If I were to write a new book (and I probably won't since I've written eight, an even number, but none on options trading) it would contain a lot of what I have already posted on this website. Below is a combination for one to pursue if they wish. I tried to just make a link for it but couldn't get it to work....one can copy and print if they wish. I was able to add many of the useThinkScript links but none of the pictures. Feedback is always appreciated.
When it comes to trading the markets (particularly options) his method has helped me use the “One Chart Visual Review.”
According to research approximately 90% of information visually transmitted to the brain is understood and retained (or immediately recognized) than is information transmitted by written, or other means.
Vision is our dominant sense which is probably why visuals are so effective for communication, learning and memory.
We’re all familiar with the phrase that “a picture is worth a thousand words.”
It is for this reason that I personally use the “One Chart Visual Review” when looking at charts, indicators, oscillators and other information provided on this wonderful website called useThinkScript. I try to view every post made on this site in order to see how it fits my picture for trading purposes (and I find more good information on this site than any other!)
In just a few seconds, a view of any proposed chart on this site, is much like the “One Bite Pizza Review” which lets one know a lot of information that can be gained with a mere glance.
This is the reason I like a chart that is not too busy! If I can’t see on one simple chart the information needed, how is an array of charts going to help any better? Charting that overanalyzes information is like reading a novel to find what the ending might be five chapters later.
This is why I don’t like “over-information” on a chart, nor more than one lower chart at the most. My brain cell can only absorb so much! This is also the reason I don’t like to trade more than one or two stocks at a time. Why screen a host of stocks when they all do basically the same thing: move up, down, or sideways? All I’m looking for is a possible (probable) change-in-direction taking place in a short, or longer term, time frame on very few stocks at the most.
During my 12+ years of trading options, it has been my goal to develop charting that is pleasing to the eye, gives information necessary in real time, and shows probable (possible) change-in-direction. My 82-year-old brain (coming next Sunday) needs the KISS principle to adequately analyze anything, which is why I have spent the past few years developing my AsGoodAsItGets charting.
Many of my losses have come when I think I know what the market is going to do rather than rely on the information being provided visually. Remember the market itself only provides a 50/50 chance (At-the-money) of moving one way or the other. We need to use adequate charting to hopefully gain an edge on the process. Keep in mind that most indicators have the ability to repaint as the market (stock, ETF) changes its mind.
There is a lot of information on “Buy the Dip” trading (which has been very effective for me) although my best trading usually comes from trading “The Extended High.”
It has also been my experience that the market doesn’t usually gap up at the rate it can gap down. I find the escalator ride up easier to defend than the elevator ride down if my trades have been placed wrongly, and I need to defend a position? (I will talk about Buying or Selling positions in another post).
Well, enough ramblings of an old man. Find yourself some good visual charts and do the “One Chart Visual Review.” That just might be As Good As It Gets?
First let’s look at Day Trading: Day Trading is where we buy/sell options within the same day usually in a short period of time which may be within minutes, or hours. An individual can day trade any stock or ETF desired, and we do not need to use today’s expiration in order to successfully day trade. In day trading we are looking for movements towards, and/or away from the mean (average price). One of the best and most accurate average prices of a security is considered to be the VWAP.
The VWAP (volume weighted average price) is a technical indicator used on intraday charts because it resets at the start of the morning session and continues throughout the day.
The VWAP is calculated from the total dollars used for every transaction (using price multiplied by volume and then dividing that amount by the total number of shares traded). Thus, it is called the Volume Weighted Average Price.
VWAP can be displayed as a line, similar to a moving average line, although it can also be changed on a chart to a chain-like dashed line, or something that fits your eye in a more efficient visual manner?.
Since the VWAP combines price and volume together, many traders consider it to be more representative of the “true average value” of the stock (ETF) price.
AGAIG: ARM WRESTLING
HEIKEN ASHI CANDLE WICKS
Candle Wicks can be indicators showing potential change in direction?
When I see long wicks protruding above 2-3 GREEN candles in a row these may represent (Buyers) Bulls testing a higher price with (Sellers) Bears resisting the higher price? I call this “arm-wrestling” between Bulls and Bears (Buyers and Sellers) and may represent an impending change-in-direction (depending on who wins)?
Conversely if I see 2-3 RED candles in a row with long wicks protruding down frequently represents Sellers (Bears) trying to reduce price, with Buyers (Bulls) resisting the lower price. Again, a little “arm-wrestling” taking place and may represent an impending change-in-direction?
Some thoughts about Wicks:
Wicks represent the highest and/or lowest price during the candles’ time frame being used.
A long upper wick suggests price rejection by Bears (Sellers) whereas a long lower wick shows rejection by Buyers (Bulls). The end of a wick does not represent the closing price.
A short candle body with long wicks on both ends shows indecision with neither side winning the wrestling match?
Wicks and candle bodies represent price action during the current candles’ time period.
NOTE: Don’t trade wicks by themselves. The best trades have multiple indicators in agreement.
JAs Good As It Gets Visual Options Trading Chart
My goal is to develop charts that are easy to trade and visually appealing to the eye
(each person visualizes differently).
When learning to trade options right
Pick a chart that’s good by sight
My AGAIG charts are good to trade
As with good indicators they are made
So, if you want to elevate your wins
You should take my charts for a few good spins!
This is the link for this new dual chart: http://tos.mx/!Kj9bc5iQ
This is what it looks like:
I find this an easy chart to trade.
My Put trades are placed when I get a lower Red Bar, a Red Traffic Light and MTF shows longer time frames Red as well.
I also view my chart arrows for direction. A Call would just be the opposite (Green Bar, Green Traffic Light, Green MTFs and Green Arrows on Chart).
I find my best two trades of the day are usually between 10:00 - Noon when two or more indicators align. Also note if trading is above/below VWAP and/or 20 EMA White Line.
Watch for crossovers of the 20 EMA.
Just some food for thought. Happy Trading!
ARTIFICIAL INTELLIGENCE: YOURS, MINE or THEIRS?
As I understand it, A.I. is a broad term for technology that mimics human decision-making (or problem-solving) by taking everything that is already in the literature, analyzing it, and then projecting answers from that pool of knowledge.
As a matter of fact, you and I do the same thing but with limitations. Our pool of knowledge is based on what we already know, have studied, and/or experienced. And (as has been my experience) there is a lot more outside my pool of knowledge than there is inside!
In our e-mail, we frequently find all manner of trading sights wanting us to pay for their new A.I. designed services, which they say are geared to help us make better trading decisions.
Are these sights worth the expense?
They can certainly evaluate the historical parameters of a stock (ETF) and make price predictions into the future based on past history but they can’t tell what the price will be in five minutes, tomorrow, the next day, or anytime into the future.
Therein, to my thinking, lies the downside of AI. You, me and AI can only see the past, the present, but not the future.
The stock market itself only gives current price and calls it ATM (at-the-money). Furthermore, the market labels current price as a 50 Delta giving a 50/50 chance of going up, going down, or chopping sideways. An ATR (Average True Range) can look back and give an expected price range based on the past X number of days (I use nine days look back).
Why do I use nine days? It has been shown that candlesticks (price) historically move 6–10 bars average (in all time frames) before changing direction.
So, why don’t we just rely on history for making trading decisions?
Why do I use indicators, oscillators, and/or other parameters for making current trading decisions? Shouldn’t A.I. be enough?
If the market itself doesn’t know the next move, then a small player like me might need to look at some other current facts and tendencies, before making a decision to place a trade?
What is my chosen oscillator telling me? I see it only showing footsteps up to this point. There are no footprints in the sand ahead. It has no foreknowledge for its next step. It only hints as to direction. An oscillator is limited to showing past movement up, down, or chopping sideways. It will show its footsteps in color, which is very helpful as to strength of the footstep.
Possibly I need other indications for what the next move might be?
Some of my questions might be:
Is there momentum taking place in the current direction? What is the overall market doing? What was the opening range for this stock (ETF)? Is it trading within that range, or has it broken out above or below that range? Does it seem to be down at support, or is it up at a possible resistance level? What is its ATR (average true range)? Is it trading within 1SD (one standard deviation) which it normally does around 80% of the time? Are there other parameters that I should take into consideration?
What I need is something visual to help me see what’s happening! My motto is: If you can’t see it, why trade it?
A.I. is helpful, but it’s a blank for the next step to take?
Projections are nice, but I need to see the now?
I need indicators that show current status with possible changes in direction that might happen.
I think I’ll go look at some of Charles’ AGAIG charts and see if they give a better clue to the answer for some of my questions? I need something more in addition to Artificial Intelligence.
This may be a 50/50 game, but I need to find an edge!
AS A REFERENCE: ALL OF MY CHARTS AND POSTS:
https://usethinkscript.com/search/1...4&c[nodes][1]=5&c[title_only]=1&o=replies&g=1
Below are listed (in no particular order) subjects and issues that might be of interest to you?
First some definitions:
Indicator: in the stock market it is a quantitative tool to interpret financial data to help forecast stock price movements.
Lagging Indicator: Indicators that confirm longer term trends. They are based on historical data (on things that have already happened). They may provide information about likely future changes.
Leading Indicator: These are Indicators which show where a price might move next. When they give the correct signal they give a trader the ability to get into a trade ahead of price movement. The indicators on my AGAIG charts are intended to be leading indicators with trade recommendations only when two or more are in agreement.
SMA (Simple Moving Average) verses EMA (Exponential Moving Average): The difference in these two is in their calculation method. The EMA gives weight to current (recent) prices and is usually suited to short-term trading, whereas the SMA provides equal weight to all prices and is usually favored by longer-term traders. My AGAIG charts favor EMA for trades. Some favored EMA moving averages are the 5, 8, 13, 21, 34. Most of my charts highlight the 21 EMA by using a white 20 EMA line, watching for candles to cross over this line. Some traders trade only crossovers. The 20 EMA is a heads-up for the 21 EMA, which is a favored crossover for many algorithms and computer based trading.
Candle Types: The most frequently used Candles are Standard Candles, or Monkey Bars. My favorite (and mostly used on my AGAIG Charts is the Heikin Ashi). I find standard candles to be noisier as they are real time and unprocessed, whereas the Heikin Ashi are data filtered based on a two period moving average. I have discussed these two types of candles on My AGAIG TREND & MOMENTUM tutorial.
PIVOTS: Places where the market frequently makes changes in direction. Some of these Pivots are the 1 SD (Standard Deviation) and the Murrey Math Pivots shown on my AGAIG High Profit Options Trading Chart
VWAP Volume Weighted Average Price I have explained and show how this works on my AGAIG Daytrading the VWAP . The VWAP (Volume Weighted Average Price): Institutional traders frequently use the VWAP (Volume Weighted Average Price) primarily for intraday trading, usually on a one-minute, five-minute or fifteen-minute chart.
AI = Artificial Intelligence, which comprises most of my own. To my thinking, AI is just another indicator which extrapolates historical into the present, but is unable to tell you where the market will end today. Is it a leading indicator? I don’t think so but would like other’s thoughts on this issue?
Trading Waves: The market (Stocks, ETFs) tend to moves in waves on all time frames being used. These are frequently described as M Waves and W Waves. If you are interested in Waves, I discussed them on my AGAIG M & W Wave
The GREEKS: There are several Greeks which the market uses in establishing prices. One of these is DELTA: I explained them in AGAIG The Greeks Delta
Another necessary GREEK is THETA DECAY which I discussed under a posting titled: AGAIG The Greeks Theta Decay
It has been my assessment that there are two best trades of the day: They are explained in an AGAIG The Best Two Trades Of Each Day
Visual Options Trading: During my 10+ years of trading options it is my belief that seeing charts visually is the best method for trading. I explained my thoughts on AGIAG Visual Options Trading
Success in Options Trading is best achieved if you have a TRADING EDGE: I discussed AGIAG TRADING WITH AN “EDGE” IS THE DESIRE OF ALL TRADERS.
A trader also needs a TRADING PATH in order to be successful. I made a post showing a Trading Path using no Candles in order to better show the pathway. It is titled: AGIAG TRADING PATH CHART
You also might like my Indicators: AGIAG “GPS” System for Trading
I have developed my many trading charts which I believe are pleasing to the eye and include within them the basics as listed above.
Find all of my Charts and Tutors:
https://usethinkscript.com/search/1...4&c[nodes][1]=5&c[title_only]=1&o=replies&g=1
You will find all of my Charts and Posts designed to help you become an efficient and hopefully better trader.
UPDATE: 9/30/24 new indicators! new chart!
This is a new update I am using for all time frames. You can continue to use the old setup (see post below) or this new one if you prefer. I am using the new one on all time frames.
Chart Link: AGAIG BestTradingChartSetup 9-30-24 http://tos.mx/!ayok5Szv
Chart Look:
Here is some further narration.
AGAIG Best Trading Chart Setup Update
I have added a couple of things to this chart. Added is the 9:55 “Time To Trade Heads Up” (30 min ORB coming to a finish and methinks the first two changes in direction may be the best trades of the day?) and I have also added a Revamped Oscillator showing on Lower and Overlaid on my Lowered Squared Histogram. The Histogram coordinates with the upper Long/Short Bubbles and the Oscillator shows previous candle movement as well as current candle movement. I will usually enter a trade when the Red/Green Heikin Ashi Candle first shows and is corroborated by my Long/Short Bubble and/or another change in direction indicator.
Let’s review Heikin Candles so as to better understand them.
A Green Candle is Bullish. It should be Flat on the bottom with wick protruding up from top of candle. The wick shows continuing direction movement. As the Candle moves up you would like for each candle to be larger and close above previous candle (acceleration is body growing in length). If you start getting a wick showing on the bottom as well as top momentum may be slowing and may be signaling a change in direction (also probable change if showing candle shrinking in size as well as closing below last candle). A candle with wicks protruding evenly both sides is most likely a change in direction.
A Red Candle is Bearish. It should be Flat on Top with wick protruding down from bottom of candle. The wick shows continuing direction movement. As the Candle moves down you would like for each candle to be larger and close below previous candle (acceleration is body growing in length). If you start getting a wick showing on the top as well as bottom momentum may be slowing and may be signaling a change in direction (also probable change if showing candle shrinking in size and closing above last candle). A candle with wicks protruding evenly both sides is most likely a change in direction.
DO YOU PAY YOURSELF EVERY FRIDAY (IF NOT, WHY NOT)?
How much would you like to earn from trading options? What about $500 per week? Or maybe $750, $1,000, or more? The question is: How much would you like to pay yourself every Friday (or maybe daily)? Once you have the answer you gear yourself to accomplish your goal.
Research tells us that only 5-10% of option traders make consistent money. Do you belong to that 5-10% of traders? Would you like to belong?
My first question is…how many trades do you have in place at one time? Or, to put it another way: “How many horses can you ride at one time”?
In my earlier days I frequently had 10 – 20 trades in place at one time. These were usually all single trades and so I learned how to lose money one trade at a time. I was a “gut” trader at the time and it’s easy to lose when the mind can’t absorb that many trades at one time. I’m older and hopefully a little smarter now?
My new model is to trade only three charts at one time using my AGAIG indicators placing five contracts on each stock ITM (In-The-Money) so as to have some intrinsic value at the start (intrinsic value is the value the stock price already has). You can trade these as a spread as well. It has been my experience that if you trade a $250 spread for approximately half the price (or less) of the spread you can make $24-$50/contract fairly rapidly. My three charts today are MSFT, AGAIG, and NVDA. MSFT and AGAIG have both paid $250 each and the day is not yet finished.
The goal is to enter the spread
9if used) for $1.25 - $1.35/contract and enter a GTC (Good Until Cancelled) for .25 - .50 cents more than you paid. My 5 contracts then quickly pay approximately $125 - $250 profit (usually fairly quickly when direction is right). My trades today were not spreads and so today was an easy $500 profit on MSFT and AGAIG and the day is not finished. I will usually place my first two trades of the day around 10:00 (or when two or more indicators agree) and then play them to exit and then not trade again until after 2:00 p.m. but only with clear entries and exit before the end of day if possible. A $500 spread takes longer and I find the $250 spread to work faster and more efficiently.
The bottom line is to set your goal, don’t be greedy, and enjoy your profits.
I used to scan thirty or forty stocks to find the good ones. Now I pick three for the day and trade the ups and downs of those. If you had only one, two, or three consistent trades per day…would that be AS GOOD AS IT GETS?
Happy New Year and may all your trades be profitable (and most will if you use good indicators wisely)!
read more about my chart here:
https://usethinkscript.com/threads/agaig-visual-options-trading-chart-for-thinkorswim.19840/
This is my grid link: http://tos.mx/!XFW9xBEv
AGAIG: WHICH WAY DOJI? IS IT ANOTHER INDICATOR ON TOS?
Even though a DOJI is a type of Candle you should think of it as another POTENTIAL INDICATOR in your arsenal.
A DOJI CANDLE shows possibility of an impending trend reversal. I only like to look at Doji’s using Heikin Ashi Candles (of course I only like Heikin Ashi Candles for trading purposes in general as they are smoother).
The Doji has a small body which looks like a cross or a + (plus) sign on the chart. The body price could be a straight line when opening and closing prices are the same, or a box as shown below if opening/closing prices are nearly the same.
The small central body represents a tug of war between buyers and sellers. The shadows (wicks) represent buyers trying to push price up and sellers trying to push price down. The middle box on a Doji shows that opening price (on this candle) was almost the same as the closing price and the wicks didn’t have much affect on price.
The Doji represents a “heads up” showing a moment of indecision concerning price. A Doji should not be used as a trade entry until the next candle closes above or below the Doji showing an actual change-in-direction. That candle is the trading point. It may be the first or second Candle after the Doji forms. Therefore a Doji can act as another indicator in your trading arsenal.
Now to repeat myself: the Doji basically represents a moment of indecision as to where price of the stock (ETF) might change direction. This is true for all time frames. It is the next candle (or two) after the Doji which provides the clue but only if the next candle closes above, or below the Doji showing a probable direction entry point. It’s that next candle (or two) clearly above/below the Doji which represents the probable change in direction and a trader could use the actual Doji level as a stop.
A trade close then would be at the next Doji plus Candle that shows another impending change in direction (or use another exit point that you trust).
A Doji can show on all time frames. One issue with many traders (including myself) is “exit-itis” (not letting a trade play out and leaving profits on the table). The same time frame should be used for entries and exits.
The expirations I use when trading the Doji is based on the time frame I am using. For Day Trading (short time frames) I will be in and out during the day and will be using the next expiration. For longer time frames I might use 1-3 weeks out (or longer) expirations and will close an entered when the next Doji + first Candle Change appears.
SO, HOW TO TRADE THE DOJI
Once you see a DOJI trade the next candle closing above/below the Doji (it might not be the first candle could be the second or third that actually closes above/below the Doji. The Doji itself only suggests a change in direction (Indicator). The next Candle(s) fully above or below the Doji lets us know the probable direction of the breakout. Again, the trading candle must close fully above/below the Doji to confirm direction.
Once a trade is placed usually ATM, slightly ITM, or a bar or two OTM (Out of the money) usually produces the best trades. The ATR (Average Trade Range) lets us know the Day, Week and Month range to expect for volatility. I like to trade stocks that move 5+ points per day.
One can place a stop at the level of the Doji to protect the risk of the trade. The exit for the trade would be the next Doji (that is the first candle of the next Doji depending if that candle shows a reversal or a continuing trade? If a continuing trade more profits are in store and the trader can stay in the trade?
You should be able to use any of my AGAIG charting for Doji trades (whichever chart fits your eye the best) and using Heikin Ashi Candles for the style setting. Frequently my Long/Short Bubbles are on top of, or close to, a Doji.
Here is a Bearish example of Doji Candle with second candle below the Doji showing a downward trend. The second candle is the trade entry point. The first candle is not clearing the Doji (only the shadow).
THE WORST TRADER
he worst trader has the ability to be right 50% of the time mathematically according to the stock market. The current price of any (and every) stock is determined by the market to be at Delta 50 (meaning there is a 50/50 chance of going either way.
So how does even the worst trader find something that might increase their chance for a winning trade above the 50% level? Finding that possibility is called FINDING AN EDGE.
So what is an edge? An edge refers to a Consistent Advantage a trader can develop that will give them an advantage over other market participants i.e. the worst traders.
Making money in the stock market is rarely luck or just a random occurrence. Successful trades more often come from having a well-defined strategy that tips the odds in the trader's favor. So, how does one develop a strategy that helps them become a successful trader i.e. more wins and profits than losses.
A stock can only move in one of three directions, that is UP/DOWN or SIDEWAYS. To find that edge an educated trader frequently turns to indicators, oscillators and candlestick understanding. A problem is that indicators have the ability to repaint confirming a Paradox in life: "A thing and its opposite may both be true." Because of that paradox the intelligent trader looks for more than one indicator suggesting a change in direction. The oscillator meanwhile is showing you the former footsteps of the stock (ETF).
This brings us to ESSENCE which means: Stock movement is what it is regardless of what anyone thinks about it!
I would suggest that the most visual candle style is Heikin Ashi? If you are using regular candles I would encourage you to open two charts side by side with one regular candles and the other Heikin Ashi and determine for yourself which is easier to follow?
Next, find 2-4 indicators that look at direction and momentum from different perspectives realizing that they are all measuring the same “possible direction changes” but from slightly different perspectives. The EDGE is when two, or more, agree that that a change in direction is taking place (but again repainting is always possible). Also know what the market is doing overall as well.
Now, I have only been trading options for around fourteen years and have learned what little knowledge I have from The School of Hard Knocks which is actually a pretty good school for everyone since “those things we don’t learn the first time keep repeating themselves until we do?”
I would invite you to look at some of my charting on this website which begin with the moniker: AGAIG
https://usethinkscript.com/search/2...1&c[nodes][0]=5&c[title_only]=1&o=replies&g=1
Once you find an EDGE that works for you begin using REPITITION for successful trades and you don’t need a lot of stocks to make successful trades. My thinking the fewer is the better. I do NO SCREENING since all stocks do the same thing UP/DOWN/Sideways so why not trade one’s that have good volatility and have good ATR (Average Trading Range) of 4+ or greater.
REPETITION: “Stock tendencies we refuse to learn are simply repeated until we do learn them if, and until, they are mastered. If not mastered they usually come back a little harder each time until we do.”
Happy trading. It is possible to have an EDGE and move the 50/50% chance up to maybe a 75-90% or better!
SO, WHAT IS THE MMM (MARKET MAKER MOVE) AND HOW DO YOU USE IT?
The MMM calculates the expected magnitude of price movement based on market volatility. According to TOS (ThinkOrSwim) the calculation is made using stock price, volatility differential, and time to expiration.
In short, it means that the options market MMM has priced in an expected move from current price up or down from that of a typical trading day. For me, it represents another indicator to take into account what the expected movement for a stock (ETF) that I’m trading.
MMM therefore is one of the ways to see what market “expectations” are for a particular stock (ETF). Remember: Expectations and Realities can frequently be unrelated parameters?
Where do you find the MMM on TOS? It shows on the option chain, usually as a yellow MMM showing a +- from the current price, and is located to the right of the stock you have entered (on that same line out to the right). If it is not automatically showing, it is one of the “All Products” offered by TOS. Not all stocks will show MMM, but most of the major stocks will. (If not showing on your charts, you can google how to add MMM to your chart or call a TOS agent for help).
So how do I use the MMM?
On a daily basis, I will frequently use it for trading the SPX and/or XSP (the mini SPX). I usually place trades for these around 10:00 a.m. after the market has established its ORB (Opening Range Breakout). For these trades, I will Sell Credit Spreads outside the MMM expected move. These trades can be either Call or Put Credit Spreads.
Remember: When you sell a Credit Spread you receive funds into your account with maximum risk being the spread minus the funds received. My goal is for these to then trade within MMM parameters and let me keep my cash received. The nice thing about the SPX and XSP is that they cash settle at the end of the day (it is not necessary to close them prior to market close at 4:00 P.M) which is good for smaller accounts since these trades do not count as a day trade unless you close it prior to the end of market, which it would then count as a day trade. For larger accounts, you can place these trades multiple times during the day and place a GTC (Good Until Cancelled) to buy them back at half price (which is something I frequently do on 0 DTE trades).
This process can also be used for stocks (I use it for stocks that have a lot of volatility and premium available). I mostly trade these on the day of expiration, or the night before. The night before provides for overnight theta decay.
An example for this might be TSLA. Before market open (last Friday, May 5, 2025) the MMM was +-6.44 and the stock price was 280.52. The MMM range then was 286.96 high and 274.08 low. TSLA closed at 287.21 just above the MMM (this is an example and I did not place that particular trade, although I would have had a GTC auto close for around half price buyback during the day if a Credit Call, or Put spread). My choice is to always take a half price gain rather than experience a double loss. A good trade based on MMM would have been a 287.50/290 CCS (Call Credit Spread) or a 272.50/270 Put Spread, with both just outside the MMM.
For day trades placed in the morning, one will usually enjoy accelerated theta decay in the afternoon for Credit Spread trades. Wins can go to losses, especially in the last half hour of trading, and so I close any that might be in range and usually don’t place Credit Spreads during that time period (although I have a friend who frequently trades during the last half hour and has had mixed results). Market chops for Credit Spreads generally work in your favor.
When trying to figure where a stock might close, I also take into consideration where the most OI (Call & Put) is. It has been my observation through the years that closing price is frequently right at the level of most OI where the brokers and/or market makers can dash the hopes of traders or make the positions less valuable? (This is often referred to “as getting the rug pulled out from under you”)
These are some of my thoughts, and I’m always interested in yours!
DAY TRADING – SCALPING FOR SUCCESS
So, what is the best way to Day Trade? How do I Day Trade? What stocks (ETFs) are picked, and why do I pick them? How do I know when to enter and/or exit?
The old song “knowing when to hold them, knowing when to fold them, knowing when to walk away and knowing when to run” fits well for an options' day trader!
First of all let’s look at what to trade. I quit trading (for the most part) 0DTE (zero days until expiration) although I have done well with these during my foregone more alert days. Sometimes I will trade the ODE SPY, but not as much as I used to. Too many others work better with less stress and give more flexibility?
I want stocks that:
ATR gives the average movement of the security on a daily, weekly, or monthly basis, but we’re trading intraday and can expect multiple up and down movements within that range during the day with a possible ORB (Opening 15-30 minute Breakout) to the upside or downside.
An added comment if I may: It has been my experience that most stocks close at the edges or within the ORB (15-30 minute Opening Range Breakout). When trading into closing I take this into consideration. I also notice that stocks tend to move towards the VWAP (Volume Weighted Average Price) which to me represents home-base for a security (a frequent area of resistance). I also stated that I trade Friday’s Expirations Monday thru Wednesday and then begin trading the next week out. I actually start the next week out at Wednesday between Noon and 1:00 p.m.
MAJOR KEY POINT: When using my charting similar to the AGAIG Visual Options Trading Chart
https://usethinkscript.com/threads/agaig-visual-options-trading-chart-for-thinkorswim.19840/
I’m using the Long/Short Bubbles and Lower Squared Histograms for entry/exits after looking back 2-3 days to see what the average intraday movement (AIM) has been and use that average for expected intraday movement.
I have found it best for intraday trading:
Some approximate Stats using average intraday movements on some of the ones I Day (Scalp) Trade: (2-day intraday average movements) are as follows:
SNOW: 10 Entry/Exit Bubbles with average 5.92 intraday moves including end of day exits. ATM trades = 5.92 X .5 X 100 = $2.96 potential per trade X 3 trades/day = $888 profit daily. I place GTC Exits at .75% of expected move, watch for turning points, and expect profit of approx. $600 - $1,000+ Daily.
VST: 14 Entry/Exit Bubbles including EOD (End of Day) exits with average 2.5 intraday moves. ATM trades = $125 potential on 5 contracts. 3 Trades/day = $375 or more easy profit per day.
The other two I watched on Friday last was AVGO and MSFT.
I’ll let you figure out the intraday averages for your favorite trades. Honesty is a good practice and my goal is $2K+ per day and Friday last easily eclipsed that amount and I was away half the day!!).
My trading setup used to have six (or more) monitors and now only use three monitors (two with double charts with the one in the middle having only the options trading chain. I have two stocks showing that I trade for the day on the right monitor with the other two stocks on the left monitor that might be traded if showing clear entry or exit signals?
My trades are usually just ITM (In-the-Money)so there is a little intrinsic value to start. I trade Friday’s expirations Monday - Wednesday and then the next week's beginning Thursday. Some of my favorite stocks are SNOW, VST, AVGO and MSFT and usually place a GTC of .75 - 1.00 per contract on these. My goal is to be in cash at the beginning of the day and back into cash at end of day although occasionally I will have to hold overnight which leaves me a few days grace if needed.
Bottom line you only need 2-4 stocks for day trading, know the average intraday moves, relax and don’t be greedy. You never lose money when you take a profit. Taking profit on half the expected movement increases the odds greatly.
I know traders who exit trades at 10-12% profit, others at 2-25% profit whereas I’m looking for 50 cents – 1.00 per contract profit. Your risk determines you toleration to profit/loss.
Greed (trading options) is usually inversely proportional to one’s expectations?
My pre-trading (daily) routine: Twenty minutes on our “stationary” bike (approximately 2.5 miles) always wearing a helmet in case I get hit by a stationary car!
Confession: My trading for the past several years has usually been 0 DTE Day Trading. As I get older (81 next month) my lone brain cell doesn’t want to focus that rapidly anymore.
My new trading style is using Heinkin Ashi One Hour Chart with Entries/Exits taking place at 1-3 places.
First, trade the Heikin Ashi Candles on pivot from Red to Green, or Green to Red (proving very accurate on trades). Second, my Long/Short Bubbles are also proving accurate on this time frame. Third, the Murrey Math Pivots are good Entry/Exit points (especially when in agreement with one (or more) of other indicators.
My trades are now placed at least one week out as a single option, or a spread trade (I particularly like pivots showing in the last hour of trading especially pullbacks). I also like Spreads with the Long ATM (At The Money) and the Short OTM (Out of The Money). On these trades if direction is right, the Short Position Theta Decay is faster than the Long Theta Decay position making profitability easier to achieve. Also Risk is less with a spread.
When considering a trade look at the option chart for the trade you are wishing to make and see where most of the OI (Open Interest) activity is. Is it mostly on the Long/Short side. I usually like to trade inside where most of the OI activity is.
This chart setup includes the 14 Day ATR. the PSAR, Stacked EMA’s, the Long/Short Bubbles, the TI MTF’s, and the Traffic Light.
Also added is the Lower Squared Histogram which coordinates with the Long/Short Bubbles. The Profit Maximizer Arrows and Trend Line are in place as well as the Automatic VWAP. There is enough information on this chart to make successful trades.
Notice on the included Chart for MSFT and AMD that there was overnight entries near close of yesterday which paid out nicely today.
One could basically use the Heikin Ashi candle color change for trades. Following the Heikin Ashi Color Candles on Day Charts is also good for longer term trades. We recommend, however, that multiple indicators are in agreement for placing trades.
So, what are the best two possible trades each day (I answered this before to a question and will again show it here as a trading strategy).
These TWO BEST TRADES are the FIRST TWO TRADE ENTRIES (Long or Short) that take place AFTER ORB (Opening Range Breakout) on whatever stock/ETF you choose to trade.
Opening Ranges Breakout is considered to be the first 15-30 minutes after market opens. ORB is usually the most volatile time of the trading day. Option prices are usually highest price (cost) during this period of time due to the pent-up energy built during after-hours and pre-market hours for opening trades being placed, or for trades already in place that individuals are hoping to close at the opening market pop.
To me the best two trades of the day are the first two change of direction trades that take place around or after 10:00 a.m. As examples I will show two charts (4 trades) on QQQ, SPY, TSLA and APPL that took place yesterday 9/9/24 after ORB.
The QQQ first entry (short) was at 10:25 – 11:20 for 4.94 points. A re-entry long was at 11:30 – 1:15 for 5.94 points.
The SPY first entry (short) was at 10:10 – 11:15 for 3.11 points. A close of first trade and re-entry (long) was at 11:20 – 1:20 for 4.82 points.
The first TSLA (again short) was at 10:25 – 11:15 for 5.32 points. A close of that position and re-entry (Long) was at 11:20 – 1:20 for 4.11 points.
Lastly AAPL first trade (Long) 11:00 – 1:40 for 3.58 points. A close of that trade and re-entry (Long) from 1:40 - - 2:40 for 3.77 points.
The total points on those trades was around 35 points which ATM (At the Money) entries X .50 X 100 = roughly $1,750 profit for single contracts.
It has been my experience that an AAPL a day (especially between two crusts, warmed, and covered with whipped cream) is good for the soul!
You can do this with any of your favorite stocks (ETFs) because of the movement up/down throughout the day and I find the first two moves (trades) after ORB can be most productive. Beyond these two trades the market may mostly turn to chop.
Exits are when two or more indicators suggest another change in direction. Look back at a couple of your favorite stocks (ETFs) and see how this type of trade would have gone for you yesterday? My exits are usually when the Murrey Math Pivots are reached especially for stocks that are not O DTE (Zero days until expiration). Stocks will give you extra time to play out.
Also for those of you who are limited to 3/5 trade’s in a five day period, if you trade more than one contract at the same time (both entry and exit) it will count as one day trade. One can also open a cash account which has no day trade limits (the limits are the amount of cash you have on hand in the account to trade and your cash will not be replenished until banks and market open the next morning for trades placed the day before. Then you will have your cash available once again if you had used it all up the day before).
Happy trading and then finish with a hot piece of AAPL pie!!
SELLING CASH COVERED PUTS vs SELLING COVERED CALLS
A friend asked me over the weekend what I think about Selling Cash Covered Puts?
These are my thoughts on Cash Covered Puts, Stock Covered Calls and/or Selling Naked Calls or Puts:
First of all: I don’t recommend selling naked Puts! Never sell Naked Puts on a stock you don’t want to own. With Cash Covered Puts make sure you have the cash available to actually buy the stock being traded (or else you might be using margin and/or become subject to a margin call).
On the positive side: Selling Cash covered Puts may allow you to buy the stock at a price lower than its current selling (cost) price. This is a strategy frequently used by traders with larger accounts and/or traders wanting to hold stocks (or this particular stock) in their portfolios.
Let look at an example: NVDA is a stock frequently traded and its 12-Day ATR (Average True Range) is 6 points up/down Daily, and 13.1 points up/down Weekly based currently on 21 March ’25.
NVDA is in a pullback this morning trading at $121.40 as I begin to write. Next Friday’s 115 Put (21 March ’25) is Selling for 1.69 ($169) per contract, and/or the 110 Put for .78-.82. One week further out (i.e. 28 March ’25) the 115 Put is selling for 2.50 – 2.52 ($250-$252 per contract) and the 110 Put for 1.18 ($118 per contract). The reason for the increase in price one week further out is based on time until expiration (slower Theta Decay).
Selling a Cash Covered Put reduces the amount you are willing to pay for the stock. If you sell Friday’s 115 Put for 1.69 you would be willing to buy NVDA between now and Friday for 119.71 (121.40 – 1.69 = 119.71) should the stock pull back below that $119.71 price. If it does not pull back at, or below, that price and you end Friday OTM (Out of the Money and have not been exercised) you will have made 1.69 ($169 per contract). It is highly doubtful that your position would be exercised when if the stock is selling for more than what you have sold the Cash Covered Put and are willing to pay for the stock.
If you sold the Cash Covered 115 Put one week further out (i.e. 28 March ’25) for $2.50 you would be willing to buy NVDA for 118.90 should it fall at, or below that $118.90 price. If you sold the 110 Cash Covered Put you would have received $1.18 and be willing to Buy NVDA for $120.22 should it fall at, or below that $1.18 price.
The other option you have is to close the Put you have sold prior to expiration for a price lower (or higher if you chicken out) or have been exercised and now own the stock for the price you agreed.
Ironically, as I finish writing this diatribe, NVDA is selling for $119.73 (and trending back up) and you may have purchased NVDA for a lower price than where it opened and can now Sell Covered Calls on the position’s you now hold which is essentially the same process in reverse except now you are Selling Calls against Shares you own (Selling Calls further out should the price reach a higher price and you will be willing to sell the shares you now hold). Again, since you are receiving money for the Call being sold the cash is yours unless the stock rises above that price or is at, or above, the agreed Sell price at expiration.
Of course one can Sell naked Calls (according to personal risk) for impending stock pullbacks with less risk usually than that of a naked Put since stocks don’t usually rise as fast as they tend to fall.
Both Selling Cash Covered Puts and/or Selling Stock Covered Calls and/or Naked Calls are viable trades depending on your risk tolerance and desires, but no naked puts unless you meet the first criteria as outlined above!
Hopefully this is an understandable explanation.
In order to have an “edge” in trading, we need an indication to where the market is heading and what its next move might be (thus the development of indicators). Some day traders (like me) are looking for moves over a short period of time.
see the next post below for a full explanation of this chart and the overall concepts seen in all As Good As It Gets setups.
There may be other chart setups that don’t use candles, but this is my first using indicators alone. The top labels are fairly straightforward. I have added the DMI MTF (a free indicator from TI for which I added the Cyan Header).
This chart is called THE TRADING PATH CHART using HEAVY RED/GREEN ARROWS comprising “THE PATHWAY”. THE THICK RED/GREEN ARROWS ARE THE TRADING PATH. The thinner line is the EMA (Exponential Moving Average Price Line) and shows its relation to the solid White 20 EMA.
The SOLID Red/Green horizontal thick line shows Reversal Pivot Points on the chart and works with my Short/Long (possible) transition Bubbles.
The Price Pointer (on the chart) shows actual price movement.
The Yellow Dotted Dashed Line on the chart corresponds with the PSAR (Parabolic Stop and Reverse) Label showing number of bars since Last Direction Transition.
Added are the high/low 1 SD horizontal lines (frequent turning points), as well as my HiAlgoPivot (Red Solid Line)and LoAlgoPivot (Green Solid Line) Pivot Points. The PDHi (Previous Days High) and PDLow (Previous Days Low) are shown as White Lines .
Support/Resistance is shown as a Red/Green Cloud area.
Also added are SD (Standard Deviation) Vertical Lines: The RED Vertical Dashed Line shows when the stock or ETF has reached a +2.5 SD Extension (EXT UP +2.5 SD) and may be nearing a transition down; the GREEN Vertical Dashed Line shows a -2.5 SD Extension Down (EXT DOWN -2.5 SD) and may be nearing a transition up. These do not paint unless those levels are reached.
Also shown as Vertical Lines are: MARKET OPEN (Yellow); UK MARKET CLOSING 10 MIN (White); and POWER HOUR HEADS UP (White).
This should cover everything. I have been putting this together for two weeks without any losing days. If you can’t live without candles you can go to Added studies and strategies and delete AsGood_CancelCandles_Lines.
Here is an updated link with VWAP added to the chart. Refer to my tutor on Daytrading the VWAP
http://tos.mx/!cypFFgGo
“NO MAN’S LAND
It has been my experience that it is best to trade a security (Stock) in one direction at a time and not trade both directions (although some sites will recommend Straddles or Strangles around Earnings Reports).
Getting caught between two extremes is what I call “NO MAN’S LAND” and over a period of time theta decay produces more grief than success.
Another thought: RELEASE: You are bound to lose on any trade you do not release (exit) while it’s making money?
They posted me on the "Weekly New For ThinkOrSwim" today
https://usethinkscript.com/threads/agaig-daytrading-scalping-for-success-in-thinkorswim.20383/
and as a current small report I have been in/out of MSFT (5 Contracts each time for 31 January Expirations) for small profits ($25-$45/contract) and am currently up $1,267.38 when this is posted.
A lot of small trades add up to one large trade?
REPAINT VERSES NON-REPAINT
REPAINT or DOES NOT REPAINT
I am always interested when an indicator is labeled Repaints verses Non-Repaint.
So the question arises: Repaint vs. Non-Repaint Indicators: Which is Better?
Every type of indicator has advantages and disadvantages. Myself, I am more dependent on indicators that repaint. To mitigate the repainting, I rely on two (or more) indicators telling me the same thing before placing a trade.
For instance, the Opening Range Breakout becomes static after the first 15-30 minutes and stays the same for the rest of the day. The stock may end up trading above, within, or below that range. A High, or Low for the day will also stay static unless a Higher High or a Lower Low is achieved.
For day trading purposes I find the Murrey Math Pivots as my repainting indicator as it will move with the Highs and Lows.
I also rely on the 1 SD (One Standard Deviation) since it has been shown that a stock moves within 1 SD as a rule during the day and the options market is mathematically designed, and priced, on a one standard deviation basis.
Non-repainting indicators are designed to show past and present price data. They don’t change once they have formed using historical price and volume data. They don’t have the ability to predict the future.
I use repainting indicators for trading within expiration, a week or less. As a rule, my trading is for in/out trades today, regardless of expiration. To me, a profit is a profit and one never loses money when they take a profit.
In short, indicators that repaint can change their signals or values after they have been generated, which is why I want agreement between two or more before placing a trade and am prepared to exit a trade if they reverse. This is why some traders don’t recommend repainting indicators. Remember though that I am now 81 years old and need as many positive current indicators as possible!
Non-repainting indicators are more stable and provide a more reliable signal. They include more back testing in the signal generated. This makes for less stressful trading?
However, Non-repainters lack real-time price action, which is what I’m looking for.
Otherwise, I might miss some good trading opportunities!
Repaint indicators continually adjust to new market condition and provide signals based on the most recent price data, which is helpful in faster moving markets. To me, they frequently give me a head start on a reversal taking place.
The difference then is based on your trading style, both of which can be profitable at least up and until after eighty-one? One of the paradoxes of life is that “A thing and its opposite may both be true.”
One of the natural laws of life is Non-Completion: “We are always expanding our concepts and re-inventing ways to do things.”
TREND AND MOMENTUM TUTORIAL
Trend Direction and Momentum (Price Action) are two important factors for your success.
The Trend of the Market is the tendency (Stock, ETF, etc.) to move in a particular direction over time (short, intermediate and/or long term). We have several indicators to help show trend, direction and momentum.
MOMENTUM measures the rate of the rise/fall of stock prices in real time.
Today, I want to talk about using REGULAR CANDLES verses HEIKIN ASHI CANDLES for both DIRECTION and MOMENTUM.
Here are two charts: an AAPL Day Dual Chart and then two MSFT Day Charts, which after viewing we will discuss.
First, I want you to look at Dual Charts of AAPL. Both of the charts are Day Charts. First study the left chart (it is using REGULAR CANDLES, which most traders use).
Now look at the Right Chart (it is using HEIKIN ASHI CANDLES) and my question is this: If trading AAPL on a loner term basis which chart would you prefer to use.
Now look at two Day Charts for MSFT
So, let’s talk about what we see. Heikin Ashi Candles are Japanese inspired, which average price data using Red/Green bars.
Direction and Momentum are Green/Red Candles growing, or shrinking in length.
The Green candles which you saw on both charts on the right side were Heikin Ashi having flat bottoms and growing in length with each candle closing higher than the day before. Note you will frequently see a wick on top of a Green Candle showing direction being traveled. We know that candles usually last 6-10 days in all time frames. When they begin to shrink (or have traveled 6-10 days) look for an impending change in direction and a slowing in momentum.
Red candles work the same, except in reverse.
On the AAPL Day Chart, there was a change to Long on 10/9 that lasted for at least four days for at least a 9 point change. Which chart was easiest to follow and would that have been a good trade?
Notice on MSFT that an uptrend began on 10/10 and lasted for 5 Days before momentum began to slow for a change of approximately 33 points. How would that have been for a nice profit? Then on 9/23 it changed direction and momentum again (short) for 11 days and another 23 points. Which candles were the easiest to trade or follow?
This works with Heikin Ashi Candles on all time frames and works wonderfully if you’re using a chart like my AGAIG Visual Options Trading Chart for ThinkOrSwim
https://usethinkscript.com/threads/agaig-visual-options-trading-chart-for-thinkorswim.19840/
or my AGAIG Swing Trading With Heikin Ashi for ThinkOrSwim
https://usethinkscript.com/threads/agaig-swing-trading-with-heikin-ashi-for-thinkorswim.19699/
or any of my AGAIG Charts!
My charts add indicators which help add value to Heikin Ashi and when two or more other indicators are in agreement you are looking to add dollars to your account.
I hope this Tutor Session was of some value for you, and also hope it helps improve your trading acumen and success!
AGAIG TUTOR “YOU NEVER LOSE MONEY WHEN YOU TAKE A PROFIT”
A SHORT NUGGET TO PONDER?
You’re walking along a path, and you see a $20 Bill lying on the edge. No one is around to ask if it’s theirs. Do you pick it up or think “I’ll be back through here in a few minutes and if it’s still there I’ll pick it up?”
It makes me wonder why someone who has a decent profit on an options trade doesn’t take it when it’s lying there, instead of hoping there will be more there in a few minutes?
That’s what the 90% of traders who lose money do. It’s the 5-10% (the percent of option traders who make money) that take the easy profit lying there (begging to be picked up) instead of waiting for more!
One of the first lessons learned when I started trading options was:
I can’t lose a little money on each trade and make up for it with volume!
However, I could make a little bit on each trade and with a volume of easy trades it could turn out to be very profitable!
As Yogi Berra once said: “If you come to a fork in the road take it” or to say it my way: “if you come to a fork in the road (a change in direction) and there’s a $20 Dollar Bill lying there for Pete’s sake take it! $20 earned is far better than $2 lost.
What rate of return is your bank currently giving you on your money? A very small amount has been my experience. I have known traders who trade in/out for a mere 10%, 15% or 20% gain (I strive for 24% myself). These individuals put their trade in place with a GTC for the amount (gain) they are seeking and then watch it come true (but are smart enough to monitor it as well).
I used to screen 30+ options to find a good one to trade. NO MORE. Why scan a lot of stocks (ETFs) when 3-4 can provide a good living for you. Right now I have SPY and QQQ on my right chart, and on my left chart is NVDA and MU. My right chart always stays the same and my left chart frequently changes. It might be GOOGL, TSLA, MSFT or another security that has a close BID/ASK since a close Bid/Ask provides for an easy in/out.
A CSR THEOREM: Those who wait for more usually get less!
What do Stocks (ETFs) have in common?
They all move up and down throughout the trading day (EVERY DAY), and I can easily day trade all four I have in place. Just because NVDA doesn’t expire until Friday doesn’t mean I can’t trade its ups/downs and be in/out today. There’s nothing wrong with being in cash at the beginning of the day and in more cash at the end of the day as well. Sleep comes better that way!
Trust your indicators, not your instincts. The Market Makers have an easier time with your instincts, and a harder time with indicators that are charting trend, direction and momentum.
Today I’m using my AGAIG Visual Options Trading Chart
https://usethinkscript.com/threads/agaig-visual-options-trading-chart-for-thinkorswim.19840/
and probably would be having a more successful day if paying attention to my trades rather than writing this little essay!
Oh Well...Straight ahead!
DELTA – Let’s take a look at Delta
Delta measures how much the price an option is expected to rise/fall for each $1 change up/down in price of the underlying stock (ETF). It is expected to move approximately 50 cents in option price for each one dollar move in stock (ETF) price.
Think of Delta’s as a Dollar Bill lying on its side. The middle of the dollar bill represents the current stock (ETF) price. Current stock (ETF) price is then the 50 cents level of the dollar bill and option price will rise on the Call Side in value if stock (ETF) price moves up, or down in value on the Call side if stock (ETF) price drops in value.
The Put side is just the opposite although the midpoint 50 cents (current stock (ETF) price is the same. The put side option price will rise in value as stock (ETF) price rises, or down in value if the stock (ETF) moves up in price.
The reason current price is the 50 cent level of the dollar bill is because the market stock (ETF) price is “neutral” and the market does not pre-suppose movement in either direction.
You will need other indicators such as AsGoodAsItGets BEST TRADING CHART SET UP
https://usethinkscript.com/threads/agaig-best-trading-chart-setup-for-thinkorswim.18436
to help determine direction and movement of the underlying.
What are some ways to use Delta?
The 50 cent level also represents the 50% level of stock (ETF) price and percentage will rise/fall depending on the direction the stock (ETF) is moving. The 50% level means the stock has a 50% chance of closing at that level at the traded option expiration.
A 40% on the Call side means the stock (ETF) has a 40% chance of being ITM (In-The-Money) at the expiration chosen. Conversely it also means there is a 60% chance it will expire OTM (Outside-The-Money).
A 40% Delta on the Put side means the 40 Delta Put has a 40% chance of being ITM (In-The_Money) at expiration. Conversely it also tells you that there is a 60% chance that it will be OTM (Out-Of-The-Money) at option expiration.
Delta then is a measure of the risk for the trade you are taking whether buying or selling an option (we do not advise selling options except as a spread for the inexperienced trader). Buying an option limits your risk to the amount paid for the option.
Some individual’s trade options ITM (In-The_Money) greater than 50% levels (maybe 55%+) in order to lessen THETA DECAY which I will talk about in my next tutor post.
An Options Trader MUST understand Theta Decay
Theta Decay for Options is like buying a shiny new car and watching it depreciate in value as soon as you drive it off the lot.
When you purchase something for resale you hope to buy it at wholesale and then resell it for more than you paid (capitalism). That is the goal trading options. It can happen when you get direction right and price outruns what you paid for the option. Contrary to what a lot of pundits say, you can make profits buying options.
In layman’s terms an option will decay in value based on its number of days until expiration with price paid for the option divided by the number of days until expiration. Expiration several days out can buy time for your option trade to play out?
Let’s say you pay $2.00 ($200.00) for an option that expires in 30 days. As a rule it will decrease in value at minus $6.66 per day ($200 ÷ 30 DTE = -$6.66 per day). An option with 0 DTE (Zero Days Until Expiration) can go to Zero rather rapidly unless you have volume and movement in your trade direction that outruns Theta Decay. Options decay faster the closer they get to expiration (the above is a general rule).
If you Sell an Option, Theta Decay will move at the same rate as above and again, if direction is right, you may be able to Buy it back for less than you were paid. However, we only recommend selling options as a spread in order to limit risk which would be the amount of the spread less what you received in payment for the short spread (not recommended unless you are a seasoned trader willing to accept a lot of risk).
The part of an option that decays is that portion which is basically (OTM) Out-Of-The-Money) known as Extrinsic Value, VERSES actual value which is termed Intrinsic Value. Options bought ITM therefore decrease at a slower rate because of Intrinsic Value than those bought OTM (Extrinsic Value).
In any event, your goal as a trader is to get direction and movement correct so that your paid option price increases in value if bought and decreases in value if sold.
There is a lot of discussion about AI (Artificial Intelligence) these days but remember: AI cannot tell you where the market will end today (it’s just another indicator). AI therefore can only give you an “indication” which is why we want other (and more accurate) indicators that are current and moving with today’s market providing direction, movement, and momentum showing probable highs/lows based on what the market is actually doing.
Most of my intelligence is definitely artificial which is why I have developed several visual chart setups like my AGAIG (AsGoodAsItGets) BEST TRADING CHART SETUP with the following link:
https://usethinkscript.com/threads/agaig-best-trading-chart-setup-for-thinkorswim.18436/
which was designed in order to help make trading easier, more visual, and hopefully more successful. I have several others available on this site as well under AGAIG or AsGoodAsItGets. Always use charts that are visual, easy to follow and understand (the most information necessary but not over complicated) and always remember:
The Murrey Math lines, created by T.H. Murrey in the 1990s, help spot important price points where the market may reverse or pause (support and resistance levels).
It works by dividing market movements into waves with key price levels, based on the concept of "Gann angles."
This system can be applied to any market: stocks, commodities, or Forex.
By identifying these key levels, traders can make smarter decisions about when to enter or exit trades and where to place stop-losses. It combines math and chart analysis to highlight these important pivot points.
A lot of individuals like the Murrey Math Lines (as do I).
Since I’m somewhat adverse to a lot of lines on a chart, I pared this one down to two upper and two lower
- a period of trend weakening (the two inner)
and
- the peak oversold/overbought where changes usually take place (the two outer).
FIRST THE EDGE: The RED/GREEN HORIZONTAL ARROWS (non-repainting) are showing probable change in direction but should not be used in isolation.
shared chart link: http://tos.mx/!ogAx8PPv Click here for --> Easiest way to load shared links
Only enter a trade when multiple indicators are in confirmation including these horizontal arrows, but NOT until a confirming EMA RED/GREEN Arrow also appears. This is your trading “Edge.” EMA (Exponential Moving Average) is represented by the RED/GREEN Line with Arrows and Clouds attached moving above/below the white 20 EMA.
This is the chart I have been using for a few days now. Instead of candles the RED/GREEN CLOUDS represent candle movement
The large YELLOW ARROWS are ATR 2.0 direction arrows.
The Long/Short Bubbles are my Trading Path 1.75 ATR Bubbles.
The small dotted YELLOW triangle Line is the Anchored VWAP (NOTE: The current date needs to be changed every day for this to show properly).
The PRICE POINTER (BLUE LINE) is displayed and moves with Price (Current price shown on right).
The Larger Dotted Yellow line is the PSAR (shows change in direction and is coordinated with the PSAR Label above showing how many bars ago the change in direction took place.
The WHITE DASHED LINES are the plus or minus 1 SD (One Standard Deviation). Remember that stocks (ETFs) move within 1 SD approximately 80% of the time and represent frequent pivot points.
The RED/GREEN VERTICAL DASHED LINES are 2.5 ATR.
The ORB (Opening Range Breakout) is represented by the first 15 minute YELLOW DASHES followed by SOLID YELLOW LINES once ORB has been established. These are labeled with Yellow ORRB Hi and ORB LO. Above is a label stating if price is Above/Within/Below ORB.
Hi/LOW ALOGO PIVOTS are solid RED/GREEN LINES with Chart Bubble ID.
Previous days HI/LOW is represented by SOLID WHITE LINES with ID Bubbles.
The Market Open (Yellow), UK Market Closing 10 MIN (White), and Power Hour Heads Up (White) are Vertical Labeled Lines.
The Labels at top of chart are ones frequently used. If any questions on these just ask?
I have offered multiple chart selections over a period of time and consider this to be a best choice for trading success.
AGAIG STARS ALIGNED TRADING for TOS
I’m using clouds instead of candles
Since (to my knowledge) nobody has found the actual Holy Grail for options trading, it leaves me with the idea that the next best goal is to trade with “As Good As It Gets -- The Stars Aligned.”
For trading purposes, I use a 2min/5min chart combination (although one can use the time frames of their choice).
Now let’s see HOW THE STARS CAN BECOME ALIGNED.
FIRST THE CHART “STARS”
The three Chart Stars are: The Traffic Light (one of my newest and best Dashboard Labels), The TI- MTF-DMI and the Chart Trading Path (Red/Green MA (Moving Average Arrows). WHEN THESE THREE AGREE “THE STARS ARE ALIGNED.”
NEXT “THE SUPPORTING CAST”
THE SUPPORTING CAST is all the other indicators which provide a heads-up for changes in direction that might be happening soon, as well as known Pivot Points where computers and algorithms frequently express themselves, as well as the Price Pointer and PSAR (Parabolic Stop and Reverse).
I’ve also added the Bayesian Trend Labels. These two labels show TREND STRENGTH Up/Down % and Probability of Up/Down TREND BY PERCENT.
I’m using clouds instead of candles, and I am following price trend with my Price Pointer.
ORB (Opening Range Breakout is shown as a 15 minute opening dashed yellow and after 15 minutes becomes a solid yellow line, The label above will show if trading is within/above/below the ORB.
NOTE: The VWAP date must be changed daily to be accurate.
Other labels are self-explanatory, or you can ask questions related to the chart.
This is the link for a dual chart: http://tos.mx/!qGnoz9il
Note: My last post was oriented for newer traders whereas this post is for more experienced traders)
I frequently place overnight trades (usually Monday thru Wednesday with Friday expirations). Trades are normally placed in the afternoon after 3 p.m. when, and only when, a stock makes what looks like its low for the day and indicators show a change in direction (and afternoon theta decay has reduced option cost). These trades should only be made on stocks with adequate daily/weekly volatility (4.0+ daily). One of my current favorites is AMD where trades can be placed around the 15-20 Delta area (as these are usually under $1/ contract). An AMD 170 Call was .75 late yesterday and opened this morning at 1.00.
After buying the option I placed a GTC at .79 which would have covered my position and cost of trade. With my .79 GTC in place the trade closed at open for 1.00. Why did it close above my GTC order? I’m glad you asked.
Option prices are mathematically set with new Bid/Ask prices taking place at market open. Option prices for a position are usually highest at market open. I have tested this theory multiple times and have frequently closed an option for a nice gain, sometimes a double, or occasionally more. Stocks frequently pop at market open and the goal is to capture that pop. So, what happens if the stock option opens for less than what was paid? The GTC order will not fill. I will cancel it and place another order for 25-50 cents more than what was originally paid for the option (in this case 1.04 – 1.19) since I now have 2-4 days for it close using the new GTC order (DTE depending on which day the order was placed). My experience is to rarely lose on these trades. Monitor them as you would monitor any other trade.
These can be great trades for traders who might be trading under Day Trading Rules (since overnight does not count as a day trade). Another way to avoid Day Trading Rules is to open a cash account which avoids those rules. A person can open a cash account by funding it with the maximum amount they want to put at risk, or an amount one can afford to lose. I personally have three different trading accounts, two regular accounts and one cash account. My favorite for day trading is the cash account.
My setup: https://usethinkscript.com/threads/agaig-best-trading-chart-setup.18436/
For those of you new to trading, a debit spread is a lower risk trade since risk is the amount paid for the spread, or if a credit spread, the maximum risk is the width of the spread minus the amount received.
With debit spreads I will usually go at least a week out and place the long position ITM (In-The-Money) and the short position at least 1-2 points OTM (Out-of-the-Money). The reason for this is because the ITM Long position will theta decay at a slower rate than the short position OTM. Since the market is mathematically designed each point will usually be .50 cents, whereas a 2 point spread will usually cost around $1 leaving a potential $1 profit if it finishes ITM. For these I will usually place a GTC for 1.50 - 1.70 in order to hopefully profit prior to expiration.
As with all trades direction is the most important factor, so trade in the direction of money flow and make sure your indicators agree!
Right now an NVDA 122/124 Aug 23 Call Debit Spread is .98 - 1.00 leaving the potential for $1.00 profit (which would be 100% if closes ITM)?
All good strategies should have a Trend, a Momentum, and a Cycle script.
This study strives to provide all the essentials in one indicator.
It includes studies such as TTM Trend, Super Trend, Frema, TMO, TOP, DMI , BOP, Slim Ribbon, ADX as Trending/Non-Trending, Super Trend w/CCI and ATR combo and a tri-fecta of CCI + TTM squeeze + TTM trend Combo with labels for Go, Stop, and Caution.
This is a new label for ThinkOrSwim using a:
Red Light = Possible stop and turn (consider exiting a long and/or entering a short ONLY if Chart Indicators in agreement.
GreenLight = Possible stop and turn up (consider exiting a short and/or entering a long ONLY if Chart indicators in agreement.
CautionLight = Take your time and make a prudent decision based on Multiple Chart Indicators in agreement.
Here is the link: http://tos.mx/!SEwxVdlT
RESULTS ORIENTED TRADING
NOTE: Tutoring comments are designed for those who are newer to trading. They are designed to be the type of information that was not readily available when I started trading several years ago. Tutoring is a valuable addition to this website.
Those lessons of life (or lessons of trading) that we don’t learn the first time, keep repeating themselves until we do!
Approximately 90% of options traders lose money. They keep getting the same results and wonder why? I know this from personal experience. My trading was the same for the first two years, just long enough to have enough wins to keep me going, but not enough to become consistently Results Oriented.
My best example of “results oriented” came from one of my childhood friends from early days in Elementary School in Elizabethtown, Kentucky. Wesley and I lost contact with each other after we moved from the area, although our parents kept in contact through the years.
Some thirty-five years later, I was in the Orlando area and had learned from my parents that my boyhood friend had also entered the same profession as mine. I googled his address and went to pay a visit.
It didn’t take long for us to regain our old friendship, even though many years had passed. I asked him how he was doing, was he married, had any children?
He said, “Charles, I’m glad you asked. I just got married last month…for the sixth time.” I said incredulously, “For the sixth time!”
He said “Yes, for the sixth time, and what I can’t understand is that the issues in each marriage have always been the same… Do you think it could be my fault?”
Duh!
As stated above…lessons of life (trading) keep repeating themselves until we learn them. Trading options is no different. Until we learn the basics of the market and how it is designed to operate, we will keep making the same mistakes over and over.
Because the market is designed mathematically to move within 1 SD (One Standard Deviation), it is incumbent on the trader to learn how to trade the market mathematically in the way it is designed to operate.
My advice to any new perspective trader is to go to the tutoring section of this website and learn (hopefully up front) how the market works. You will find many charting setups that properly assess market direction from multiple perspectives. You will find setups I have offered under the moniker AGAIG (AsGoodAsItGets). My newest one without any candles http://tos.mx/!95YjmEow is working as good as any I have developed or previously used. My latest chart with Candles http://tos.mx/!mPuNL9nn
The goal of us as chart posters is to help traders become profitable (especially newbies).
One suggestion from me that I do when entering a day (or longer) trade is to frequently place a GTC (Good Until Cancelled) order right at (or inside) the 1 SD Line and let the trade play itself out (never trade more than you can afford to lose).
When I started trading options (several years ago) I was with unaware of any trading help available, and so I started surfing the web for resources. A small fortune (depending on one’s definition of fortune) was spent learning everything available that could be found. Determination played a role in learning what I might do in retirement. There are few individuals who have listened to more webinars, and/or subscribed to more trading sites than me?
It is also my assessment that there is a lot of bogus information being advertised or posted on the web, and that many “gurus” make more money advertising their wares than trading their expertise (?). My desire would have been to find useThinkScript.com several years before I did (I’m actually not sure when it started). New traders, and old timers alike, are fortunate to have this resource available.
First, let’s explore “Assumption Trading” a bit and see how it fits into the reality of options trading.
As we travel through life we constantly make assumptions concerning our pathway choices. A close friend of mine (who was much smarter than me) said: “All assumptions are true; All assumptions are false; We must make assumptions!”
So, what is the first assumption we should make about the stock market and trading options successfully? To my way of thinking the first assumption we must make is that “assumptions” do not work when trading the market.
Many are sincere in their ability to become knowledgeable traders, but *** I quickly learned, sincerity cannot be the bottom line.
The market was “sincerely” designed only using mathematics and probabilities for its basis, and it will take mathematics and probabilities to have any hope of being successful trading options in the market.
This is where useThinkScript.com is one of the best resources available to us (both newcomers and old timers). We must always continue to learn and hone our process! “As long as we are green traders we continue to ripen. It is only when we think we’re ripe that we tend to get rotten!”
Since the market is designed mathematically, we need to use mathematics in trading to be successful traders.
How does AI (Artificial Intelligence) play into our becoming successful traders’. As of this minute artificial intelligence cannot tell us where the market will close today. Artificial Intelligence cannot tell us where the market will open Friday morning, or where it will close Friday.
Artificial intelligence can take a lot of historical information into consideration, and from that information, determine what the market has done historically, look at where the market is currently, and make projections (assumptions) as to where the market will be in the near (or long term future).
To be successful one needs charting with indicators that take into consideration, direction, volume being traded, money flow and mathematical tendencies (ATR, SD, Pivot Points, Tops/Bottoms, the Greeks, etc.) currently in place. Even the market itself says that current ATM (At-the-money) price has a 50/50 chance of moving up, or moving down.
There are many types of indicators and charting available with everything you need for success already available here on useThinkScript.com. (and like new options on an automobile new indicators and charts one are being developed constantly).
There are Oscillators (which show where they have been, where they are at, and the apparent direction they might be heading); We can use a Parabolic which shows the Stop and Reverse of Candle direction; there are multiple indicators that measure Direction from multiple perspectives. There just aren’t indicators that can tell what might happen next. It is for this reason that one should never use any indicator in isolation. A successful trader should (WILL) have multiple reasons (indications) for placing a trade. Intuition (assumption) is not one of those indicators.
The most important decision a trader can make is to choose charting and indicators that fits your eye and helps determine direction a stock (ETF) might be heading (your GPS System which I have talked about in a previous post).
All of this is available to you on this website. There are multiple options (no pun intended) for an individual to choose from. Many experienced traders are sharing their knowledge and how to effectively trade. REMEMBER: 90% of traders lose money. This website follows one of the Basic Principles of Life called “Group Good” which states: “What you do (recommend and post) should always be for the greater group good.”
Happy Trading!
You should be able to notice the difference VISUALLY on these two MSFT Four-Minute Charts (I used 4Min because I could show the whole day verses another time frame but it works on all time frames). The Heikin Ashi is much smoother. I am also using only the Date Time Lines, My AsGoodAsItGets Indicator, and the Murrey Math Pivots. Here is the Heikin Chart with Indicators: http://tos.mx/!4iowTUcP
Can you see the difference?
The Administrative Team had good comments here if you go back and read!
AGAIG KEEP IT SIMPLE CHART
This is the third in my series of trading charts and is my simplest chart put together as yet.
Don’t get rid of my other two:
AGAIG Best Trading Chart Setup For ThinkOrSwim
AGAIG Day Trading Chart Set-up For ThinkOrSwim
Keep this as a third setup and check all three to see which works best for you.
Like everyone who seeks The Holy Grail, this might be The Grail without the holy?
This chart is very simple to follow and the arrows and bubble help keep you on track with your trading.
I want to give thanks to @samer800 for the Profit Maximizer which I modified to have a different look on this chart for my purposes.
The beauty of this Chart Setup is to just follow the Long/Short Bubbles, the Green/Red Arrows and the 8 EMA Red/Green Fast EMA Line positioned with the White 20 EMA Line.
Look for both crossovers and arrows pointing direction.
My Short/Long Bubble indicator is in place, along with the ORB, reverse pivot lines and algo pivots. I am using 2-color Trend Candles. Of course, my price pointer is a favorite, as is the PSAR.
Included will be two pictures using two different size candles in which I use Heikin Ashi as I like them for shorter direction purposes.
If you are a VIP useThinkScript member, the 10x multi labels are available to you. I couldn't add any of the VIP Indicators on this general charting area. The 10x will show you what is happening in time frames further out.
I will try to answer any questions posed about this Chart Setup?
The link for the charting is: http://tos.mx/!Rq44W7WC Click here for --> Easiest way to load shared links
CATCHING BUTTERFLIES TRADING OPTIONS
What is an Options Butterfly?
An Options Butterfly consists of a Debit Spread combined with a Credit Spread. The body of the butterfly is comprised of the two short positions combined together (the body of the butterfly) while the two long positions, one on each side of the body are called the wings. The beauty of a butterfly trade is the low cost compared to the potential return if the trade pins near the body or ITM.
Any stock (ETF), that has options can be Butterfly traded. My favorite is the SPX Butterfly which is cash settled (meaning it can’t be closed against the trader – the trader is the only one who can close the trade and, if not closed, will become cash settled at expiration).
To buy a SPX butterfly you would place your pointer on the strike that you want to be the body (the two short positions) of the butterfly , right click on that strike go up to buy and then click on butterfly. This will open a 5 point SPX Butterfly Spread Trade. As I write this the SPX closed today at 5127.79. A five point Call 5125/5130/5135 spread would have been ITM (In-the-money) and returned $127.79 minus what you paid for the butterfly.
I like to trade the SPX 0DTE after 1 p.m. (as late as possible) in the afternoon when there is a pullback in the SPX and my indicators show a positive change in direction. The maximum loss that can be sustained is the amount you paid (risk) for the butterfly. (Both a Call and/or a Put Butterfly can be traded equally as well).
As a side note: The big boys (algorithms, computer trades, etc.) are mostly fond of the 25, 50, 75 and 100 strike positions. Today those levels would have been the 5100, 5125, 5150 and the 5200.
At his point for tomorrow there is action at the 5140. A Butterfly centered on the 5150 is listed at .40 - .90 and probably could have been bought for somewhere in the mid-point. One of my favorites is to guess where the next Friday SPX will close. Maybe this Friday we might have a close at 5200. A 5200 5-point Butterfly can probably be bought for less than .25 and a 10 point spread 5190/5200/5210 for less than a dollar. These can be closed at any point you wish prior to expiration where there is an acceptable profit worth taking. A closing pin at 5200 would be worth $1,000 for a 10 point spread less the amount paid. I have paid as little as .!5 - .20 for one of these.
A happy note for traders who are limited in the number of day trades available. Since the SPX is cash settles you can leave the trade in place and it will automatically close at 4:00 p.m. and will not count as a day trade unless you close it yourself prior to closing (it then becomes a day trade). You would manage this trade as any other and close it out if the stars don't seem to be line in your direction
When I make a post like this it is usually listed as “Tutoring” which reminds me of an old Far Side Cartoon with a car backing out of the driveway and a large dog sticking his head out the window talking to the next door neighbor dog saying “Hey Biff, I’m going to get tutored!”
Hopefully my tutoring will provide for a more favorable outcome! Catching Butterflies can be both fun and rewarding!
Traveling one morning to an unknown destination, my automobile GPS system suddenly said “Prepare to make a U-turn.” This was a heads-up that I would shortly need to make a “change-in-direction”. That change was not immediate, since the operative word was “Prepare.” I actually passed a couple of roads to the right and then traveled almost a half mile before the GPS said, “Now make a U-turn.”
Five days a week (except for holidays) options traders start a journey in the stock market towards an “unknown destination”. We don’t know where the market will take us, nor do we know its ending monetary destination? As an important note: neither do the Market TV Business Pundits know where the day’s market will end. As such, it might be helpful to have a good “GPS Market Trading System” to help make decisions along the way.
My wife is sitting here in the office with me and just asked: “Why are those candles on your chart going up and down?” I told her that is an excellent question and that the stock market is a lot like life. Life has its ups and downs, although it usually moves sideways, and like the market chart we never know which way the next candle might move? Sometimes our internal GPS system is our only guide as we move through life!
What about the market, and how are we going to navigate through this day?
First, we need a good charting vehicle that includes a GPS system to help reach our destination. For me that GPS system is called “Indicators”. Indicators can help show when to “Prepare for a Change in Direction.” Some of my Indicators have a tendency to repaint, we may pass a road (indicator arrow) or two before any trend change actually takes place. Because of that reason, my charting is comprised of “multiple indicators” looking for possible change from more than one perspective.
We need Indicators that track money flow, overbought/oversold conditions, natural pivot points, support/resistance, and Fibonacci levels where computers might be programmed to buy or sell. There may be other parameters as well, and I’m always seeking one’s that have a 90% chance for providing indications for a probable trend reversal to take place.
Let’s first take a short look at some market dynamics.
Most of us learned the Bell Curve (a graph depicting normal data distribution) in High School. The Bell Curve shows that distribution takes place within three Standard Deviations. In a normal distribution curve, about 68% of data falls within 1 SD, 95% within 2 SD, and 99.7% within 3 SD. Options in the market are mathematically designed, and priced, to fit within 1 SD. The market uses several parameters to derive that 1 SD for each stock (ETF). Some of these parameters include price, volatility, time, and a few Greeks thrown in for good measure. As with the purchase of many things in life, an option begins to lose value as soon as it is purchased.
First, most indicators are oscillator driven, which is why we want different parameters for each of our indicators. Without different parameters for each indicator, we would only need one indicator. Multiple indicators provide the opportunity to see changes in trend taking place from different perspectives.
My first indicator of interest is the ORB (Opening Range Breakout). During the first 15 – 30 minutes, the market sets its High/Low parameters for the day. As a rule, the chosen security (stock, ETF) will trade between these two ORB levels unless it breaks out above/below the ORB.
Since the market is designed to trade approximately 80% of the time between a 1 SD High and a 1 SD Low, those areas become important pivot points to take into consideration. Other pivot points of interest are the previous day’s High/Low, as well as Support and Resistance Levels (which I like to show as a cloud). Fibonacci levels can also be major pivot points (8, 13, 21, 34, 55, etc.) which are Moving Averages – my preference being EMAs (Exponential Moving Averages) which are slanted more towards current values. My charting includes the 8/20 EMAs with a favorite trade being the crossovers of these two moving averages. My favorite day trading is a 5-minute chart, although other time frames may be used as well.
It is usually good policy to let the market settle in for a short period of time before placing trades. The first couple hours are usually the most active periods of the day. Some traders only trade during the first 1–2 hours.
A favorite indicator on my chart is the PSAR (Parabolic Stop and Reverse) which helps determine the direction an asset is moving. History shows that candles tend to move 6–10 bars on each time frame before changing direction. The PSAR shows where the last change in direction took place, and on my chart there is an upper label showing how many bars ago that transition took place. Of course, in a strong uptrend or downtrend, movement can be a lot more than 10 candles.
This may be more information than a person needs, however this represents a collection comprising my personal GPS system for placing trades. Statistics show that 90% of option traders lose money, and my guess is that most of them have no Charting (GPS) System in place? Many losing traders are probably “gut” traders, which has never proved to be a reliable trading system. Dilbert the cartoon wondered, “where do you place your head to listen to your gut?” My worst trades have always been when I thought I knew better than my indicators.
This site “useThinkScript.com” has a lot of charts and indicators to choose from. I would encourage all new traders to pick a charting setup that fits your eye and especially one that has at least 3–4 indicators showing probable trend changes, and then use it as your trading GPS system. (Of course my preference is my personal charting: “AGAIG-BestTradingChartSetup” posted a few weeks ago although there are many good other choices also available on this site).
CAN TRADING BECOME LESS COMPLICATED
There is a maxim related to GROUP GOOD: Anything we do (or in this case post) should always be for the greater group good.
First of all: There are almost 6,000 companies with optionable stocks, as well as several hundred more ETFs with listed options. Many of these stocks are not worth our time, effort, or energy.
This trader (me) had a long-term habit of screening more than 50 stocks at a time, looking to see which one’s included some of my trading parameters. I had as many as 10 or more stocks on my screen at one time, hoping to find one to quickly grab. A friend recently asked: “How many horses (indicators) can you get into a small corral?” (or charts on a small screen)
My charting was once filled with a plethora of indicators on the chart as well as multiple lower studies as well. It finally dawned on me that I was creating insanity for myself, and was making trading more complicated than it really needs to be.
As a side note: Because of my background in healthcare I was visiting a Mental Health Ward one day and asked a patient “Why are you here?” His answer: “Because I’m not all there!”
So, what are we actually looking for when trading options? How about momentum, direction, volatility, close Bid/Ask and a few other parameters such as: The previous day’s High/Low; ORB; PSAR, some upper labels showing a few extras like: Multiple Time Frame activity; ATR, a few Chart Arrows, a couple of important EMA lines, and a bubble or two suggesting a change in direction.
Everything listed above can be placed on one chart without our eyes glazing over?
Question: How many trades can you actually manage at one time? It was my experience that overload came easy, and often.
One if the Natural Laws of Life is “The Law of Increase” which states:” What we put the energy of our thoughts into will increase.”
Let’s put this in simple terms since this is probably one of the most important principles for any person who wishes to be successful. Focus on the simplest things necessary for trading.
Focusing on multiple extras will only increase your trading dilemmas. Focus on the simplest parameters necessary and the rest will take care of itself? This is why focusing on problems only increases the problems when one should just focus on solutions and then problems will take care of themselves (no extra charge for this wisdom which I learned the hard way).
The “College of Hard Knocks” has stopped me from incessant screening. All stocks go through the same motions: Up, Down, and Sideways. My trading consists of only two ETFs (SPY & QQQ) that meet all my trading criteria, i.e. they move Up, Down, Sideways, have volatility, close Bid/Ask and are easy to trade.
When trading the SPY we are screening 500 stocks all at the same, time and all on the same screen. And with the QQQs we’re looking simultaneously at 100 stocks and all with no onerous screening.
Why then trade more? Pick one or two good stocks (or ETFs). Trade their movement on a daily, weekly, or longer basis. Use the best charting you can find. Trade only one or two at a time (you can always trade as many contracts as desired).
If, and when trading longer term spreads my usual is to accept the risk being taken, place a GTC for a 50 -75% profit, and let it be. Read my previous post on Catching Butterflies for low risk, and if ITM at expiration can make for great profits.
Life should be kept as a simple as possible and trading the market should be kept as simple as possible as well! It’s actually an individual choice?
Normal wisdom (and most of the pundits) advise us to trade the midpoint of the
Bid/Ask spread.
Let me suggest another strategy?
Suppose you are trying to place a Put or Call option trade that has a Bid 1.00 and
Ask 1.30. The midpoint would be 1.15, and you would probably get filled at that
level.
My experience has been that it can often be filled for a few cents less. If the Bid is
1.00 my first bid would be 1.06 and then 1.11. (i.e. I go to the next whole number
.05 or .10 and the add one cent. You will frequently get filled at that level.
Getting filled closing a position will also frequently work using the same strategy
but in reverse (deducting a penny from the whole number).
On the above trade if you don’t get filled at the 1.15 midpoint add a penny and
you will often get filled (unless there is a lot of current volatility driving price).
For spreads, it is the midpoint that will usually get filled unless you choose to trade
each leg one at a time.
This comes under the concept that a penny saved is a penny earned?
Scaling in/out with options can be an effective method for adding or removing positions. Scaling can help adjust risk, lock in profits, and/or maximize profit potential. I have also used scaling into a position to try and salvage a trade that is going against me.
CONFESSION: Trades that are going against me are usually because I have not stuck to my trading plan and have slipped into that gray area of trading called “gut instinct trading.” Gut instinct trading is the worst trading plan available!
So, what happens when Scaling into a trade happens using gut instinct trading.
Yesterday morning my gut instinct was telling me it’s time for a pullback in the market. Contrary to sticking with my charting indicators, I bought a single 417 SPY Put for .78 cents. My first mistake was not closing it out when it became slightly profitable a few minutes later, and the market began moving back up with the position beginning to lose value. When it fell to .34 cents I scaled in and bought a second 417 Put. I now own two 417 Puts (a .78 and a .34 which has lowered the cost for two to .56 cents each. Again the market continued to move against me and the 417 Put was now down in the .20 - .25 cent range. Being stubborn I bought a third for .21 cents. Now there are three 417 Puts with a value of .443 cents each.
Finally at 1:30 p.m. the market reversed direction and an hour later I was able to close all three for .79 cents each (for a profit of $108).
So, why do I share this with you? First of all to let you know that “gut instinct trading” is poor trading , rarely works, and should be avoided even though I eventually pulled this one out.
I rarely use “scaling in” on a 0 DTE trade but have frequently used the concept for longer trades (several days until expiration) usually to increase a winning position and/or occasionally to lower the cost of an overall options cost. I will only increase positions when most of the activity shows more positive trend movement likely available prior to expiration.
My purpose for sharing this is to discourage any from “gut instinct trading.” It is far better to put individual feelings aside, develop, or find, a good chart setup (similar to my AGAIG-BestTradingChartSetup) and let market trend be the impetus for all of your trades. Gut instinct trading ultimately leads to losses although we might get an occasional streak of luck.
As an ardent cartoon lover (the part of the paper I read first) an old Dilbert Cartoon explains “gut instinct trading” the best: The pointy hair boss says to Dilbert: “People Tell Me You’re Underperforming,” Dilbert responds: “Did You HearI It From AnyoneCredible?” The pointy hair boss says: “No, But I Know It’s True Because My Gut Tells ME IT’s True” and Dilbert responds: “I’m Curious, Where Do You Stick Your Head To Listen To Your Gut?”
Bottom line: Don’t listen to your gut! It’s not reliable. Find, or develop, a good chart set up, follow it faithfully, and make sure several indicators agree with a change in direction (let the market lead). Also scaling into a position can sometimes turn out to be an effective strategy?
The nice thing about trading options is that one can limit their risk. When buying an option, risk is limited to the amount paid for the option. Selling options is not recommended for the inexperienced trader (since loss can be substantial unless limited by using spreads). I have a high school classmate who lost 500K selling QQQ Puts (he was subscribed to a site that kept telling him to “hold on” until it was too late). Lesson learned: don’t rely on someone else to tell you what trades to make? “Paper Trade” until you fully understand what you’re doing and how to manage the risk involved.
Only about 10% of options traders make consistent money. I have learned to appreciate the 90% who make my trades successful (just don’t be one of them)!
This site useThinkScript is a wonderful place to learn and share ideas. One of the Natural Laws of Life states: When two or more individuals share with each other, all of them have more!”
Also learn to understand Theta Decay. An option bought begins to decline in value as soon as it’s purchased, and will be worth zero at expiration unless it’s ITM (In-the-money) with value only equaling the amount still ITM. It’s like buying a new car (which begins losing value as soon as you leave the dealership).
It’s amazing to me that people will insure their homes, automobiles, and health (hoping they never need to use the insurance) and yet very few individuals insure their money (portfolios). The options market is a good hedge for many things when used in the right manner.
I see many complicated chart setups with all kinds of indicators top and bottom. It has been my experience that since the market only moves three ways (up, down, and/or sideways) that I should keep things AS SIMPLE AS POSSIBLE to give me an indication of the markets intention.
Life is complicated enough without making it harder, which is why I like my Best Trading Chart Setup because (for me) that’s AsGoodAsItGets.
Remember: Most indicators repaint – but so does life!
“Exit-it is” is an affliction suffered by many traders. It is a condition caused by exiting a trade too early or while the trade is still making a profit. The opposite of “exit-itis” is called “greed.” Greed is the malady of many traders (including myself who finally found the cure).
I have a good friend in New Jersey (a better trader than me and also a member of useThinkScript). We frequently discuss our trades and lament the times we leave money on the table. There are many times, however, when we should have exited before the “big boys” pulled the rug out from under us (a favorite tactic of the “big boys”). We have also come to an important conclusion which should be your thought for the day: "A TRADER NEVER LOSES MONEY WHEN THEY TAKE A PROFIT"!
So, what is a fair profit?
To my way of thinking “a fair profit” is any profit that pays a better return on my money risked than what my bank pays for a similar deposit. As traders we are actually investing our cash in a trade and, as such, need to make an adequate return on our investment (or on all trades overall).
I can assure you that the 90% of options traders who lose money are plagued with the greed malady and/or are not using good indicators, or rationale, for placing their trades. As in life many individuals want more and place trades thinking they know what the market has in mind (I usually lose when I think I know what the market is going to do).
What is the cure for these afflictions?
There are many traders who place a trade and then automatically place a GTC (Good Until Cancelled) order for 11% (a 10% profit after costs) more than what they paid for the trade. These traders are very effective in receiving a 10% return on their money. Others use 15%, 20% or maybe like me, usually 24%.
Why do I like GTC orders? Look at the shadows (wicks) on a candle and see how often they momentarily pop up or down. A lot of profits lie in those shadows just waiting to be collected. Once that shadow pops up/down I am not usually fast enough to grab the amount my GTC collected for me, and that shadow may be a turning point for the stock (ETF).
Of the two afflictions “exit-it is” tends to be more profitable in the long run than does the malady of “greed”?
THE “ONE BITE PIZZA” CHART REVIEW
Dave Portnoy of Barstool Sports is famous for his “One Bite Pizza Reviews.”
Dave Portnoy of Barstool Sports is famous for his “One Bite Pizza Reviews.”
When it comes to trading the markets (particularly options) his method has helped me use the “One Chart Visual Review.”
According to research approximately 90% of information visually transmitted to the brain is understood and retained (or immediately recognized) than is information transmitted by written, or other means.
Vision is our dominant sense which is probably why visuals are so effective for communication, learning and memory.
We’re all familiar with the phrase that “a picture is worth a thousand words.”
It is for this reason that I personally use the “One Chart Visual Review” when looking at charts, indicators, oscillators and other information provided on this wonderful website called useThinkScript. I try to view every post made on this site in order to see how it fits my picture for trading purposes (and I find more good information on this site than any other!)
In just a few seconds, a view of any proposed chart on this site, is much like the “One Bite Pizza Review” which lets one know a lot of information that can be gained with a mere glance.
This is the reason I like a chart that is not too busy! If I can’t see on one simple chart the information needed, how is an array of charts going to help any better? Charting that overanalyzes information is like reading a novel to find what the ending might be five chapters later.
This is why I don’t like “over-information” on a chart, nor more than one lower chart at the most. My brain cell can only absorb so much! This is also the reason I don’t like to trade more than one or two stocks at a time. Why screen a host of stocks when they all do basically the same thing: move up, down, or sideways? All I’m looking for is a possible (probable) change-in-direction taking place in a short, or longer term, time frame on very few stocks at the most.
During my 12+ years of trading options, it has been my goal to develop charting that is pleasing to the eye, gives information necessary in real time, and shows probable (possible) change-in-direction. My 82-year-old brain (coming next Sunday) needs the KISS principle to adequately analyze anything, which is why I have spent the past few years developing my AsGoodAsItGets charting.
Many of my losses have come when I think I know what the market is going to do rather than rely on the information being provided visually. Remember the market itself only provides a 50/50 chance (At-the-money) of moving one way or the other. We need to use adequate charting to hopefully gain an edge on the process. Keep in mind that most indicators have the ability to repaint as the market (stock, ETF) changes its mind.
There is a lot of information on “Buy the Dip” trading (which has been very effective for me) although my best trading usually comes from trading “The Extended High.”
It has also been my experience that the market doesn’t usually gap up at the rate it can gap down. I find the escalator ride up easier to defend than the elevator ride down if my trades have been placed wrongly, and I need to defend a position? (I will talk about Buying or Selling positions in another post).
Well, enough ramblings of an old man. Find yourself some good visual charts and do the “One Chart Visual Review.” That just might be As Good As It Gets?
DAY TRADING THE VWAP
First let’s look at Day Trading: Day Trading is where we buy/sell options within the same day usually in a short period of time which may be within minutes, or hours. An individual can day trade any stock or ETF desired, and we do not need to use today’s expiration in order to successfully day trade. In day trading we are looking for movements towards, and/or away from the mean (average price). One of the best and most accurate average prices of a security is considered to be the VWAP.
The VWAP (volume weighted average price) is a technical indicator used on intraday charts because it resets at the start of the morning session and continues throughout the day.
The VWAP is calculated from the total dollars used for every transaction (using price multiplied by volume and then dividing that amount by the total number of shares traded). Thus, it is called the Volume Weighted Average Price.
VWAP can be displayed as a line, similar to a moving average line, although it can also be changed on a chart to a chain-like dashed line, or something that fits your eye in a more efficient visual manner?.
Since the VWAP combines price and volume together, many traders consider it to be more representative of the “true average value” of the stock (ETF) price.
AGAIG: ARM WRESTLING
HEIKEN ASHI CANDLE WICKS
Candle Wicks can be indicators showing potential change in direction?
When I see long wicks protruding above 2-3 GREEN candles in a row these may represent (Buyers) Bulls testing a higher price with (Sellers) Bears resisting the higher price? I call this “arm-wrestling” between Bulls and Bears (Buyers and Sellers) and may represent an impending change-in-direction (depending on who wins)?
Conversely if I see 2-3 RED candles in a row with long wicks protruding down frequently represents Sellers (Bears) trying to reduce price, with Buyers (Bulls) resisting the lower price. Again, a little “arm-wrestling” taking place and may represent an impending change-in-direction?
Some thoughts about Wicks:
Wicks represent the highest and/or lowest price during the candles’ time frame being used.
A long upper wick suggests price rejection by Bears (Sellers) whereas a long lower wick shows rejection by Buyers (Bulls). The end of a wick does not represent the closing price.
A short candle body with long wicks on both ends shows indecision with neither side winning the wrestling match?
Wicks and candle bodies represent price action during the current candles’ time period.
NOTE: Don’t trade wicks by themselves. The best trades have multiple indicators in agreement.
JAs Good As It Gets Visual Options Trading Chart
My goal is to develop charts that are easy to trade and visually appealing to the eye
(each person visualizes differently).
When learning to trade options right
Pick a chart that’s good by sight
My AGAIG charts are good to trade
As with good indicators they are made
So, if you want to elevate your wins
You should take my charts for a few good spins!
This is the link for this new dual chart: http://tos.mx/!Kj9bc5iQ
This is what it looks like:
I find this an easy chart to trade.
My Put trades are placed when I get a lower Red Bar, a Red Traffic Light and MTF shows longer time frames Red as well.
I also view my chart arrows for direction. A Call would just be the opposite (Green Bar, Green Traffic Light, Green MTFs and Green Arrows on Chart).
I find my best two trades of the day are usually between 10:00 - Noon when two or more indicators align. Also note if trading is above/below VWAP and/or 20 EMA White Line.
Watch for crossovers of the 20 EMA.
Just some food for thought. Happy Trading!
ARTIFICIAL INTELLIGENCE: YOURS, MINE or THEIRS?
As I understand it, A.I. is a broad term for technology that mimics human decision-making (or problem-solving) by taking everything that is already in the literature, analyzing it, and then projecting answers from that pool of knowledge.
As a matter of fact, you and I do the same thing but with limitations. Our pool of knowledge is based on what we already know, have studied, and/or experienced. And (as has been my experience) there is a lot more outside my pool of knowledge than there is inside!
In our e-mail, we frequently find all manner of trading sights wanting us to pay for their new A.I. designed services, which they say are geared to help us make better trading decisions.
Are these sights worth the expense?
They can certainly evaluate the historical parameters of a stock (ETF) and make price predictions into the future based on past history but they can’t tell what the price will be in five minutes, tomorrow, the next day, or anytime into the future.
Therein, to my thinking, lies the downside of AI. You, me and AI can only see the past, the present, but not the future.
The stock market itself only gives current price and calls it ATM (at-the-money). Furthermore, the market labels current price as a 50 Delta giving a 50/50 chance of going up, going down, or chopping sideways. An ATR (Average True Range) can look back and give an expected price range based on the past X number of days (I use nine days look back).
Why do I use nine days? It has been shown that candlesticks (price) historically move 6–10 bars average (in all time frames) before changing direction.
So, why don’t we just rely on history for making trading decisions?
Why do I use indicators, oscillators, and/or other parameters for making current trading decisions? Shouldn’t A.I. be enough?
If the market itself doesn’t know the next move, then a small player like me might need to look at some other current facts and tendencies, before making a decision to place a trade?
What is my chosen oscillator telling me? I see it only showing footsteps up to this point. There are no footprints in the sand ahead. It has no foreknowledge for its next step. It only hints as to direction. An oscillator is limited to showing past movement up, down, or chopping sideways. It will show its footsteps in color, which is very helpful as to strength of the footstep.
Possibly I need other indications for what the next move might be?
Some of my questions might be:
Is there momentum taking place in the current direction? What is the overall market doing? What was the opening range for this stock (ETF)? Is it trading within that range, or has it broken out above or below that range? Does it seem to be down at support, or is it up at a possible resistance level? What is its ATR (average true range)? Is it trading within 1SD (one standard deviation) which it normally does around 80% of the time? Are there other parameters that I should take into consideration?
What I need is something visual to help me see what’s happening! My motto is: If you can’t see it, why trade it?
A.I. is helpful, but it’s a blank for the next step to take?
Projections are nice, but I need to see the now?
I need indicators that show current status with possible changes in direction that might happen.
I think I’ll go look at some of Charles’ AGAIG charts and see if they give a better clue to the answer for some of my questions? I need something more in addition to Artificial Intelligence.
This may be a 50/50 game, but I need to find an edge!
Trading Guide & Summary
A primer on trading for the new trader (or refresher for the more advanced).
A primer on trading for the new trader (or refresher for the more advanced).
AS A REFERENCE: ALL OF MY CHARTS AND POSTS:
https://usethinkscript.com/search/1...4&c[nodes][1]=5&c[title_only]=1&o=replies&g=1
Below are listed (in no particular order) subjects and issues that might be of interest to you?
First some definitions:
Indicator: in the stock market it is a quantitative tool to interpret financial data to help forecast stock price movements.
Lagging Indicator: Indicators that confirm longer term trends. They are based on historical data (on things that have already happened). They may provide information about likely future changes.
Leading Indicator: These are Indicators which show where a price might move next. When they give the correct signal they give a trader the ability to get into a trade ahead of price movement. The indicators on my AGAIG charts are intended to be leading indicators with trade recommendations only when two or more are in agreement.
SMA (Simple Moving Average) verses EMA (Exponential Moving Average): The difference in these two is in their calculation method. The EMA gives weight to current (recent) prices and is usually suited to short-term trading, whereas the SMA provides equal weight to all prices and is usually favored by longer-term traders. My AGAIG charts favor EMA for trades. Some favored EMA moving averages are the 5, 8, 13, 21, 34. Most of my charts highlight the 21 EMA by using a white 20 EMA line, watching for candles to cross over this line. Some traders trade only crossovers. The 20 EMA is a heads-up for the 21 EMA, which is a favored crossover for many algorithms and computer based trading.
Candle Types: The most frequently used Candles are Standard Candles, or Monkey Bars. My favorite (and mostly used on my AGAIG Charts is the Heikin Ashi). I find standard candles to be noisier as they are real time and unprocessed, whereas the Heikin Ashi are data filtered based on a two period moving average. I have discussed these two types of candles on My AGAIG TREND & MOMENTUM tutorial.
PIVOTS: Places where the market frequently makes changes in direction. Some of these Pivots are the 1 SD (Standard Deviation) and the Murrey Math Pivots shown on my AGAIG High Profit Options Trading Chart
VWAP Volume Weighted Average Price I have explained and show how this works on my AGAIG Daytrading the VWAP . The VWAP (Volume Weighted Average Price): Institutional traders frequently use the VWAP (Volume Weighted Average Price) primarily for intraday trading, usually on a one-minute, five-minute or fifteen-minute chart.
AI = Artificial Intelligence, which comprises most of my own. To my thinking, AI is just another indicator which extrapolates historical into the present, but is unable to tell you where the market will end today. Is it a leading indicator? I don’t think so but would like other’s thoughts on this issue?
Trading Waves: The market (Stocks, ETFs) tend to moves in waves on all time frames being used. These are frequently described as M Waves and W Waves. If you are interested in Waves, I discussed them on my AGAIG M & W Wave
The GREEKS: There are several Greeks which the market uses in establishing prices. One of these is DELTA: I explained them in AGAIG The Greeks Delta
Another necessary GREEK is THETA DECAY which I discussed under a posting titled: AGAIG The Greeks Theta Decay
It has been my assessment that there are two best trades of the day: They are explained in an AGAIG The Best Two Trades Of Each Day
Visual Options Trading: During my 10+ years of trading options it is my belief that seeing charts visually is the best method for trading. I explained my thoughts on AGIAG Visual Options Trading
Success in Options Trading is best achieved if you have a TRADING EDGE: I discussed AGIAG TRADING WITH AN “EDGE” IS THE DESIRE OF ALL TRADERS.
A trader also needs a TRADING PATH in order to be successful. I made a post showing a Trading Path using no Candles in order to better show the pathway. It is titled: AGIAG TRADING PATH CHART
You also might like my Indicators: AGIAG “GPS” System for Trading
I have developed my many trading charts which I believe are pleasing to the eye and include within them the basics as listed above.
Find all of my Charts and Tutors:
https://usethinkscript.com/search/1...4&c[nodes][1]=5&c[title_only]=1&o=replies&g=1
You will find all of my Charts and Posts designed to help you become an efficient and hopefully better trader.
UPDATE: 9/30/24 new indicators! new chart!
This is a new update I am using for all time frames. You can continue to use the old setup (see post below) or this new one if you prefer. I am using the new one on all time frames.
Chart Link: AGAIG BestTradingChartSetup 9-30-24 http://tos.mx/!ayok5Szv
Chart Look:
Here is some further narration.
AGAIG Best Trading Chart Setup Update
I have added a couple of things to this chart. Added is the 9:55 “Time To Trade Heads Up” (30 min ORB coming to a finish and methinks the first two changes in direction may be the best trades of the day?) and I have also added a Revamped Oscillator showing on Lower and Overlaid on my Lowered Squared Histogram. The Histogram coordinates with the upper Long/Short Bubbles and the Oscillator shows previous candle movement as well as current candle movement. I will usually enter a trade when the Red/Green Heikin Ashi Candle first shows and is corroborated by my Long/Short Bubble and/or another change in direction indicator.
Heikin Candles Overview
Let’s review Heikin Candles so as to better understand them.
A Green Candle is Bullish. It should be Flat on the bottom with wick protruding up from top of candle. The wick shows continuing direction movement. As the Candle moves up you would like for each candle to be larger and close above previous candle (acceleration is body growing in length). If you start getting a wick showing on the bottom as well as top momentum may be slowing and may be signaling a change in direction (also probable change if showing candle shrinking in size as well as closing below last candle). A candle with wicks protruding evenly both sides is most likely a change in direction.
A Red Candle is Bearish. It should be Flat on Top with wick protruding down from bottom of candle. The wick shows continuing direction movement. As the Candle moves down you would like for each candle to be larger and close below previous candle (acceleration is body growing in length). If you start getting a wick showing on the top as well as bottom momentum may be slowing and may be signaling a change in direction (also probable change if showing candle shrinking in size and closing above last candle). A candle with wicks protruding evenly both sides is most likely a change in direction.
DO YOU PAY YOURSELF EVERY FRIDAY (IF NOT, WHY NOT)?
How much would you like to earn from trading options? What about $500 per week? Or maybe $750, $1,000, or more? The question is: How much would you like to pay yourself every Friday (or maybe daily)? Once you have the answer you gear yourself to accomplish your goal.
Research tells us that only 5-10% of option traders make consistent money. Do you belong to that 5-10% of traders? Would you like to belong?
My first question is…how many trades do you have in place at one time? Or, to put it another way: “How many horses can you ride at one time”?
In my earlier days I frequently had 10 – 20 trades in place at one time. These were usually all single trades and so I learned how to lose money one trade at a time. I was a “gut” trader at the time and it’s easy to lose when the mind can’t absorb that many trades at one time. I’m older and hopefully a little smarter now?
My new model is to trade only three charts at one time using my AGAIG indicators placing five contracts on each stock ITM (In-The-Money) so as to have some intrinsic value at the start (intrinsic value is the value the stock price already has). You can trade these as a spread as well. It has been my experience that if you trade a $250 spread for approximately half the price (or less) of the spread you can make $24-$50/contract fairly rapidly. My three charts today are MSFT, AGAIG, and NVDA. MSFT and AGAIG have both paid $250 each and the day is not yet finished.
The goal is to enter the spread
9if used) for $1.25 - $1.35/contract and enter a GTC (Good Until Cancelled) for .25 - .50 cents more than you paid. My 5 contracts then quickly pay approximately $125 - $250 profit (usually fairly quickly when direction is right). My trades today were not spreads and so today was an easy $500 profit on MSFT and AGAIG and the day is not finished. I will usually place my first two trades of the day around 10:00 (or when two or more indicators agree) and then play them to exit and then not trade again until after 2:00 p.m. but only with clear entries and exit before the end of day if possible. A $500 spread takes longer and I find the $250 spread to work faster and more efficiently.
The bottom line is to set your goal, don’t be greedy, and enjoy your profits.
I used to scan thirty or forty stocks to find the good ones. Now I pick three for the day and trade the ups and downs of those. If you had only one, two, or three consistent trades per day…would that be AS GOOD AS IT GETS?
Happy New Year and may all your trades be profitable (and most will if you use good indicators wisely)!
read more about my chart here:
https://usethinkscript.com/threads/agaig-visual-options-trading-chart-for-thinkorswim.19840/
This is my grid link: http://tos.mx/!XFW9xBEv
AGAIG: WHICH WAY DOJI? IS IT ANOTHER INDICATOR ON TOS?
Even though a DOJI is a type of Candle you should think of it as another POTENTIAL INDICATOR in your arsenal.
A DOJI CANDLE shows possibility of an impending trend reversal. I only like to look at Doji’s using Heikin Ashi Candles (of course I only like Heikin Ashi Candles for trading purposes in general as they are smoother).
The Doji has a small body which looks like a cross or a + (plus) sign on the chart. The body price could be a straight line when opening and closing prices are the same, or a box as shown below if opening/closing prices are nearly the same.
The small central body represents a tug of war between buyers and sellers. The shadows (wicks) represent buyers trying to push price up and sellers trying to push price down. The middle box on a Doji shows that opening price (on this candle) was almost the same as the closing price and the wicks didn’t have much affect on price.
The Doji represents a “heads up” showing a moment of indecision concerning price. A Doji should not be used as a trade entry until the next candle closes above or below the Doji showing an actual change-in-direction. That candle is the trading point. It may be the first or second Candle after the Doji forms. Therefore a Doji can act as another indicator in your trading arsenal.
Now to repeat myself: the Doji basically represents a moment of indecision as to where price of the stock (ETF) might change direction. This is true for all time frames. It is the next candle (or two) after the Doji which provides the clue but only if the next candle closes above, or below the Doji showing a probable direction entry point. It’s that next candle (or two) clearly above/below the Doji which represents the probable change in direction and a trader could use the actual Doji level as a stop.
A trade close then would be at the next Doji plus Candle that shows another impending change in direction (or use another exit point that you trust).
A Doji can show on all time frames. One issue with many traders (including myself) is “exit-itis” (not letting a trade play out and leaving profits on the table). The same time frame should be used for entries and exits.
The expirations I use when trading the Doji is based on the time frame I am using. For Day Trading (short time frames) I will be in and out during the day and will be using the next expiration. For longer time frames I might use 1-3 weeks out (or longer) expirations and will close an entered when the next Doji + first Candle Change appears.
SO, HOW TO TRADE THE DOJI
Once you see a DOJI trade the next candle closing above/below the Doji (it might not be the first candle could be the second or third that actually closes above/below the Doji. The Doji itself only suggests a change in direction (Indicator). The next Candle(s) fully above or below the Doji lets us know the probable direction of the breakout. Again, the trading candle must close fully above/below the Doji to confirm direction.
Once a trade is placed usually ATM, slightly ITM, or a bar or two OTM (Out of the money) usually produces the best trades. The ATR (Average Trade Range) lets us know the Day, Week and Month range to expect for volatility. I like to trade stocks that move 5+ points per day.
One can place a stop at the level of the Doji to protect the risk of the trade. The exit for the trade would be the next Doji (that is the first candle of the next Doji depending if that candle shows a reversal or a continuing trade? If a continuing trade more profits are in store and the trader can stay in the trade?
You should be able to use any of my AGAIG charting for Doji trades (whichever chart fits your eye the best) and using Heikin Ashi Candles for the style setting. Frequently my Long/Short Bubbles are on top of, or close to, a Doji.
Here is a Bearish example of Doji Candle with second candle below the Doji showing a downward trend. The second candle is the trade entry point. The first candle is not clearing the Doji (only the shadow).
THE WORST TRADER
he worst trader has the ability to be right 50% of the time mathematically according to the stock market. The current price of any (and every) stock is determined by the market to be at Delta 50 (meaning there is a 50/50 chance of going either way.
So how does even the worst trader find something that might increase their chance for a winning trade above the 50% level? Finding that possibility is called FINDING AN EDGE.
So what is an edge? An edge refers to a Consistent Advantage a trader can develop that will give them an advantage over other market participants i.e. the worst traders.
Making money in the stock market is rarely luck or just a random occurrence. Successful trades more often come from having a well-defined strategy that tips the odds in the trader's favor. So, how does one develop a strategy that helps them become a successful trader i.e. more wins and profits than losses.
A stock can only move in one of three directions, that is UP/DOWN or SIDEWAYS. To find that edge an educated trader frequently turns to indicators, oscillators and candlestick understanding. A problem is that indicators have the ability to repaint confirming a Paradox in life: "A thing and its opposite may both be true." Because of that paradox the intelligent trader looks for more than one indicator suggesting a change in direction. The oscillator meanwhile is showing you the former footsteps of the stock (ETF).
This brings us to ESSENCE which means: Stock movement is what it is regardless of what anyone thinks about it!
An EDGE IN TRADING is most easily accomplished by having charting that is visual and easy to follow.
I would suggest that the most visual candle style is Heikin Ashi? If you are using regular candles I would encourage you to open two charts side by side with one regular candles and the other Heikin Ashi and determine for yourself which is easier to follow?
Next, find 2-4 indicators that look at direction and momentum from different perspectives realizing that they are all measuring the same “possible direction changes” but from slightly different perspectives. The EDGE is when two, or more, agree that that a change in direction is taking place (but again repainting is always possible). Also know what the market is doing overall as well.
Now, I have only been trading options for around fourteen years and have learned what little knowledge I have from The School of Hard Knocks which is actually a pretty good school for everyone since “those things we don’t learn the first time keep repeating themselves until we do?”
I would invite you to look at some of my charting on this website which begin with the moniker: AGAIG
https://usethinkscript.com/search/2...1&c[nodes][0]=5&c[title_only]=1&o=replies&g=1
Once you find an EDGE that works for you begin using REPITITION for successful trades and you don’t need a lot of stocks to make successful trades. My thinking the fewer is the better. I do NO SCREENING since all stocks do the same thing UP/DOWN/Sideways so why not trade one’s that have good volatility and have good ATR (Average Trading Range) of 4+ or greater.
REPETITION: “Stock tendencies we refuse to learn are simply repeated until we do learn them if, and until, they are mastered. If not mastered they usually come back a little harder each time until we do.”
Happy trading. It is possible to have an EDGE and move the 50/50% chance up to maybe a 75-90% or better!
SO, WHAT IS THE MMM (MARKET MAKER MOVE) AND HOW DO YOU USE IT?
The MMM calculates the expected magnitude of price movement based on market volatility. According to TOS (ThinkOrSwim) the calculation is made using stock price, volatility differential, and time to expiration.
In short, it means that the options market MMM has priced in an expected move from current price up or down from that of a typical trading day. For me, it represents another indicator to take into account what the expected movement for a stock (ETF) that I’m trading.
MMM therefore is one of the ways to see what market “expectations” are for a particular stock (ETF). Remember: Expectations and Realities can frequently be unrelated parameters?
Where do you find the MMM on TOS? It shows on the option chain, usually as a yellow MMM showing a +- from the current price, and is located to the right of the stock you have entered (on that same line out to the right). If it is not automatically showing, it is one of the “All Products” offered by TOS. Not all stocks will show MMM, but most of the major stocks will. (If not showing on your charts, you can google how to add MMM to your chart or call a TOS agent for help).
So how do I use the MMM?
On a daily basis, I will frequently use it for trading the SPX and/or XSP (the mini SPX). I usually place trades for these around 10:00 a.m. after the market has established its ORB (Opening Range Breakout). For these trades, I will Sell Credit Spreads outside the MMM expected move. These trades can be either Call or Put Credit Spreads.
Remember: When you sell a Credit Spread you receive funds into your account with maximum risk being the spread minus the funds received. My goal is for these to then trade within MMM parameters and let me keep my cash received. The nice thing about the SPX and XSP is that they cash settle at the end of the day (it is not necessary to close them prior to market close at 4:00 P.M) which is good for smaller accounts since these trades do not count as a day trade unless you close it prior to the end of market, which it would then count as a day trade. For larger accounts, you can place these trades multiple times during the day and place a GTC (Good Until Cancelled) to buy them back at half price (which is something I frequently do on 0 DTE trades).
This process can also be used for stocks (I use it for stocks that have a lot of volatility and premium available). I mostly trade these on the day of expiration, or the night before. The night before provides for overnight theta decay.
An example for this might be TSLA. Before market open (last Friday, May 5, 2025) the MMM was +-6.44 and the stock price was 280.52. The MMM range then was 286.96 high and 274.08 low. TSLA closed at 287.21 just above the MMM (this is an example and I did not place that particular trade, although I would have had a GTC auto close for around half price buyback during the day if a Credit Call, or Put spread). My choice is to always take a half price gain rather than experience a double loss. A good trade based on MMM would have been a 287.50/290 CCS (Call Credit Spread) or a 272.50/270 Put Spread, with both just outside the MMM.
For day trades placed in the morning, one will usually enjoy accelerated theta decay in the afternoon for Credit Spread trades. Wins can go to losses, especially in the last half hour of trading, and so I close any that might be in range and usually don’t place Credit Spreads during that time period (although I have a friend who frequently trades during the last half hour and has had mixed results). Market chops for Credit Spreads generally work in your favor.
When trying to figure where a stock might close, I also take into consideration where the most OI (Call & Put) is. It has been my observation through the years that closing price is frequently right at the level of most OI where the brokers and/or market makers can dash the hopes of traders or make the positions less valuable? (This is often referred to “as getting the rug pulled out from under you”)
These are some of my thoughts, and I’m always interested in yours!
DAY TRADING – SCALPING FOR SUCCESS
So, what is the best way to Day Trade? How do I Day Trade? What stocks (ETFs) are picked, and why do I pick them? How do I know when to enter and/or exit?
The old song “knowing when to hold them, knowing when to fold them, knowing when to walk away and knowing when to run” fits well for an options' day trader!
First of all let’s look at what to trade. I quit trading (for the most part) 0DTE (zero days until expiration) although I have done well with these during my foregone more alert days. Sometimes I will trade the ODE SPY, but not as much as I used to. Too many others work better with less stress and give more flexibility?
I want stocks that:
- move more than five points (ATR) per day (based on a 9 period look back).
- Entries/Exits will be taken when the “intraday” has moved 1.75 - 2.0 of its daily intraday ATR (Intraday Average True Range).
- I mostly trade five contracts at a time.
- This will frequently give me 2-3 trades on the same stock each day.
ATR gives the average movement of the security on a daily, weekly, or monthly basis, but we’re trading intraday and can expect multiple up and down movements within that range during the day with a possible ORB (Opening 15-30 minute Breakout) to the upside or downside.
An added comment if I may: It has been my experience that most stocks close at the edges or within the ORB (15-30 minute Opening Range Breakout). When trading into closing I take this into consideration. I also notice that stocks tend to move towards the VWAP (Volume Weighted Average Price) which to me represents home-base for a security (a frequent area of resistance). I also stated that I trade Friday’s Expirations Monday thru Wednesday and then begin trading the next week out. I actually start the next week out at Wednesday between Noon and 1:00 p.m.
MAJOR KEY POINT: When using my charting similar to the AGAIG Visual Options Trading Chart
https://usethinkscript.com/threads/agaig-visual-options-trading-chart-for-thinkorswim.19840/
I’m using the Long/Short Bubbles and Lower Squared Histograms for entry/exits after looking back 2-3 days to see what the average intraday movement (AIM) has been and use that average for expected intraday movement.
I have found it best for intraday trading:
- to only trade the same 2-4 stocks over and over
- using 5-10 days expiration for my intraday trades.
Some approximate Stats using average intraday movements on some of the ones I Day (Scalp) Trade: (2-day intraday average movements) are as follows:
SNOW: 10 Entry/Exit Bubbles with average 5.92 intraday moves including end of day exits. ATM trades = 5.92 X .5 X 100 = $2.96 potential per trade X 3 trades/day = $888 profit daily. I place GTC Exits at .75% of expected move, watch for turning points, and expect profit of approx. $600 - $1,000+ Daily.
VST: 14 Entry/Exit Bubbles including EOD (End of Day) exits with average 2.5 intraday moves. ATM trades = $125 potential on 5 contracts. 3 Trades/day = $375 or more easy profit per day.
The other two I watched on Friday last was AVGO and MSFT.
I’ll let you figure out the intraday averages for your favorite trades. Honesty is a good practice and my goal is $2K+ per day and Friday last easily eclipsed that amount and I was away half the day!!).
My trading setup used to have six (or more) monitors and now only use three monitors (two with double charts with the one in the middle having only the options trading chain. I have two stocks showing that I trade for the day on the right monitor with the other two stocks on the left monitor that might be traded if showing clear entry or exit signals?
My trades are usually just ITM (In-the-Money)so there is a little intrinsic value to start. I trade Friday’s expirations Monday - Wednesday and then the next week's beginning Thursday. Some of my favorite stocks are SNOW, VST, AVGO and MSFT and usually place a GTC of .75 - 1.00 per contract on these. My goal is to be in cash at the beginning of the day and back into cash at end of day although occasionally I will have to hold overnight which leaves me a few days grace if needed.
Bottom line you only need 2-4 stocks for day trading, know the average intraday moves, relax and don’t be greedy. You never lose money when you take a profit. Taking profit on half the expected movement increases the odds greatly.
I know traders who exit trades at 10-12% profit, others at 2-25% profit whereas I’m looking for 50 cents – 1.00 per contract profit. Your risk determines you toleration to profit/loss.
Greed (trading options) is usually inversely proportional to one’s expectations?
My pre-trading (daily) routine: Twenty minutes on our “stationary” bike (approximately 2.5 miles) always wearing a helmet in case I get hit by a stationary car!
Confession: My trading for the past several years has usually been 0 DTE Day Trading. As I get older (81 next month) my lone brain cell doesn’t want to focus that rapidly anymore.
My new trading style is using Heinkin Ashi One Hour Chart with Entries/Exits taking place at 1-3 places.
First, trade the Heikin Ashi Candles on pivot from Red to Green, or Green to Red (proving very accurate on trades). Second, my Long/Short Bubbles are also proving accurate on this time frame. Third, the Murrey Math Pivots are good Entry/Exit points (especially when in agreement with one (or more) of other indicators.
My trades are now placed at least one week out as a single option, or a spread trade (I particularly like pivots showing in the last hour of trading especially pullbacks). I also like Spreads with the Long ATM (At The Money) and the Short OTM (Out of The Money). On these trades if direction is right, the Short Position Theta Decay is faster than the Long Theta Decay position making profitability easier to achieve. Also Risk is less with a spread.
When considering a trade look at the option chart for the trade you are wishing to make and see where most of the OI (Open Interest) activity is. Is it mostly on the Long/Short side. I usually like to trade inside where most of the OI activity is.
This chart setup includes the 14 Day ATR. the PSAR, Stacked EMA’s, the Long/Short Bubbles, the TI MTF’s, and the Traffic Light.
Also added is the Lower Squared Histogram which coordinates with the Long/Short Bubbles. The Profit Maximizer Arrows and Trend Line are in place as well as the Automatic VWAP. There is enough information on this chart to make successful trades.
Notice on the included Chart for MSFT and AMD that there was overnight entries near close of yesterday which paid out nicely today.
One could basically use the Heikin Ashi candle color change for trades. Following the Heikin Ashi Color Candles on Day Charts is also good for longer term trades. We recommend, however, that multiple indicators are in agreement for placing trades.
THE BEST TWO TRADES OF EACH DAY
So, what are the best two possible trades each day (I answered this before to a question and will again show it here as a trading strategy).
These TWO BEST TRADES are the FIRST TWO TRADE ENTRIES (Long or Short) that take place AFTER ORB (Opening Range Breakout) on whatever stock/ETF you choose to trade.
Opening Ranges Breakout is considered to be the first 15-30 minutes after market opens. ORB is usually the most volatile time of the trading day. Option prices are usually highest price (cost) during this period of time due to the pent-up energy built during after-hours and pre-market hours for opening trades being placed, or for trades already in place that individuals are hoping to close at the opening market pop.
To me the best two trades of the day are the first two change of direction trades that take place around or after 10:00 a.m. As examples I will show two charts (4 trades) on QQQ, SPY, TSLA and APPL that took place yesterday 9/9/24 after ORB.
The QQQ first entry (short) was at 10:25 – 11:20 for 4.94 points. A re-entry long was at 11:30 – 1:15 for 5.94 points.
The SPY first entry (short) was at 10:10 – 11:15 for 3.11 points. A close of first trade and re-entry (long) was at 11:20 – 1:20 for 4.82 points.
The first TSLA (again short) was at 10:25 – 11:15 for 5.32 points. A close of that position and re-entry (Long) was at 11:20 – 1:20 for 4.11 points.
Lastly AAPL first trade (Long) 11:00 – 1:40 for 3.58 points. A close of that trade and re-entry (Long) from 1:40 - - 2:40 for 3.77 points.
The total points on those trades was around 35 points which ATM (At the Money) entries X .50 X 100 = roughly $1,750 profit for single contracts.
It has been my experience that an AAPL a day (especially between two crusts, warmed, and covered with whipped cream) is good for the soul!
You can do this with any of your favorite stocks (ETFs) because of the movement up/down throughout the day and I find the first two moves (trades) after ORB can be most productive. Beyond these two trades the market may mostly turn to chop.
Exits are when two or more indicators suggest another change in direction. Look back at a couple of your favorite stocks (ETFs) and see how this type of trade would have gone for you yesterday? My exits are usually when the Murrey Math Pivots are reached especially for stocks that are not O DTE (Zero days until expiration). Stocks will give you extra time to play out.
Also for those of you who are limited to 3/5 trade’s in a five day period, if you trade more than one contract at the same time (both entry and exit) it will count as one day trade. One can also open a cash account which has no day trade limits (the limits are the amount of cash you have on hand in the account to trade and your cash will not be replenished until banks and market open the next morning for trades placed the day before. Then you will have your cash available once again if you had used it all up the day before).
Happy trading and then finish with a hot piece of AAPL pie!!
SELLING CASH COVERED PUTS vs SELLING COVERED CALLS
A friend asked me over the weekend what I think about Selling Cash Covered Puts?
These are my thoughts on Cash Covered Puts, Stock Covered Calls and/or Selling Naked Calls or Puts:
First of all: I don’t recommend selling naked Puts! Never sell Naked Puts on a stock you don’t want to own. With Cash Covered Puts make sure you have the cash available to actually buy the stock being traded (or else you might be using margin and/or become subject to a margin call).
On the positive side: Selling Cash covered Puts may allow you to buy the stock at a price lower than its current selling (cost) price. This is a strategy frequently used by traders with larger accounts and/or traders wanting to hold stocks (or this particular stock) in their portfolios.
Let look at an example: NVDA is a stock frequently traded and its 12-Day ATR (Average True Range) is 6 points up/down Daily, and 13.1 points up/down Weekly based currently on 21 March ’25.
NVDA is in a pullback this morning trading at $121.40 as I begin to write. Next Friday’s 115 Put (21 March ’25) is Selling for 1.69 ($169) per contract, and/or the 110 Put for .78-.82. One week further out (i.e. 28 March ’25) the 115 Put is selling for 2.50 – 2.52 ($250-$252 per contract) and the 110 Put for 1.18 ($118 per contract). The reason for the increase in price one week further out is based on time until expiration (slower Theta Decay).
Selling a Cash Covered Put reduces the amount you are willing to pay for the stock. If you sell Friday’s 115 Put for 1.69 you would be willing to buy NVDA between now and Friday for 119.71 (121.40 – 1.69 = 119.71) should the stock pull back below that $119.71 price. If it does not pull back at, or below, that price and you end Friday OTM (Out of the Money and have not been exercised) you will have made 1.69 ($169 per contract). It is highly doubtful that your position would be exercised when if the stock is selling for more than what you have sold the Cash Covered Put and are willing to pay for the stock.
If you sold the Cash Covered 115 Put one week further out (i.e. 28 March ’25) for $2.50 you would be willing to buy NVDA for 118.90 should it fall at, or below that $118.90 price. If you sold the 110 Cash Covered Put you would have received $1.18 and be willing to Buy NVDA for $120.22 should it fall at, or below that $1.18 price.
The other option you have is to close the Put you have sold prior to expiration for a price lower (or higher if you chicken out) or have been exercised and now own the stock for the price you agreed.
Ironically, as I finish writing this diatribe, NVDA is selling for $119.73 (and trending back up) and you may have purchased NVDA for a lower price than where it opened and can now Sell Covered Calls on the position’s you now hold which is essentially the same process in reverse except now you are Selling Calls against Shares you own (Selling Calls further out should the price reach a higher price and you will be willing to sell the shares you now hold). Again, since you are receiving money for the Call being sold the cash is yours unless the stock rises above that price or is at, or above, the agreed Sell price at expiration.
Of course one can Sell naked Calls (according to personal risk) for impending stock pullbacks with less risk usually than that of a naked Put since stocks don’t usually rise as fast as they tend to fall.
Both Selling Cash Covered Puts and/or Selling Stock Covered Calls and/or Naked Calls are viable trades depending on your risk tolerance and desires, but no naked puts unless you meet the first criteria as outlined above!
Hopefully this is an understandable explanation.
THE TRADING PATH CHART FOR THINKORSWIM
(THIS CHART HAS NO CANDLES – INDICATORS ONLY!)
(THIS CHART HAS NO CANDLES – INDICATORS ONLY!)
In order to have an “edge” in trading, we need an indication to where the market is heading and what its next move might be (thus the development of indicators). Some day traders (like me) are looking for moves over a short period of time.
see the next post below for a full explanation of this chart and the overall concepts seen in all As Good As It Gets setups.
There may be other chart setups that don’t use candles, but this is my first using indicators alone. The top labels are fairly straightforward. I have added the DMI MTF (a free indicator from TI for which I added the Cyan Header).
This chart is called THE TRADING PATH CHART using HEAVY RED/GREEN ARROWS comprising “THE PATHWAY”. THE THICK RED/GREEN ARROWS ARE THE TRADING PATH. The thinner line is the EMA (Exponential Moving Average Price Line) and shows its relation to the solid White 20 EMA.
The SOLID Red/Green horizontal thick line shows Reversal Pivot Points on the chart and works with my Short/Long (possible) transition Bubbles.
The Price Pointer (on the chart) shows actual price movement.
The Yellow Dotted Dashed Line on the chart corresponds with the PSAR (Parabolic Stop and Reverse) Label showing number of bars since Last Direction Transition.
Added are the high/low 1 SD horizontal lines (frequent turning points), as well as my HiAlgoPivot (Red Solid Line)and LoAlgoPivot (Green Solid Line) Pivot Points. The PDHi (Previous Days High) and PDLow (Previous Days Low) are shown as White Lines .
Support/Resistance is shown as a Red/Green Cloud area.
Also added are SD (Standard Deviation) Vertical Lines: The RED Vertical Dashed Line shows when the stock or ETF has reached a +2.5 SD Extension (EXT UP +2.5 SD) and may be nearing a transition down; the GREEN Vertical Dashed Line shows a -2.5 SD Extension Down (EXT DOWN -2.5 SD) and may be nearing a transition up. These do not paint unless those levels are reached.
Also shown as Vertical Lines are: MARKET OPEN (Yellow); UK MARKET CLOSING 10 MIN (White); and POWER HOUR HEADS UP (White).
This should cover everything. I have been putting this together for two weeks without any losing days. If you can’t live without candles you can go to Added studies and strategies and delete AsGood_CancelCandles_Lines.
Here is an updated link with VWAP added to the chart. Refer to my tutor on Daytrading the VWAP
http://tos.mx/!cypFFgGo
“NO MAN’S LAND
It has been my experience that it is best to trade a security (Stock) in one direction at a time and not trade both directions (although some sites will recommend Straddles or Strangles around Earnings Reports).
Getting caught between two extremes is what I call “NO MAN’S LAND” and over a period of time theta decay produces more grief than success.
Another thought: RELEASE: You are bound to lose on any trade you do not release (exit) while it’s making money?
They posted me on the "Weekly New For ThinkOrSwim" today
https://usethinkscript.com/threads/agaig-daytrading-scalping-for-success-in-thinkorswim.20383/
and as a current small report I have been in/out of MSFT (5 Contracts each time for 31 January Expirations) for small profits ($25-$45/contract) and am currently up $1,267.38 when this is posted.
A lot of small trades add up to one large trade?
REPAINT VERSES NON-REPAINT
REPAINT or DOES NOT REPAINT
I am always interested when an indicator is labeled Repaints verses Non-Repaint.
So the question arises: Repaint vs. Non-Repaint Indicators: Which is Better?
Every type of indicator has advantages and disadvantages. Myself, I am more dependent on indicators that repaint. To mitigate the repainting, I rely on two (or more) indicators telling me the same thing before placing a trade.
For instance, the Opening Range Breakout becomes static after the first 15-30 minutes and stays the same for the rest of the day. The stock may end up trading above, within, or below that range. A High, or Low for the day will also stay static unless a Higher High or a Lower Low is achieved.
For day trading purposes I find the Murrey Math Pivots as my repainting indicator as it will move with the Highs and Lows.
I also rely on the 1 SD (One Standard Deviation) since it has been shown that a stock moves within 1 SD as a rule during the day and the options market is mathematically designed, and priced, on a one standard deviation basis.
Non-repainting indicators are designed to show past and present price data. They don’t change once they have formed using historical price and volume data. They don’t have the ability to predict the future.
I use repainting indicators for trading within expiration, a week or less. As a rule, my trading is for in/out trades today, regardless of expiration. To me, a profit is a profit and one never loses money when they take a profit.
In short, indicators that repaint can change their signals or values after they have been generated, which is why I want agreement between two or more before placing a trade and am prepared to exit a trade if they reverse. This is why some traders don’t recommend repainting indicators. Remember though that I am now 81 years old and need as many positive current indicators as possible!
Non-repainting indicators are more stable and provide a more reliable signal. They include more back testing in the signal generated. This makes for less stressful trading?
However, Non-repainters lack real-time price action, which is what I’m looking for.
Otherwise, I might miss some good trading opportunities!
Repaint indicators continually adjust to new market condition and provide signals based on the most recent price data, which is helpful in faster moving markets. To me, they frequently give me a head start on a reversal taking place.
The difference then is based on your trading style, both of which can be profitable at least up and until after eighty-one? One of the paradoxes of life is that “A thing and its opposite may both be true.”
One of the natural laws of life is Non-Completion: “We are always expanding our concepts and re-inventing ways to do things.”
TREND MOMENTUM TUTORIAL
TREND AND MOMENTUM TUTORIAL
Trend Direction and Momentum (Price Action) are two important factors for your success.
The Trend of the Market is the tendency (Stock, ETF, etc.) to move in a particular direction over time (short, intermediate and/or long term). We have several indicators to help show trend, direction and momentum.
MOMENTUM measures the rate of the rise/fall of stock prices in real time.
Today, I want to talk about using REGULAR CANDLES verses HEIKIN ASHI CANDLES for both DIRECTION and MOMENTUM.
Here are two charts: an AAPL Day Dual Chart and then two MSFT Day Charts, which after viewing we will discuss.
First, I want you to look at Dual Charts of AAPL. Both of the charts are Day Charts. First study the left chart (it is using REGULAR CANDLES, which most traders use).
Now look at the Right Chart (it is using HEIKIN ASHI CANDLES) and my question is this: If trading AAPL on a loner term basis which chart would you prefer to use.
Now look at two Day Charts for MSFT
So, let’s talk about what we see. Heikin Ashi Candles are Japanese inspired, which average price data using Red/Green bars.
Direction and Momentum are Green/Red Candles growing, or shrinking in length.
The Green candles which you saw on both charts on the right side were Heikin Ashi having flat bottoms and growing in length with each candle closing higher than the day before. Note you will frequently see a wick on top of a Green Candle showing direction being traveled. We know that candles usually last 6-10 days in all time frames. When they begin to shrink (or have traveled 6-10 days) look for an impending change in direction and a slowing in momentum.
Red candles work the same, except in reverse.
On the AAPL Day Chart, there was a change to Long on 10/9 that lasted for at least four days for at least a 9 point change. Which chart was easiest to follow and would that have been a good trade?
Notice on MSFT that an uptrend began on 10/10 and lasted for 5 Days before momentum began to slow for a change of approximately 33 points. How would that have been for a nice profit? Then on 9/23 it changed direction and momentum again (short) for 11 days and another 23 points. Which candles were the easiest to trade or follow?
This works with Heikin Ashi Candles on all time frames and works wonderfully if you’re using a chart like my AGAIG Visual Options Trading Chart for ThinkOrSwim
https://usethinkscript.com/threads/agaig-visual-options-trading-chart-for-thinkorswim.19840/
or my AGAIG Swing Trading With Heikin Ashi for ThinkOrSwim
https://usethinkscript.com/threads/agaig-swing-trading-with-heikin-ashi-for-thinkorswim.19699/
or any of my AGAIG Charts!
My charts add indicators which help add value to Heikin Ashi and when two or more other indicators are in agreement you are looking to add dollars to your account.
I hope this Tutor Session was of some value for you, and also hope it helps improve your trading acumen and success!
AGAIG TUTOR “YOU NEVER LOSE MONEY WHEN YOU TAKE A PROFIT”
A SHORT NUGGET TO PONDER?
You’re walking along a path, and you see a $20 Bill lying on the edge. No one is around to ask if it’s theirs. Do you pick it up or think “I’ll be back through here in a few minutes and if it’s still there I’ll pick it up?”
It makes me wonder why someone who has a decent profit on an options trade doesn’t take it when it’s lying there, instead of hoping there will be more there in a few minutes?
That’s what the 90% of traders who lose money do. It’s the 5-10% (the percent of option traders who make money) that take the easy profit lying there (begging to be picked up) instead of waiting for more!
One of the first lessons learned when I started trading options was:
I can’t lose a little money on each trade and make up for it with volume!
However, I could make a little bit on each trade and with a volume of easy trades it could turn out to be very profitable!
As Yogi Berra once said: “If you come to a fork in the road take it” or to say it my way: “if you come to a fork in the road (a change in direction) and there’s a $20 Dollar Bill lying there for Pete’s sake take it! $20 earned is far better than $2 lost.
What rate of return is your bank currently giving you on your money? A very small amount has been my experience. I have known traders who trade in/out for a mere 10%, 15% or 20% gain (I strive for 24% myself). These individuals put their trade in place with a GTC for the amount (gain) they are seeking and then watch it come true (but are smart enough to monitor it as well).
I used to screen 30+ options to find a good one to trade. NO MORE. Why scan a lot of stocks (ETFs) when 3-4 can provide a good living for you. Right now I have SPY and QQQ on my right chart, and on my left chart is NVDA and MU. My right chart always stays the same and my left chart frequently changes. It might be GOOGL, TSLA, MSFT or another security that has a close BID/ASK since a close Bid/Ask provides for an easy in/out.
A CSR THEOREM: Those who wait for more usually get less!
What do Stocks (ETFs) have in common?
They all move up and down throughout the trading day (EVERY DAY), and I can easily day trade all four I have in place. Just because NVDA doesn’t expire until Friday doesn’t mean I can’t trade its ups/downs and be in/out today. There’s nothing wrong with being in cash at the beginning of the day and in more cash at the end of the day as well. Sleep comes better that way!
Trust your indicators, not your instincts. The Market Makers have an easier time with your instincts, and a harder time with indicators that are charting trend, direction and momentum.
Today I’m using my AGAIG Visual Options Trading Chart
https://usethinkscript.com/threads/agaig-visual-options-trading-chart-for-thinkorswim.19840/
and probably would be having a more successful day if paying attention to my trades rather than writing this little essay!
Oh Well...Straight ahead!
The Delta Greek is a must know for all traders
DELTA – Let’s take a look at Delta
Delta measures how much the price an option is expected to rise/fall for each $1 change up/down in price of the underlying stock (ETF). It is expected to move approximately 50 cents in option price for each one dollar move in stock (ETF) price.
Think of Delta’s as a Dollar Bill lying on its side. The middle of the dollar bill represents the current stock (ETF) price. Current stock (ETF) price is then the 50 cents level of the dollar bill and option price will rise on the Call Side in value if stock (ETF) price moves up, or down in value on the Call side if stock (ETF) price drops in value.
The Put side is just the opposite although the midpoint 50 cents (current stock (ETF) price is the same. The put side option price will rise in value as stock (ETF) price rises, or down in value if the stock (ETF) moves up in price.
The reason current price is the 50 cent level of the dollar bill is because the market stock (ETF) price is “neutral” and the market does not pre-suppose movement in either direction.
You will need other indicators such as AsGoodAsItGets BEST TRADING CHART SET UP
https://usethinkscript.com/threads/agaig-best-trading-chart-setup-for-thinkorswim.18436
to help determine direction and movement of the underlying.
What are some ways to use Delta?
The 50 cent level also represents the 50% level of stock (ETF) price and percentage will rise/fall depending on the direction the stock (ETF) is moving. The 50% level means the stock has a 50% chance of closing at that level at the traded option expiration.
A 40% on the Call side means the stock (ETF) has a 40% chance of being ITM (In-The-Money) at the expiration chosen. Conversely it also means there is a 60% chance it will expire OTM (Outside-The-Money).
A 40% Delta on the Put side means the 40 Delta Put has a 40% chance of being ITM (In-The_Money) at expiration. Conversely it also tells you that there is a 60% chance that it will be OTM (Out-Of-The-Money) at option expiration.
Delta then is a measure of the risk for the trade you are taking whether buying or selling an option (we do not advise selling options except as a spread for the inexperienced trader). Buying an option limits your risk to the amount paid for the option.
Some individual’s trade options ITM (In-The_Money) greater than 50% levels (maybe 55%+) in order to lessen THETA DECAY which I will talk about in my next tutor post.
An Options Trader MUST understand Theta Decay
Theta Decay for Options is like buying a shiny new car and watching it depreciate in value as soon as you drive it off the lot.
When you purchase something for resale you hope to buy it at wholesale and then resell it for more than you paid (capitalism). That is the goal trading options. It can happen when you get direction right and price outruns what you paid for the option. Contrary to what a lot of pundits say, you can make profits buying options.
In layman’s terms an option will decay in value based on its number of days until expiration with price paid for the option divided by the number of days until expiration. Expiration several days out can buy time for your option trade to play out?
Let’s say you pay $2.00 ($200.00) for an option that expires in 30 days. As a rule it will decrease in value at minus $6.66 per day ($200 ÷ 30 DTE = -$6.66 per day). An option with 0 DTE (Zero Days Until Expiration) can go to Zero rather rapidly unless you have volume and movement in your trade direction that outruns Theta Decay. Options decay faster the closer they get to expiration (the above is a general rule).
If you Sell an Option, Theta Decay will move at the same rate as above and again, if direction is right, you may be able to Buy it back for less than you were paid. However, we only recommend selling options as a spread in order to limit risk which would be the amount of the spread less what you received in payment for the short spread (not recommended unless you are a seasoned trader willing to accept a lot of risk).
The part of an option that decays is that portion which is basically (OTM) Out-Of-The-Money) known as Extrinsic Value, VERSES actual value which is termed Intrinsic Value. Options bought ITM therefore decrease at a slower rate because of Intrinsic Value than those bought OTM (Extrinsic Value).
In any event, your goal as a trader is to get direction and movement correct so that your paid option price increases in value if bought and decreases in value if sold.
There is a lot of discussion about AI (Artificial Intelligence) these days but remember: AI cannot tell you where the market will end today (it’s just another indicator). AI therefore can only give you an “indication” which is why we want other (and more accurate) indicators that are current and moving with today’s market providing direction, movement, and momentum showing probable highs/lows based on what the market is actually doing.
Most of my intelligence is definitely artificial which is why I have developed several visual chart setups like my AGAIG (AsGoodAsItGets) BEST TRADING CHART SETUP with the following link:
https://usethinkscript.com/threads/agaig-best-trading-chart-setup-for-thinkorswim.18436/
which was designed in order to help make trading easier, more visual, and hopefully more successful. I have several others available on this site as well under AGAIG or AsGoodAsItGets. Always use charts that are visual, easy to follow and understand (the most information necessary but not over complicated) and always remember:
There is no holy grail!
MURREY MATH PIVOT LINES FOR TOS
The Murrey Math lines, created by T.H. Murrey in the 1990s, help spot important price points where the market may reverse or pause (support and resistance levels).
It works by dividing market movements into waves with key price levels, based on the concept of "Gann angles."
This system can be applied to any market: stocks, commodities, or Forex.
By identifying these key levels, traders can make smarter decisions about when to enter or exit trades and where to place stop-losses. It combines math and chart analysis to highlight these important pivot points.
A lot of individuals like the Murrey Math Lines (as do I).
Since I’m somewhat adverse to a lot of lines on a chart, I pared this one down to two upper and two lower
- a period of trend weakening (the two inner)
and
- the peak oversold/overbought where changes usually take place (the two outer).
TRADING WITH AN “EDGE” IS THE DESIRE OF ALL TRADERS
Instead of candles the RED/GREEN CLOUDS represent candle movement
Instead of candles the RED/GREEN CLOUDS represent candle movement
FIRST THE EDGE: The RED/GREEN HORIZONTAL ARROWS (non-repainting) are showing probable change in direction but should not be used in isolation.
shared chart link: http://tos.mx/!ogAx8PPv Click here for --> Easiest way to load shared links
(NO SINGLEINDICATOR SHOULD BE USED IN ISOLATION).
Only enter a trade when multiple indicators are in confirmation including these horizontal arrows, but NOT until a confirming EMA RED/GREEN Arrow also appears. This is your trading “Edge.” EMA (Exponential Moving Average) is represented by the RED/GREEN Line with Arrows and Clouds attached moving above/below the white 20 EMA.
This is the chart I have been using for a few days now. Instead of candles the RED/GREEN CLOUDS represent candle movement
The large YELLOW ARROWS are ATR 2.0 direction arrows.
The Long/Short Bubbles are my Trading Path 1.75 ATR Bubbles.
The small dotted YELLOW triangle Line is the Anchored VWAP (NOTE: The current date needs to be changed every day for this to show properly).
The PRICE POINTER (BLUE LINE) is displayed and moves with Price (Current price shown on right).
The Larger Dotted Yellow line is the PSAR (shows change in direction and is coordinated with the PSAR Label above showing how many bars ago the change in direction took place.
The WHITE DASHED LINES are the plus or minus 1 SD (One Standard Deviation). Remember that stocks (ETFs) move within 1 SD approximately 80% of the time and represent frequent pivot points.
The RED/GREEN VERTICAL DASHED LINES are 2.5 ATR.
The ORB (Opening Range Breakout) is represented by the first 15 minute YELLOW DASHES followed by SOLID YELLOW LINES once ORB has been established. These are labeled with Yellow ORRB Hi and ORB LO. Above is a label stating if price is Above/Within/Below ORB.
Hi/LOW ALOGO PIVOTS are solid RED/GREEN LINES with Chart Bubble ID.
Previous days HI/LOW is represented by SOLID WHITE LINES with ID Bubbles.
The Market Open (Yellow), UK Market Closing 10 MIN (White), and Power Hour Heads Up (White) are Vertical Labeled Lines.
The Labels at top of chart are ones frequently used. If any questions on these just ask?
I have offered multiple chart selections over a period of time and consider this to be a best choice for trading success.
AGAIG STARS ALIGNED TRADING for TOS
I’m using clouds instead of candles
Since (to my knowledge) nobody has found the actual Holy Grail for options trading, it leaves me with the idea that the next best goal is to trade with “As Good As It Gets -- The Stars Aligned.”
For trading purposes, I use a 2min/5min chart combination (although one can use the time frames of their choice).
Now let’s see HOW THE STARS CAN BECOME ALIGNED.
FIRST THE CHART “STARS”
The three Chart Stars are: The Traffic Light (one of my newest and best Dashboard Labels), The TI- MTF-DMI and the Chart Trading Path (Red/Green MA (Moving Average Arrows). WHEN THESE THREE AGREE “THE STARS ARE ALIGNED.”
NEXT “THE SUPPORTING CAST”
THE SUPPORTING CAST is all the other indicators which provide a heads-up for changes in direction that might be happening soon, as well as known Pivot Points where computers and algorithms frequently express themselves, as well as the Price Pointer and PSAR (Parabolic Stop and Reverse).
I’ve also added the Bayesian Trend Labels. These two labels show TREND STRENGTH Up/Down % and Probability of Up/Down TREND BY PERCENT.
I’m using clouds instead of candles, and I am following price trend with my Price Pointer.
ORB (Opening Range Breakout is shown as a 15 minute opening dashed yellow and after 15 minutes becomes a solid yellow line, The label above will show if trading is within/above/below the ORB.
NOTE: The VWAP date must be changed daily to be accurate.
Other labels are self-explanatory, or you can ask questions related to the chart.
This is the link for a dual chart: http://tos.mx/!qGnoz9il
PLACING OVERNIGHT TRADES IN TOS
Note: My last post was oriented for newer traders whereas this post is for more experienced traders)
I frequently place overnight trades (usually Monday thru Wednesday with Friday expirations). Trades are normally placed in the afternoon after 3 p.m. when, and only when, a stock makes what looks like its low for the day and indicators show a change in direction (and afternoon theta decay has reduced option cost). These trades should only be made on stocks with adequate daily/weekly volatility (4.0+ daily). One of my current favorites is AMD where trades can be placed around the 15-20 Delta area (as these are usually under $1/ contract). An AMD 170 Call was .75 late yesterday and opened this morning at 1.00.
After buying the option I placed a GTC at .79 which would have covered my position and cost of trade. With my .79 GTC in place the trade closed at open for 1.00. Why did it close above my GTC order? I’m glad you asked.
Option prices are mathematically set with new Bid/Ask prices taking place at market open. Option prices for a position are usually highest at market open. I have tested this theory multiple times and have frequently closed an option for a nice gain, sometimes a double, or occasionally more. Stocks frequently pop at market open and the goal is to capture that pop. So, what happens if the stock option opens for less than what was paid? The GTC order will not fill. I will cancel it and place another order for 25-50 cents more than what was originally paid for the option (in this case 1.04 – 1.19) since I now have 2-4 days for it close using the new GTC order (DTE depending on which day the order was placed). My experience is to rarely lose on these trades. Monitor them as you would monitor any other trade.
These can be great trades for traders who might be trading under Day Trading Rules (since overnight does not count as a day trade). Another way to avoid Day Trading Rules is to open a cash account which avoids those rules. A person can open a cash account by funding it with the maximum amount they want to put at risk, or an amount one can afford to lose. I personally have three different trading accounts, two regular accounts and one cash account. My favorite for day trading is the cash account.
My setup: https://usethinkscript.com/threads/agaig-best-trading-chart-setup.18436/
VERTICAL SPREADS
For those of you new to trading, a debit spread is a lower risk trade since risk is the amount paid for the spread, or if a credit spread, the maximum risk is the width of the spread minus the amount received.
With debit spreads I will usually go at least a week out and place the long position ITM (In-The-Money) and the short position at least 1-2 points OTM (Out-of-the-Money). The reason for this is because the ITM Long position will theta decay at a slower rate than the short position OTM. Since the market is mathematically designed each point will usually be .50 cents, whereas a 2 point spread will usually cost around $1 leaving a potential $1 profit if it finishes ITM. For these I will usually place a GTC for 1.50 - 1.70 in order to hopefully profit prior to expiration.
As with all trades direction is the most important factor, so trade in the direction of money flow and make sure your indicators agree!
Right now an NVDA 122/124 Aug 23 Call Debit Spread is .98 - 1.00 leaving the potential for $1.00 profit (which would be 100% if closes ITM)?
VISUAL OPTIONS TRADING
If I were to write a book about options trading it would be titled “VISUAL OPTIONS TRADING” with the subtitle “If you can’t see it, why trade it”?
Question: Is eyesight our most important sense? If, not I’m not sure what would take its place?
A published study “All About Vision” tells us that "vision is a two-part process that is first seen and then processed by the brain". This two-part “process” is probably the most important formula for becoming a profitable retail trader (“SEE” -“PROCESS” - "TRADE").
Eyes have the ability to focus on and capture an image (i.e., an options chart with proper indicators and labels is an image) and what we see needs to be interpreted by the brain “BEFORE” we can make sense of what we’re seeing! This is probably why “Seeing Is Believing” is a well-known proverb, and why “Eye Witnesses” are an invaluable part of our legal system.
Adam Debrowski states that “our sense of sight is responsible for most of the information we absorb from our five combined senses.” It is for this reason that all of my charts for options trading that have put together through the years are geared towards finding trades from a "visual" perspective.
My moniker here on useThinkScript.com is AGAIG (AsGoodAsItGets). Actually I have a blank chart on my screen where nearly every post made on this site is loaded and tested.
My goal is to continually adopt charting and/or indicators that one can immediately see where a stock (ETF) is trending and what the next price move might be. This task is accomplished by using multiple indicators analyzing the same parameters while using slightly different inputs to show mathematically what is taking place. A good friend of mine (who is a great trader) says “follow the flow.”
Since the market was developed mathematically, and because many individuals tend to be challenged when it comes to understanding multiple computations at the same time (mainly the Greeks), it is my goal to make charting and indicators as “Visually Simple” as possible.
Today, I want to discuss an Indicator titled “New & Improved Smoothed RSI Dynamic Range w/RSR (a long title).
The original was developed by Merry Day in 1/24 for VIP members and she’s updating to the New & Improved version.
This might seem like a complicated indicator with multiple lines of code to make it work. It is a “lower indicator” (and I don’t much like lower indicators) unless they are highly visual and can be recognized very quickly in combination with my upper charting and dashboard. This indicator accomplishes that very nicely!
SADLY, this indicator is for VIP traders only (but may be worth the price of becoming VIP since many of the other VIP indicators are great as well). Hopefully this one will be highlighted in one of the weekly Your useThinkScript Updates and/or the Newsletter?
First, I will admit to removing the labels as they are a bit of a distraction to me. The visual parts are the upper and lower lines (potential changes in direction) with a clearly defined MA (moving average) red/green line which follows price. Since this is an oscillator it shows trailing history which makes it an easy to follow visual. The upper/lower lines frequently make good entry/exit points.
If you are a VIP member you can luckily add this to your charting (hopefully to charting I have already published under the AGAIG moniker).VISUAL OPTIONS TRADING
AGAIG TREND, MOMENTUM, & CYCLE TRAFFIC LIGHT
If I were to write a book about options trading it would be titled “VISUAL OPTIONS TRADING” with the subtitle “If you can’t see it, why trade it”?
Question: Is eyesight our most important sense? If, not I’m not sure what would take its place?
A published study “All About Vision” tells us that "vision is a two-part process that is first seen and then processed by the brain". This two-part “process” is probably the most important formula for becoming a profitable retail trader (“SEE” -“PROCESS” - "TRADE").
Eyes have the ability to focus on and capture an image (i.e., an options chart with proper indicators and labels is an image) and what we see needs to be interpreted by the brain “BEFORE” we can make sense of what we’re seeing! This is probably why “Seeing Is Believing” is a well-known proverb, and why “Eye Witnesses” are an invaluable part of our legal system.
Adam Debrowski states that “our sense of sight is responsible for most of the information we absorb from our five combined senses.” It is for this reason that all of my charts for options trading that have put together through the years are geared towards finding trades from a "visual" perspective.
My moniker here on useThinkScript.com is AGAIG (AsGoodAsItGets). Actually I have a blank chart on my screen where nearly every post made on this site is loaded and tested.
My goal is to continually adopt charting and/or indicators that one can immediately see where a stock (ETF) is trending and what the next price move might be. This task is accomplished by using multiple indicators analyzing the same parameters while using slightly different inputs to show mathematically what is taking place. A good friend of mine (who is a great trader) says “follow the flow.”
Since the market was developed mathematically, and because many individuals tend to be challenged when it comes to understanding multiple computations at the same time (mainly the Greeks), it is my goal to make charting and indicators as “Visually Simple” as possible.
Today, I want to discuss an Indicator titled “New & Improved Smoothed RSI Dynamic Range w/RSR (a long title).
The original was developed by Merry Day in 1/24 for VIP members and she’s updating to the New & Improved version.
This might seem like a complicated indicator with multiple lines of code to make it work. It is a “lower indicator” (and I don’t much like lower indicators) unless they are highly visual and can be recognized very quickly in combination with my upper charting and dashboard. This indicator accomplishes that very nicely!
SADLY, this indicator is for VIP traders only (but may be worth the price of becoming VIP since many of the other VIP indicators are great as well). Hopefully this one will be highlighted in one of the weekly Your useThinkScript Updates and/or the Newsletter?
First, I will admit to removing the labels as they are a bit of a distraction to me. The visual parts are the upper and lower lines (potential changes in direction) with a clearly defined MA (moving average) red/green line which follows price. Since this is an oscillator it shows trailing history which makes it an easy to follow visual. The upper/lower lines frequently make good entry/exit points.
If you are a VIP member you can luckily add this to your charting (hopefully to charting I have already published under the AGAIG moniker).VISUAL OPTIONS TRADING
AGAIG TREND, MOMENTUM, & CYCLE TRAFFIC LIGHT
All good strategies should have a Trend, a Momentum, and a Cycle script.
This study strives to provide all the essentials in one indicator.
It includes studies such as TTM Trend, Super Trend, Frema, TMO, TOP, DMI , BOP, Slim Ribbon, ADX as Trending/Non-Trending, Super Trend w/CCI and ATR combo and a tri-fecta of CCI + TTM squeeze + TTM trend Combo with labels for Go, Stop, and Caution.
This is a new label for ThinkOrSwim using a:
Red Light = Possible stop and turn (consider exiting a long and/or entering a short ONLY if Chart Indicators in agreement.
GreenLight = Possible stop and turn up (consider exiting a short and/or entering a long ONLY if Chart indicators in agreement.
CautionLight = Take your time and make a prudent decision based on Multiple Chart Indicators in agreement.
Here is the link: http://tos.mx/!SEwxVdlT
RESULTS ORIENTED TRADING
NOTE: Tutoring comments are designed for those who are newer to trading. They are designed to be the type of information that was not readily available when I started trading several years ago. Tutoring is a valuable addition to this website.
Those lessons of life (or lessons of trading) that we don’t learn the first time, keep repeating themselves until we do!
Approximately 90% of options traders lose money. They keep getting the same results and wonder why? I know this from personal experience. My trading was the same for the first two years, just long enough to have enough wins to keep me going, but not enough to become consistently Results Oriented.
My best example of “results oriented” came from one of my childhood friends from early days in Elementary School in Elizabethtown, Kentucky. Wesley and I lost contact with each other after we moved from the area, although our parents kept in contact through the years.
Some thirty-five years later, I was in the Orlando area and had learned from my parents that my boyhood friend had also entered the same profession as mine. I googled his address and went to pay a visit.
It didn’t take long for us to regain our old friendship, even though many years had passed. I asked him how he was doing, was he married, had any children?
He said, “Charles, I’m glad you asked. I just got married last month…for the sixth time.” I said incredulously, “For the sixth time!”
He said “Yes, for the sixth time, and what I can’t understand is that the issues in each marriage have always been the same… Do you think it could be my fault?”
Duh!
As stated above…lessons of life (trading) keep repeating themselves until we learn them. Trading options is no different. Until we learn the basics of the market and how it is designed to operate, we will keep making the same mistakes over and over.
Because the market is designed mathematically to move within 1 SD (One Standard Deviation), it is incumbent on the trader to learn how to trade the market mathematically in the way it is designed to operate.
My advice to any new perspective trader is to go to the tutoring section of this website and learn (hopefully up front) how the market works. You will find many charting setups that properly assess market direction from multiple perspectives. You will find setups I have offered under the moniker AGAIG (AsGoodAsItGets). My newest one without any candles http://tos.mx/!95YjmEow is working as good as any I have developed or previously used. My latest chart with Candles http://tos.mx/!mPuNL9nn
The goal of us as chart posters is to help traders become profitable (especially newbies).
One suggestion from me that I do when entering a day (or longer) trade is to frequently place a GTC (Good Until Cancelled) order right at (or inside) the 1 SD Line and let the trade play itself out (never trade more than you can afford to lose).
ASSUMPTION TRADING
When I started trading options (several years ago) I was with unaware of any trading help available, and so I started surfing the web for resources. A small fortune (depending on one’s definition of fortune) was spent learning everything available that could be found. Determination played a role in learning what I might do in retirement. There are few individuals who have listened to more webinars, and/or subscribed to more trading sites than me?
It is also my assessment that there is a lot of bogus information being advertised or posted on the web, and that many “gurus” make more money advertising their wares than trading their expertise (?). My desire would have been to find useThinkScript.com several years before I did (I’m actually not sure when it started). New traders, and old timers alike, are fortunate to have this resource available.
First, let’s explore “Assumption Trading” a bit and see how it fits into the reality of options trading.
As we travel through life we constantly make assumptions concerning our pathway choices. A close friend of mine (who was much smarter than me) said: “All assumptions are true; All assumptions are false; We must make assumptions!”
So, what is the first assumption we should make about the stock market and trading options successfully? To my way of thinking the first assumption we must make is that “assumptions” do not work when trading the market.
Many are sincere in their ability to become knowledgeable traders, but *** I quickly learned, sincerity cannot be the bottom line.
The market was “sincerely” designed only using mathematics and probabilities for its basis, and it will take mathematics and probabilities to have any hope of being successful trading options in the market.
This is where useThinkScript.com is one of the best resources available to us (both newcomers and old timers). We must always continue to learn and hone our process! “As long as we are green traders we continue to ripen. It is only when we think we’re ripe that we tend to get rotten!”
Since the market is designed mathematically, we need to use mathematics in trading to be successful traders.
How does AI (Artificial Intelligence) play into our becoming successful traders’. As of this minute artificial intelligence cannot tell us where the market will close today. Artificial Intelligence cannot tell us where the market will open Friday morning, or where it will close Friday.
Artificial intelligence can take a lot of historical information into consideration, and from that information, determine what the market has done historically, look at where the market is currently, and make projections (assumptions) as to where the market will be in the near (or long term future).
To be successful one needs charting with indicators that take into consideration, direction, volume being traded, money flow and mathematical tendencies (ATR, SD, Pivot Points, Tops/Bottoms, the Greeks, etc.) currently in place. Even the market itself says that current ATM (At-the-money) price has a 50/50 chance of moving up, or moving down.
There are many types of indicators and charting available with everything you need for success already available here on useThinkScript.com. (and like new options on an automobile new indicators and charts one are being developed constantly).
There are Oscillators (which show where they have been, where they are at, and the apparent direction they might be heading); We can use a Parabolic which shows the Stop and Reverse of Candle direction; there are multiple indicators that measure Direction from multiple perspectives. There just aren’t indicators that can tell what might happen next. It is for this reason that one should never use any indicator in isolation. A successful trader should (WILL) have multiple reasons (indications) for placing a trade. Intuition (assumption) is not one of those indicators.
The most important decision a trader can make is to choose charting and indicators that fits your eye and helps determine direction a stock (ETF) might be heading (your GPS System which I have talked about in a previous post).
All of this is available to you on this website. There are multiple options (no pun intended) for an individual to choose from. Many experienced traders are sharing their knowledge and how to effectively trade. REMEMBER: 90% of traders lose money. This website follows one of the Basic Principles of Life called “Group Good” which states: “What you do (recommend and post) should always be for the greater group good.”
Happy Trading!
HEIKIN ASHI CANDLES vs REGULAR CANDLES
You should be able to notice the difference VISUALLY on these two MSFT Four-Minute Charts (I used 4Min because I could show the whole day verses another time frame but it works on all time frames). The Heikin Ashi is much smoother. I am also using only the Date Time Lines, My AsGoodAsItGets Indicator, and the Murrey Math Pivots. Here is the Heikin Chart with Indicators: http://tos.mx/!4iowTUcP
Can you see the difference?
The Administrative Team had good comments here if you go back and read!
AGAIG KEEP IT SIMPLE CHART
This is the third in my series of trading charts and is my simplest chart put together as yet.
Don’t get rid of my other two:
AGAIG Best Trading Chart Setup For ThinkOrSwim
AGAIG Day Trading Chart Set-up For ThinkOrSwim
Keep this as a third setup and check all three to see which works best for you.
Like everyone who seeks The Holy Grail, this might be The Grail without the holy?
This chart is very simple to follow and the arrows and bubble help keep you on track with your trading.
I want to give thanks to @samer800 for the Profit Maximizer which I modified to have a different look on this chart for my purposes.
The beauty of this Chart Setup is to just follow the Long/Short Bubbles, the Green/Red Arrows and the 8 EMA Red/Green Fast EMA Line positioned with the White 20 EMA Line.
Look for both crossovers and arrows pointing direction.
My Short/Long Bubble indicator is in place, along with the ORB, reverse pivot lines and algo pivots. I am using 2-color Trend Candles. Of course, my price pointer is a favorite, as is the PSAR.
Included will be two pictures using two different size candles in which I use Heikin Ashi as I like them for shorter direction purposes.
If you are a VIP useThinkScript member, the 10x multi labels are available to you. I couldn't add any of the VIP Indicators on this general charting area. The 10x will show you what is happening in time frames further out.
I will try to answer any questions posed about this Chart Setup?
The link for the charting is: http://tos.mx/!Rq44W7WC Click here for --> Easiest way to load shared links
CATCHING BUTTERFLIES TRADING OPTIONS
What is an Options Butterfly?
An Options Butterfly consists of a Debit Spread combined with a Credit Spread. The body of the butterfly is comprised of the two short positions combined together (the body of the butterfly) while the two long positions, one on each side of the body are called the wings. The beauty of a butterfly trade is the low cost compared to the potential return if the trade pins near the body or ITM.
Any stock (ETF), that has options can be Butterfly traded. My favorite is the SPX Butterfly which is cash settled (meaning it can’t be closed against the trader – the trader is the only one who can close the trade and, if not closed, will become cash settled at expiration).
To buy a SPX butterfly you would place your pointer on the strike that you want to be the body (the two short positions) of the butterfly , right click on that strike go up to buy and then click on butterfly. This will open a 5 point SPX Butterfly Spread Trade. As I write this the SPX closed today at 5127.79. A five point Call 5125/5130/5135 spread would have been ITM (In-the-money) and returned $127.79 minus what you paid for the butterfly.
I like to trade the SPX 0DTE after 1 p.m. (as late as possible) in the afternoon when there is a pullback in the SPX and my indicators show a positive change in direction. The maximum loss that can be sustained is the amount you paid (risk) for the butterfly. (Both a Call and/or a Put Butterfly can be traded equally as well).
As a side note: The big boys (algorithms, computer trades, etc.) are mostly fond of the 25, 50, 75 and 100 strike positions. Today those levels would have been the 5100, 5125, 5150 and the 5200.
At his point for tomorrow there is action at the 5140. A Butterfly centered on the 5150 is listed at .40 - .90 and probably could have been bought for somewhere in the mid-point. One of my favorites is to guess where the next Friday SPX will close. Maybe this Friday we might have a close at 5200. A 5200 5-point Butterfly can probably be bought for less than .25 and a 10 point spread 5190/5200/5210 for less than a dollar. These can be closed at any point you wish prior to expiration where there is an acceptable profit worth taking. A closing pin at 5200 would be worth $1,000 for a 10 point spread less the amount paid. I have paid as little as .!5 - .20 for one of these.
A happy note for traders who are limited in the number of day trades available. Since the SPX is cash settles you can leave the trade in place and it will automatically close at 4:00 p.m. and will not count as a day trade unless you close it yourself prior to closing (it then becomes a day trade). You would manage this trade as any other and close it out if the stars don't seem to be line in your direction
When I make a post like this it is usually listed as “Tutoring” which reminds me of an old Far Side Cartoon with a car backing out of the driveway and a large dog sticking his head out the window talking to the next door neighbor dog saying “Hey Biff, I’m going to get tutored!”
Hopefully my tutoring will provide for a more favorable outcome! Catching Butterflies can be both fun and rewarding!
INDICATORS: A “GPS” SYSTEM FOR TRADING
Some possible thoughts for newer traders
Some possible thoughts for newer traders
Traveling one morning to an unknown destination, my automobile GPS system suddenly said “Prepare to make a U-turn.” This was a heads-up that I would shortly need to make a “change-in-direction”. That change was not immediate, since the operative word was “Prepare.” I actually passed a couple of roads to the right and then traveled almost a half mile before the GPS said, “Now make a U-turn.”
Five days a week (except for holidays) options traders start a journey in the stock market towards an “unknown destination”. We don’t know where the market will take us, nor do we know its ending monetary destination? As an important note: neither do the Market TV Business Pundits know where the day’s market will end. As such, it might be helpful to have a good “GPS Market Trading System” to help make decisions along the way.
My wife is sitting here in the office with me and just asked: “Why are those candles on your chart going up and down?” I told her that is an excellent question and that the stock market is a lot like life. Life has its ups and downs, although it usually moves sideways, and like the market chart we never know which way the next candle might move? Sometimes our internal GPS system is our only guide as we move through life!
What about the market, and how are we going to navigate through this day?
First, we need a good charting vehicle that includes a GPS system to help reach our destination. For me that GPS system is called “Indicators”. Indicators can help show when to “Prepare for a Change in Direction.” Some of my Indicators have a tendency to repaint, we may pass a road (indicator arrow) or two before any trend change actually takes place. Because of that reason, my charting is comprised of “multiple indicators” looking for possible change from more than one perspective.
We need Indicators that track money flow, overbought/oversold conditions, natural pivot points, support/resistance, and Fibonacci levels where computers might be programmed to buy or sell. There may be other parameters as well, and I’m always seeking one’s that have a 90% chance for providing indications for a probable trend reversal to take place.
Let’s first take a short look at some market dynamics.
Most of us learned the Bell Curve (a graph depicting normal data distribution) in High School. The Bell Curve shows that distribution takes place within three Standard Deviations. In a normal distribution curve, about 68% of data falls within 1 SD, 95% within 2 SD, and 99.7% within 3 SD. Options in the market are mathematically designed, and priced, to fit within 1 SD. The market uses several parameters to derive that 1 SD for each stock (ETF). Some of these parameters include price, volatility, time, and a few Greeks thrown in for good measure. As with the purchase of many things in life, an option begins to lose value as soon as it is purchased.
First, most indicators are oscillator driven, which is why we want different parameters for each of our indicators. Without different parameters for each indicator, we would only need one indicator. Multiple indicators provide the opportunity to see changes in trend taking place from different perspectives.
My first indicator of interest is the ORB (Opening Range Breakout). During the first 15 – 30 minutes, the market sets its High/Low parameters for the day. As a rule, the chosen security (stock, ETF) will trade between these two ORB levels unless it breaks out above/below the ORB.
Since the market is designed to trade approximately 80% of the time between a 1 SD High and a 1 SD Low, those areas become important pivot points to take into consideration. Other pivot points of interest are the previous day’s High/Low, as well as Support and Resistance Levels (which I like to show as a cloud). Fibonacci levels can also be major pivot points (8, 13, 21, 34, 55, etc.) which are Moving Averages – my preference being EMAs (Exponential Moving Averages) which are slanted more towards current values. My charting includes the 8/20 EMAs with a favorite trade being the crossovers of these two moving averages. My favorite day trading is a 5-minute chart, although other time frames may be used as well.
It is usually good policy to let the market settle in for a short period of time before placing trades. The first couple hours are usually the most active periods of the day. Some traders only trade during the first 1–2 hours.
A favorite indicator on my chart is the PSAR (Parabolic Stop and Reverse) which helps determine the direction an asset is moving. History shows that candles tend to move 6–10 bars on each time frame before changing direction. The PSAR shows where the last change in direction took place, and on my chart there is an upper label showing how many bars ago that transition took place. Of course, in a strong uptrend or downtrend, movement can be a lot more than 10 candles.
This may be more information than a person needs, however this represents a collection comprising my personal GPS system for placing trades. Statistics show that 90% of option traders lose money, and my guess is that most of them have no Charting (GPS) System in place? Many losing traders are probably “gut” traders, which has never proved to be a reliable trading system. Dilbert the cartoon wondered, “where do you place your head to listen to your gut?” My worst trades have always been when I thought I knew better than my indicators.
This site “useThinkScript.com” has a lot of charts and indicators to choose from. I would encourage all new traders to pick a charting setup that fits your eye and especially one that has at least 3–4 indicators showing probable trend changes, and then use it as your trading GPS system. (Of course my preference is my personal charting: “AGAIG-BestTradingChartSetup” posted a few weeks ago although there are many good other choices also available on this site).
CAN TRADING BECOME LESS COMPLICATED
There is a maxim related to GROUP GOOD: Anything we do (or in this case post) should always be for the greater group good.
First of all: There are almost 6,000 companies with optionable stocks, as well as several hundred more ETFs with listed options. Many of these stocks are not worth our time, effort, or energy.
This trader (me) had a long-term habit of screening more than 50 stocks at a time, looking to see which one’s included some of my trading parameters. I had as many as 10 or more stocks on my screen at one time, hoping to find one to quickly grab. A friend recently asked: “How many horses (indicators) can you get into a small corral?” (or charts on a small screen)
My charting was once filled with a plethora of indicators on the chart as well as multiple lower studies as well. It finally dawned on me that I was creating insanity for myself, and was making trading more complicated than it really needs to be.
As a side note: Because of my background in healthcare I was visiting a Mental Health Ward one day and asked a patient “Why are you here?” His answer: “Because I’m not all there!”
So, what are we actually looking for when trading options? How about momentum, direction, volatility, close Bid/Ask and a few other parameters such as: The previous day’s High/Low; ORB; PSAR, some upper labels showing a few extras like: Multiple Time Frame activity; ATR, a few Chart Arrows, a couple of important EMA lines, and a bubble or two suggesting a change in direction.
Everything listed above can be placed on one chart without our eyes glazing over?
Question: How many trades can you actually manage at one time? It was my experience that overload came easy, and often.
One if the Natural Laws of Life is “The Law of Increase” which states:” What we put the energy of our thoughts into will increase.”
Let’s put this in simple terms since this is probably one of the most important principles for any person who wishes to be successful. Focus on the simplest things necessary for trading.
Focusing on multiple extras will only increase your trading dilemmas. Focus on the simplest parameters necessary and the rest will take care of itself? This is why focusing on problems only increases the problems when one should just focus on solutions and then problems will take care of themselves (no extra charge for this wisdom which I learned the hard way).
The “College of Hard Knocks” has stopped me from incessant screening. All stocks go through the same motions: Up, Down, and Sideways. My trading consists of only two ETFs (SPY & QQQ) that meet all my trading criteria, i.e. they move Up, Down, Sideways, have volatility, close Bid/Ask and are easy to trade.
When trading the SPY we are screening 500 stocks all at the same, time and all on the same screen. And with the QQQs we’re looking simultaneously at 100 stocks and all with no onerous screening.
Why then trade more? Pick one or two good stocks (or ETFs). Trade their movement on a daily, weekly, or longer basis. Use the best charting you can find. Trade only one or two at a time (you can always trade as many contracts as desired).
If, and when trading longer term spreads my usual is to accept the risk being taken, place a GTC for a 50 -75% profit, and let it be. Read my previous post on Catching Butterflies for low risk, and if ITM at expiration can make for great profits.
Life should be kept as a simple as possible and trading the market should be kept as simple as possible as well! It’s actually an individual choice?
HOW TO TRADE WIDE BID/ASKS IN TOS
Normal wisdom (and most of the pundits) advise us to trade the midpoint of the
Bid/Ask spread.
Let me suggest another strategy?
Suppose you are trying to place a Put or Call option trade that has a Bid 1.00 and
Ask 1.30. The midpoint would be 1.15, and you would probably get filled at that
level.
My experience has been that it can often be filled for a few cents less. If the Bid is
1.00 my first bid would be 1.06 and then 1.11. (i.e. I go to the next whole number
.05 or .10 and the add one cent. You will frequently get filled at that level.
Getting filled closing a position will also frequently work using the same strategy
but in reverse (deducting a penny from the whole number).
On the above trade if you don’t get filled at the 1.15 midpoint add a penny and
you will often get filled (unless there is a lot of current volatility driving price).
For spreads, it is the midpoint that will usually get filled unless you choose to trade
each leg one at a time.
This comes under the concept that a penny saved is a penny earned?
SCALING IN/OUT WITH OPTIONS
Scaling in/out with options can be an effective method for adding or removing positions. Scaling can help adjust risk, lock in profits, and/or maximize profit potential. I have also used scaling into a position to try and salvage a trade that is going against me.
CONFESSION: Trades that are going against me are usually because I have not stuck to my trading plan and have slipped into that gray area of trading called “gut instinct trading.” Gut instinct trading is the worst trading plan available!
So, what happens when Scaling into a trade happens using gut instinct trading.
Yesterday morning my gut instinct was telling me it’s time for a pullback in the market. Contrary to sticking with my charting indicators, I bought a single 417 SPY Put for .78 cents. My first mistake was not closing it out when it became slightly profitable a few minutes later, and the market began moving back up with the position beginning to lose value. When it fell to .34 cents I scaled in and bought a second 417 Put. I now own two 417 Puts (a .78 and a .34 which has lowered the cost for two to .56 cents each. Again the market continued to move against me and the 417 Put was now down in the .20 - .25 cent range. Being stubborn I bought a third for .21 cents. Now there are three 417 Puts with a value of .443 cents each.
Finally at 1:30 p.m. the market reversed direction and an hour later I was able to close all three for .79 cents each (for a profit of $108).
So, why do I share this with you? First of all to let you know that “gut instinct trading” is poor trading , rarely works, and should be avoided even though I eventually pulled this one out.
I rarely use “scaling in” on a 0 DTE trade but have frequently used the concept for longer trades (several days until expiration) usually to increase a winning position and/or occasionally to lower the cost of an overall options cost. I will only increase positions when most of the activity shows more positive trend movement likely available prior to expiration.
My purpose for sharing this is to discourage any from “gut instinct trading.” It is far better to put individual feelings aside, develop, or find, a good chart setup (similar to my AGAIG-BestTradingChartSetup) and let market trend be the impetus for all of your trades. Gut instinct trading ultimately leads to losses although we might get an occasional streak of luck.
As an ardent cartoon lover (the part of the paper I read first) an old Dilbert Cartoon explains “gut instinct trading” the best: The pointy hair boss says to Dilbert: “People Tell Me You’re Underperforming,” Dilbert responds: “Did You HearI It From AnyoneCredible?” The pointy hair boss says: “No, But I Know It’s True Because My Gut Tells ME IT’s True” and Dilbert responds: “I’m Curious, Where Do You Stick Your Head To Listen To Your Gut?”
Bottom line: Don’t listen to your gut! It’s not reliable. Find, or develop, a good chart set up, follow it faithfully, and make sure several indicators agree with a change in direction (let the market lead). Also scaling into a position can sometimes turn out to be an effective strategy?
AN OPTIONS TRADING OVERVIEW FROM A FELLOW TRADER
The nice thing about trading options is that one can limit their risk. When buying an option, risk is limited to the amount paid for the option. Selling options is not recommended for the inexperienced trader (since loss can be substantial unless limited by using spreads). I have a high school classmate who lost 500K selling QQQ Puts (he was subscribed to a site that kept telling him to “hold on” until it was too late). Lesson learned: don’t rely on someone else to tell you what trades to make? “Paper Trade” until you fully understand what you’re doing and how to manage the risk involved.
Only about 10% of options traders make consistent money. I have learned to appreciate the 90% who make my trades successful (just don’t be one of them)!
This site useThinkScript is a wonderful place to learn and share ideas. One of the Natural Laws of Life states: When two or more individuals share with each other, all of them have more!”
Also learn to understand Theta Decay. An option bought begins to decline in value as soon as it’s purchased, and will be worth zero at expiration unless it’s ITM (In-the-money) with value only equaling the amount still ITM. It’s like buying a new car (which begins losing value as soon as you leave the dealership).
It’s amazing to me that people will insure their homes, automobiles, and health (hoping they never need to use the insurance) and yet very few individuals insure their money (portfolios). The options market is a good hedge for many things when used in the right manner.
I see many complicated chart setups with all kinds of indicators top and bottom. It has been my experience that since the market only moves three ways (up, down, and/or sideways) that I should keep things AS SIMPLE AS POSSIBLE to give me an indication of the markets intention.
Life is complicated enough without making it harder, which is why I like my Best Trading Chart Setup because (for me) that’s AsGoodAsItGets.
Remember: Most indicators repaint – but so does life!
WICKS (CANDLE SHADOWS)
We frequently assume during trading hours that a long Wick (Shadow) on a regular candle portends a probable change in direction (which is frequently the case).
Do you ever look at Wicks (Shadows) on candles after hours and try to understand their meaning?
First of all, the end of a Wick (Shadow) is actually a price level that has been tested. These price levels are not only tested during trading hours but are tested after hours as well. After hour shadows have a different meaning for the next few option trading days.
As a rule I always look at Wicks (Shadows) on five minute after hour charts, “especially paying attention to the longest after hour shadows”. I then mark the longest with a price line as support/resistance which will inevitably be reached 100% of the time (my experience is that these levels are usually reached on, or before, the next Friday’s expiration).
Price lines can be found in your Drawings Drop-down box. I use the one with the underlined $ symbol. I use a different color and leave them in place until that price is reached and then erase them.
I am showing a picture of MSFT after hours for last night and have marked two levels: A High Price Level of 394.35 which has already been reached. The Lower Price Level (389.33) is still active. At this point MSFT has crossed the upper price line and should be removed. Also notice that it has reached a double top with shadow above. The lower Price Level is still in place and will be reached in the future (I can almost guarantee since it hasn’t failed to work for me as yet).
To erase a Price Level Line put your pointer on the line and click “Remove Drawing”.WICKS (CANDLE SHADOWS) RTH vs ETH
“EXIT-IT IS” or EXITING TOO EARLY IN TOS
We frequently assume during trading hours that a long Wick (Shadow) on a regular candle portends a probable change in direction (which is frequently the case).
Do you ever look at Wicks (Shadows) on candles after hours and try to understand their meaning?
First of all, the end of a Wick (Shadow) is actually a price level that has been tested. These price levels are not only tested during trading hours but are tested after hours as well. After hour shadows have a different meaning for the next few option trading days.
As a rule I always look at Wicks (Shadows) on five minute after hour charts, “especially paying attention to the longest after hour shadows”. I then mark the longest with a price line as support/resistance which will inevitably be reached 100% of the time (my experience is that these levels are usually reached on, or before, the next Friday’s expiration).
Price lines can be found in your Drawings Drop-down box. I use the one with the underlined $ symbol. I use a different color and leave them in place until that price is reached and then erase them.
I am showing a picture of MSFT after hours for last night and have marked two levels: A High Price Level of 394.35 which has already been reached. The Lower Price Level (389.33) is still active. At this point MSFT has crossed the upper price line and should be removed. Also notice that it has reached a double top with shadow above. The lower Price Level is still in place and will be reached in the future (I can almost guarantee since it hasn’t failed to work for me as yet).
To erase a Price Level Line put your pointer on the line and click “Remove Drawing”.WICKS (CANDLE SHADOWS) RTH vs ETH
“EXIT-IT IS” or EXITING TOO EARLY IN TOS
“Exit-it is” is an affliction suffered by many traders. It is a condition caused by exiting a trade too early or while the trade is still making a profit. The opposite of “exit-itis” is called “greed.” Greed is the malady of many traders (including myself who finally found the cure).
I have a good friend in New Jersey (a better trader than me and also a member of useThinkScript). We frequently discuss our trades and lament the times we leave money on the table. There are many times, however, when we should have exited before the “big boys” pulled the rug out from under us (a favorite tactic of the “big boys”). We have also come to an important conclusion which should be your thought for the day: "A TRADER NEVER LOSES MONEY WHEN THEY TAKE A PROFIT"!
So, what is a fair profit?
To my way of thinking “a fair profit” is any profit that pays a better return on my money risked than what my bank pays for a similar deposit. As traders we are actually investing our cash in a trade and, as such, need to make an adequate return on our investment (or on all trades overall).
I can assure you that the 90% of options traders who lose money are plagued with the greed malady and/or are not using good indicators, or rationale, for placing their trades. As in life many individuals want more and place trades thinking they know what the market has in mind (I usually lose when I think I know what the market is going to do).
What is the cure for these afflictions?
There are many traders who place a trade and then automatically place a GTC (Good Until Cancelled) order for 11% (a 10% profit after costs) more than what they paid for the trade. These traders are very effective in receiving a 10% return on their money. Others use 15%, 20% or maybe like me, usually 24%.
Why do I like GTC orders? Look at the shadows (wicks) on a candle and see how often they momentarily pop up or down. A lot of profits lie in those shadows just waiting to be collected. Once that shadow pops up/down I am not usually fast enough to grab the amount my GTC collected for me, and that shadow may be a turning point for the stock (ETF).
Of the two afflictions “exit-it is” tends to be more profitable in the long run than does the malady of “greed”?
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