Trade your plan! When you originally created and backtested your trading plan you would have entered things like stop loss and hold times into the system.

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    It seems obvious but it’s important to note that in the long run, your results will be more dependent on how you manage the trade and less on the outcome of your directional bet.

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    Follow your rules with discipline. Sharpen your trading edge from scanning and watching charts. Keep the statistics on your side.

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    About the Author

    Author: Michael Nauss

    Company: Trade Ideas LLC

    Website: Trade-Ideas.com

    Services Offered: Live Streaming Trading Ideas Powered by Artificial Intelligence

    Markets Covered: U.S. and Canadian Equities

    Chapter 4

    The Best Free Indicator in the World

    Chapter 04

    Hubert Senters | Senters Group

    The Best Free Indicator in the World

    The next decade is shaping up to be more volatile than we’ve seen in a very long time. This scares a lot of traders. But not me - because I have a strategy that takes advantage of that volatility. 

    In the next few minutes, I’m going to show you how it works - with real trade setups that I’ve seen. When we’re done, you won’t be scared of the coming volatility… you’re going to welcome it.

    About the Author

    Author: Hubert Senters
    Company: Senters Group, LLC
    Website: www.hubertsenters.com
    Services Offered:  Trading Education, Daily Videos, Live Trading Room, Custom Indicators and Trading Workshops.
    Markets Covered:  Stocks, Futures, Pre-IPO Investments

    Chapter 5

    The T-Line: An Uncommon Indicator

    Chapter 05

    Steve Bigalow | Candlestick Forum

    The T-Line: An Uncommon Indicator

    Candlestick analysis was developed using one of the most reliable and consistent price movement indicators – human emotions. The Japanese rice traders identified signals and patterns that consistently occurred because of human nature. Investor sentiment has not changed over the past 400 years and will not change over the next 400 years. Candlestick analysis also has another compelling facet, is merely common sense put into a graphic depiction. For many investors, when learning the candlestick signals and patterns, and the investor sentiment that created those patterns, a very striking revelation occurs. The common reaction is “ yeah, I knew that”. Everything built into a candlestick chart is merely common sense.

    Candlestick signals illustrate what is occurring in investor sentiment. They have proven to be very accurate indicators. There is an additional relatively unknown indicator that dramatically improves the results of candlestick signals and patterns – the T line.

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    Prices do not move based upon fundamentals! Prices move based upon the perception of fundamentals. When an investor understands this basic concept, they gain a much stronger perspective on when prices are reversing and also analyzing when price trends will continue. The Japanese rice traders use very simple parameters to show when a reversal is likely to be occurring. Simply stated, if you see a candlestick bullish reversal signal in the oversold condition, the probabilities dictate that an uptrend is about to occur. The same analysis can be applied to a sell signal. If you witness a candlestick sell signal in the overbought condition, the probabilities indicate a downtrend is about to start.

    Utilizing those parameters creates a trading strategy that greatly improves investors profitability. First, if candlestick signals and patterns did not work, we would not be looking at them hundreds of years after their development. The Japanese rice traders, that created candlestick analysis, did not become  wealthy, they became legendarily wealthy. They were the financial powerhouse in Japan for centuries. And they created this wealth on the most boring trading commodity in the world – rice. Secondly, an investor understanding the highly profitable probabilities of price movements, based upon candlestick signals, is now in a position to trade by taking out the emotional decision-making process most investors apply. Where do most people buy? They buy exuberantly at the top! Where the most people sell? They panic sell at the bottom!

    Have you ever wondered why when you became confident enough to start buying a position, as soon as you buy it goes the opposite direction? That is normal human investment decision-making. When the pain of holding a down trending position gets so great you can’t stand holding the position anymore, you sell? But as soon as you sell, it immediately starts reversing and heading back up. That is normal human investment nature. Ask yourself, when everybody else is selling, who is buying? When everybody else is exuberantly buying, who is selling? The smart money!

    Candlestick charts graphically reveal exuberant buying at the top and panic selling at the bottom. If you understand that is the case, logic dictates watching for candlestick bullish signals at the bottom, and be ready to buy with the smart money or witnessing exuberant buying at the top of a trend should prepare an investor to get ready to sell.

    A major attribute of candlestick signals is being able to see what investor sentiment is doing at observable technical levels. Major moving averages, trend lines, recent tops or bottoms, or any technical indicators that is being used by other investors become levels that candlestick signals reveal what investors are doing at those levels. This allows the candlestick investor to see exactly what the decisions are at those technical levels. But the most powerful trend indicator used in conjunction with candlestick signals is the T line.

    The T line

    The T line is the 8 exponential moving average. In produces a very effective trend strategy. The T line rule. If you witness a candlestick buy signal and a close above the T line, you can stay long as long as there is not a candlestick sell signal and a close back below the T line. Conversely you can go short if you see a candlestick sell signal and a close below the T line. This is an extremely high probability result. Confirm this for yourself. Put the 8 exponential moving average/T line on your charts. It can be easily back tested by visually analyzing what price trends have done after a reversal signal and a close above or below the T line. Also, be aware of a caveat to that basic rule. The further away you move from the T line, the higher the probability prices will come back and test the T line area.

    The accuracy of the T line support and resistance implies a viable concept. The T- line has Fibonacci characteristics. It acts like a natural support and resistance level of human nature. This makes the T line indicator an extremely powerful trend indicator when used with candlestick signals. Why? If candlestick signals and patterns are the accumulative knowledge of everybody buying and selling during a specific time frame, the graphic depiction of what is occurring in investor sentiment and the T line is the natural support and resistance level of human nature, the combination is an extremely powerful trading technique. This is the most important statement in this chapter!

    The T line rule - the formation of a candlestick buy signal and a close above the T line produces extremely strong probabilities an uptrend has been confirmed.


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    The formation of a candlestick sell signal and a close below the T line produces very strong probabilities the bears are now in control.

    When prices move dramatically away from the T line, the probabilities are highly likely for the price to come back and test the T line. This enhances price reversal analysis. Witnessing prices that have moved excessively lower in a downtrend, well away from the T line, the higher the probability when witnessing a candlestick reversal signal implies a reversal will occur with the first target being the T line.

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    When to take profits? This is an area that most investors have problems. Candlestick analysis produces visual indications of when the probabilities favor taking profits. Witnessing a candlestick sell signal in the overbought condition is a likely reversal, be prepared to take profits on the signal’s confirmation. A greater profit taking indication is witnessing potential reversal signals at a top of a trend that have moved well above the T line. The further price moves away from the T line, the higher the probabilities the price will come back to test the T line. This scenario works very effectively because it is based upon what normally occurs in human nature.

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    The T line – Enhancing trades set ups.

    The T line is a natural support and resistance level of human nature, identifying a candlestick pattern set up becomes much easier. Patterns, such as the J Hook pattern can be recognized much faster when seeing the price is not able to close below the T line. This allows the candlestick investor to be prepared for the next strong price move of a pattern. If it can be recognized that a profit-taking pullback after a strong uptrend is supporting at the T line, the prospects of a J-Hook pattern set up is highly likely.

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    The bobble pattern provides further credibility that a J Hook pattern is setting up. The first evidence of a bobble pattern is a failure at a visible resistance level, a major moving average. The pullback is then supported by the T line. Further evidence of supporting on the T line is the appearance of indecisive trading days, Doji’s, spinning tops, small hammer signals. This provides visual evidence that a bobble breakout is likely to occur if the price can’t breach below the T line. The appearance of bullish candles after those indecisive signals creates the expectation of prices   coming back up through the initial resistance level, creating a J Hook pattern. The resistance level makes for   a much more defined J Hook pattern. If you took the resistance level off the chart and obvious J Hook pattern is in progress.

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    The probabilities of an uptrend remaining in progress is greatly enhanced as long as the price continues to trade above the T line. When a price is heading toward a resistance level, the probabilities of the uptrend continuing with also the prospects of a breakout through the resistance level. The price continuing above the T line into the resistance level is called a T line crunch.

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    A major benefit of using the T line has a trend indicator is keeping emotions out of a trade. A candlestick buy signal and a close above the T line creates   high probability trades set up. It also provides a trading format for greatly improving profitable trades. One of the major flaws for most investors is having a profit in a trade. The fear factor sets in. The rationale becomes “I better take profits. I don’t want to look stupid by letting a profitable trade turn into a loss.” Utilizing the probabilities of the T line, an investor can make better trade decisions knowing what the trend is doing. Merely taking profits for the sake of taking profits offsets the often-heard advice of cutting your losses short and letting your profits run. The T line becomes a high probability factor for knowing when to continue to hold a trade versus taking profits to early.

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    An investor’s discipline becomes enhanced knowing what the probabilities are when using the T line as a trend support or resistance level. Remember the simple T line rule. Upon seeing a candlestick buy signal and a close above the T line, the uptrend will continue until there is a candlestick sell signal and a close below the T line. The combination is important. There will be candlestick sell signals during an uptrend but they will not be confirming the bears are in control unless there is a sell signal AND a close below the T line. Remember, the caveat to that rule is when prices move too far above the T line and a sell signal occurs, the prospects for taking profits become greater with the expectation the price will move back down to the T line. At that point, and investor can always analyze whether a new bullish pattern, such as a J Hook pattern is forming.

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    The most powerful trading technique is utilizing a combination of candlestick signals in conjunction with the T line. The reason candlestick charts have been around for hundreds of years is because they work. A basic rule of Wall Street is if something doesn’t work for effective trading, it disappears very quickly. The T line has very high probability results. This is something an investor does not have to take for granted. Putting the 8 exponential moving average on your charts  can be back tested very easily. Simple visual analysis will illustrate whether the T line produced effective trend results when scrolling back through charts.

    Once in investor understands the candlestick signals are high probability graphics of changes in investor sentiment and the T line acts as a natural support and resistance level of human nature, they will now have the same perspective of what moves prices as in investor who has been in the markets for 50 years. Where does the smart money buy? They buy at the bottom when everybody else is selling. Where does the smart money take profits? When everybody else is buying exuberantly at the top. Being able to identify candlestick buy signals at the bottom of a trend puts in investor into positions where the probabilities are greatly in their favor that an uptrend is starting, buying with the smart money.  A bullish position can be maintained as long as the trend stays above the T line. When is it time to go short? Witnessing a candlestick sell signal in the overbought condition and a close below the T line. As an investor learns how to utilize the combination of candlestick signals and the T line, trade profitability will be greatly improved and emotional investment decisions will be eliminated. Candlestick signals and patterns are the accumulative knowledge of everybody buying and selling during a specific time frame, the graphic depiction of what is occurring in investor sentiment and the T line is the natural support and resistance level of human nature, the combination is an extremely powerful trading technique.

    About the Author

    Author: Stephen Bigalow

    Company: Candlestick Forum

    Website: CandestickForum.com

    Services Offered: Trading Education, Books, Videos, Webinars, Indicators, Live Trading Room

    Markets Covered: Options, Stocks, Forex, Futures

    Chapter 6

    Profiting Off the Waves of the Market

    Chapter 06

    Silas Peters | Seasonal Swing Trader

    Profiting Off the Waves of the Market

    The strategy I am sharing is called the ‘TPI divergence trading system’. With this trading system you can trade any market … stocks, futures, forex, and even cryptocurrencies.

    It also works on ANY timeframe although the higher timeframes are generally more reliable.  I refer to this ‘system’ as the ‘TPI Divergence System’….and you may ask, “What does ‘TPI’ stand for?”    You’ll soon find out as you read through the guide…. 😊

    This system can be used to make trades that you will hold for several minutes on the lower timeframes (tick, 5m, 10m, etc.) to a day or two with the hourly charts.  It can also be used with longer term charts such as daily, weekly, or monthly to make longer term trades.  

    With this particular system we are going to be using some more complicated (but basic) indicators so we will cover those first.  


    We will be using two different indicators with this trading system and they are both oscillators. We will be using the MACD indicator to determine divergence, and we will be using a stochastic indicator to determine entry points.  

    These indicators can seem complicated to newer traders, so let’s just start with a short discussion about the indicators themselves. By the time you are finished this chapter it should become clear that it isn’t really that complicated at all, it just looks that way.  


    The first indicator we want to look at is the MACD (Moving Average Divergence Convergence). It looks like this:  

    The MACD indicator forms waves relative to the price. What it really does is show the difference between a fast and a slow EMA (exponential moving average). Next to moving averages themselves, MACD is likely one of the most used indicators in trading.  

    By using the MACD we can determine the trends and more importantly we get a solid indicator of when a trend is about to change. Looking at the MACD indicator on a chart with the prices, it looks like this: 

    On the chart with the MACD included, we can see how the indicator follows the trend.  When the price was trending up, so was the MACD. By the same token when the price took a turn, so did the MACD.  

    As the MACD reached the center point, and cross under this is our indication that the trend is likely going to change. In this case it did, it changed from an uptrend to trading sideways in a range for about 2 weeks.  

    There are actually many ways to use this indicator in your trading.  For our purposes we will be using it to find divergence points (which we will cover shortly). 


    The next indicator that we will be using is called Stochastic. This indicator is a momentum indicator that is intended to show when a market is overbought or oversold.  The indicator itself looks like this:  

    There is one main area you want to pay attention too though.  

    Looking at the screenshot to the right, there are two numbers that matter to us. The 80 and the 20 indicate overbought and oversold regions.  

    When the two lines on the indicator are above the 80, it is an indication that the market is overbought. Whenever the lines are below the 20, that is our indication that the  

    market is oversold.  

    As much as this indicator is an oscillator that speaks of current market conditions, it is also a timing indicator. We will be using this one to time the entry points of our trades to ensure we get into the trades when they have the most profit potential.  

    System Overview and Chart Setup  

    With a basic idea of what indicators we will be using, and what we will be using them for, let’s just dive right in. We have a lot of material to cover with this trading system and it all starts with a chart.  

    Chart Setup  

    Load up any chart of your choosing and add the following indicators:  

    1. MACD (12, 26, 9) – This is the standard setting on most charting software.
    2. Stochastic (%K9, %D3, Slowing 3) – This one may require you to change the  setting of the %K.   Most common charting platforms defaults it to %K12. 

    Once you add these indicators to a chart, your chart should look something like this:

    Once you have your charts in order it is time to talk about divergence.  The idea itself isn’t really complicated, but newer traders may find this one intimidating, and I do suggest taking the time to familiarize yourself with the charts and finding divergence points before ever trading with this system.  

    Divergence in a Nutshell  

    As it pertains to trading any market, divergence is a point on the chart where the price makes a new swing high or low and the MACD does not.  This indicates a divergence between price and momentum.  

    For clarity let’s just put it on a chart: 

    In the chart above, although the trend is slow, the market is making new highs.  Looking at the MACD though, there are a couple of small hills, but the indicator is on its way down indicating new lows.  

    What this really tells us is that the trend is running out of steam, and that the currency pair is likely due for a small reversal.  

    To provide example in a downtrend as well, here is what divergence looks like when the market is currently falling in price: 

    For our purposes we need a couple of things to happen when a convergence is showing on a chart for it to be a valid indicator.  

    First the MACD indicator must have two clear lower highs or higher lows.  In other words, the indicator itself will have two hills and a valley in between. To put this in visual form: 

    The screenshot above shows a divergence. The MACD has made two lower highs (it’s opposite of the price), indicated by the black arrows, and it has a valley in between which is shown by the red arrow.  

    This is an example of a valid MACD divergence signal for this trading system. It should be noted that it can have 3 or 4 ‘hills’ and more than one valley and still be valid. The important thing is that it is not just a slope up or down.  

    Some traders do use divergence by itself to trade. However, using it that way tends to give a lot of false signals and you end up with too many losing trades. To compensate we add in the Stochastic which will help us to find our entry points.  

    Entry Signals and Stops  

    With an idea of what divergence is and how to identify it on a chart, we need to cover the rules for entering a trade with this system. The rules for short and long trades are basically the same, but since they look different on the chart, I want to cover them separately. 

    With this system we are trying to catch the trend on the reversal, and we are not actually trading with a trend. Having a clear understanding here is important to staying profitable. So, for both long and short trades, I want to walk through making a trade step by step.  

    Entry Signals for Long Trades  

    Step 1 – Identify the Trend and Look for Divergence:  

    Looking at the chart above we can clearly see that the market has been in a downtrend for a few days now. Looking at the price the trend is still making lower lows which tell us it is still on its way down.  

    Looking below the chart at the MACD we see the opposite occurring. The price is making lower lows, but the MACD is making higher lows. We look close at the MACD to confirm that there is more than one higher low. This is easily confirmed by the fact that there are hills with valleys in between when we look at the indicator itself. 

    Step 2 – Find Your Entry Point:  

    Once we have a possible buy indicator, we need to wait for an entry point. Zooming in on our chart to look closer at the Stochastic indicator we get:  

    Our entry signal comes when all of the following occur:  

    1. The fast stochastic passes below the 20 mark.  

    2. The fast stochastic line passes back up through the 20 mark.  

    3. The current bar/candle on your chart must close and the line must stay above the    20.  This helps us not take a false entry signal. 

    Once all of those three things have happened, we can enter the trade long.   We now have a ‘TPI’ or Turning Point Identifier in the market!

    Step 3 – Enter the Trade:  

    Once you have a clear buy signal and an entry point from the stochastic indicator you simply enter the trade. For a stop set it just back of the last low (add a few ticks, pips, points depending on the market to give it a buffer).  

    If that is too large of a stop, and it can be if we are catching a fast swing in a strong trend, avoid the trade altogether or go to a lower time frame and look for better entry points.  Since we will often be trading against the trend with this system you don’t want to risk large amounts.  

    Once the trade moves in your favor by the same amount as your stop, move your stop to the breakeven point.  

    Entry Signals for Short Trades  

    When entering a short trade our rules are largely the same, just opposite of what we did for the long trade. Walking through it step by step again:  

    Step 1 – Determine the Trend and Find the Divergence: 

    In the chart shown above, the market is in an uptrend. The trend has slowed somewhat compared to what it was before, but it still is making higher highs. At the same time, the MACD is making lower highs.  

    This is our indicator that a possible reversal may occur, and it is time to wait for an entry signal.  

    Step 2 Look for an Entry Signal: 

    For our entry signal we turn to our stochastic indicator. After the divergence has occurred on the chart and MACD, all of the following must occur before we enter a trade:  

    1. Fast stochastic moves above the 80 mark  

    2. Fast stochastic turns to move back below 80.  

    3. The current candle/bar must close and the fast stochastic must stay below 80 while it does.  

    Once all criteria are met, we have a ‘TPI’ or Turning Point Identifier!

    Step 3 Enter the Trade:  

    Once you have a clear sell signal and an entry point from the stochastic indicator you simply enter the trade. For a stop set it just above the last high (add a few ticks, pips, points depending on the market to give it a buffer).  If this stop is too much, ignore the trade altogether or drill down to a lower time frame to find a more favorable entry point.

    Again, once the trade moves in your favor by the same amount as your stop, set your trade to the breakeven point.  

    Exit Rules  

    Once you are in a trade using this system, the exit rule that you use will depend on the market condition you are trading. There are two main times that you will see indicators appear for this system:  

    1. In a trend – If the currency is currently in a strong up trend or down trend you may get a buy or sell signal that will allow you to catch the swing back as the currency retraces.  

    2. On the reversal – When a trend has completely run out of steam and the trend itself is reversing you will often get signals from this system.  

    The exit strategies for each market condition are different. If you are catching the retracement you should shoot to earn double what you originally set your stop at (ie, 2:1 reward to risk).  This is simple to do with a take profit level. 

    In the case of a complete trend reversal, I like to move my stops as the trade moves in my favor. Often you will find that upon reversing a trend will begin to move the other way quite quickly. In this case a trailing stop will work just as well.  

    Trade Example  

    Before we finish off with this trading system, let’s look at an example trade. Here is a trade that I made off the 1 HR British Pound chart, using the TPI method. This one actually came within a few pips of stopping out on me, but it did turn in my favor and ended up being a profitable trade:  

    Looking at the chart above, the market is currently trending up, and it had been for some time. The price is making higher high, but the MACD is making lower lows.  

    Looking at the stochastic below it, I got an entry signal at about the same time the second hill on the MACD had finished forming, giving me a valid TPI sell signal.

    The market actually climbed to within a few ticks of my stop, but then it turned again and started to go in my favor. Once it did turn the trade began to move fairly quickly, and I identified it as a reversal.  

    With this trade I held it for two days and set my stop to the breakeven point. I exited this one manually when a news release caused the market to shoot up for a couple of hours.

    The end result:

    I exited the trade at 1.6124 and earned a total profit of 446 ticks in just two days.   Whether you decide to use MACD, RSI or any other oscillator, I hope you now see the power of the “TPI Divergence Trading System” and how you can use it in your trading!

    About the Author

    Author:  Silas Peters
    Company:  Seasonal Swing Trader
    Website:   SeasonalSwingTrader.com
    Services Offered: Trading/Investing education, trade ideas, courses, indicators, scanners, seasonality software
    Markets Covered: Stocks, ETFs, Commodities, Futures, Forex

    Chapter 7

    How To Beat Inflation Trading The Markets

    Chapter 07

    Melissa Armo | The Stock Swoosh

    How To Beat Inflation Trading The Markets

    A random walk. That is what most people think the stock market is. Just a series of random events with no predictable pattern or link. Just total randomness.

    Well, the fact is that most people are right. Most of the time during the trading day the market is random and has no predictable pattern.

    This is why so many lose. I have traded the market for years, but realized long ago that MOST of the time the market is random, and people try to make too much out of insignificant patterns that give little odds of success. However, success comes from those few times where there is NOT randomness, when there IS a predictable pattern. When you find these times, it is when you have an edge. Making money trading is all about the strategy you ae using to make your pick.  

    To me, there is one very important time when you have a predictable and precise time to trade – a time when you have an edge, when equities give reliable patterns. It comes from what we call ‘shock value’. Shock value can happen first thing in the morning in the U.S. equities market.

    Because the stock market closes at 4:00pm EST and opens at 9:30am EST, there is a period where trades cannot take place. Yet events still occur. News still happens, stocks are still upgraded and downgraded, companies are still sued, and companies release earnings. As a matter of fact, companies intentionally release earnings when the market is closed. 99% of earnings are released during non-market hours. Any one of these events can cause tremendous demand to buy or sell a stock, yet it cannot be done. The market is closed.

    Yes, there is post- and pre-market trading. But even if you include that, there is still a long period of time when there is no trading. And the post- and pre-market trading is not always reliable. It is generally light volume, and some participants are not able or willing to participate. Either way, the tremendous pent-up demand causes a void in the price chart. This means at open, traders and investors can be instantly rewarded, or punished. This creates four groups of traders/investors. There are those that have to buy, those that have to sell, those that want to buy, and those that want to sell.

    This can lead to big swings in these equities at or near the open. Let’s be clear about something. We’re not talking about predicting the actual gap. In all my years, I have to tell you, it is not possible to predict the actual gap. That is nothing more than gambling. No research, no indicators, nothing but actual inside information can help you predict the gap. We are talking about how to play the stock once it gaps, regardless of whether you knew it was going gap. Here are a couple of examples.

    In this daily chart above FB gapped down (on 10/4/21) and after the gap down, it fell all day. FB was a short and sold off. You could have traded this initially at the open as an equity trade, or bought a put. Notice that the stock had been falling prior to this gap down for the last two weeks off the previous highs. The stock gapped down in the pre-market on 10/4 and continued lower since its previous high at $384.33 on 9/1/21. Close on 10/4 after the gap down was $326.23. That’s a 15% move lower since the highs in a month. Note if you had shorted the stock even earlier back in September you would have gotten a much larger move as a swing trade or longer term put. The thing I love about trading stocks and gaps is that you can trade them in multiple ways- you can day trade gaps, do swing trades, or options. FB had multiple plays since 9/1. The momentum was to the down-side, however you can trade gaps doing longs and shorts. In this chart however FB was a short. However, you can trade gaps in both directions. While ‘fear’ can drive prices lower at a faster rate, the proper bullish gaps can have the same effect. Fear creates selling and you saw that in FB in the last month. Below is a one minute chart of FB on 10/4 showing how fast the stock dropped right into the open.

    Below is one minute chart of the QQQ. This chart is from 10/4/21 when the market gapped down and sold off quick. Many days the market etfs gap. They can gap up or gap down, however they usually have huge volume and can have large momentum moves. The QQQ have been in a very strong uptrend for most of 2021. However, on this day on 10/4 the QQQ fell hard and fast and you could have shorted it as an equity trade or bought a put. The majority of the move happened at the open. Again if you look at the whole move on the day an early entry would have provided you with a big risk to reward trade.

    Below is a daily chart of the QQQ showing you the sell off on 10/4/21. This was a very steep drop off since the previous QQQ highs. We had a previous high in the QQQ on 9/7/21 of $382.78. The open on 10/4 gap down was $358.52. And we closed then on 10/4 at $352.62. This means in one more we dropped 6% from the highs. 

    This is not a rare event. There are usually multiple gaps in any daily chart in any given week or month. Gaps happen in stocks all the time. You just have to know which direction to play the gap for profit. Very often earnings announcements create an event that can cause additional gaps, this occurrence is usually more frequent during the time known as “earnings season,” which happens for about four weeks every three months. The fall earning season for 2021 begins the second week of October and will be a fruitful and busy time to trade.

    Remember, big funds always have rules, and they often require that the fund cannot hold a position that goes a certain amount against them. This means big money is often forced to exit whether they want to or not. This often causes a snowball effect as the decline in price causes so much pain for other traders, that they sell, which creates more of a drop, which causes more pain and other traders to sell, etc. Take a look at the power of the recent QQQ daily chart below. Much of this sell off was data and news driven in the overall market. We are in a period of high inflation, and supply chain problems with no end in sight.

    Why are gaps so meaningful? Because they have power. The power of big money. And if you know what you are doing, it can be one of the most profitable and predictable moves. These charts you are seeing are all the subject matter of plays that were discussed or traded on the morning that these gaps occurred in the Stock Swoosh Live Trading Room. These set ups happen often in stocks and the market. They can also happen in a relatively short period of time. It is very common for a lot of that movement to happen first thing in the morning. 

    See another daily chart above showing a gap down on 9/28/21 in ADBE. That one move in one single day was over $18.00. It was a short. The stock has continued to fall since that very bearish sell off. It produced another big red bar. 

    Above is a one minute chart of ADBE from 9/28/21. It fell fast out of the open and fell all day. If you got in early and stay in it all day you had a huge play. The stock opened on 9/28/21 at $596.31 and closed at $578.77.  

    The stock was in a power trend move down all day. It had shorts and sellers. If you look at the size of the bar you can tell there were little to no buyers. This was very predictable if you look at the daily chart. Looking at the chart, it was clear there were many with short positions. Add to that those mistakenly thinking that this is a buying opportunity, and you get a morning bounce. But buying soon runs out. And those that bought because they were bullish are soon proved wrong and they add fuel to the fire by having to exit and add more pressure to the selling. Look at the pure powerful selling going down into the close.

    Knowledge of the gap and understanding the daily chart is key. Having the proper knowledge can help you make money. Without knowledge you will be lost, so you need it to trade and be successful.

    Knowing and understanding what is happening this is very playable. Early fast plays are possible when you find good gaps. Especially when you are shorting selling can come in quick. Panic selling is very powerful. It creates momentum and that means opportunity for you as a trader. 


    Panic selling is when people get scared and sell and this usually occurs fast. Selling always happens faster than buying. You rarely see panic buying. Panic selling is the norm. In times like this when we have had a big drop just like the last week of September, and now we are down again to begin October- this is what I call the beginning of panic selling.  With inflation on the rise the debt ceiling deadline looming, and so many unknowns with COVID going into the holiday season the market is not likely to let up for the short term and more panic selling could continue and force the market lower.   

    Short plays in gaps are possible and can set up very quick. Again because of the fear and panic of people, news, economic data. Sometimes the selling happens at the open, sometimes it is later in the morning after the stock grinds back in the morning, but then sells off for the rest of the day.  Many of these early entries at the open provide traders with are high odds with great risk to reward.

    Putting all of this together, trading morning gaps is not hard, but it is very counter intuitive for many new, or even somewhat experienced traders. Very simply stated, trading the proper, quality morning gaps is one of the few times you truly have an edge and can get high return on investment wins. If you are sick of hit or miss concepts, ask yourself what ‘edge’ do you currently have in your current trading strategies. Trading professional gaps has you trading on the side of big money. This means big moves. This means fast moves. This means that once you know the entries, stop outs are fewer than with most trading strategies. Many people trade for pennies and barely cover their losses with their wins because the wins are so small. Again- early entries at the open can set up to provide trades with all day power trend moves with big risk to reward. 


    A lot is weighing on this market. The debt ceiling deadline was pushed back to 10/18 and that hasn’t been resolved yet.

    We have a HUGE number of people still unemployed. That will be a problem going into the holiday season for supplies and goods getting timely delivery and production. Any data numbers that miss will wreak havoc on a market that is starting the fall period bearish.

    And the most important numbers are always the unemployment number. Unfortunately, the numbers are still too high. If we crash it could be due to bad data, or a failed debt ceiling negotiation in time, or more issues with COVID variants. The first full week of October was filled with selling to start the month.


    Look at your time horizon for your investments. The market always recovers. It is typically in an uptrend the majority of the time. However, if you are nearing retirement age or at retirement age you may want to consider selling some of your positions in case we fall further.


    OPPORTUNITY. You will have loads of opportunity to earn money trading if you know how to go both short and long and capitalize on the volatility in this current market climate. However, you have to utilize a strategy that will allow you to capture the big moves as fast as you can trading the best pick. My strategy teaches you how to find, pick, and play these big moves.  

    Thank you for reading this article. If you are serious about trading then feel free to reach out to us. I teach and trade only one method on gaps which I alone created. My method sets up fast and the trades move with momentum quickly, so you can trade and get on with your day. I only trade the first half hour of the market day. It is easy to follow my trades as I call them live while I'm taking them and only trade one stock at a time, and usually one stock only per day. There is no chitter-chatter in the room, it is just trading and teaching. If you want to make money and are focused on doing so then The Stock Swoosh can help teach you how. At the Stock Swoosh we have one focus during one time frame in order capitalize on trading the first 30 minutes of each day with a focus on shorting stocks that meet certain criteria.

    About the Author

    Author: Melissa Armo, Founder

    Company: The Stock Swoosh

    Website: TheStockSwoosh.com

    Services Offered: Trading Rooms, Trading Courses, Newsletters

    Markets Covered: Stocks, Options

    Chapter 8

    Weird Ghost Trade That Generates Big Returns

    Chapter 08

    Steven Brooks | Stony Brook Securities

    Weird Ghost Trade That Generates Big Returns

    I recently surveyed all my students and asked them the following question: 

    “What is your number one trading problem?”

    A person with his hands up

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    The responses came back in all different shapes and sizes, but the top two
    responses by far were:

    1. How do I identify or find top trades and what are the key indicators and factors that go into these trades?
    2. How do I know when to enter or exit a trade?

    As a result, I have decided to share my trade entry checklist and will focus on the following three things I do every day:

    1. Finding solid trades on a regular basis
    2. How to identify a trade entry point
    3. Knowing when to exit a trade and how

    Maybe you have similar struggles with your trading and would like nothing
    more than a solution to these very coming problems that traders face on a
    daily basis.

    Well, ask and you shall receive!

    Below is a simple trade to follow if you are starting out trading or would like to simplify the process of entering and exiting at the right time. While there are hundreds of different types of trades that traders can make, here is a checklist for entering and exiting one of my top trades with precision.

    The following checklist, entry, and exit strategy is based on a study that we ran in a randomized sampling of 50 stocks out of the top 250 stocks based on volume.





    Here are the entry criteria:

    • Make sure the stock does not have earnings in the next 2 days and did not have earnings in the past 2 days
    • Is the stock’s 14-day RSI is less than 25
    • Is the stock is down for the day

    Here is the trade:

    • Sell an ‘at the money put’ in the monthly expiration closest to 45 days

    Here is the exit:

    • Buy it back when it reaches 50% of the amount you sold it for
    • Or … if your profit target is not hit, exit the day before the option expires

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    Now, if you do not want to sell puts, or do not have the capital to be able to sell these
    puts, you can simply sell an ‘at the money put’, or can sell the ‘at the money put spread’.  

    So, for this defined risk trade, here is the entry criteria:

    Checklist, Goals, Box, Notebook, Pen, People, Man, Hand
    • Make sure the stock does not have earnings in the next 2 days or did not have earnings in the past 2 days
    • Is the stocks 14-day RSI less than 25
    • Is the stock down for the day

    Here is the trade:

    • Sell a ‘50/40 delta put spread’ in the monthly expiration closest to 45 Days

    Here is the exit:

    • Buy it back when it reaches 50% of the amount you sold it for
    • Or … - If your profit target is not hit, exit the day before the options expire

    Here are the results:


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    About the Author

    Author:  Steven Brooks
    Company:  Stony Brook Securities
    Websites: stevenbrooks.co
    Services Offered:  Trading Education, Automation Tools, Trade Alerts
    Markets Covered: Stocks, Options, ETFs

    Chapter 9

    A Very Consistent Strategy For Today’s Markets

    Chapter 09

    Steven Primo | Pro Trader Strategies

    A Very Consistent Strategy For Today's Markets

    What if I told you that all that was needed to increase your trading consistency during volatile markets was to simply change the settings of a very common indicator? And what if I said you could begin applying this method as early as today? Join Steven Primo, 42-year trading veteran and former Stock Exchange Specialist as he presents "Leveraging Volatility - Best Best Strategy For Today's Markets."

    This is Steven's premier continuation strategy that can be applied to any market and time frame. In this presentation Steven will not only reveal the entry rules to this method but also show you recent examples of this strategy in action. Whether you are a skilled investor or new to trading, you can't afford to miss this educational presentation.

    About the Author

    Author: Steven Primo, Founder

    Company: Pro Trader Strategies, Specialist Trading

    Websites:  ProTraderStrategies.com, SpecialistTrading.com

    Services Offered: Trading Courses, Trade Signals, Member’s Section, Videos

    Markets Covered: Stocks, Emini Trading, Forex, Day Trading, Swing Trading

    Chapter 10

    Profiting From This New Market Opportunity

    Chapter 10

    Serge Berger | The Steady Trader

    Profiting From This New Market Opportunity

    US equity markets for the past 12 years have largely traded higher almost every year and volatility has been crushed. Chances are high that the next 5-10 years for equity investors will look notably less rosy than the past 10 years. In fact, history shows when you buy a stock market with a valuation of 25 forward P/E, the stock market returns over the next 5-10 years are low single digits. 

    Simply put, expect at least somewhat more volatility over the coming years that what we have seen over the past decade. With higher volatility also comes a perfect environment for the so called 'mean-reversion trade.'

    About the Author

    Author: Serge Berger, Head Trader and Investment Strategist
    Company: The Steady Trader
    Website: TheSteadyTrader.com
    Services Offered: Trading Education, Trade Alerts, Trading Workshops
    Markets Covered: Stocks, Options, Futures

    Chapter 11

    Climax Analysis Identifies Market Pivot Points

    Chapter 11

    Erin Swenlin | Decision Point

    Climax Analysis Identifies Market Pivot Points

    Participation and the Golden/Silver Cross Indexes (Erin Swenlin, Decision Point)

    A concept that is often overlooked is “Participation”. What does participation mean? It is a measure of how many stocks are currently participating in a particular market move. Additionally, we talk about “Breadth”. Common measurements of breadth are New Highs/New Lows, Advances minus Declines and Volume.

    By combining participation and breadth we are able to visualize the internal strength or internal weakness of a move.

    Let’s start by looking at our favorite participation measure, %Stocks greater than their 20-EMAs, 50-EMAs and 200-EMAs. If we want a bull market to continue, we need to have ample participation. We can also measure oversold and overbought conditions and right now although participation is lagging, it is also oversold right now.

    Below is the chart that identifies participation in the short, intermediate and long terms. Obviously the %Stocks > 20-EMA is the short-term timeframe, the %Stocks > 50-EMA is the intermediate-term timeframe and %Stocks > 200-EMA gives us the health of the market in the long term.


    This is a long-term view of participation. We have annotated red dotted vertical lines at “cardinal tops”, basically tops that arrive after an established rising trend. Notice how prescient the negative divergences are before these cardinal tops. 

    Participation readings are mostly oversold with the exception of %Stocks > 200-EMA. This is function of the strong bull market move out of the bear market lows. Price on most stocks was pushed well past the 200-EMA (similar to the SPY). It will take a longer-term decline to clear those overbought conditions.

    We do see rising bottoms on %Stocks > 20-EMA. This sets up a short-term positive divergence and suggests the selling may subside soon.

    Now let’s talk about the Golden Cross and Silver Cross Indexes (GCI & SCI) which were created by Carl Swenlin at DecisionPoint.com so we believe they are pretty good. This is also a measure of participation. 

    Most people have heard of the Golden Cross, which is when the 50-day moving average crosses up through the 200-day moving average. The Golden Cross implies a very positive long-term outlook for the stock or market index. We have always viewed the upside crossover of the 20EMA versus the 50EMA, a Silver Cross, as a positive omen for the intermediate-term, and so we developed the SCI, which expresses the percentage of stocks in the SPX that have a Silver Cross.

    The chart below shows the SCI along with its sister, the Golden Cross Index (GCI), which is the same as the SCI except it tracks the percentage of upside 50/200EMA crossovers in the SPX. But back to the SCI, which gives us a more accurate, more enduring assessment of market breadth, and it is a superior breadth indicator. When the 20EMA is above the 50EMA, it tells us that the stock has been persistently bullish over an extended period. When the SCI drops, we know with certainty that negative 20/50EMA crossovers are taking place, and that participation is fading. The result is that any market advance is being undermined. We can see exactly this right before the top at the last all-time highs for the SPY.


    These indicators are very powerful and we’ve found them to be extraordinarily useful in determining possible reversals and the strength of particular market trends. 

    We decided that these indicators were so powerful that it was important to create these indexes for most of the common broad market indexes. 

    Right now, small- and mid-cap stocks are showing relative strength when compared to the SPY. Notice that the readings for the SCI for both the SP400 and SP600 in the chart below are rising; whereas, the SCI is falling for the SPX. Additionally, there are positive divergences leading into the current decline:


    Small and Mid-caps are clearly outperforming the SPY and are likely holding the market up to some degree. Reviewing the same chart for the Golden Cross Index, we see that in the long-term, the SPX has a positive divergence shaping up. Unfortunately, long-term strength has yet to be detected on the SP600 and SP400. In fact, the GCI for both shows tops below the signal line. This tells us that while we they are bullish in the short term, there are still serious problems in the long term.


    Bullish and Bearish Bias Assessment

    We’ve found that the SCI when compared to the %Stocks > 20/50-EMAs affords us the opportunity to learn the current bias of an index. It occurred to us that one of the ways we can measure market bias is to compare the SCI to the percent of stocks above their 20/50-EMAs. When the percentages are lower than the SCI, the market bias is bearish and if they are higher, it is bullish. Any "mechanical" signal requires additional analysis to confirm the numbers, but this gives us an excellent starting point on evaluating the bias of a particular index.

    Currently there is a bearish bias on the SPY given the SCI reading is higher than participation of stocks > 20/50-EMAs. Why is this bearish? The beauty of EMAs is that when price is higher than EMA, it rises to meet price. When price is lower than an EMA is turns lower. The only way the SCI can see improvement is when more stocks have a 20-EMA > 50-EMA. Price must be above both EMAs to generate a “silver cross” of the 20/50-EMAs. 


    Let’s consider the bias of the SP600 and SP400. Notice in both cases, the SCI reading is lower than the participation readings for the %Stocks > 20/50-EMAs. The SCI has the ability to improve and thus we have a bullish bias.

    Algorithmic Curated Swing Trading

    Michael Nauss, Trade-Ideas.com


    At DecisionPoint.com we have SCI/GCI and participation charts for every sector and most broad market indexes. Here is a look at the Nasdaq Composite’s bias chart:


    There is a no bias visible. Readings are very similar… participation readings aren’t low enough to damage the SCI, but they are also not high enough to improve it. 

    Here is the Energy Sector ETF (XLE):


    100% of stocks in the Energy sector have their price above both the 20/50-EMAs. The SCI is at 90%, but that will continue to rise if stocks continue to hold above both the 20/50-EMAs. While these readings are overbought, we can see that they can remain overbought for weeks (example: November 2020 to June 2021).

    Conclusion: Participation is an important measure of the strength of rising and falling trends. Divergences can give us insight into possible market pivot points. The Golden Cross Index (GCI) and Silver Cross Index (SCI) are part of the DecisionPoint.com suite of indicators that are available to all of our subscribers. Contact support@decisionpoint.com to learn more.

    About the Author

    Author: Erin Swenlin

    Company: DecisionPoint

    Website: DecisionPoint.com

    Services Offered: Trading Education, Software, Trade Alerts

    Markets Covered: Stocks, Options, Futures, Forex

    Chapter 12

    Explosive Traffic Pattern for Trading Options

    Chapter 12

    Mark Helweg | 3X Options

    Explosive Traffic Pattern for Trading Options

    Markets often move in cycles across all timeframes, and swing trading is a strategy designed to profit from both up-cycle swings and down cycle swings. The concept is really very simple. Price cycles comprise four price actions:

    • Top 
    • Down Swing 
    • Bottom 
    • Up Swing  

    You can see in the image below, a cycle top, down swing, cycle bottom, and an upswing.  Trading these cycle swings is known as Swing Trading. Swing trading involves doing one of two types of trading. Buying up swings in markets to profit from forecasted up cycle swings. Or, selling short down swings in markets to profit from forecasted down cycle swings.  


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    The image above shows an example of price cycles. Swing trading can be a highly profitable way to trade the markets. Swing trading is popular because of the frequency of swing trading opportunities in all markets and across all timeframes. Traders can trade intraday price swings, daily price swings, or even weekly or monthly price swings.

    Trading Cycles

    It’s a documented phenomenon that prices in stocks, futures, and forex markets tend to move in cycle patterns (cycles). There can be many reasons for these cycles, including institutional trading behavior, consumer behavior, earnings reports, as well as many other factors. I believe that price cycles are a result of market participants searching for fair value for all timeframes. Understanding the cause of price cycles isn’t as important, however, as recognizing when a stock is experiencing cyclical price behavior. And in my experience, most of these price cycles are fairly easy to recognize in any market. 

    The image below shows us an example of a cycle upswing. Our goal as traders, is to try to buy as early after the cycle low as possible and exit as close to the cycle top as possible. Realistically, we will never enter at the exact cycle bottom or exit at the exact cycle top, but we typically should be able to capture 50% to 70% of an upswing or down swing in a market. The highlighted box in the image below shows the duration of the cycle upswing.


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    Trading down cycles is simply the opposite of trading up cycles. When trading down cycles, our goal is to enter our sell short trade order as close to the cycle top (where the down swing begins) as possible and to exit our short trade as close to the cycle bottom as  we can (where the down swing ends). See the image below that displays a down swing example. The highlighted box in the image below shows the duration of the cycle down swing.


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    When you view the images above of an upswing and a down swing in a market, I want you to clearly understand that every price swing has what I call a Shelf Life. The shelf life of a price swing is defined by how far a swing travels, or the distance between the cycle top and the cycle bottom, and defined by how long it lasts, usually stated in terms of price bars. When understanding shelf life for any cycle swing, it is important to understand how this will always correlate to the bar interval you are looking at (like 5 min, 60 min, daily, weekly price bars). As with any chart pattern, we don’t want to overstay our welcome and continue trading a chart pattern after the predictive power of the pattern has ended. Doing this would be trading against the odds instead of trading with the odds. 

    Identifying Cycles 

    In order to define and track price cycles, we need two things. We need a price chart of a market, and we need an indicator that effectively models price cycles. For this, I use a proprietary indicator from TopTradeTools.com called the TOP Cycle indicator. You can see it displayed as the blue cycle line in the subgraph of the chart below. The price chart below shows an example of an upswing in Amazon stock on a 120-minute chart.

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    Notice the 120-minute price bars at the top of the chart and the cycle indicator at the bottom of the chart. My preferred cycle indicator is the custom indicator (shown in the chart above) I like to use called the TOP Cycle indicator, as I stated above. Notice in this Amazon upswing example, if we traded 100 shares of AMZN, we would have the potential to make $6,500 on a buy or long trade. 

    Now, as I stated before, we will never expect to capture this entire swing trading profit potential. Our goal is to capture 50% to 70% of this price swing trade potential, which still represents fairly strong profits. Notice in the Amazon chart above that the price cycles were not as clearly defined in the first third of the chart. This was partly since prices were not very active as they seemed to trade in a narrow range. But once they broke out and traded higher to the upside, you can see that the price cycles became much more clearly defined and easier to identify. 

    The next chart below shows an example of a down cycle swing, also on an Amazon 120- minute bar chart. In this example, assuming that we are trading a round lot of 100 shares, the down cycle swing represented potential profits of $15,000. I think we can all agree that even if we only caught 50% of this down swing, this was a great trading opportunity.


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    One other note about trading price swings; profitable swing trades can happen even when the markets are in an overall “sideways” period. Notice in the AMZN chart above that the net move from the beginning of the chart to the end of the chart was very little.  Amazon began trading around 1,900 in the beginning of the chart and ended trading around 1,880. So, the longer-term net opportunity price move over the span of the chart was not significant. However, some of the price swings within this period, including our example down swing in the chart above, represented good profit opportunities. 

    Cycle swing patterns occur in all asset classes. You can find tradable swing patterns in stocks, options, futures, and forex markets. Price cycle swings can also be traded across all timeframes. You can trade price cycle swings on 5-minute charts for extremely short-term trades, 60-minute and 120-minute for standard short-term trades, daily charts for intermediate timeframe trades, and you can also trade cycle swings on weekly and monthly charts for long-term trades. Swing trading price cycles can be done on any timeframe, including on tick charts, giving traders a lot of strong trading opportunities in the markets.

    Remember, the cycle swing pattern is the opportunity, not the trading strategy. Think in terms of the difference between the fish finder and the fishing pole. The fish finder, like the cycle swing trading patterns, defines the opportunity. Once you identify the opportunity, you’ll need a trading strategy (like the fishing pole) to capitalize on it or profit from it.  

    Two of My Favorite Swing Trading Patterns

    Now for the good stuff. I think most traders understand the basics behind swing trading price cycles. However, the question that traders often ask me is, which cycle swings should I trade? Are some cycle swings better trading opportunities than other cycle swings? That answer in my experience is an overwhelming YES! Certain cycle swings represent much better profit opportunities.

    As you put the time in to study market cycles, you will learn that cycles can offer powerful clues about the dominant force in a market - between the buyers and the sellers.  When buyers and sellers are equally matched in a market, price swings will tend to cross the “0” line as they develop in a symmetrical way like in the image below.

    Chart, line chart

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    However, as one side of the market becomes stronger, i.e., buyers are stronger than sellers or sellers are stronger than buyers, the cycle pattern will change to reflect this. Learning to recognize and read these imbalances between buyers and the sellers as reflected by the cycle indicator can tell us which force is dominant in a given market, which can give us a huge edge. Our goal as traders is to join the dominant side; to buy when buyers are stronger or sell short when sellers are stronger. Once you know how to recognize these special cycle swing patterns in the markets, you will potentially put the odds in your favor.  

    Special note about selling short: of the 2 patterns I’m going to show you, 1 of them require “selling short” to take advantage of down cycle swing with falling prices. For those of you not familiar with the concept of selling short, it’s basically just the opposite of buying a market and profiting when prices go higher. When you sell short, you enter a market by placing a sell short order first, then after prices hopefully fall, you then buy the market to exit your short position. To calculate your profit, you take your short entry price level and subtract your buy exit order price level. In this scenario, if prices continue to rise after you enter a sell short order, you will lose money; you are betting on the price to go down. Make sure you do some research and fully understand this concept before jumping into a short trade. Also, don’t forget that you can also buy Put Options to profit from falling prices.

    Bullish Zero Touch Strategy

    This cycle swing pattern is what I call the Bullish Zero Touch swing. Look at the 120-minute price chart of Apple below.

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    The Bullish Zero Touch is defined as follows: 

    1. Strong Positive Cycle Top 
    2. Following Cycle Low at Zero Axis 

    Condition 1: We first need evidence of strong buying, and this comes in the form of a strong up cycle into a positive cycle top on the cycle indicator plot. See the AAPL price chart above. 

    Condition 2: Then we observe a weak selling response which results in the following cycle low coming in at the red zero line in the cycle indicator plot. See the AAPL price chart above. 

    Strategy: After the Bullish Zero Touch pattern has been confirmed, buy the following upswing in the shaded blue box on the Apple chart above.  

    Remember, when the buyers and the sellers are equally matched, the cycle low should develop in negative territory (below the zero axis) and the cycles should be symmetrical around the zero axis.  

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    But when buyers are strong and sellers are weaker, we get a strong positive cycle top and then we get a cycle low that comes in right around the zero line (red line). 

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    Again, the Bullish Zero Touch swing pattern indicates that the buyers are stronger than the sellers, and our goal is to trade and profit from the following cycle up swing after the cycle low is in place at the zero line. In my experience, the upswing after the Bullish Zero Touch pattern is often a powerful up move that can be very profitable to trade.

    Below you can see two Bullish Zero Touch patterns unfold in a daily chart of Netflix.  Notice that before each Bullish Zero Touch, the price pattern showed strong cycle tops (strong buyers) preceding the cycle lows that came in right around the red zero axis (weak selling response). This indicated that buyers were strong, and the sellers’ response was unable to send the cycle indicator low into negative territory below the zero line, meaning there was potential for a powerful follow-on upswing.  

    Bullish Zero Touch Strategy

    This price swing pattern is what I call the Bearish Zero Touch swing. This is basically the opposite of the Bullish Zero Touch. Take a look at the daily price chart of Amazon below.

    Chart, histogram

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    The Bearish Zero Touch is defined as follows: 

    1. Strong Negative Cycle Low  
    2. Following Cycle High at Zero Axis  

    Condition 1: We first need evidence of strong selling, and this comes in the form of a strong down cycle into a negative low on the cycle indicator plot. See the AMZN price chart above. 

    Condition 2: Then we observe a weak buying response which results in the following cycle top coming in at the red zero line in the cycle indicator plot. See the AMZN price chart above. 

    Strategy: After the Bearish Zero Touch pattern has been confirmed, sell short the following down swing in the shaded blue box on the AMZN chart above.  

    In the GLD daily chart below, you can see an excellent example of a Bearish Zero Touch pattern. Notice how the first requirement, having a strong negative cycle low is met when GLD experiences strong selling. Then, as a weak buying response comes into the market, the following cycle top develops right around the zero axis. Now, the cycle high is not exactly positioned at the red zero axis, but it’s close enough for us to sell short the following down cycle for a nice potential profit.

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    Always remember the concept of shelf life. In the chart above, the blue box highlight shades the down cycle swing segment that we are aiming to profit from. Once the down swing has run its course and the following cycle low is in place, our opportunity has expired, which means that we don’t want to continuing selling short, or we would be trading against the cycle.


    There are many swing trading patterns and all are the same. In my experience, some cycle price swings are much better than others. The goal is to put the odds in our favor by buying when buyers are in control and selling when sellers are dominant. The cycle swing patterns I have presented in this article represent just 2 of the 6 patterns I like to track and trade. Take the time to begin studying your charts and learn these special swing patterns! It will be well worth it!

    About the Author

    Author: Mark Helweg

    Company: 3X Options

    Websites: http://www.3xoptions.com/

    Services Offered: Trading Education, Software, Trade Alerts

    Markets Covered: Stocks, Options, Futures, Forex

    Chapter 13

    How to Fix Losing Options Trades

    Chapter 13

    Jeff Tompkins | Altos Trading

    How to Fix Losing Options Trades

    Options Income Strategy #1: Writing Puts


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    We will be selling Put options (STO), not buying them, because it gives us a much higher probability trade.

    When you sell or write Put option contracts it allows you to profit from three outcomes, not just one. When you write a Put option contract, you profit if the stock rises, stays stagnant, or even moves down slightly.

    However, if you buy a Call option the stock has to move quickly and significantly to overcome time decay in order to profit. If it does not, you risk losing your entire investment.

    Both are bullish positions, but Put selling has a much higher probability for success. High probability allows for consistency. And consistency is truly the “holy grail” of trading.

    A naked Put write, or short Put, is when you Sell-to- Open Put options without first being short in the underlying stock.

    When the stock rises, the put options that you sold expire out of the money, allowing you to keep the entire premium you collected when you sold them.


    ABC stock is trading at $100 per share. You decide to sell-to-open (STO) 10 of the 95-strike contracts for $2.5/contract that expire in 30 days. Since each contract controls 100 shares of stock, you receive an immediate deposit of $2,500 into your brokerage account. As long as ABC stock closes above $95 (the strike price) at expiration, you keep the entire $2,500 premium you received when you initiated the trade.

    One would sell Puts on a stock when they expect a rise in the price of the shares, but still want the ability to make a profit if the underlying stock stays stagnant or even declines.

    When you Sell-to-Open a put, you are essentially playing the role of the “casino” where you are selling put options to “gamblers” who are betting on the price of the underlying stock going down. If they’re wrong and the stock rises, you keep the money they paid you for the put options if the put options expires Out-Of-The-Money (OTM). If the gambler, or option buyer, is correct and the stock falls, you could potentially suffer a loss. That is how Put selling works in a nutshell.

    There’s a huge added benefit to selling Puts, and that is the ability to profit even if the underlying stock stays stagnant or moves against you. This is due to what is known as Time Decay.

    Time Decay

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    The ratio of the change in an option's price to the decrease in time to expiration. Since options are wasting assets, their value declines over time. 

    As an option approaches its expiration date without being in the money, its time value declines because the probability of that option being profitable is reduced.

    The more the value of the options you sold decay, the more you profit from the sale. By writing a put option, you’re not only making money if the underlying stock rises due to delta effect, but you’re also putting Time Decay, which is the biggest threat to buyers of stock options, in your favor.

    Writing a put option is never really "Naked" or "Uncovered" because you need to have an amount of cash, known as a Margin, on deposit with your broker before you can initiate a trade. 

    Furthermore, since you’re obligated to buy the underlying stock at the strike price of the put options sold, some option trading brokers require option traders to have that corresponding amount of money before they are allowed to sell a put option. 

    This is known as a Cash Secured Put.


    Delta is the amount an option price is expected to move based on a $1 change in the underlying stock. Calls have positive delta, between 0 and 1. That means if the stock price goes up and no other pricing variables change, the price for the call will go up. 


    If a call has a delta of .50 and the stock goes up $1, in theory, the price of the call will go up about $.50. If the stock goes down $1, in theory, the price of the call will go down about $.50.

    Puts have a negative delta, between 0 and -1. That means if the stock goes up and no other pricing variables change, the price of the option will go down. 

    For example, if a put has a delta of -.50 and the stock goes up $1, in theory, the price of the put will go down $.50. If the stock goes down $1, in theory, the price of the put will go up $.50.  

    How to Choose the Best Put Options to Sell

    Use Delta or ‘Probability Out-of-the-Money’ statistics. Choose options with expiration dates 30-60 days out.

    Support/Resistance levels – Sell Put options with Strike prices below key support levels

    Trade with the trend – Sell Put options on quality stocks in a strong uptrend or bouncing off a key support level. 

    Implied Volatility (IV) – Focus on selling Put options when IV is relatively high.

    Advantages of Selling Put Options

    A strategy which results in a credit, or deposit, into your account upon initiating the trade. Unlike other more complex option strategies, it’s a simple strategy which requires no difficult

    calculations to execute.

    Commissions tend to be lower due to the nature of the trade. If the trade expires out-of-the-money (OTM), you pay nothing to close the trade.

    It allows you to profit even if the underlying stock stays completely stagnant.

    Unlike a long Call option, writing Put options offers you a margin of error if the underlying stock falls instead of rises.

    It’s a versatile option strategy which can be transformed into other option strategies prior to

    expiration, in order to accommodate changing market conditions or outlook.

    What to do When Things Go Wrong

    Imagine you’ve sold 10 Put option contracts on ABC stock, but then the stock immediately begins to go down in price. 

    Rather than closing the position and taking a loss, you’re able to repair the position and prevent further damage. You’re even able to turn the trade into a profitable one. 

    There’s a way to do this and it’s called Delta Neutral hedging. This is a technique which will create a position that will not only help halt further directional losses, but also allows the overall position to start making a profit. This is the first trade adjustment we make when a trade moves against us.

    Trade Adjustments

    There are two methods explained below that can be used to repair losing positions.

    Delta Neutral Hedging (DNH)

    Delta neutral hedging is a very useful and powerful method to repair losing positions. 

    In order to transform a naked put write into a delta neutral position, all you need to do is buy (buy-to open) enough at the money or near the money put options in order to completely (or as completely as possible) offset the positive delta of your existing short put options.

    If the stock continues to fall, you can profit on the Put options that you purchased by executing this adjustment. 

    This will offset losses on the ones that you sold if the stock continues to move lower. I typically do this if my short Puts move in-the money.


    Let’s say we make a Delta Neutral trade adjustment to a losing trade, and it still isn’t profitable by the time the options are set to expire. 

    In this case, we would execute our next trade adjustment method.

    What is Rolling?

    Rolling involves closing out our initial trade (the short Puts) and opening a new trade at a further out expiration. Ideally, we want to do this for an equal or greater “credit” or deposit into our account. 

    Depending upon where the stock price is, and any profit we made from Delta Neutral Hedging, we may also want to continue to hedge our trade using our first trade adjustment.

    Rolling can buy us more time, and it allows us to recover losses from our initial position should the stock price increase. It’s a very powerful technique, however, it should only be used with high quality stocks. 

    Generally, we roll a position right before expiration if we’ve not yet achieved a profit.

    Options Income Strategy #2: Credit Spreads and Iron Condors

    An Iron Condor Consists of two credit spreads: (both a vertical bull put spread and a vertical bear call spread with the same expiration dates).

    I will teach you the best way to structure the trade

    • The best ticker symbols to trade
    • How to pick the right strike prices
    • How to pick the best expiration dates

    How to determine the correct number of contracts to trade.

    How to fix a losing trade and turn it into a winner!

    There are two problems with credit spreads:

    1. There is an unfavorable risk/reward profile, so that a losing trade can wipe out a series of winners
    1. If you hedge a losing credit spread to prevent further losses, you incur additional costs by having to purchase more option contracts

    The Anatomy of a Credit Spread


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    Source: incomeswitch.com

    Credit Spreads are options positions created by buying cheaper options contracts and simultaneously writing an equal number of more expensive options contracts. 

    A Credit Spread refers to options spreads that you actually receive cash (net credit) when executing them. This credit to your options trading account is why such options spreads are known as "Credit Spreads”

    When you write an option, you’re putting on a short options position. When you buy a cheaper option on the same underlying stock (using the premium received from the sale of the short options position), a Credit Spread is created.

    Why Iron Condors Can Be Your Best Bet


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    Profit from Multiple Outcomes & Benefit from Time Decay.

    You would execute a Bull put spread, if you expect the underlying stock to stay above a certain price (the strike price).

    You would execute a Bear call spread, if you expect the underlying stock to stay below the predetermined strike price.

    To initiate a bull put spread, you would simultaneously sell an out-of-the-money (OTM) put, and then buy an equal number of contracts at a further out-of-the-money (OTM) strike price.

    This trade results in a net credit that is deposited into your brokerage account when you initiate the trade. Why is this? You would collect more premium on the short put than you would have to pay for the long put. 

    To initiate a bear call spread, you simply do the opposite. 

    You would simultaneously sell an out-of-the-money (OTM) call, and buy an equal number of contracts at a further out-of-the-money (OTM) strike price. 

    This trade results in a net credit that is deposited into your brokerage account when you initiate the trade. Why is this? You would collect more premium on the short call than you will have to pay for the long call.

    The Goal

    The goal with this strategy is for the underlying stock to expire above the short strike price (in the case of a bull put spread), or below the short strike price (in the case of a bear call spread) by the time the options expire. 

    Due to the Time Decay, which we previously defined, this will occur most of the time. 

    An Iron Condor is simply the combination of a “bull put spread” and a “bear call spread” on the same underlying equity with the same expiration.

    Margin Requirements

    You need to calculate the required amount of money you need in your brokerage account to execute a trade. 

    This is your margin. 

    The Margin requirement is your maximum loss in the very worst-case scenario.

    How to Calculate Margin Requirements

    Take the difference between your short and long strike prices and subtract the credit you received when you initiated the trade.

    For example.

     Let’s say you simultaneously sold 10 contracts of ABC stock at the 100 strike price for $1, and bought 10 contracts of ABC stock at the 102 strike price for $.50. 

    You would receive a credit, or deposit into your brokerage account of $500 before commissions ($1-$.50) x 1,000. 

    The difference between your strike prices is $2, which equates to $2,000 since we’re trading 10 contracts (each contract controls 100 shares of stock.)

    We subtract our credit of $500 from the difference in strike prices of $2,000 and arrive at our margin requirement of $1,500.

    The Secret to Choosing the Best Strike Price

    To figure out our odds of success before we even place a trade, we use a readily available statistic called the Option Delta. Delta is the amount an option price is expected to move based on a $1 change in the underlying stock

    You can also use Delta to estimate the probability that an option contract will expire out-of-the-money (OTM), which is our main goal when trading Iron Condors.

    To figure out the percentage chance your trade will finish OTM, you simply subtract the Delta of the option contracts you sold from 1. When we set-up an Iron Condor trade, we want to sell options that have at least an 80% chance of expiring out-of-the-money

    The Beauty of the Iron Condor

    It’s impossible to lose both sides of the trade. Brokers do not increase the margin requirements for trading Iron Condors versus trading a single Credit Spread

    Choosing an Underlying Security

    The Index and ETF list I am going to provide to you also have weekly options available, providing plenty of trading opportunities...

    The List:








    Trade Adjustments to Fix Losing Credit Spreads and Iron Condors

    The adjustment requires us to “Roll” the trade. We will roll up if the Bear Call Spread is threatened. We will roll down if the Bull Put spread is threated. 

    We may also roll the trade out in time if there’s little time left till expiration, and the overall position has not reached profitability

    Close (Buy-to-Close) the threated side of your Iron Condor trade if the price of the underlying closes past either of your short strike prices.

    Open a new spread on the threatened side that is further out-of-the-money (80% chance of expiring OTM)

    If the other side of your trade has captured at least 75% of its potential profit, close that side and open a new trade with at least an 80% chance of expiring OTM.


    No need to use charts, indicators or any fundamental analysis.

    Select one of the Indexes or Exchange Traded Funds (ETFs) from the list provided earlier in the course. Follow the steps to select the best strike prices and options expiration dates. 

    If one side of the trade is threatened, adjust the trade using the rolling technique (often this creates even more income)

    Repeat this process with a new ticker symbol each Friday.

    About the Author

    Author: Jeff Tompkins, Founder

    Company: Altos Trading

    Website: AltosTrading.com

    Services Offered: Trading Software, Coaching, Trading Courses, Trade Alerts

    Markets Covered: Stocks, ETFs, Options, Futures, Currencies

    Chapter 14

    Finding Trades in An Exhausted Market

    Chapter 14

    Troy Noonan | Backpack Trader

    Finding Trades in An Exhausted Market

    Back in the late 90’s, during the ‘ramping up’ of the Dot- com Boom, I had the great opportunity of backpacking through Western Europe right when the revolutionary new proliferation of internet café’s began cropping up all over the place. I would land in a particular city and before even checking into my lodgings, I would be logging into my online trading account to manage my trades. I had been trading for several years with a lot of ups and downs, successes, and failures. I had already lived through the best trade of my life and the worst trade of my life, though at the time I hadn’t fully realized that yet nor had I even given it any thought.

    All I knew at the time was that I was loving this newfound level of freedom. Being able to come and go, stay put, leave, turn left when 5 minutes earlier I had planned on turning right, etc. Nothing felt more empowering than being able to log into my account with a nice strong freshly brewed cup of coffee in some strange place I had never been to before. Best of all was the feeling I had from watching the balance of my account continue to grow with each passing day and each new exotic location.

    What I did not know at the time however, apart from the freedom I was experiencing, was that during that historic time in the markets, anyone who could have fogged a mirror would have been able to grow their trading account.

    That fact was lost on me at the time until a year or so later when the Dot-com Boom had become the Dot-com Bust, which I actually survived, by the way. Many did not, however. Thus, the word Bust! It was clear to me that I had MUCH to learn.

    Successful Trading = Absolute Freedom It would be a few years before I would discover many of the ingredients required for consistent trading success. There were a number of pivotal steppingstones, each one progressing to the next that set me on the proper path and basically changed my life.

    “Success Trading = Absolute Freedom”

    From over 13 years of calling a successful live trade room, to creating a number of highly effective, top selling trading strategies, training regiments, countless winning trade plans, webinars, live group training sessions, one on one mentoring, large in person presentations and training

    sessions, more trades than I could count, as well as becoming a trading coach and helping countless traders over the years, I can say that the same themes continue to emerge; themes that indicate why a trader is struggling or how and why they are succeeding.

    “All my strategies were created with the intention of solving these issues”

    All my strategies were created with the intention of solving these issues, in their approach, their training, and their overall trading philosophy. It’s no coincidence that my latest and most effective trading strategy to date (at the time of this publication) is called the Spotlight Power Trader. The word ‘Power’ is to signify that these 12 Powers to Successful Trading are built right into the very DNA of the strategy itself.

    The Spotlight shines a light on winning trade setups that have a very high percentage predictive outcome and that continually repeat themselves all the time on all the best trading markets and charts.

    We then combine that with the 12 Powers to Successful Trading, as described in this report, the net result being, the Spotlight Power Trader.

    All of these 12 powers are things we have POWER over and can control as traders. By learning how to focus and control each one in a coordinated effort, we can stack the odds in our favor (power of the numbers) and be in the absolute best position for ongoing success as traders.

    It is necessary though to NOT just shake your head yes because you intellectually understand the good sense that is being described, and then move on, forgetting to actually implement the power in your trading. Work these powers into your everyday routine. You have to DO it!

    Actions speak louder than words and to really enact change for yourself, you have to take ownership of the power and then remain vigilant and judge yourself by the  things you actually do, not what you say and think. That will separate the winners from those who think they want it, but really don’t.

    It all flows down from the first power. The strategy is designed to apply each of the subsequent powers to the benefit of the first and most important power, WHY we are trading in the first place. To make money!

    For that reason, our overall strategy goal is “to be able to quit with a positive result, a vast majority of the time, while controlling our drawdowns with minimal and efficient trading as defined in our trade plans.” It takes all 12 powers working in concert to be able to accomplish this overriding goal on a consistent basis. The rewards though are astronomical and life changing, the theme of which is what our blog, BackpackTrader.com is all about.

    The Power of Why

    This is where it all begins and is THE most important power. If you don’t really know WHY you are trading, you are doomed to get results you never intended, probably leading to failure.

    The markets will give you what you are asking for which will be a net result of everything that you DO or don’t do as a trader. Most people do not actually know WHY they are trading. They think they do but then their own actions suggest something completely different.

    The only reason to trade is ‘to make money.’ That’s it! Until you take ownership of that reason, you will end up repeating the things that lead to losses and failure. You will get the results caused by trading for wrong reasons. Own it! Commit to your reason for trading and then DO the things that  reflect that and nothing else.

    If you truly understand WHY you are trading and are ready to commit to owning it, then the next logical question to ask is HOW? How do you achieve your reason for trading?

    The answer is in the remaining powers beginning with the next one.

    The Power of the Trade Plan

    The Trade Plan PROVES you can make money. The only real way you can make money as a trader is by the proven statistical advantage, the EDGE, that your trade plan gives you.

    We can prove our trade plans before we ever risk our capital. Successful, proven trade plans are what achieves our WHY, because it gives us a way to grow our equity in our trading accounts. I often refer to this work as ‘preproduction’ and it is essential you get it right.

    Making money is WHY we trade. Proven trade plans is HOW we achieve our WHY, using the other 10 powers that follow.

    The Power of Foundation

    One of the earliest components an aspiring successful trader should focus on building is a strong ‘trader foundation.’ As a concept, this should be pretty obvious. Try building a house for example on a flimsy foundation and you can imagine the disaster that would soon ensue.

    Trading is a business and like a house, a business must also be built on a strong foundation. Trading though is very unique because there are many ‘human’ aspects involved that we have to learn how to solve, if we are to become successful traders. As you will learn throughout this eBook, humans are not wired to make good traders. Successful trading is something that must be learned.

    Technique is the easy part of the learning process. That’s just a matter of repetition. What’s harder is learning how to master oneself. There is a process that one can and should follow and this section is meant to help you understand what is required for a strong foundation that you can grow your trading business on.

    In short, when I speak of ‘strong trader foundation,’ I am speaking of your belief in what you are doing. If you do not believe in what you are doing as a trader, the human elements that are destructive to trading will emerge and cause you to do everything that will lead to losses.

    I often receive questions about certain trade plans, strategies, setups, etc. that imply a lack of belief. The questions are often hidden in terms that are seeking absolute answers.

    Indirect questions that amount to “will this be a winning trade?” The proper answer is ‘no one knows!’ Nor should it matter. The results of the trade plan is what makes you money, not the result of a trade. Because as traders, we have to take another trade, right? We can’t be worried about the outcome of a trade or series of trades.

    We have to instead, run our trading business based on rules (Power of Mechanical Rules) and the statistical advantage our trade plan gives us (Power of the trade plan, Power of Numbers, Power of the CEO).

    One must go through a series of steps to build the necessary belief so that you have the confidence required to ‘take the next trade,” as described in the rules of your proven trade plan; proven being the operative word here. You can’t just talk yourself into believing. That can never work. Your human instincts are too powerful. You need to train yourself by ‘recalibrating your internals,’ so you can transform from a person trying to trade into an actual trader.

    You have to have had lived through the good, the bad, the ugly, the great, over and over, and also witness the equity curve rising, despite the moments of ugly. This helps you rise above to the higher level of understanding that traders must ascend to to achieve consistent success. You will never be able to believe in what you are doing if you don’t build a strong trader foundation. And if you can’t believe in what you are doing, it will show and manifest in your actions -- actions that will not get you the desired result -- the accomplishing of your WHY for trading. The good news is that there are very tangible steps one could follow to build a strong trader foundation correctly and thoroughly.

    The Power of Quitting

    The Power of Quitting is one of the most elusive, hard to understand powers yet it is critical to one’s success. Inexperienced traders think the more you trade, the more money you make. The Power of Quitting says the more you KEEP, the more money you make.

    There is nothing more aggravating than banking some nice profits only to keep trading and give the money back to the markets. You would have been far better off just stopping and hanging onto your hard-earned gains.

    The Power of Quitting (PoQ) empowers you to do just that. We build it into the rules of our trade plans. It is a ‘dynamic’ self-adjusting goal setting strategy that allows us to mitigate our risk exposure to the market and to keep our profits in our accounts.

    The best PoQ rules will “allow you to take what the market wants to give (not what YOU want from the market) while allowing you to quit with a positive result a majority of the time.”

    The great irony is that by taking what the market wants to give you, over time as you build your position size, the markets WILL give you what you want. We use the next power to achieve this as we continue to grow our accounts.

    The example on the right is a classic Spotlight Power Trader trade. The green bars mean stay long. The entire trade prints right on the chart. The plan is clearly displayed in the data window on the right side. There is no guess work. We know exactly what to do from start to finish.

    This recent long trade in crude oil futures was the first trade of one of our Spotlight Power Trader trade plans. It triggered in at the yellow plus sign, the 3rd and 4th dots above being our profit objective for this trade.

    The trade triggered in and hit its targets in less than 2 minutes. Imagine the very same trade once the trading account has grown to be able to support 10 contracts.

    There is no need to continue trading with this trade plan once the goals are reached, in this case, 2 minutes into our session. This trade might not look like much, but it has all 12 powers built into it and it continues to win, and reach new equity highs on a consistent basis, thus, achieving our reason for trading.

    The Power of Compounding

    There’s a reason Albert Einstein refers to the power of compounding as the 8th wonder of the world. This is truly the path to riches. We use this concept to help guide us along the path of least resistance. Realizing that wins and losses come at a random distribution, we need to control our risk in the market. The Power of Quitting, the Power of the Trade Plan, some of the other powers in this report help us do that. The Power of Compounding though is how we leverage our success into the realization of our financial goals -- and dreams, for that matter.

    The way to succeed and reach our financial goals requires trading LESS, not more. We control our risk with smart money management. One should only risk about 2% of their trade capital on any given trade, and only trades within the context of their proven trade plan. As your account grows, you can give yourself a raise by moving your finger from the one to the two. You add to your position, in other words, keeping to the 2% risk:capital ratio. The 2% can be a little more for more aggressive traders, and a little less for more conservative traders. Much depends on the effectiveness of your trade plan, too. If you’re winning at a large rate, perhaps risking a little more is appropriate. The point is, keep your risk small as a ratio to your trading capital so you can survive the random distribution of wins and losses. This is essential. The Power of Compounding works like a ramp, that inclines faster and faster as your account gets larger and larger. In other words, the rate of growth increases exponentially.

    Power of the Numbers

    Successful trading is purely a numbers game. It’s ALL about the numbers. We can’t control the random distribution of wins and losses, but we CAN control what we do with that distribution. Ultimately, we have to let the superior odds of our trading strategy and trade plan do the heavy lifting for us. Winning more, losing less, proper risk management and money management, along with proper and accurate execution is what it takes to succeed.

    A good money-making approach, using the powers in this report, should produce a ‘2 steps forward, 1 step back, 2 steps forward, 1 step back’ journey to success, or better. It’s all about staying focused on the big picture and executing the proven trade plan so that the odds can work to grow your equity and get you to your financial goals. Combine that with the Power of Compounding (all the powers) and even just one trade per day can get you to your goals.

    Humans make terrible trades because we live in the moment and have a hard time elevating to the necessary higher point of view required for success. We want to avoid pain. The typical ‘human’ thing to do when trying to trade is to wait until witnessing the ‘markets trading well, and the winning trades happening.’ Ironically, the ‘person trying to trade’ will jump in, right at the end of the 2 steps forward.

    As the ‘1 step back’ begins, all the unpleasant feelings one experiences from losses begin to mount. Then, right at the end of the 1 step back process, the typical ‘human trying to trade’ will quit with their losses, right before the ‘2 steps forward’ is about to begin, which would eliminate their losses and actually grow their equity to higher levels. Too late!

    That person has already headed for the exit, feeling beaten up and cheated, looking for the ‘next great strategy’ to begin the same destructive routine all over again until they have blown up their account and begun their new job working at IN and Out Burger; a noble pursuit but perhaps not their first choice in career paths. They threw the baby out with the bathwater; a perfectly good and profitable trading approach, merely because they didn’t understand the Power of the Numbers and the 2 steps forward, 1 step pathway to financial freedom.

    We call that ‘Chasing Performance’ and it’s a sure path to financial ruin. Check yourself and make sure that you too, are not falling into this trap.

    Here is a real-world example to help you better understand how the Power of Numbers work, in concert with the other powers. This example is from a trade plan from one of my earlier strategies, the Trend Jumper. Perhaps you’ve heard of it? I called the trades from this trade plan live in our trade room back in 2012 thru 2014, give or take. This plan still works!

    The first graphic below shows the hypothetical parameters of a trader who only has $2000 to trade with. Due to her small account, it was decided that the best approach would be to day trade an effective forex plan because of the ability to employ micro lots, keeping the risk finely tuned to a safe ratio of risk to capital.

    This plan utilized a scaling in and scaling out concept and as a result, it uses a 3% net position size (3% of one’s capital). And, as you look at this example, notice the two columns on the right. The Column under SINGLE illustrates how a $2000 account would have grown to over $2500 in about 15 months. The position size remained the same throughout the 15 months. No money management was used. That’s an excellent return, for sure, on a percentage basis. Remember this trader only started with a $2000 account. A Wall Street career requires about 10% per year growth but this tradeplan’s growth reflects much more than that. This is just trading 1 micro lot, 10 cents/pip, per trade, to put things in perspective.

    The Power of Structure

    What you see on your chart makes all the difference.  The power of structure is all about setting up your charts in a way that leads to flawless trade execution and understanding. Each trade one takes should be fully planned from start to finish, along with rules in how to manage the trade once it is live. We set up our strategies so that the entire trade prints right on the chart; entry, stop and targets, all clearly indicated. No guesswork. We’ve all heard the words of wisdom, ‘plan your trade, trade your plan.’ This is part of trade planning, but structure is how we see the trade presented on the chart so that we can act upon it.

    Notice on this chart, we can see exactly where the entry is, the stop, the targets and even how and when we moveour stop to reduce or eliminate risk as the trade progresses. There is never any guess work. We can even see the important details of the trade in the side data window.

    The Power of Dynamic Setups

    Markets are not static. They are ever changing, uncontrollable beasts that have a mind of their own; a collective mind of all the participants. As a result they can not be controlled. This is not a good thing or a bad thing, it just is. Because of the every changing conditions of the market, we need to be able to go with the flow. I like to say that we need to be a willing dance partner, always letting the market take the lead. Whether we like it or not, the market IS going to lead.

    That’s what makes this power so essential for ongoing success. The Power of Dynamic Setups means that our trade setups can adjust to market conditions. They can tune themselves, dance with the market, to give us the best chance of succeeding with a particular trade.

    My earlier strategies (Seven Summits Trader, Trend Jumper, Counter Punch Trader, etc) all work just as good today as they did when they first were created, because they ALL use the Power of Dynamic Setups. They all can dance with the market and present trades that are the most appropriate for that exact moment on the chart. That doesn’t mean every trade will win. If we have done our homework though and the trade fits into the context of our winning trade plan, then the odds will be stacked firmly on our side, which is all we can ever hope for as traders.

    Notice in the example below how the trades shown have different sizes. Each one has been self-adjusted, tuned to the conditions of the market at the moment the setup appears. We take what the market wants to give us.

    The Power of Surrender

    You ever wonder why real smart people often make terrible traders? It’s all about surrender. Some people are just too smart to realize that their smarts are not helping them as traders. They cannot relinquish control and they struggle trying to control that which cannot be controlled. The market! For being so smart, that’s not so smart, is it? Most people are their own worst problems and their own worst impediment to success. Why?

    This power often causes one to scratch their head and say ‘huh?’ but it is one of the most important powers. Without this, most people find it impossible to take ownership of the rest of the powers. Start from the first power, the Power of Why.

    Why are we trading? Most people think they know, but then their actions suggest otherwise. This is the root of everything that destroys a trader and the only way to solve it is through the Power of Surrender. If we can put our egos aside, we can begin to judge ourselves by our own actions. Your actions as a trader will tell you what issues you need to work on to move you closer to success. It’s your number one indicator.

    Humans have strong egos. We want to control everything. We want to prove how ‘smart’ we are. We may not even understand this about ourselves, but it always shows in one’s actions. There is no hiding from it and it is easy for anyone to see. It requires humility and the ability to have an honest heart to heart with the person in the mirror.

    Commit to WHY you are trading (The Power of Why) and then set out to accomplish your WHY. It does not involve proving how smart you are, avoiding losing trades or any of the other intuitive stuff humans do. If you are doing those things it’s because you are not trading to make money. You are trading for another reason that you probably don’t even understand about yourself.

    Those types of behaviors come from a different motivation and indicates that you have not taken ownership of the first power. Most people trying to trade don’t even realize these trappings are occurring or why, or how to fix them even if by chance they are aware of them. Failure is unavoidable until this is solved.

    To be a successful trader, you need to transfer yourself and actually become a trader”

    It all comes from the need to survive. That’s why humans typically make terrible traders. Losing trades are painful and pain represents extinction. It causes us to do things that attempt to stop the pain. Successful trading though is counter intuitive.

    To be successful as a trader, one needs to transform him/herself and actually become a trader. A person needs to go through the process of ‘recalibrating their internals,’ and do the things to transform into a trader. (The No Brainer Guide to Trading Success, focuses on this.) Losing trades exist inside of winning trade plans. You cannot divorce losing trades from winning trades. That’s what humans try to do. It is not what successful traders do.

    The Power of Surrender teaches us to relinquish what we cannot control and instead, focus on what we CAN and NEED to control in order to achieve our financial goals; our reason for trading. It’s all about humility and accepting the fact that at the right edge of the chart, we cannot control what the market will do next. The GOOD news is that we can control what trades we take, how we manage them, how we stack the odds in our favor, our position size, and all the other ‘powers ‘in this report that lead us to success.

    The Power of Mechanical Setups

    If you think of everything you’ve learned so far, one permeating theme that runs through these 12 Powers is the need to remove the ‘human element’ from trading. Making objective decisions is ultimately what we must do to succeed. That’s easier said than done without taking full ownership of the other powers, but it can and must be done.

    This is where the Power of the trade plan, as well as the Power of Why, the Power of Structure and the Power of the CEO come into play. But it begins with the Power of the Trade Plan. When we have a trade plan with a clear set of rules, we can test it and prove that it gives us an EDGE that will make us money. Once we have tested and achieved ‘measurable results,’ we can use that to build our Foundation of Belief

    (Power of Foundation) and create a set of mechanical rules to follow. We can use that to confirm our trade plan. If we have rules to follow that we have built enough belief in, then all we have to do is ‘lean on the strategy and rules of our proven trade plan,’ and take the next trade as the rules dictate. We can remove the human element and remain objective. It’s an amazing experience when you take the pressure off of yourself as a trader and just ‘lean on the system.’

    Moreover, we can practice executing the plan physically, so that we learn to master our trading platform, eliminate execution errors, and perfect our ability to flawlessly placeour trades. This is obviously a critical component to ongoing success as a trader. Mechanical rules will help us eliminate costly mistakes.

    A simple set of rules that could and should be tested would be:

    • Start time
    • Strategy (setups based on a strategy’s set of rules)
    • Dynamic Session Goals (PoQ)
    • Maximum number of trades
    • End Time

    These are rules that can be tested, proven and then made mechanical so that you don’t have to think at the right edge of the chart, where trade decisions are made. The next trade in the trade plan shows up, you pull the trigger and take the trade, objectively and without ‘human’ intervention.

    There are also subjective decisions that can and will emerge at times. Things like trade maneuvers we often refer to as ‘key level adjustments,’ for example. Wouldn’t it be better to get long a trade a few ticks above a major resistance level than a couple ticks below? We can ask for additional price action confirmation in other words, to give us a little more proof that the price is ready to move through the barrier, or not.

    We can make these decisions subjectively (I often refer to them as the 5% art to trading, type of decisions) or, we can create mechanical rules to follow that guide us through these types of decisions and actually work at reducing the 5% art to trading to just 1 or 2%. The Power of Mechanical Rules gives us something to lean on and depend on so that we can remain traders and eliminate the risk of falling into the trappings of being a human trying to trade, what trades we take, how we manage them, how we stack the odds in our favor, our position size, and all the other ‘powers’ in this report that lead us to success.

    Power of Lifestyle

    There is only ONE reason for trading and that is to make money. Losing traders fail to recognize this critical first step. This power however, the Power of Lifestyle, reminds us why it is we want to make money in the first place. In the end, it’s all about lifestyle. It’s all about having the lifestyle we have always wanted -- the lifestyle we know we deserve, if only we can find a way to achieve it.

    It never ceases to amaze me how complicated people make things that are really just best kept simple. There is no reason to overcomplicate one’s trading yet that’s what the majority of people do. If you are strong with your reason for trading, it helps you remain on point with what is actually required to accomplish it. That’s what the power of lifestyle is all about.

    Our motto is the “Get in, Get out and Get done!” There is no better feeling than starting your trading session and hitting your goals with the very first trade.

    People often ask me what I do and when I tell them I trade in the markets, one of two things typically happens. Either their eyes glaze over, in which case I quickly change the subject or, they say something like “I would love to do that too, but I can’t stand the idea of sitting in front of my computer all day long watching price bars go up and down.”

    I get a kick out of the 2nd comment because little do they know that I too, could never do that either. The thought of being glued to my computer all day long is horrifying to me. If the conversation continues, and they ask me how long I am planted in front of my monitors day to day, I merely tell them that today I hit my goals inside of 3 minutes! My biggest problem was figuring out how I wanted to use my free time for the rest of the day!

    That same trade two years from now, with a position 20 times larger (power of compounding), still will only take 3 minutes! Of course not all tradeplans hit their goals within 3 minutes every day, but they often do and even if it takes longer sometimes, it’s still about ‘getting in, getting out, and getting done,’ as efficiently and effectively as possible so we can turn our attention on the most important things in life; that which brings us enjoyment and happiness.

    We don’t have to work harder to make more money. We work smarter. Less is more! The Power of Lifestyle reminds us of that each and every day.

    The Power of the CEO

    When I am working with a trader, one of the first messages I try to convey to them is that they need to stop being ‘that person trying to trade,’ and instead, ‘be a trader.’ This is usually a head scratcher at first and it often requires a person to go through a series of steps to learn what this actually means.

    Trading is a business. Your trading should be your business. All businesses have expenses. All businesses have slow days and busy days. The local dry cleaner down the street might have had very few customers this past Tuesday. She still needs to pay her bills and in fact, she may have even lost money that day. Then Thursday and Friday, all the business comes pouring in and she is able to feed her family and support her lifestyle as a result of her business.

    On Wednesday, she heard a customer arguing with her employee working the counter. She had a standard operating procedure in place and her worker new how to handle the irate customer. The owner didn’t intervene, didn’t fret or worry about the outcome. This was just par for the course, another transaction in a series of countless transactions, the sum of which added up to a nice profit -- her reason for being in business in the first place. Do you see my point?

    Trades will win and trades will lose. Each trade is nothing more than a business transaction. Some days won’t make any money. What’s important is that the net result of your trading business does make money. From this day forward, I suggest you commit to cease being ‘that person trying to trade,’ and instead, transform yourself into the ‘CEO of your trading business.’ by doing so you will equip yourself with the proper mindset that is required to succeed.

    Keeping your attention on the big picture is required for consistent success. It’s a simple concept
    when you are the CEO. The power of the CEO is what keeps your business running smoothly, regardless of the bumpy road that we all must travel as traders.

    About the Author

    Author: Troy Noonan
    Company: Backpack Trader
    Website:  BackPackTrader.com
    Services Offered: Trading Education, Alerts
    Markets Covered: Stocks, Options, Forex, Day Trading, Swing Trading, Investing

    Chapter 15

    Macro & Mini Portfolios – The Growth Continues

    Chapter 15

    Bubba Horwitz | The Bubba Show

    Macro & Mini Portfolios - The Growth Continues

    The leading reasons traders lose money over time are because they miss opportunities, allow losses to mount on risk positions, and allow emotions to force early profit-taking.

    The micro-mini futures continue to grow, new products continue to be added. The ability to follow trends and stay in markets through rough times will always benefit traders who understand the rules of the system.

    Bubba Trading’s method avoids these pitfalls, increasing the odds of profits. The algorithmic and systematic approach has created profitable results over time. The system is not human, so it always follows the tested rules of trading and investing. It never misses a sustained trend, allows profits to run, and nips losses in the bud.

    • The trend is your best friend in markets
    • Trends can continue for extended periods
    • Never miss a move
    • A portfolio approach creates diversification
    • Following the rules creates profits- We can help!

     Micro and mini futures products create the opportunity for wider participation in futures markets. That is why they are the “Next Big Thing.” A Micro E-mini contract provides exposure to a major market index but at 1/10 the size and a lower margin requirement than the standard E-mini futures contract. These products trade around the clock, six days each week. A systematic approach adds flexibility in changing market conditions via long and short risk positions. And, the algorithm reduces market risk without the need to change your current equity portfolio.

    Micro E-mini contracts are leveraged futures products that can result in losses exceeding the original investment. Understanding the risks involved with futures products before placing a futures trade is critical. However, your portfolio is always at risk! Micro and mini futures portfolios often mitigate overall market exposure as their best friends are trends.

    The trend is your best friend in markets

    The trend is always your closest ally in any market. Prices tend to move higher than most market participants believe possible during bull markets and lower than what seems logical during bearish periods. Picking tops and bottoms in markets is an exercise in ego and mental gymnastics. It does not belong in a prudent and successful strategy for making and protecting profits. Successful traders and investors will tell you that picking a top or bottom is all about luck. Luck has no place in a trading or investing plan.

    Trends occur because buyers or sellers are more aggressive than their counterparts on the other side of trades.

    Trends can continue for extended periods

    Bubba Trading’s algorithmic and systematic approach to a Micro and mini futures portfolio does all the work. It decides when buying or selling is appropriate. The system dictates if a trend is continuing or if it is changing.

    Think of markets as a big piece of meat, a side of beef. The end pieces are the less desirable cuts. The center is the filet mignon, the chateaubriand, the filet of the filet, or the prime piece. The system ignores the grisly tops and bottoms. It seeks to capture the majority of a price move, where risks are lowest, the odds of success are greatest, and the rewards are a significant percentage of the total of a trend’s trajectory. Trends can continue for long periods. They end when they run out of steam. Emotions get in the way of interpreting a trend- Bubba Trading’s proprietary systems have no emotions. They do not think; they react. 

    In markets, the Bubba Trading algorithmic approach only dines on the prime cuts of trends. It is an egoless snob that ignores all other input.

    Never miss a move

    The micro and mini portfolio will never miss a substantial trend. How is that possible?

    The only strategy that will not lose by snoozing when major trends develop is the one that is always in the market. A constant long or short risk exposure crushes the potential of missing a sustained trend. The micro and mini portfolio always have a position on the long or short side of all the markets it covers.

    A trend can last for a lot longer than any human being has patience. Source: TradingView

    Chart, line chart

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    Source: TradingView


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    The Gold Mini futures contract chart shows the bullish trend from May 2021 through October 2021- 6 Months of lower prices and still heading lower in 2021 so far. 

    The WTI crude oil mini futures contract has been in a bullish trend from November 2020 through October 2021.

    Many other examples of extended trends in markets benefit from a systematic approach. Bubba Trading’s proprietary systems dine on the profits from extracting the “meat” out of the moves. They never capture an entire move and are often short at the bottom and long at the top. However, the filet of filet’s is never at the low or the high, where most traders and investors suffer the most substantial losses.

    A portfolio approach creates diversification

    Variety is the spice of life! A diversified portfolio tends to lower risks. Market volatility occurs for many reasons over time. A diverse portfolio includes assets that are correlated and uncorrelated to each other. Micro and mini futures contracts are available in a wide range of assets from stock indices to commodities and other market sectors.

    Bubba Trading’s portfolios undergo careful testing and constant scrutiny that creates the balance that mitigates risk over time.

    Following the rules creates profits- We can help!

    The difference between algorithmic systems and humans is that the former always follows the rules, while the latter does not. A way to make sure you are always in the game, following the rules, and eliminating emotion from all decision-making is to automate your market approach. Automation and technology allow us to have our capital working for us all the time, so we never have to give it a second thought. Pick a portfolio that fits your budget and be prepared to grow with the trend 

    It is impossible to "predict" future prices with any consistency or accuracy. No one knows why markets do what they do and move where they move. “Experts” who think they can "forecast" often find themselves broke. Ego is the opposite of logic.

    Many “Gurus” con gullible traders into believing they have some special knowledge of the future. They are no better than fortune tellers.

    Most trading and investing are based on false premises, which is why so very few obtain substantial wealth from the markets. Those who make profits understand, you buy when prices are going up and sell when they are going down. It is that simple. However, the concept is lost on most traders. They believe they will make more if they know more. At Bubba Trading, we know that the less you know, the more you will profit. Let our systems do all the work and enjoy the filet of the filet of profits.

    About the Author

    Author: Todd "Bubba" Horwitz

    Company: The Bubba Show

    Websites: TheBubbaShow.org, BubbaTrading.com

    Services Offered: Market Commentary, Trade Alerts

    Markets Covered: Futures, Stocks, Options

    Chapter 16

    Predicting Explosive Moves in Uncertain Markets

    Chapter 16

    John Seville | Acorn Wealth Corp

    Redicting Explosive Moves in Uncertain Markets

    On September 7th the US indexes, most notably the S&P 500 and Nasdaq, took a sharp dive. However, the breakdown we saw along with the deep dives we saw along with it on stocks such as AMZN, AAPL and Facebook were almost perfectly predicted by the Smart Money Playbook and Patterns and we follow. 

    In this special ‘look behind the curtain’ you will get to watch the live recordings from our members alerts on September 7th and September 14th where we broke down all the most important moves the market made. More importantly you will get to see the power of the Smart Money Playbook and the precision of high probability patterns at its best. 

    While September may be behind us now, the lessons you will learn from these two short videos contain valuable trading rules that are timeless, and you can start applying to your market analysis immediately.

    About the Author

    Author: John Seville
    Company: Acorn Wealth Corp
    Website: www.acornwealthcorp.com
    Services Offered: Trading/Investing education, trade ideas, courses, indicators, scanners,
    Markets Covered: Stocks, options