Chat Room Lessons

Trading lessons archived from the OneOption chat room.

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Pete
10:06:58

Editor's note
10:07:00

Algo Lines (New): red D1, Option Liquidity: -2 ~ 15, Heavy Volume Today: 120 ~ 500, Stock < Prior Day Low

2022-09-30
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Zen_Trading
16:11:15

@Hariseldon Thanks. At first, I thought the system here mainly relies on price action alone. And that, for example, things like short percentage interest, unusual sweeps, and other bits of information would be considered extraneous and not necessary. So, I’m surprised to see you mention. If you see an unusual sweep, will that actually affect your strategy? 

Hariseldon
16:12:43
Zen_Trading wrote:

@Hariseldon Thanks. At first, I thought the system here mainly relies on price action alone. And that, for example, things like short percentage interest, unusual sweeps, and other bits of information would be considered extraneous and not necessary. So, I’m surprised to see you mention. If you see an unusual sweep, will that actually affect your strategy? 

Answer Well it relies on technicals and price action combined here – but yes of course I take information like that into account 

2022-09-30
Mark As Read

Pete
15:31:46
I came up 100% dry on bullish lotto searches and I tried for a good 20 min to find one
Superpantz
15:37:40
Pete wrote:

I came up 100% dry on bullish lotto searches and I tried for a good 20 min to find one
when that happens it could be a sign that we’re not ready to move higher yet?

Zander
15:45:54

Superpantz wrote:

Pete wrote:

I came up 100% dry on bullish lotto searches and I tried for a good 20 min to find one
when that happens it could be a sign that we’re not ready to move higher yet?

 Question I’ve been meaning to ask something related to this – how much can the quality of a SPY move be judged by the nature of the results returned in searches? If intraday RS searches mostly return stocks with bad D1 charts in downtrends, is that a sign that the SPY move up is mostly driven by short-covering instead of legitimate institutional accumulation, and more likely to retrace at any minute? 

View Answer View Answer

Hariseldon
16:16:14
Zander wrote:

Superpantz wrote:

Pete wrote:

I came up 100% dry on bullish lotto searches and I tried for a good 20 min to find one
when that happens it could be a sign that we’re not ready to move higher yet?

 Question I’ve been meaning to ask something related to this – how much can the quality of a SPY move be judged by the nature of the results returned in searches? If intraday RS searches mostly return stocks with bad D1 charts in downtrends, is that a sign that the SPY move up is mostly driven by short-covering instead of legitimate institutional accumulation, and more likely to retrace at any minute? 

View Answer

Answer If most of your searches are turning up stocks with weak daily charts that is a commentary on the strength of the market overall (or lack thereof)

2022-09-30
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lilsgymdan
17:07:09
Roughest week I’ve had in months. Came back from a vacation off and just had fear fear fear all week for some reason. Killed on swings and poor discipline. Going back a step, taking it slow and fully analyzing the moves I made that were good vs bad.
Still a lot of really nice trades made this week but taking a week off turned me into a nervous wreck. Does anyone else experience this or is my “trader mind” just not full baked enough yet? This was my first vacation in 3 years
Hariseldon
17:12:04
@lilsgymdan what was your mindset coming into the week after the vacation – were you determined to accomplish or do certain things this week?
lilsgymdan
17:15:45

@Hariseldon Honestly I felt terrible during the vacation. Like my house was on fire or something. Could not relax or unwind. Like time was running out. Part of it is that this is a slower month for my fitness training work and the first month in my entire adult life that we spent more than we made as a family. On paper we literally have years of living expenses but I think that turned me scared of losing, which wrecked the whole mindset. You saw me all week jittery as hell with my scratches all over the place

Pete
17:16:04
lilsgymdan wrote:

Roughest week I’ve had in months. Came back from a vacation off and just had fear fear fear all week for some reason. Killed on swings and poor discipline. Going back a step, taking it slow and fully analyzing the moves I made that were good vs bad.
Still a lot of really nice trades made this week but taking a week off turned me into a nervous wreck. Does anyone else experience this or is my “trader mind” just not full baked enough yet? This was my first vacation in 3 years
Make sure to take time off. You’ve gone way too long. If you get in the practice of taking time off, coming back will not be as hard and you will have a routine for it. Realize that you came back during what I would consider a tough week. I rarely take time off as well and that is NOT good for you physically or mentally. I took a couple of days off this week and I thought I had a good enough bounce Wed to carry an overnight ES long… wrong. I recovered from it, but it took a couple of days to settle back in. 

lilsgymdan
17:19:10

@Pete thanks for the kind words. Too much of my self worth tied up into the ability to provide for family and have work addiction. It’s a superpower when it works until it doesn’t Have a great weekend.

Hariseldon
17:21:36

@lilsgymdan I get what you are saying – it is all on your shoulders – and right now there is a feeling of insecurity.  When business slows down, even if it is cyclical or expected, there is always the fear that the reduction in income will become permanent and not transitory.  That places heavier reliance on your trading – it it is something that you seem to feel you have to get right or you will let everyone down. 

lilsgymdan
17:23:06
Exactly. Which creates a scarcity mindset 
Hariseldon
17:24:03

@lilsgymdan to add – that is an unfair amount of pressure to place on something you have not yet mastered .  Emotionally you seem to be approaching your trading as if you have completed all training and are now at the stage where you should be producing profit and adding to your family.  Thus, when you lose you must feel like a liability, you are not only not adding anything, but you are taking something away – leaving your family worse off at the end of the week than they were at the beginning

Hariseldon
17:24:12
Is this close to how you feel?
lilsgymdan
17:25:17

@Hariseldon to the T

Hariseldon
17:28:02

@lilsgymdan – ok well then let’s reframe that for a moment – You are dedicating yourself, your time and your energy to learning a skill that can provide a safety net for your family.   Rather than leave your families financial well-being up to the randomness of a client-based business and the economic gods which are mercurial at best you have decided to act on it.  What you are doing is something that very few people attempt, or even have the empathic foresight to consider the need for a back-up plan.   

Hariseldon
17:34:32

@lilsgymdan your family is lucky to have you – you are busting your ass to do everything you can in order to make sure they have a better life, for one reason or another you have put all of that on your shoulders and feel completely responsible – their fortunes rise or fail based on your efforts.  Off the bat you are taking on 100% of the burden, and not only that but you are trying to ensure that no matter what happens, you will be able to continue to provide for them – even if that means spending two years studying and getting your ass kicked by the market day in and day out , emotionally dragging you on a roller coaster that you can’t even really share with anyone that truly understands it .  So understand this – what you are doing is heroic – and your motives are selfless.  You cannot also put the expectations of having the results that a full-time trader has before you are ready to be a full-time trader.  

lilsgymdan
17:35:49
Fair enough, climbing a mountain that most people die on or don’t even try to climb is going to be harrowing. Deep down inside I really don’t like people, in general, and always hated having to depend on them “doing the right thing” for me to earn a living for those I love. Part of why trading is so appealing is because essentially you provide for your family when everyone else “does the wrong thing” haha
lilsgymdan
17:36:35
which I believe is a much higher probability.
Hariseldon
17:36:52

@lilsgymdan I hope you read this again and again and truly internalize it and then perhaps you can stop kicking your own ass for a bit , god knows the market kicks it enough without you having to add to it!

lilsgymdan
17:37:27
Thanks for the pep talk Hari. I am not expecting to be full time performance, just frustrated that I played this week like it was my first damn month.

2022-09-29
Mark As Read

Russ
11:17:30

Question @Hariseldon – on the rule around not going long when SPY is down – do you think this applies to hedges if a trader has multiple shorts on and maintain a net short exposure? View Answer

Hariseldon
13:32:37
Russ wrote:

Question @Hariseldon – on the rule around not going long when SPY is down – do you think this applies to hedges if a trader has multiple shorts on and maintain a net short exposure?

Answer No – it doesn’t.  As long as you know how to properly hedge. 

SubZer0
16:00:07

Question Is it a good idea to trade in the last 30 mins of the day using RS/RW or is it too chaotic for RS/RW to make sense? View Answer

Pete
17:24:50
SubZer0 wrote:

Question Is it a good idea to trade in the last 30 mins of the day using RS/RW or is it too chaotic for RS/RW to make sense?

You would need an incredibly strong stock rally that late in the day (ideally it supported by an SPY breakout above resistance). The stock would need to be in a very steady grind higher. I prefer not to day trade in the last 30 minutes because everything has to go perfectly and because the last 30 min can be “noisy” with position squaring. 

Pete
17:31:49
bbordic wrote:

As I clearly stated, yes shorting at the LOY was not good. My point was that there was a long strong trend down right out of the gate, which for me was much easier trading then it was after the consolidation/chop and drift higher. Most of the trades I see posted are fairly small profit targets so I was curious as why no shorts on the way down. That’s all I meant.
Again, it is critically important to identify a gap and go early. If you are proficient at it – fine. Most traders are not. What looked easy today was due to the fact that that pattern was correctly identified. Most of the time shorts will pile in early and you will have violent short squeezes that fly back in your face and leave you with nasty losses. That pattern of stacked candles has to be PERFECT! Realize that when you short after a 40 pt S&P 500 drop on the open, much if not all of the move could have been made. That limits the downside and because of the drop your risk exposure is great because the market/stock could fill the gap. As Hari pointed out, all ships drop with the tide. It is much harder to identify relative weakness because the fakes and the “real McCoy’s” are falling. It is always much easier to look back at what happened than it is to trade in the moment. I hope this perspective helps.

Hariseldon
18:29:42
And if you got lucky and made most of you money in the first 30 minutes of trading – you are doing the exact opposite of what has been taught – that is not repeatable.  If you continue to try and trade the first 30 minutes of the day it will eventually wind up blowing up your account.  It is trading 101 and something that gets hammered into everyone’s heads – do not trade the first 30 minutes. Even profitable traders avoid it – Dave or I make a rare exception at times to trade the opening – but in general we don’t – and whether it is a gap and go, gap and flat, or just plan chop – it doesn’t matter –  you shouldn’t trade it.
Hariseldon
18:33:02
I am trying to teach you all how to be consistently profitable full-time traders, not traders that can have a huge winning day and then eventually lose it, not traders that slowly bleed out their accounts – but actual traders – and do you know how rare that is to become?  Very.  And it is because of a hundred things like this – whether it is adding to winners, cutting losers, not chasing, etc..etc…any one of those things could be the trap-door that ends your trading career.  And as a professional trader you have to master all of them.  
Hariseldon
18:46:58
And if you read back at what @Pete was saying – he was urging caution to “scale in” and he mentioned several times that while he felt the low would be breached, he was also waiting for confirmation that it would be – I was saying we would bounce off that low – but in essence both of us were saying – wait to see what happens at the low.  Pete said this was the “backdrop” for a “sell stupid” scenario – meaning the table was set for it – but it does not mean that dinner was served.  And he was right, this was the backdrop for it – it just did not materialize – it may still, it may tomorrow.  

2022-09-29
Mark As Read

ican
21:07:09
Question on doji sandwich. Trying to look beyond “pattern” and explain price action. Taking bullish side for mapping it out. Big bar signify one side action. Then doji signifies sellers couldn’t deter buyers and any profit taking was bought up – (“gains held”). Then break of doji high means buyers still want more. Is that the right way to think about it? Importance of doji being there were sellers but they got bought up.
Dave W
21:22:06
depends on where the doji is created relative to the first large green candle. Doji needs to be near or over the top of the first large green candle and a break over the doji or the top of the large green candle is a buy. Buyers came in on the first green candle doji is indecision not necessarily selling then a green open after the doni indicates buyers coming back in 

2022-09-28
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Joao
03:21:14

@Pete Does 1OP work well even from a close on a Friday to the opening on Monday, having (I suppose) no data points in between -, and given the notorious differences between intraday timeframes last Friday? What was the late bounce on Friday due to: a. Only short-covering; b. Institutions rebalancing; c. Simply the effect of hedging options flows from market makers; d. None of these or maybe something else?Thanks.

Pete
07:22:14
Joao wrote:

@Pete Does 1OP work well even from a close on a Friday to the opening on Monday, having (I suppose) no data points in between -, and given the notorious differences between intraday timeframes last Friday? What was the late bounce on Friday due to: a. Only short-covering; b. Institutions rebalancing; c. Simply the effect of hedging options flows from market makers; d. None of these or maybe something else? Thanks.Question 
When you say “does it work well” that implies “should I jump on a trade signal Monday morning”. We don’t jump on anything without technical confirmation whether it is Mon or any other day. 1OP is one piece of information and we consider it along with the price action Monday morning. It is always best to wait for the first 30-45 minutes to pass before taking day trades. If you are using longer term time frames for 1OP, you have to take the position Fri based on what the indicator and price action are telling you at that time knowing that conditions can change over the weekend (good or bad).

Pete
13:32:04

Fishing is a lot like trading. You have to evaluate conditions and adapt. All of your skills come into play and you have to know the patterns of the fish and more importantly, the patterns of the baitfish. If you want to catch fish, you have to follow the bait. If you want to make money trading, you have to follow the money (relative strength).

There are times when you should NOT fish (lightening and fall turnover) and there are times when you should not trade (flat markets with low volume). There are times when you can fish, but conditions are very tough. Low pressure systems and cold fronts right now are not good and this is when Mother Nature separates the boys from the men. The same is true for trading. If you have survived this year, you are about to join an elite group of traders. Most traders have been destroyed by this bear market and the snap back rallies.
A good fishing guide can help you navigate treacherous waters and he will know what the fish are eating and where to find the bait fish. He will also teach you his system. The guide I used for this trip I have known for years. He only guides Monday through Friday and he scouts almost every day after he concludes his trips for a few hours. He is booked a year out.
He puts his customers in high probability situations, but he can’t catch the fish for you.
Your guides in the chat room are the Featured Traders. They help you navigate rough conditions. They use Option Stalker and other tools to evaluate the market and to find the best stocks. It is hard to make money and they can’t do it for you, but they will dramatically increase your odds of success.
The last two days I fished the Upper Mississippi River where Minnesota, Iowa and Wisconsin meet. It is one of the most beautiful areas you can imagine with 300’ bluffs and expansive wetlands/tributaries. This is typically a good time of year to fish and perch are one of my favorites. I wanted to catch a few meals for the freezer and some fresh air.
I got more fresh air than I bargained for, but I had the right gear. The temps dropped dramatically when I got there and they almost got down to freezing overnight. The winds were gusting to 30+ mph. Needless to say, the fish were shutting down and the conditions were tough.
With the right guide, some skill and persistence, we were able to do well. For those of you who fish, many of these are 13”+. We caught 14-16” fish, but threw those “breeders” back.
I thought I would share this story because of the similarities.
Pete
13:34:48

Pete
13:41:05
We all do that we can to help you navigate these tough conditions, but it is going to take work on your end. Many of you have already crossed over to profitability. Congratulations and thank you Featured Traders! If you are learning, know that you are cutting your teeth in the toughest conditions. You will look back at this stretch as an incredible learning experience. 

drluke
15:49:11

Question for after hours…from a mental standpoint, how quickly can you reverse your thesis in the day.  I had a neutral/bearish bias and lost my first put of the day.  I managed the position well and saved face (selling against it into a spread, then legged out), but mentally it took a long time to come back from having tunnel vision looking for bearish plays all morning.  I find myself missing out on the bulk of moves on days when I get the thesis wrong and fail to recognize it and adapt.  Looking back on today (and last Friday where I was small green but missed out on so much), there were so many clearly strong stocks I could’ve ridden up (NFLX, META, TGT, etc) but I wasn’t in a place to do anything else until 3pm.  Thanks in advance for any insight. View Answer

Pete
16:12:59
drluke wrote:

Question for after hours…from a mental standpoint, how quickly can you reverse your thesis in the day.  I had a neutral/bearish bias and lost my first put of the day.  I managed the position well and saved face (selling against it into a spread, then legged out), but mentally it took a long time to come back from having tunnel vision looking for bearish plays all morning.  I find myself missing out on the bulk of moves on days when I get the thesis wrong and fail to recognize it and adapt.  Looking back on today (and last Friday where I was small green but missed out on so much), there were so many clearly strong stocks I could’ve ridden up (NFLX, META, TGT, etc) but I wasn’t in a place to do anything else until 3pm.  Thanks in advance for any insight.

You mention your thesis, but you do not provide a timeline. Is this an M5 day trading thesis or a D1 longer term swing trading thesis. The longer term your thesis, the harder is should be to turn. If your longer term thesis is bearish, you can’t ignore what is happening short term. You have to decide if you are going to lighten your risk and take some gains or if you are willing to ride out the bounce and to what degree. When your longer term thesis is bearish and your short term thesis is bullish, you do not have to take bullish positions. You can go to cash and wait to reload. You can also mix in a few longs to hedge your shorts. It is a personal preference. I like favor cash when I am in that situation. An M5 thesis can change many times during the day. 

drluke
16:22:20

@Pete I generally think in terms of less than 10 days for the purposes of this room.  (different from my long term and retirement accounts).  I have been working on win rate and am around 90% in the last 2 weeks, but I’m only taking 1-2 trades a day.  I have to keep telling myself the market will always be there and stop focusing on what I’m leaving on the table.  I will side with you for the cash over hedging and actively managing multiple theses on different time frames.  Mindset issues are always the hardest when you’re not a fully seasoned vet while trying to manage this and a full time job/family.

drluke
16:23:55
Basically, there’s nothing wrong with sitting in cash until the market and my thesis match up.  Overtrading destroys retail. Have a thesis, wait for confirmation, then trade what’s in front of me.  Got it and thank you.
Pete
16:30:13
drluke wrote:

Basically, there’s nothing wrong with sitting in cash until the market and my thesis match up.  Overtrading destroys retail. Have a thesis, wait for confirmation, then trade what’s in front of me.  Got it and thank you.
That is exactly what you have to do. Your 2 week thesis is your guide. You focus on trades inside that window and you look for confirmation across shorter time frames. When they all agree, you size up. When they start to conflict, you take some of the gains. If they continue to conflict you eventually go to cash and wait. Sometimes your 2 week thesis will change from bearish to bullish when you are in cash and then you have to evaluate and gradually adjust to the new thesis. Sometimes your 2 week  will remain as it was and you gradually start to scale back in when the shorter time frames agree. Use the 1OP H1 and M30 crosses to help you. They are perfect for that time frame.

Hariseldon
16:34:08
drluke wrote:

Question for after hours…from a mental standpoint, how quickly can you reverse your thesis in the day.  I had a neutral/bearish bias and lost my first put of the day.  I managed the position well and saved face (selling against it into a spread, then legged out), but mentally it took a long time to come back from having tunnel vision looking for bearish plays all morning.  I find myself missing out on the bulk of moves on days when I get the thesis wrong and fail to recognize it and adapt.  Looking back on today (and last Friday where I was small green but missed out on so much), there were so many clearly strong stocks I could’ve ridden up (NFLX, META, TGT, etc) but I wasn’t in a place to do anything else until 3pm.  Thanks in advance for any insight.

Answer To add to what @Pete said – for me it really depends – If I have a strong thesis already, like I did a few weeks ago having a very bearish thesis, it takes quite a bit to disavow me of it – I need to see major technical indications that my hypothesis was wrong; however, that doesn’t mean that I can’t day trade the trend of the day.  Is it harder to day trade bullish when my thesis is overall bearish? Yes – certainly – but my long-term thesis should not have much bearing on a trade that is 15 minutes long.  But on days like today where I have no thesis other than – the market will chop around between the low of the year and occasional rallies up until new information is presented in Oct/Nov – then I trade exactly what the day presents.  

Superpantz
16:00:49

Question @Hariseldon when there is a compression breakout or trendline/algo line breakout or SMA break, do you ever wait for a retest or you would enter right away or wait a few bars? View Answer

Hariseldon
17:04:46
Superpantz wrote:

Question @Hariseldon when there is a compression breakout or trendline/algo line breakout or SMA break, do you ever wait for a retest or you would enter right away or wait a few bars?

Answer I don’t wait for a retest, but I do wait for confirmation – especially if it is a long-standing line that was breached – so I would typically want to see several directional bars that confirm the break before entering

2022-09-27
Mark As Read

DanielF
15:32:04

Question Hari, why did you say you don’t like trading REITs? They keep showing up in my searches as weak. Is it because they have low volatility (although some seem to move) or is there something else? Thanks! View Answer

Hariseldon
17:05:45
DanielF wrote:

Question Hari, why did you say you don’t like trading REITs? They keep showing up in my searches as weak. Is it because they have low volatility (although some seem to move) or is there something else? Thanks!

Answer They typically have low volume and are subject to single bar burst of buying/selling that can drastically alter the price 

2022-09-26
Mark As Read

Russ
11:20:46
Tips on custom search: Some days you have a ton of good candidates that look great based on their charts and the intraday price action. This tends to have when you’ve have a pretty consistent market direction for more than 3 days (such as this recent drop). One way to filter out the best is to do a Custom Search with Heavy Volume > 300. If you get a ton of results, you can increase it even further (or drop it if you don’t get many). This increases your odds of finding the best candidates that are truly RS or RW and the least likely ones to reverse if the market tides change against you.

Russ
16:48:37

@Hariseldon I’ll ask for advice on what to do with this type of trade in the future. I entered a short on IP at $32.24 at 9:03 AM CST, and then added to double my size as it confirmed at $31.60 at 12:00 PM CST. My target on the trade was $31.11 based on a gap fill level on the daily chart. As you can see, the LOD on IP was $31.13, so I never hit that target. I wanted to give the position room to reach my target but it ended up gaining strength and I didn’t exit until $31.86 for a measly $0.07 on the position. When you have trades like this where you come really close to hitting your target and they reverse, do you manage them (i.e. via an adjustment of your mental stop or even a hard trailing stop)?

Hariseldon
17:06:46

Hariseldon
17:08:40
When adding – if you are in the during the “pullback” portion of a trend (which you were when you took the trade, which was one candle before the long green one) – you want to wait to make sure the pullback does not exceed the high of the previous one, especially when it is as close as this one was.  The trade was fine and the daily chart remains very bearish, so it isn’t a bad swing either – but you could have considered exiting once you saw the downward trend was broken, or next time – waiting until the pullback is complete .
Russ
17:10:57
Thanks Hari and very helpful – that is a really clean way of looking at it. My add was at 12:00 PM not 2:00 PM on the chart. My takeaway is that long green candle should have been my exit point since it broken the trend, or possibly when SPY almost got back to the LOD on the 12:55 PM CST candle and IP stayed well off the lows (preserving the open from the long green candle).
Russ
17:11:47
1:00 PM on your chart*
Russ
17:11:55
(for the add)
Hariseldon
17:15:29

@Russ you’re right I got cst and pst confused – but yes, or when you saw the HA reversal at 1:40pm (est)

2022-09-26
Mark As Read

Russ
21:58:58
We have no edge in trading 99% of stocks in the market on a given day. Our job is all about making sure we are in the 1% of stocks where there is a clear edge.
Dave W
22:17:00
I usually take way fewer trades than most traders in the room because i only take the very highest probability setups 

Dave W
13:36:33
SAVA    a note on the stock it has completed what is called a doji sandwich  ie  big green candle (10 points) on tues followed by a doji on wed and another 10 point candle today   almost exactly the same as tues  that is a perfect doji sandwich      for anyone interested in candlestick patterns 
puckshaw
13:39:17

Question Is there an expectation for what comes after a doji sandwich?

Dave W
13:44:07
FREY is a doji sandwich setup for trading tomorrow if it opens green 
Pete
16:03:35
puckshaw wrote:

Question Is there an expectation for what comes after a doji sandwich?

Follow though in the direction of the long candle that precedes the doji. Typically that pattern will produce. If not, I expect heartburn from that sandwich.

Pete
09:05:52
According to purists, yesterday was not a doji, but close if you strip out the last 10 min yesterday. DaveW is enjoying his breakfast doji sandwich.
Dave W
09:16:23
regarding the doji sandwich    what you are looking for is the doji sandwich setup which is a big green (or red) candle followed buy a doji then if the stock opens green after the big green candle and doji or red after the big red candle and doji you can take the trade looking for todays candle to be approximately the same length as the original big green or red candle 
Dave W
09:17:03
SAVA was a perfect example of a bullish doji sandwich yesterday 
ican
09:17:29
NIO is on doji sandwich today
Dave W
09:37:22
NIO is a doji sandwich setup yes

SubZer0
12:14:18

Question @Hariseldon Another mindset question. I come from a scalper’s past and tight bid-ask spreads were highly critical to my stock picks. I never traded stocks that had spreads larger than 0.03 because if the stock moves against me, it could’ve burnt a hole in my p&L very quickly with a large spread. I see many tickers traded here have large spreads and i’m still not comfortable trading them. Do you even look at spread when selecting a stock to day-trade using the RS/RW method? Or just overlook it because you are confident with your conviction?

Hariseldon
12:48:24
SubZer0 wrote:

Question @Hariseldon how do you develop the mindset to trade very slow moving tickers? They show up in the scanner as having great RS or RW but the tape barely moves. For me, a decent or fast moving tape shows good liquidity and enough interest from traders, which means you can expect the price to move. I have always traded those type of tickers and avoided slow moving ones because i could be waiting for a long time and still not make much money from them. Thoughts? Totally avoid slow moving tickers? Or is there a different approach to day-trading them?

Answer It has to have volume foremost, if it trades under a million shares a day I will generally skip it – but if it does, than I use the daily chart as my guide

2022-09-22
Mark As Read

AriS
10:08:04

Question If you buy/sell a tech stock. Are you looking at QQQ or SPY for RS/RW or paying attention to one more than the other? I typically watch both but with tech I favor QQQ a bit more.

Hariseldon
11:12:34
AriS wrote:

Question If you buy/sell a tech stock. Are you looking at QQQ or SPY for RS/RW or paying attention to one more than the other? I typically watch both but with tech I favor QQQ a bit more.

Answer SPY – not saying ignore QQQ but absolutely you should be looking at SPY for RS/RW

2022-09-22
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SubZer0
11:36:40

@Dave W @Hariseldon How do you know where to exit on a stock that is at all time high… with reference to FREY here

Hariseldon
11:40:14
SubZer0 wrote:

@Dave W @Hariseldon How do you know where to exit on a stock that is at all time high… with reference to FREY here

You don’t.  I had decent profit, so I took it.

Dave W
11:41:42
Hariseldon wrote:

SubZer0 wrote:

@Dave W @Hariseldon How do you know where to exit on a stock that is at all time high… with reference to FREY here

You don’t.  I had decent profit, so I took it.

I had a sell order already working  

Superpantz
16:42:41

Question if I decide to only swing trade, what is the best timeframe to trade with?  I’m considering to switch over to swing trade primarily when my day job take too much of my attention.  5M would be too demanding during a busy work day.

Hariseldon
16:50:35
Superpantz wrote:

Question if I decide to only swing trade, what is the best timeframe to trade with?  I’m considering to switch over to swing trade primarily when my day job take too much of my attention.  5M would be too demanding during a busy work day.

Answer You should be using the daily chart to make your decisions – it is fine to look at the M5 for entry reasons – but really all you care about it the daily candle

Superpantz
17:11:38

Question follow up question.  This is something that I’ve been confused about for a while and I’ve been asking questions in different ways, but still a little confused.  If we lean on the daily when we day trade, how is it different than swing trading other than entering and exiting based on 5M and closing the trade during the day? I think I’m confused because I size my positions based on where I set my mental stop where some others have a specific share/contract count.  So if I’m daytrading and I’m leaning on D1, should I set my mental stop based on D1 structure or M5 structure? If I’m setting mental stop based on D1 structure, that would make any trade swingable, but it would also make sense to exit based on D1 as well since exiting on M5 would make risk way bigger to reward, but that becomes swing trading.  As of now, I’m using D1 to determine what stock to trade, entering and exiting based on 5M structures.

Hariseldon
17:19:30
Superpantz wrote:

Question follow up question.  This is something that I’ve been confused about for a while and I’ve been asking questions in different ways, but still a little confused.  If we lean on the daily when we day trade, how is it different than swing trading other than entering and exiting based on 5M and closing the trade during the day? I think I’m confused because I size my positions based on where I set my mental stop where some others have a specific share/contract count.  So if I’m daytrading and I’m leaning on D1, should I set my mental stop based on D1 structure or M5 structure? If I’m setting mental stop based on D1 structure, that would make any trade swingable, but it would also make sense to exit based on D1 as well since exiting on M5 would make risk way bigger to reward, but that becomes swing trading.  As of now, I’m using D1 to determine what stock to trade, entering and exiting based on 5M structures.

Answer There are several answers to this question – first – when the intention is to day trade, trading a stock in the direction of the daily chart (i.e. if the stock is bullish on the day but the daily chart is very bearish it is not as high a probability trade than if I were to day trade a stock that is both bullish intraday and on the daily chart).  So the first reason to use the daily chart even when your intention is to close the position before the end of the day is that informs the trend and tendency of the stock you are trading.  Next – as we all know very well, not every trade works out – I could short NVDA with every intention of making it a day trade but the market may have turned against me and gone bullish, and now my NVDA position is under-water.  Trading in the same direction of a strong daily chart now gives me a viable option of holding the trade.  So even though it was not my original intention to swing NVDA (in this example) – because the daily chart is so bearish, it becomes an attractive choice rather than just closing it for a loss.  However, since my trade is intended to be a day trade I would be using the M5 to guide my decisions on a potential exit.  I hope this answers the question?

2022-09-21
Mark As Read

Fox
13:07:55

@Zander re institutional participation in options, volume & liquidity is obviously in SPX above all else, often as conjunction with part of their nominal exposure in equities (as hedge or leverage). vol fund guys are very very active in highly liquid retail names and they consider this the easier money than reliably farming SPX option inefficiencies

st0rm
12:27:28
Purely hypothetical, but wouldn’t a time spread on spy before FOMC benefit the same way as a time spread over earnings? I suppose one reason it wouldn’t is the unknown expected change. 
Zander
12:33:44

@st0rm Part of the time spread is selecting companies where the market has a strong historical tendency before earnings to over-estimate volatility and subsequently over purchase the post earnings options – you would need to know that the market has the same tendency pre-FOMC and I’m not sure it does or does not. I would also wager that due to the much greater liquidity of SPY options, that institutions would have more of an incentive to pay attention to inefficiencies like that than on the less-liquid options on individual equities, and any edge might be harder to find. Curious to hear thoughts on this from someone more experienced. 

Zander
12:55:32
Also, with a time spread, I think it’s been mentioned that part of the mispricing is due to retail traders predominantly using the cheaper weekly expiration to speculate on earnings instead of more expensive further-out options, so a disproportionate amount of earnings-related IV is packed into that nearest expiration options chain. I would also bet that FOMC related speculation is more evenly distributed among different options expiration dates than earnings related speculation, since people know that post-earnings moves often happen immediately overnight but post FOMC moves might take longer to materialize, so paying more in time-premium is worth it. If this is true, it would further reduce the edge of the time gap between the short-vega leg and the long-vega leg because the FOMC related IV is more spread out among different expiration dates. But that part is entirely just speculation and a total guess on my part and more relevant to a pure interest in options than actual trading. 
Fox
12:56:56

@Zander yes

Fox
12:57:23
time spreads largely depend on the inefficiencies of pricing single name option chains around binary events
Fox
12:57:36
such inefficiencies are not to be so easily or reliably found/farmed on index options

2022-09-21
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Fox
15:43:49
one that’s been working well for me all year – buy 1*25delta C and 1*25delta P about an hour before the meeting and sell a minute before the meeting starts. natural increase in IV as a whole outmoves the loss in delta from one side. well it has this year with so many people piling into bets pre-meeting
Fox
15:45:01
the idea comes from OptionStalker “Buy into Earnings” (buy the build up and get out before the boom)

2022-09-20
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A man
14:27:56
Done for the day. 4L, 2W. I’m one of those who got ripped up today lol. The chop burned me. Red for the week, will try and reset. Won’t trade until after Fed tomorrow. Hope everyone is having a better day! 
Dave W
14:28:33
low probability trading days will do that  much better to sit on the sidelines 
A man
14:29:44

@Dave W Def should’ve stayed on the sidelines today, but I was trading 1/2 position size so was able to manage my risk somewhat. 

Dave W
14:30:31
you maybe trading just to trade then  
A man
14:34:44

@Dave W I’m not trading for the sake of making a trade, I’m trading to learn. I’d like to get better at navigating these choppy environments, and I think the best way to do that is to trade with real (but reduced) capital. I risked what I was willing to lose, so I don’t feel too bad about it. After all, every red day is an opportunity to learn!

owensd
14:38:44

@A man the lesson is that not all days or times should be traded. I took three trades today, with high probability setups, got out quick, and have been completely in cash for about 70% of the day.

Dave W
14:42:59
A man wrote:

@Dave W I’m not trading for the sake of making a trade, I’m trading to learn. I’d like to get better at navigating these choppy environments, and I think the best way to do that is to trade with real (but reduced) capital. I risked what I was willing to lose, so I don’t feel too bad about it. After all, every red day is an opportunity to learn!

I am just trying to help   learning to not trade with no edge is also a good thing to learn 

owensd
14:43:35
ROKU has been beautiful today… 
Hariseldon
14:44:29

All – understand this – a consistently profitable trader is very rare – in fact, you will not find many out there offering advice, in any at all.  So when someone like Dave W. gives you advice or tells you his interpretation of what you are doing take it for the gold that it is.

Fox
14:49:05

@owensd that sounds like a great approach to getting paid on a day ike today

owensd
14:49:43

@Fox been employing it all month – best month trading so far!

JohnB
13:49:47

Question When selling .10 delta weekly covered calls against a long position, do the professionals make any adjustments to this strategy during weeks like FOMC knowing volatility will be high? (e.g. avoid doing it, picking a different delta, etc.)

Hariseldon
14:04:36
JohnB wrote:

Question When selling .10 delta weekly covered calls against a long position, do the professionals make any adjustments to this strategy during weeks like FOMC knowing volatility will be high? (e.g. avoid doing it, picking a different delta, etc.)

Answer yeah, don’t do it on those weeks

Pete
10:30:57
When I trade futures if they drop really hard on stacked red like this, I will take some gains. Those really big drops retrace and I can usually set a sell limit higher and re-enter well. Very short term tactic. If I don’t get filled, no worries, I will just have to wait for follow thru and I can usually catch an even bigger move. That is why I pull my bid if not fill quickly. 

2022-09-15
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lilsgymdan
11:00:17

Answered View  are REIT’s reliable with the RS/RW method or are they more akin to some basic materials stocks, energy stocks, or ETFs where they are subject to other forces than just SPY?

Pete
11:07:15
lilsgymdan wrote:

Question are REIT’s reliable with the RS/RW method or are they more akin to some basic materials stocks, energy stocks, or ETFs where they are subject to other forces than just SPY?

Same concept works. The RS/RW in the group will make them come up in the searches. We  don’t care too much why they are RS/RW, we just follow the money like we do for basic mat stocks. They have rotation in and out just like other groups.

2022-09-15
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Pete
11:34:33
As I have said a hundred times, this is a game of chess. If you only focus on what you are going to do, you are going to be mated quickly. “OMG the trendline was breached. I am going to buy some puts!” That is how most retail traders think. Your opponent is thinking, “If I can poke through that D1 trendline I can lure a bunch of shorts in and then try to squeeze them. They have no staying power there because then we will be back above that trendline and they will be afraid that it confirms support and they will cover for a loss.” The seasoned trader shorts the high today on signs of resistance that that trendline will be breached. He treads cautiously at the trendline and waits for a breakdown and then continuation to confirm the selling pressure.

Hariseldon
16:13:22
BennettN wrote:

 Question @Hariseldon I know this is one of those things that often comes down to feel/experience, but were there any signals you can point out that tipped you off to the possibility of a bull trap here?
Answer Very difficult to quantify – it just lined up too perfectly – it is exactly the type of bounce that would get people out of shorts and get bullish specs long – there was no reason for it other than to do that.  In my head it went like this – the Algos had one job today – Sell – but if on the way down they could grab some extra $$ from retail, why not take it.  Basically I felt it was a Bull Trap because it was what I would have done if I were them.

ican
16:43:14
I need to learn how not to sabotage myself. I had bearish thesis, which played out today. I was holding onto my position through all drawdown without being anxious actually (position was sized appropriately). But as soon as I knew my thesis was playing out today – I exited for a small gain. somehow thesis being proved was enough as opposed to making gains on it. I do not really know what triggered the exit – maybe subconsciously – don’t want to see drawdown again? Need to introinspect. Ironically, I entered new positions with same thesis soon after. 
Hariseldon
16:44:45

@ican was it an issue with position size?

ican
16:49:23
not really. I had SPY oct $400 put for $14 about. I had been selling daily puts against it every day. Cost had come down to $12 already. Now as soon as hit the first LOD at around 11 today – I knew we have decent selling pressure and good likely hood to go down further. On the bounce there after I got out of position. Have been holding this position for over couple of weeks and thru the 389 test on 9/6 and the massive bounce. Had chance to exit for profit on 9/13 – didn’t take it with bias of “going lower”. Somehow today was the day – still struggling to figure out why I exited. 
Hariseldon
16:54:57

@ican first as an aside – likelihood is one word (I know that sounds obnoxious to correct, but figured it would help you if you use it in the future) – and I hear you and know the feeling – after awhile you actually get sick of the position itself and just want to be rid of it, and then you see it in profit – I had the same feeling with ENVX been holding it for a month and got it for around $9 a contract, averaged it down to about $6.75 – but it has been a stand out RED at the end of each day, and then today it finally went green , actually up around .75 a contract.  I wanted to close it, I really did – but I stopped myself and instead added two more contracts to my position.  And that is what I do now, when I get that urge to close the position that finally made it into profit, I add to it instead – that is the deal I made with myself and I stick to it.

ican
16:56:34

@Hariseldon I think that describes my feeling very well. I just lost the patience with “this particular position” – not logical at all. Thanks, I will work on this. 

Hariseldon
16:58:58

@ican another thing you can do is put an order in to close it, if for example it was at $11.30, put an order in to close it for $1 higher at $12.30 – if it hits your target, great, if not you still have it

Hariseldon
17:02:57
This really is the number one reason why traders do not come out ahead in the market – there are many reasons, but after all my years doing this, I truly believe this is number one – When your position is working in the direction of your trade is also when you are most likely to close that position.  Now obviously nobody can have the “perfect exit” where you get out right at the top (or bottom if you are shorting) – but it is the most inexplicable phenomenon that really only happens in trading – Traders leave when they are right and stay when they are wrong.  If the position is going your way, there is a much higher chance it will continue to go your way – 
Think about it – we spend all day looking for the highest probability trades, right? Well the highest probability trade is the one you have that is currently working and in profit – and yet that is the one we shut down and close.  That is the number one reason traders don’t “beat the market”.

Crux
11:10:52

Answered View For Dave/Hari/Pete, do you guys try to avoid swinging biotech stocks for exact reasons situations like ALT? Or is it just part of the game. I hadnt really thought about this before but it makes sense that a biotech stock is more likely to have a wild 50% swing that say AAPL would

Pete
16:43:19
Crux wrote:

Question For Dave/Hari/Pete, do you guys try to avoid swinging biotech stocks for exact reasons situations like ALT? Or is it just part of the game. I hadnt really thought about this before but it makes sense that a biotech stock is more likely to have a wild 50% swing that say AAPL would

That is why I do not swing biotech. They are very prone to news. I am not a scientist so I would have zero to go on apart from the technicals. GS has researchers who know the potential and I can’t compete with their fundamental research. They have clinical trial updates and I have no way of remembering those dates. They are also cash furnaces and they have to issue stock all the time. I will day trade the heck out of them, but I do not like to swing more than a CDS based on short term momentum.

owensd
14:02:07

Short TLSA 300/295 PDS for $1.90 – got the confirmation I was looking for the algo rejection and has lost all it’s RS from earlier.

Hariseldon
14:02:43

@owensd are you currently shorting a stock up $9? Just checking is all 

Dave W
14:03:44
TSLA also above the 200 and is having some news moving it today    be careful shorting TSLA
owensd
14:04:49

@Hariseldon yes – but the algo rejection is more influencing to me. Also why I did the spread, to limit potential loss on an overnight swing.

Dave W
14:05:54
in my opinion algo rejections are a reason to exit longs but not necessarily short it 
owensd
14:08:04

@Dave W I’m in TGT and META as well, but didn’t post those entries.

Dave W
14:09:25
perhaps post those and not TSLA

2022-09-14
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st0rm
17:45:25

Answered View  How do you handle short-squeeze rumors around tickers you might be holding short? I was holding CLAR short on 9/1 when it jumped (from 14.87 briefly to 17), then began to fall back. I held for a few days based on the D1, but then got scared when I noticed the ticker in reddit short squeeze comments. I sold immediately at a fat loss. Any lesson here? May be hard to answer. Thanks!

Hariseldon
17:49:29
st0rm wrote:

Question How do you handle short-squeeze rumors around tickers you might be holding short? I was holding CLAR short on 9/1 when it jumped (from 14.87 briefly to 17), then began to fall back. I held for a few days based on the D1, but then got scared when I noticed the ticker in reddit short squeeze comments. I sold immediately at a fat loss. Any lesson here? May be hard to answer. Thanks!

Answer The only thing I can tell you is that they actually did a study on this, although I am not sure where the citation might be, but I do recall the findings and they were this – there is no correlation between the magnitude of social mentions and the likelihood of a stock going up significantly

st0rm
17:51:12

@Hariseldon So I should stop taking my daytrade picks from reddit? Seriously, that’s a very interesting study I will go find it. Thank you.

Hariseldon
17:51:48

@st0rm if you find it, please link it here – thanks!

st0rm
17:56:53
I suppose a ticker with rw and clear institutional selling may offer a safeguard against a harmful short squeeze since those same institutions would defend their short positions (and my baby position riding on their coattails). 

2022-09-12
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Tonga
07:49:58

Answered View  Hi guys, I have a question regarding the CDS/PDS. It is always suggested to buy them with expiration in the same week. But on Friday, with so short expiration date, I would want to avoid buying lottos. So my question is if in Friday I could buy next Friday’s expiration and the strategy is still valid. 

And what about Thursday? Can I still buy next week’s?
I read the Wiki and I am still not clear about this, sorry if you already talked about this before
Pete
08:40:07
Tonga wrote:

Question Hi guys, I have a question regarding the CDS/PDS. It is always suggested to buy them with expiration in the same week. But on Friday, with so short expiration date, I would want to avoid buying lottos. So my question is if in Friday I could buy next Friday’s expiration and the strategy is still valid. 

And what about Thursday? Can I still buy next week’s?
I read the Wiki and I am still not clear about this, sorry if you already talked about this before
Yes you can buy the next week out and often your lottos are going to be excellent candidates because they are showing incredible strength/weakness late Friday. You do carry additional risk by holding over a weekend because of news and that is why you don’t see us trading them as often.

st0rm
16:08:11

Answered View  Is it ever OK to buy pds/cds beyond Friday? I like buying spreads for the safety it provides, but last week realized a mistake was buying pds that expire Fri when I should have bought calls further out. I allowed my desire for “safe” spreads to cloud my judgment and got myself trapped, instead of just buying longer-term puts. Thx.

Pete
16:28:38
st0rm wrote:

Question Is it ever OK to buy pds/cds beyond Friday? I like buying spreads for the safety it provides, but last week realized a mistake was buying pds that expire Fri when I should have bought calls further out. I allowed my desire for “safe” spreads to cloud my judgment and got myself trapped, instead of just buying longer-term puts. Thx.

Yes. I you are looking for a move that could take longer to unfold you can go out another week with CDS/PDS. We tend to wait for the move and then take the position when we feel the momentum will continue. That is why we prefer this exp for PDS/CDS. This week’s also moves better. 

Hariseldon
16:48:06
Also remember with a CDS/PDS you want to get to the natural intrinsic difference between the strikes , meaning you want premium to burn away, as your long call goes ITM – that is accelerated when the expiration is the same week.  Otherwise, both Calls go up as the stock rises meaning it is difficult to get a % profit without expiration approaching .

Russ
17:14:19

One thing I’ve observed recently is a lot of people changing their bias on the same stock intraday (i.e. being long a stock and then wanting to flip short after taking a loss). That is something that should really only be done by professionals and is also very different from flipping your SPY bias from long to short or vice versa. Why? When you made your original entry, you should have looked at the daily chart, assessed it as strong, and then looked at the intraday chart, and saw it met all your criteria. Even if it falls apart on an intraday basis, or if you have an event on a daily chart basis (breach of an SMA or the 8-EMA), then all that should change is the stock going from a good long setup to a good no trade candidate. You need to see a significant reversal on the daily chart which you will not see in one day except in exceptional circumstances! The chances are if you are getting a desire to switch your bias on a stock, what actually happened is you either 1) Made a poor initial entry and the stock did not actually have the strong/weak daily chart needed to justify your original position or 2) You are trading emotionally because you just took a loss.

Option_B
18:04:52

Can someone please elaborate on what it means to “Wait for confirmation”? Specifically, I was wondering 1) What kind of pattern formation do you look for after a trendline breach. 2) Do you have a resting order as you wait for price to come back to a “better” level, or do you jump in with a market order as soon as you have confirmation. 3) In the case of the resting order, what do you do if the price continues to take off after confirmation. For example, do you then decide to jump in with a market order, or do you consider it as a missed trade and move on to something else? Specifically, I’m trading on the larger time frame as more of a swing trader (anywhere between H1 to D1).

Pete
18:08:35

It means that the underlying has to move through the price point. If you are a swing trader, it need to close through it (not just trade through it). If you are a day trader, you need the M5 bar to close through it. Even then, I like to wait to see if the next bar follows through. If it instantly reverses it is a head fake and that does happen often at those price points. How the underlying approaches that price point matters. As I describe in The System under trendlines and MAs, we want it attacked. I never suggest using live orders (buy stops, sell stops). Alerts are much more effective. When they are triggered – evaluate. If all does not seem right, set another alert. You will notice in the charts I posted today that we had multiple new highs for the day. You want to make sure that breakout holds because it could be a head fake. Especially today where the trend strength was not very good and we were creeping up to those price points. It means you will miss a little bit of the move, but you will know for sure that the breakout is legit.

Superpantz
13:10:06

how do you set profit target for stocks at ATH or ATL

Pete
16:49:31

Without context it is impossible to answer this question. I am going to assume you are not talking about GME making a new all-time high. If yes and you are swinging it, you had better be using a CDS with limited risk and be willing to lose it all. If you are day trading it you would watch for compressions and retracements. You would also watch for bearish engulfing candles at the hod, bearish hammers at the hod. Is the volume heavy? Is it continuing? Is the stock still strong relative to SPY? Is this a normal stock like BJ? How did it get to the new high? Is it attacking it? How far did it have to travel during the last rally to get there? Are we swing trading it or day trading it? Every one of these elements matters. Please be very specific with your questions. Provide a symbol and your trade duration and we will be able to answer your question.

DanielF
17:05:55

Following up on the last question, in general, how do you set your targets? Every book has a recommendation, like if it’s coming off a flag, your target is double the pole or whatever. However, this doesn’t seem to work well when SPY is going haywire. I’ve just been aiming for the next area of resistance or support to exit (horizontal support, trendline, etc.), although I don’t know if there is a better way. To give an example, TNK had a good morning and I set my target to the 8/11/22 then going way back to 4/28/20 since that was the next one back.

Hariseldon
17:10:46

Honestly, I judge it from the price action – like with SPY today, I judged I could get a $1 but probably not more, same with GOOGL – that was based on how I felt the stock was moving and how the market was moving.

2022-09-06
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Pete
09:43:00

When you look at a D1 chart like ZI, notice how the candles overlap. “What does that mean?” It means the stock retraces a lot and you do NOT have to chase. I don’t even have to look at an M5 chart to know this.

Amerikaner
16:15:45

@Hariseldon When D1’s show such large weakness like QCOM did, do you more or less ignore the M5 chart? I ask because at your QCOM entry it was showing a higher low on increased volume and SPY was still in it’s bullish cross. I’m thinking you thought it wasn’t worth waiting on M5 with such overall weakness. You’d rather get in the short and look for other opportunities rather than squeeze slightly more profit out of a slightly higher bounce. Am I on the right path there?

Hariseldon
16:27:09

pretty close, yes -I am bearish on the market, bearish on tech, and QCOM was Bearish, so at that point it is just waiting for profit and whether or not I want to swing it

2022-09-02
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Hariseldon
14:16:00

Btw – I recognize there seems to be an inherent contradiction here – on the one hand we say, “Have a thesis on the market!” and on the other whenever someone asks where the market is going they get told, “Doesn’t matter, just pay attention to what is in front of you!” – So which is it?
I think the best way I can explain it would be to use a dating analogy. Let’s say you are getting ready for a 1st date – you met the person online, and based on the profile and your conversations, you have high hopes for this one. You’ve been on enough previous dates to know that these things can go wrong pretty fast, plus that time you were Catfished by a rather large and elderly Armenian man, but still this one looks good. So here you have your historical information, and your set-up that is informing how you are going into the date – hence you have formed a “thesis” about it, and because you have high hopes you dress nicer than normal, and choose a nicer place for dinner than usual for first dates – your thesis is one of optimism. Now – once you get there though, you need to pay attention to the date in front of you – your thesis can be nullified pretty fast if they start talking about how they still live with their ex-boyfriend/girlfriend – In this example, the two notions are not contradictory – and that is how you need to think of it.

Fox
14:35:15

from view of options trader, i have a thesis on market direction in next 1-2 expiration cycles (absolutely no further than that). then structure my trades & balance them to align with that thesis but also not pay too much if the thesis fizzles out, and ideally a low probability low cost high pay out if there is a total reversal of thesis. tldr: i expect my thesis to be wrong at some point so try to give myself multiple ways to get paid on the trade

2022-09-02
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Fox
14:42:16

one of my bag of tricks is a low probability high reward low risk trade for intra-day reversal. E.G. just now i entered ITM put credit spread on NVDA at 139/140p for .90cr. Meadning if we get an end of day bounce and close above 139 i can close it for 0 ($90 profit). if not, max loss of 0.10 ($10). my overall book is bearish so i wanted something just to get a surprise upside whoosh into EOD which is always possible on pre-holiday light volumes. but not actually wanting to risk more than .10 on a reversal because catching bottoms is for idiiots on fintwit. Please only do [this] if you are consistently reaching the win rate & PF milestones. this is a step 12 out of 10 to trading for a living

2022-08-31
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Auto
16:04:56

I truly do not understand how to properly play stocks such as MEGL, ALT, NERV or any momentum play. I avoid trading stocks like that completely because in the past I have found myself losing more than winning on trades like that. So how do you size for those positions and how do you choose when to get in and out? To me when I see stocks like that all I see is chaos. To expand on that I trade leaning all my decisions on the D1 chart. I know if I cannot get my target today, more often than not I will get it another day. But with stocks that are borderline bankrupt like REV, I cannot justify holding something like that because the risk is just too much. So for me when the position goes against me I get out quickly to avoid a bigger loss. I just would love to understand how you and Dave play these because I see you guys make so much money on them.

Hariseldon
16:37:51

You want the honest answer here? It is all price action. Playing these momentum stocks is the cherry on the trading sundae so to speak – after years of trading and experience, you get to trade these types of plays. Anyone that tries to trade these set-ups without the experience of knowing how to read pure price action is going to lose money – I don’t care how many 3-Bar method videos there are – the simple answer is – don’t play them until you are ready.

Auto
16:42:53

Alright thanks Hari I’ll just continue ignoring those stocks for the time being then. It’s just so frustrating when I can see just how profitable those moves are when we are in such shitty market conditions. But then again it’s not like anyone has ever became a profitable trader by being greedy and impatient so I’ll just continue to do what I’m doing then, thank you.

Hariseldon
16:45:47

I get it – they move fast, and they are cheap – perfect combo. Here is the problem – one never knows when to get out – how far down is too far when you have stock that jump 20% in a single candle, if you enter at $6, and it is now at $5, do you bail? Even though you saw it go from $4 to $7 just an hour ago? Do you average down? Ahhhh….it’s volume you say? But wait….volume totally dried up and the stock sat there for two hours doing nothing, and then for no reason whatsoever volume exploded again….so what the hell….?? If you are in a stock like F or CLF and you are down .50….well you know it will take a lot to turn that slow moving grinder around, so the decision is pretty easy to bail – but a stock like MEGL that can go from $5 to $100 in an hour?? Yeah, that is a different story

Superpantz
16:18:47

When it comes to leaning on the daily chart to determine stop levels, it significantly increases my win rate as I don’t get stop out by intraday noise. However since the stop level is determined on the daily level it is usually further from my entry resulting in undesirable risk to reward ratio. Since it is a day trade, the profit are usually significantly smaller compared to taking a loss. Therefore even if I have 90% win rate, my profit ratio could be 1 or less than 1. For example, if I win 9/10 trade risking $100 each trade and on average make $10 each trade, that 1 loss would take all the earnings. Especially recently since there are a lot of sideway price action from SPY. How can I improve this situation? Am I doing something wrong?

Hariseldon
16:39:11

Next time you are halfway to your profit target, increase your position by 50% – that will solve your issue

2022-08-30
Mark As Read

Pete
09:24:43

Better one safe way than a hundred on which you cannot reckon. A cat goes up a tree and gets away while a fox is caught trying to figure out what to do.
Better one safe way than a hundred on which you cannot reckon.

Pete
09:29:15

Once a Cat and a Fox were traveling together. As they went along, picking up provisions on the way—a stray mouse here, a fat chicken there—they began an argument to while away the time between bites. And, as usually happens when comrades argue, the talk began to get personal.
“You think you are extremely clever, don’t you?” said the Fox. “Do you pretend to know more than I? Why, I know a whole sackful of tricks!”
“Well,” retorted the Cat, “I admit I know one trick only, but that one, let me tell you, is worth a thousand of yours!”
Just then, close by, they heard a hunter’s horn and the yelping of a pack of hounds. In an instant the Cat was up a tree, hiding among the leaves.
“This is my trick,” he called to the Fox. “Now let me see what yours are worth.”
But the Fox had so many plans for escape he could not decide which one to try first. He dodged here and there with the hounds at his heels. He doubled on his tracks, he ran at top speed, he entered a dozen burrows,—but all in vain. The hounds caught him, and soon put an end to the boaster and all his tricks.

Pete
14:20:23

ADP revamped the way they calculate data. They stopped publishing their number in May and the first jobs report will be posted Wed. It might show weaker job growth just because of the way the number is calculated. It might not carry much weight for that reason. Initial jobless claims the last 4 weeks have been super steady. I am not expecting a bad jobs report. The BLS number is filled with seasonal adjustments (one reason I hate it) so maybe those will force it to be weaker. A strong jobs report could be bearish. Good news is bad news. Either way, the Fed is steadfast and as long as inflation is hot, one weak jobs report is not going to impact them. They said that taming inflation might come at the expense of economic growth and they are fine with that. This is why the reaction last Friday was so bearish.

2022-08-30
Mark As Read

Hariseldon
16:17:08

What is the point – or the check boxes, that tells you to Leg Out of an OTM Bullish Put Spread, rather than just close it for a loss and how far out in time should one make that decision?

Pete
16:35:22

There are many moving parts (the market, the stock and time). Since it is a swing trade and it is OTM it is going to take a fairly big move for it to go wrong. I evaluate the spread near the close and I let it move around during the day. When the technical support levels for the stock are in danger I need to know the cause. Is it stock specific or market related. If it is stock related, I better check the news. I don’t worry about broker downgrades, but material news on the company or group will get my attention. Then I look for continued rel weakness in the stock. I need a market backdrop where the market is setting up for a drop and then I can leg out. If the stock is super weak it won’t take much of a market move, I just need to make sure the market is not going to rally. If the stock is breaking down because of the market, I need to know the market move is legit and that it will have follow through. Then I am a bit more focused on timing the market because the stock will follow it. With regards to time, if the spread has more than a week until expiration I am in no hurry. Assignment is not a factor and I will have chances to leg out. Spreads that expire in a few days and that are ITM are more dangerous because I don’t have the luxury of waiting for a good set-up. Once I buy back the short put, time decay is working against me on the long put. My confidence that both the stock and the market are going to drop has to be VERY high or I will just close the spread as a spread.

Editor's note
23:59:59

Pete discusses legging out of bull put spreads in this video: How To Leg Out Of A Bad Spread

AlamVert
16:34:12

Is there a particular logic to defer mostly to bullish vs bearish time spreads for earnings? Does this mostly have to do with the ones bias on the stock/market going into the earnings?

Hariseldon
16:40:08

A time spread is neither bullish nor bearish – we use Calls because if the stock drops than you let the Call expire worthless and hold the long call for the next week. If we used Puts then you are hoping a stock that had a positive response to earnings is going to drop in the following week (if the result is outside the expected number). But a time spread is neutral on your hoped for direction.

2022-08-30
Mark As Read

Superpantz
16:22:03

I heard you said this today and last time on Twitter live; you said that setting stop level on 5M levels is consider momentum trading and is susceptible intraday noise and getting stopped out. I know we’re supposed to lean on the daily, but what exactly does that mean when it comes to determining mental stop for a day trade and not a swing trade?

Hariseldon
16:40:08

On my day trades my stops are typically determined by the daily chart, not the M5 – on occasion I will use VWAP but that is dependent on the trade. The overall point was that people exit trades because of 5-Minute candles that are basically just noise and not really cause for an exit.

lilsgymdan
10:20:03

Thanks for the pep talk coach 🙂 The hardest part of this is where you remodel your identity and beliefs. When they are still new It’s a fragile house of cards that can fall over once in a while and needs a hand to prop back up.

Hariseldon
16:32:18

You need to get three straight months of WR 75% and PF 2.0 or higher on paper trading, and then three straight months of the same thing with 1 Share – and only after that should you begin trading normal sizes. Any shortcuts around that never, like ever, end well.

lilsgymdan
16:49:52

should it be 75/2.0 for each of the those 3 months or on average across 13 weeks? Because I am EXTREMELY close

Hariseldon
16:50:20

It should be consistent – so for each month. I mean if you are close, it really is a matter of how you feel – the whole point of it is not so much learning the method, but being able to maintain the mindset needed to be consistently profitable.

lilsgymdan
16:53:07

That makes perfect sense. This month I have felt very confident but not this week. Taking it very very very cautious just tons of fear in my head for some reason yesterday and today. I am scared of messing up my win% and PF now

Hariseldon
16:59:18

Don’t be – they are just numbers – indications that you can mentally handle trading in a consistent way, that’s all. You’re a very good trader – but what makes you especially good is your ability to improve and learn, which I have certainly noticed. You will get there, and in fact, I agree – I think you pretty much are there – you have shown confidence, consistency, you’re finding great trades, you are also ignoring bad trades, and you are constantly improving. Have more faith in yourself – trust me, I know a good trader when I see one, and you will be an excellent trader.

lilsgymdan
17:26:39

@lilsgymdan mate your quality of picks & trades is visibly there or thereabouts. the difference between where you are now (trading ability CHECK) and where you want/expect to be is still a huge journey of personal growth & development. the rest beyond technique, which we have shown over and over to be simple, is all in the grey matter between your ears and it will take time. you will have great runs then have bad runs and think you just were lucky and are actually a total fraud and today your skillset has no value anymore. not only you need to be ok with that struggle but actually enjoy it. thats why we are all sick in the head and stay together as a bunch of nutters. Time at the screens. There’s a reason why prop desks give their junior traders at least a 1.5 year runway without any expectations other than follow the system and dont blow up.

Hariseldon
12:40:03

There is no asset manager in their right mind that is looking at this market and thinking, “Yeah, I should buy here”

Dave W
12:41:37

of course they all arent in their right mind

Hariseldon
12:42:09

And that right there is the entire problem with the rational actor model – there just aren’t enough rational actors out there!

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