This Is How I Trade

17 Jan
January 17, 2013



 

 

  1. I prefer above all else to simply enter a position with a break out of a price consolidation to a new high. Preferably a hot growth stock with a new revolutionary product or service. But I will also trade anything that breaks out of a base  into a trend,like  gold, silver, oil, sector ETFs etc. Unfortunately the last several years has been difficult to truly trend follow. I consider myself more of a trend trader looking for weekly and monthly trends on a shorter time frame than traditional trend followers.

  2. Even when I trend trade I will use options, both in the money for maximum delta capture and out of the money to manage risk in bigger positions. So even when I traded Apple, Priceline, and Google’s big trends last year for nice gains, I rolled option profits out continually to leave limited capital at risk and to put those profits in the bank. I prefer to trade liquid options versus stock. It is much better for me to hold a weekly in-the-money Apple call option for $3,000  with a .90 delta than to buy  100 shares of stock for $50,000.

  3. In volatile markets I will use a version of Nassim Nicholas Taleb’s Anti-Fragile trading system. Late in the week when weekly options are very cheap I open out-of-the-money long weekly option strangles at the end of the day on big stocks like Apple, Google, and Priceline, etc. If the underlying moves sharply in either direction the next morning I make profits. I am betting on one of the short option sellers losing a large amount of money. I am on the other side of that trade. This system works great in volatile markets or stocks.

  4. I believe that William J. O’Neil’s CAN SLIM system featured in Investor’s Business Daily and his book ‘How to make Money in Stocks‘ is an excellent robust system in the long run. I think O’Neil has proven that. This system is a big part of what I do and I will buy a cup with handle break out on option-able stocks when they have a big “new” thing going on with them. Unfortunately this is a system for a bull market I use trend trading and options strangles to make money in bear markets also.

  5. I use the 5 day ema, 50 day sma, and 200 day sma in my trading for directional plays. These are my basic tools along with candlestick charts.

  6. I buy stock options I do not sell them. I love the asymmetry of a $1.00 option that can be worth $10.00 in one day. I do not like the unlimited risk of selling options.

  7. I am not a day trader, I have no interest in sitting in front of the computer all day. I am primarily trade the open and the close. All my major profits were made in longer term trends where something just ran and I went about my life checking in at the close. My big wins with my strangle system were primarily with opening a position at the end of the previous day and then closing it the next morning.

  8. I am not a good predictor of market direction, I am a great risk manager I rarely ever lose more than 1% of trading capital on any one trade and options allow me to trade with a small percentage of my account. I am excellent at cutting losses short and letting winners run. I am good at losing my opinion quickly and going with the flow. This has made me money over the years.

  9. The majority of the time I look like a genius in trending markets and trade wide swings of  volatility very well most of the time. I look foolish in tight choppy markets with their many false signals.

  10. I stay fluid and trade one day at a time based on price action. My trading plan is written in stone my actual entries and exits are written by the charts.


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