Trading tips:
🔹 Trade your plan
🔹 Don’t be afraid to take a loss
🔹 Pick one style and perfect it
🔹 Don’t have any bias
🔹 Size into good R/R setups
🔹 Trade the trend
🔹 Have your entry and exit before
🔹 Have 0 emotions
1- Importance of building a cushion
Cushion = Risk market $
- Traders tend to start off their trading journeys with high
expectations, which often leads them to being red & discouraged.
Focus on:
- Proper R:R
- High probability trades
- Less trades = more
- Control your ego
2- Analyzing momentum & trend
- One of the key steps to trading options is assessing momentum &
trend.
Stocks can do one of the three: trend up, consolidate, or trend down.
Focus on:
- Volume
- PM, AH moves
- News, catalyst
3- Understanding market activity
-What goes on beneath the price on a chart.
Focus on:
Order ow & liquidity
Level 2 bid/ask prices
Number of buyers/sellers
Spreads are tight or wide
4- Position sizing
- Trade too big and you can wipe out your account. Trade too small
and you may not be using your capital ef ciently.
Focus on:
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-How much of your portfolio are you willing to risk on ONE trade?
- $50k account + 1% risk = $500 risk per trade
5 - Detach from noise
- It's easy to get caught up in the hype like meme stocks where you
think the payoff would be big.
Focus on:
- Your own watchlist.
- Your own rules.
- Your own set ups/ levels.
6- Always create an exit strategy
- Set your game plan and stick to it.
Focus on:
Not having to go all in or all out at one price and when it's time to take
pro ts (or losses), do it and don't look back.
No one goes broke taking pro t.
7 - Following your rules
- It's easier to make money than it is to keep it
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As a trader it is more important to know that you will always follow
your rules than it is to make money, because whatever money you
make, you will lose back to the market if you can't follow your rules
8 - Dealing with emotions
- To be a successful trader you need to trade without fear.
Once you build trust in yourself to always do what needs to be done,
there will be nothing to fear because the markets won't be able to do
anything to you.
9 - Manage mental energy
- Your thoughts can add energy to or detract energy from your
trading.
- If you allow yourself to think about something good/bad, the
thoughts have the power to change the way you experience things.
10 - There is no "Get Rich Quick" scheme
- Taking things step by step keeps you in the game in the long run.
- Getting rich quick can only lead to frustration if you don't have the
skills to keep it. Just follow your rules & keep working on educating
yourself.
Options Premium Pricing:
Why premiums were unusually expensive today!
Options have 2 values that affect premium
A1. Intrinsic value-> Stock price - Strike price (Only ITM contracts)
A2. Extrinsic Value-> Time (Theta)+ Implied Volatility (ITM and OTM contracts)
Implied volatility has a bigger impact on price than time (Theta)
B1. When IV on a stock spikes, it adds additional value to contract premiums
B2. When IV drops, that added value is also removed
IV has an inverse correlation to the Market Trend
1. Overall Market up-> IV down
2. Market down -> IV up
($VIX tracks overall market implied volatility)
In conclusion why premiums were high today
1. Market goes down
2. IV spikes up
3. Premium jumps up
After the IV spikes, market makers love to consolidate stock sideways to
1. Collect premium on both sides long and short
2. Eat up that additional added value by IV spike
MARKET MAKERS THRIVE BY INDECISION!
Be decisive and know if you are overpaying for option contracts!
STRADDLES AND CREDIT SPREADS WORK GREAT WITH SIDEWAYS ACTION.
HINDSIGHT TRADING
So what exactly is "Hindsight Trading" and how does it a ect newer traders in the market?
Hindsight trading is when we convince ourselves we could have predicted an outcome after
the fact.
We look at a chart from earlier in the day and the way it played out and we think to ourselves
"oh yeah, I knew that was going to play out like that". Or, "I should have jumped in earlier
because I knew that would be the outcome".
No, you did not know it was going to play out any certain way because the market is a game of
probabilities, nothing is for certain. Hindsight is always 20/20, we cannot be thinking in
hindsight, we must be thinking in the present.
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So what exactly does this look like on a chart and how can we prevent this? Let me show you
below. This $DKNG chart, shows a break on a down trend, and con rmation of the 9ema on
the 5m timeframe.
If you decided to grab calls or commons on the break of the downtrend, it looked like it was
starting to reverse. But as you can see from the chart, it gets rejected near VWAP, and makes a
new low for the day as it was again trapped under the 9ema.
Now let's switch to the 15m timeframe. You can see, we experience rejection at the 9ema on
the 15m timeframe. If you were only utilizing the 5m, you were not aware that $DKNG was still
trapped under the 9 on the 15m. Now what does this have anything to do with hindsight?
Well some people may have looked at this chart after the fact and thought, I knew $DKNG
would have been trapped under the 9 on the 15m all day, I should have put half my account
into puts. Again, no you did not.
It is easy to make that prediction after the matter, but a whole di erent story when trying to
analyze something in real time. If you would have only been looking at the 5m, you would have
thought the reversal was in.
This circles back to my other thread about utilizing multiple timeframes together. If you are
switching between the 5 and 15m and see $DKNG break that downtrend and reclaim the 9ema
on the 5m, you are aware that on the 15m, it is still trapped below.
So NOW if you play the downtrend break, you know when / if it approaches the 9ema on the
15m, you may experience a rejection. Whether its commons or calls, you have a plan mapped
out to scale and potentially get out of it rejects.
This is the di erence between trading in hindsight and having a plan and thesis in real time. We
need to be able to think on our feet and execute, not review and say what could have been.
To recap:
-Never trade in hindsight
-Utlizie multiple timeframes
-Think / adjust in real time
9 EMA SRATEGY
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Before jumping in, you rst need to know what the 9EMA represents, and how EMA'S
di erentiate from SMA'S.
Now that you have a general understanding of both, let me show you how I use the 9EMA
e ectively both ways. The highlighted line below is your 9EMA.
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Breaking down this $AFRM chart, we can see at the highlighted candles on the 5m chart, that
the 9EMA was unable to hold as support.
Once broken, you can see the rejection happening at the 9EMA as the chart continues in its
downtrend. When we experience that rejection, it would be a good put opportunity as that is
the con rmation we need.
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Once we take our position, we must take what the chart presents to us. If something is
continuously experiencing rejection at the 9, we can let some of our position ride. The rst sign
we must look for before exiting fully is a break back above the 9EMA with con rmation.
Con rmation di ers depending on who you talk to, but i personally look for a close over the 9,
or close and backtest of the 9 for the con rmation I need. A wick through is not con rmation as
we must wait until that candle fully closes. This will help you against fake outs.
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Now lets take a look at how I would play the 9EMA in an uptrend reversal. You can see here on
$LCID, that after our morning ush, we con rm back over the 9 and begin riding it for quite a
while.
The same concept and strategy applies before jumping in. We wait for con rmation on
whichever timeframe we use, we do not prematurely jump in. This will give us a much higher
probability of success. You can see below we ride the 9EMA for almost 2 hours.
Again, we could let part of our position ride as we scale out on the way up, and look to exit on
the break of the 9.
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Whether you use the 5m, 15m, 30m, or whatever timeframe you use, I suggest giving this
strategy a try. It can be very lucrative if you get good with it. I hope this thread was informative
and help you in some way!
TIMEFRAME PROBABILTY
Before I can move further, you must rst know what timeframe probability is. Timeframe
Probability refers to the likelihood a scenario plays out, based on the timeframe you are
observing. The higher the timeframe you are monitoring, the higher the chance a scenario plays
out.
An example of this would be if you only observe and use the 1m chart while trading. The
chances of a scenario playing out on a 1m chart vs. a 5m chart is much smaller. So on and so
forth as you continue to higher timeframes such as the 15m, 30m, etc etc.
Lower timeframes are essentially noise within higher timeframes. HOWEVER the higher you go,
you run the risk of missing moves that will happen within the larger timeframe. Let me give you
an example of what exactly I am talking about.
Using this $F chart as an example, we can see a ag forming on the daily timeframe. Chances
of this ag playing out on the daily, vs a weekly chart are much higher as we have more
information to go o of.
You MUST not only use a timeframe such as the daily, as you will obviously miss the price
action happening within that candle. It is important to utilize multiple timeframes no matter how
you trade.
The higher timeframe a bullish or bearish formation is forming, the higher the chance it plays
out in either direction. This is very important not only during intraday setups, but looking for
swing positions as well.
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Now lets talk about how timeframe probability can assists us with con rmation for entering and
exiting a trade. For me personally when trading options or commons, I am always using the 5
and 15m timeframes together.
This will allow me to see the bigger picture and gather information using the 15m, that I would
otherwise miss using solely the 5m. For me, the 5 and 15 together is the sweet spot that I have
found the most success with during intraday.
Lets take a look at a trade I took today and how I played it using both time frames. On $DKNG,
you can see my entry here highlighted when DKNG broke above and con rmed the 9ema on
the 5m timeframe.
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Now if you look below, you can see at 11:40 into 11:45, that 5 min candle ended up closing
below the 9ema. If you refer back to our 9ema thread, that may have been the sign I needed to
exit that trade. However, let me show you why I stuck that trade out.
You can see here on the 15m candle that closed at 11:45, this beautiful bullish engul ng candle
that kept me in the trade. If I am not observant of that timeframe, I most likely exit this trade
when that candle closes below the 9 on the 5m.
It is very important to note that when call or put triggers are met, I am utilizing the 5 and 15 for
that added con rmation I need. I may not always wait for con rmation on the 15, BUT I am
using it to keep me in a trade, or using it as a sign to exit.
To recap:
-The Higher the Timeframe, the higher the likelihood a bullish or bearish scenario
plays out.
-Use the 5 and 15m for con rmation on triggers.
-Utilize higher timeframes to see the bigger picture.
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As always I hope this helps in some way. I genuinely do not care if this gets 1 like or 100. But
sharing this or retweeting can help someone see this that may bene t from it.
SUPPLY AND DEMAND
So lets begin with what Supply & Demand is: Supply & Demand is a fairly simple concept.
Supply & Demand zones are high probability areas where the market may turn. Here is an
example below.
We can also think of these zones as an "Imbalance" between buyers and sellers. This
Imbalance is referring to the disagreement between buyers and sellers where Demand or
Supply exceed one another. This creates the zones we are looking for on a chart.
It is important to note we must think of Demand as buyers, and Supply as sellers. We are
looking for areas on a chart where impulsive moves have happened in either direction, or areas
of consolidation taking place.
Let's rst talk about Demand. When we see impulsive moves to the upside, as pictured below,
we can spot areas where big orders may remain un lled. Lets use this $QQQ chart as an
example.
We can see an impulsive move to the upside that occured. This is the Imbalance we are talking
about. This Imbalance will leave un lled orders in this area, which creates our Demand Zones.
We are looking for these Imbalances turned Demand, when looking to go long.
So how do we draw these Demand Zones? This method may vary from person to person, but I
like to start from the candle where the move began, and draw a zone from the bottom of the
wick, to the start of the body.
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We must be a little lenient with our zones, but also note that we do not want to draw a zone
that is too big. This will not give us an accurate area for an entry. As we can see from this
$QQQ chart, we bounce perfectly out of this Demand Zone.
So how would we approach taking a position within this zone? Well there are a few ways you
can go about. Some people will bid the top of the zone, some will bid the middle, some will bid
multiple orders within the zone, and some will wait for con rmation of the zone.
What do I mean by con rmation of the Zone? When we rst draw our Demand Zone, we do not
have con rmation of that zone until the price retraces back into what we have drawn.
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If we see a wick out of our zone, or a pivot within the zone, that is the con rmation we are
looking for. The below chart is an example of wicking out of our zone.
So we can either bid within the zone before con rmation, or we can wait for that con rmation
we are looking for. Either way, it is CRUCIAL we know that if that zone fails to hold, we most
likely will need to exit our position underneath.
Another tool to use when bidding a Demand Zone is looking at Level 2, and seeing an uptick in
volume as we approach or enter that zone. Those will signal to us that buyers are stepping in.
Okay now that we have Demand out of the way, lets brie y talk about Supply. We must think of
Supply Zones as areas of resistance on a chart, or sellers. The chart below shows a Supply
Zone.
We can see on that $DKNG chart, the areas of rejection that occurred multiple times within that
Supply Zone. This is very bene cial to us when we want to play the backside, or trying to
undercut resitance and get a sell order executed.
The same strategy applies to entries when using Supply as it does for Demand. We can either
bid within the zone, or wait for con rmation. Now lets talk about what happens when a zone is
broken in either direction.
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When Demand or Supply is broken, and price retraces through a zone, chances are that zone
has now turned into the inverse. To con rm this we must see if price approaches that zone
again and gets rejected or breaks through. Below is an example of what I am referring to.
This is a very very important strategy to study in my opinion as you could solely trade using
Supply and Demand on a naked chart. This is a strategy I use every single day, and is by far
my favorite to use.
To Recap:
-Supply = Sellers
-Demand = Buyers
-Look for Imbalances in either direction
-Supply can turn into Demand and vice versa
-Check Level 2, Volume to aid thesis
-Map out our zones before day begins