All About The Trendline.Hi,
Trendlines: if you do not have any rules to draw the trendline (TL) then this is the most subjective technical analysis criterion of all.
Without any rules, you can draw it basically as you want to see it. It is a perfect criterion to talk yourself into the trade or to talk to stay in the bad trade, always there is a new "support" coming. If you do not have any rules to draw it then basically all the time you can find some dots to connect which can seems "perfect" for you.
In this post, I'll talk about buying opportunities from the trendline analyzing crypto and stocks. Some rules to draw it and some typical mistakes you should avoid.
Let's start from the basics. Obviously, you know that to draw a trendline we have to connect two points and waiting for the third one to reject from it. Easy yes!? NB: For me, the third and the fourth touch are the most reliable touches to wait for. The strongest trendline comes from the points which are easily recognizable - a blink of an eye.
If you start looking deeply from where to draw a trendline then keep in mind that it is not the strongest! One second and you will know from where I should draw it!
There are some "experts" who say: you cannot draw a trendline without three touching points. Phh...as you see on the image above, I can, and as said if I have a correct lineup the third touching point is the strongest.
The second myth for me: the more touches you have on the trendline the stronger it is. Yes, the trend is probably stronger, but for me, every next touch increases the odds for a break/trend change.
Sure, I have done great trades from fifth or form the seventh touch but in general, the criteria crossing area has to be quite strong and it has to consists of many strong criteria to do that.
Why I don't like to trade for example fifth or sixth touch? Firstly, the trend is your friend until its end. The market moves up and down, as said the more touching points you have, the odds will go higher for the trend change.
Think like that, basically TL works as a support and the support is hmm...like the 5cm ice on the lake. You cannot break it with one hit, you cannot break it with second or third (ok If you are strong then you can :P). Fourth, fifth it starts to crack, and the sixth...booom...you are in the water. I don't know was it a good parallel but for me, it works the best - the more touches you have the lower chance for sustainable further growth it is.
RULE nr. 1
It is true, that you can draw it in many many ways but let's talk about the first rule. If there aren't any anomalies then the trendline should be drawn "always" from wick to wick (image above) or from body to body. "Always" because there are some cases from where you should draw a bit wider trendline but in general it should be like the prementioned rule.
If you start from the wick and the second point is from the body then this is a mistake. The mistake can lead you into quite an ugly trade/investment. If you trade breakouts then it will be misleading for you, if you trade rejections from TL then it will put you in a thought situation - do I should close it if it falls lower or whatever, simply don't do it.
If you don't have any significant large wicks then go from wicks. Usually, it will give you the most precise price zones from where to grab something. If you can draw the trendline but one touching point consists of large/huge wick (selling panic or whatever it was) but on other hand, it is quite a normal price action then use candle bodies to draw the trendline. This panic-wick can mislead you. Drawing from the bodies just widening the buying area a bit but still, it gives you a good zone to keep an eye on.
If there are a lot of wicks, then there is also a good way to go with a line chart instead candlestick.
Candlestick chart
Line chart
As you see the line chart removes the market noise and you can simply see the closing prices. I use it quite a lot because some altcoins or stocks are quite jumpy and to remove the noise I use a line chart to determine the strongest areas. Stora Enso Idea
Let's jump into rule number two. If we will wait for that third touch then there are quite a lot of small rules to keep an eye on. We want to be perfect so let's find a perfect trendline.
RULE nr. 2
It increases the odds of rejection from TL if the price has made a new higher high (HH) after the previous rejection.
As you see, after the third touch of the trendline, the price has made a new HH and the fourth worked perfectly.
- two touching points, we can draw the trendline, waiting for the third touch and if it comes the market has made a new HH after the second touch and we are ready to take it.
Summary: After the price prints the second point from where to draw the trendline we have to see a new higher highs formation after every touch. This is a great sign that the trend is strong and if everything lines up perfectly we can step in.
RULE nr. 3
It increases the odds of rejection from TL if the touching point timings/length are pretty much equal.
After the price has printed a new higher high and coming back down to make the third one it is great to see symmetric between touching points. At the moment, we have a great symmetric and trendline as a criterion is in place! This simple rule shows you that the market is healthy, moves on decent cycles as it should be, no pumps, no dumps just a simple and clean one.
The second example:
As you see gaps are quite similar and the 4th touch worked almost perfectly. Waited for rejection and stepped in after I saw a decent volume from the trendline.
They cannot be the embarrassingly accurate length, otherwise, they would be extremely few, but they cannot be as in the picture below.
Uuuh...this is ugly and actually, I see it quite often. The first and second points are too-too close considering the third touch. The third touch comes in the middle of nowhere but as said, it is a perfect way to talk you into the trade/investment. This is ugly, it is with a very low success rate so try to avoid it.
The most important rules are in place and now it's a good time to talk about mistakes. I cannot say that they are 100% wrong but in general, these mistakes can be with a very low hit rate.
Sometimes looks like we have all set and ready. We can draw perfectly from wick to wick, we have new higher highs after touches, we have an equal length between touching points but it just doesn't work. Obviously, from time to time it happens but most of the time there are some reasons behind that and one of them can be the angle of the trendline.
It is a bit subjective but for me, the best angle of the trendline stays between +-20 to +-35 degrees (in TradingView you can use it). Then I can trust it the most. I remember that the most common mistake for me I tried to buy too sharp angles 45+ degrees. To long below 20 or above 35 degrees you should have a lot of criteria to match with the trendline to determine the strong setup otherways try to be cautious if it doesn't fit inside my given numbers.
Next common mistakes:
As you see in the image above, after the third touch, we haven't seen a new higher high but the price already touching the trendline. It isn't a good sign for further growth. Does the bulls have lost their momentum or for whatever reasons the market didn't print the new higher high. This can be simply one of the trend reversal signs, bulls have lost their momentum and cannot print new ATH for example. Read between the lines and do not consider buying from the trendline if the market hasn't made a new higher high. Obviously, you can but as said, it can be a bit lower hit rate.
Here is also a second mistake, another no-go criterion for me. Do you know it already? Go and look...
Yes, correct! ;) Firstly, we haven't seen new highs and secondly, the trendline touching points (1 to 2, 2 to 3, 3 to 4) are not at a similar length. The fourth touch comes too early/fast. Another rule which can ruin your "perfect" trade from the trendline.
So, two simple mistakes to avoid. To get a better success rate from the trendline you should wait for a new higher high formation and the market cycles should be quite similar between touching points.
Breakout trades.
If the trendline looks strong but cannot get any support from other criteria then I'll start to look at selling opportunities after the breakout.
As you can assume, this isn't as simple as some guys on YouTube will sharing with you. I have also some rules here to make breakout trades.
Firstly, the price should come from an all-time high or from a mid-term high, print a short-term lower high, and then breaks. This is a good scenario because then there are some FOMO retailers who bought from the top, got a little hope for a bounce upwards, and as you should know, really often they get punished who bought the top.
Secondly, and most importantly, the break must occur with a strong and powerful candle without any significant lower wick. Basically, if you have clean touches from the trendline then it has shown its strength and the strong candle break confirms it even more. How? If the price falls below the trendline just simply with small candles then it doesn't show the strength enough to trust it on the retest. A strong and powerful candle needed! We need to see that power because after the break we start to wait for a retest of it. The strong candle shows that the trendline is still valid but in vice-versa before it acted as support now it starts to act as a resistance. Another example.
Let's talk a little bit about the timeframes. Obviously, the higher is the timeframe the stronger TL is. If I analyze stocks then I trust the most monthly and weekly timeframe. Considering crypto, there I use Daily and 4H but most likely Daily. To be said, 1H is the minimum.
That's about it. The post got quite a big one. uuh...simple trendline yes?! ;) A lot of left unspoken (minor trendlines, how fast it can come to touch it and etc.) but in general you should get at least something from here to add to your analysis. Was fun to write it but this is just the beginning. I have 15 criteria to analyze the charts. Maybe I should write an e-book about technical analysis what you think!? :) Trendline is just one of them and it isn't even the strongest criterion on my list. Doing the analysis I have 15 criteria and depending on the timeframe 3 to 7 of these 15 must be in one strong area together! So don't just go for a trade/investment if you only have one criterion, the trendline.
Hopefully, you like it, all the best!
Vaido
Stocks!
Triangle patterns - All you need to knowToday, we will explain the most important concepts behind triangle patterns.
The first thing you have to know is that triangle patterns are composed of 5 waves which we can define using letters "a,b,c,d,e" This concept was created by Ralph Nelson Elliott, one of the fathers of modern technical analysis and mainly known because of the "Elliott Wave Principle."
Most of the times , we are used to observing corrections with Zig-Zag shapes
These are really easy to spot because C always goes below A, and we can say, "NOW is finished." However, with triangle patterns, we need more patience, its not that easy to say "now is ready" because we never have waves that go above or below the other ones; it's a constant compression. That's the reason it is imperative to wait for 5 clear waves.
Another important concept of triangle patterns is that we can start drawing these two lines that will intersect in the future. These two lines will tend to contain the pattern until the breakout or the cancelation of it.
Ok, let's assume that you had the patience to spot a clear triangle pattern. How should I trade them?
ENTRY LEVEL: ALWAYS above "D" but much better above "B." Why? Because at that level, the price would have broken 2 resistances zones which is a strong sign for the bullish thesis.
STOP LEVEL: ALWAYS below A that was the main support of the structure, so we want to exit our position if the price goes below that level
TAKE PROFIT LEVELS: USE fibo extensions on the previous impulse and pay attention to two levels, 1.27 and 1.68
Important concept: Remember that context IS EVERYTHING. You don't want to trade isolated structures; you want to trade a structure and a macro context aligned with the view you have.
Final idea: Here, we have used a Real example on TSLA. We think that the best way to show these theoretical concepts is by looking for real scenarios and testing them. Here we think that the corrective pattern is not finished, and we want to observe a clear ABDE before setting confirmation areas. It's important to know also that technical analysis is not mathematic; it's closer to soft sciences/disciplines. This means that Technical Analysis is not a fundamental science that explains all the movements of the market; that would be nonsense; technical analysis provides us with statistical guidance that can help us project a probabilistic scenario which can happen or not.
Thanks for reading! Feel free to share your vision and ideas in the comment box.
Best Books on Stock Market & Finance📚 Books are always the best way to acquire knowledge even in the presence of latest technologies/e-books/videos.
There are 1000s of books in the market. So I have picked the best ones according to me!
📚 I have sub divided the books to acquire knowledge in any specific field
💲 Finance and Motivation - For knowing more about money and it's fundamentals.
Suitable for - Anyone with the interest to know about money
💲 Technical Analysis - Knowledge about candle sticks and other trading patterns
Suitable for - Anyone with the interest to know the technical analysis done by traders
💲 Fundamental Analysis - Knowledge about the base of a company with it's fundamentals/results
Suitable for - Anyone with the interest to know and analyze fundamentals of companies for investments.
🤔 Pre-requisites - None of the above book require any prior knowledge.
Thank you for viewing book recommendations.
Let me know through the comment section if you have any doubts or feedbacks.
All the best! Happy trading/investing :) 😄
No its not a picture of Mickey Mouse...🐭It's a super clear diagram on what key ingredients you need to find the 'sweet spot' = profitability.
The thing is, most people are desperately hunting for the holy-grail, you know - that 100% winning strategy... the silver bullet.
It doesn't exist - I'm sorry. 😢
So even a profitable strategy that's awesome can blow your account if the other 'factors' are not considered....
Greed and risk management.
With poor risk management you can blow your account on a profitable strategy.
Much like if the casino didn't set a trade limit - they could go bust if a gambler got 'lucky' - because its the casino that has the mathematical 'edge', right?
You must factor in your losing runs to ensure you not exposing your account to the 'risk of ruin'.
So yeah a profitable 'edge' is key, but without managing your mindset and using effective risk management, its actually useless too.
Having an understanding of probability is fine too - but if you don't execute your 'edge' or if you don't have one, you won't be profitable too.
And lastly, yeah - you can have your risk management nailed on - but if you've not got a profitable edge too, you'll lose money.
Just less money.
You could absorb 500 consecutive losses on a £1000 account at 1% risk per trade, but you'd only have about £6 left. Your strategy would have to be really poor for that to happen!
But you catch my drift, that effective risk management is vital.
So in summary, you need these three key ingredients...
Strategy with an Edge
Effective Risk Management planning for probability
Trading Psychology - (greed under control, no fear, discipline, resilience, etc)
You can't get to the 'sweet spot' without all 3 being in perfect alignment.
Good luck.
Darren
If this helps - please show me by liking this post if you can, its appreciated and I'll do more like this 😎
Option Strike Price "Secrets" In this article you will learn...
- what a strike price is,
- the different intervals for strike prices,
- how to pick the right strike price,
… and much more.
Let’s get started.
1.) The basics: What is the strike price?
Strike Price Definition:
The strike price of an option is the price at which the option buyer has the right to buy or sell an underlying security.
As an example, if you are buying a CALL option of AAPL with a strike price of 126, then you have the right to BUY 100 shares of AAPL for $126.
And if you are buying a PUT option of AAPL with a strike price of 125, then you have the right to SELL 100 shares of AAPL for $125.
Strike Price Intervals
When you open an options chain, you will see all the different strike prices that are available.
The strike price intervals are set by the options exchange and will change depending on market conditions and the price of the underlying stock.
There are four commonly used strike price intervals: $1, $2.50, $5, and $10.
There are currently no strict standards and the exchange reviews and decides on the strike price interval of each optionable stock from time to time in order to adjust policies to better cater to trading needs.
Here are some general guidelines provided by the Chicago Board Options Exchange (CBOE):
- 2.50 points strike price interval is used when the underlying stock is trading between $5 and $25,
- 5 points strike price interval is used when the stock is trading between $25 and $200,
- and 10 points strike price interval is used when the stock price is over $200.
But these are just guidelines. The options exchanges decide on strike price intervals based on market demand and trader’s needs) more than any strict mathematical formula.
In the example above, you see that AAPL is trading at about$127.
So according to the guidelines, the strike price interval should be $5.
But since AAPL is a very volatile stock that currently moves $2.50 per day on average, which is around 2% per day, the $5 strike price intervals wouldn’t make sense.
That’s why the exchange decides to only offer $10 intervals to best serve the trader.
Strike Price, Option Premium & “Moneyness”
When buying or selling an option, you must choose a strike price, and often you will hear terms like:
- In-The-Money (ITM),
- At-The-Money (ATM),
- or Out-Of-The-Money (OTM).
I call this the “Moneyness” of an option.
In-The-Money Options Strike Prices (ITM)
TM Call Options will have strike prices below the current stock price.
And ITM Put Options will have strike prices above the current stock price.
In the example above, AAPL is trading at around $127 right now.
Therefore, the strike prices of 125 and below are considered ITM for Call options.
And the strike prices of 128 and above are considered ITM for Put options.
At-The-Money Options Strike Price (ATM)
An ATM option would be the closest strike price to the current market price of the stock.
For our AAPL example (The current price is about $127), the strike prices of 126 and 127 are the closest strikes to the market.
So these strikes are considered ATM for both Call and Put options.
Out-Of-The-Money Options Strike Prices (OTM)
An OTM Call Option’s strike price would be above the current market price of the stock.
With an OTM Put Option, the strike price would be below the current market price of the stock.
For our AAPL example (The current price is about $127), the strike prices of 128 and above are considered OTM for Call options.
And the strike prices of 125 and below are considered OTM for Put options.
2.) How to Pick the Right Strike Price
Wow! So many strike prices!
So how do you pick the right option strike price?
Are some strike prices more desirable than others?
Absolutely!
It really depends on what you are trying to accomplish:
Do you want to BUY an option and make money?
Do you want to SELL an option, collect premium and let it expire worthless or
Do you want to SELL an option, collect premium, and get assigned?
For now, let’s keep it easy.
Let’s say you want to make money with a CALL option.
Call option strike price example
We will use AAPL again as an example.
Right now, AAPL is trading at about $127.
Let’s say you’re bullish AAPL and expect Apple to move up to 135 within the next month.
If you were to look at an options chain, you would have several choices.
a.) You can buy a cheap OTM option with a strike price of 135.
The last price of the option was $0.86.
Since options come in “100 packs”, you would have to pay $86 for the option.
This would allow you to buy 100 shares of AAPL at a price of $135.
b.) You can buy an ATM option with a strike price of 127.
This option is more expensive. The last traded price was $3.80, so you would have to invest $380 for this option.
And this option would allow you to buy 100 shares of AAPL at a price of $127.
c.) You can buy an ITM option with a strike price of 124.
This option is the most expensive. The last traded price was $5.90, so you would have to invest $590 for this option.
And this option would allow you to buy 100 shares of AAPL at a price of $124.
Now let’s say that AAPL never goes back up to $135.
Let’s say that on expiration day (June 11), AAPL is trading at $134:
a.) OTM Option with a strike price of 135
This option allows you to buy 100 shares of AAPL at $135.
Since AAPL is trading at 134, that wouldn’t make sense.
Why would you pay MORE for 100 shares of AAPL than the underlying stock price?
So this option is worth nothing, and you lose the $86 option premium that you paid.
b.) ATM Option with a strike price of 127
This option allows you to buy 100 shares of AAPL at $127.
Since AAPL is trading at 134, you could buy 100 shares at $127 and immediately sell them for $134.
In this case, you would make 134–127 = 7 per share.
1 option allows you to buy 100 shares, so your profit is $700.
You paid $380 for this option and make $700.
That’s a net profit of 700–380 = 320 or 84% based on your initial investment!
c.) ITM Option with a strike price of 124
This option allows you to buy 100 shares of AAPL at $124.
Since AAPL is trading at 134, you could buy 100 shares at $124 and immediately sell them for $134.
In this case, you would make 134–124 = $10 per share.
1 option allows you to buy 100 shares, so your profit is $1,000.
But you paid $590 for this option to make $1,000.
So the net profit of this trade is 1,000–590 = 410 or 69% based on your initial investment.
Let’s review:
OTM Option: $86 loss
ATM Option: $320 profit = 84%
ITM Option: $410 profit = 69%
As you can see from this example, it’s super important to pick the right strike price.
The underlying security (AAPL) moved from $127 to $134. That’s a 5.5% move.
Often traders who are new to options pick the cheapest options contract, i.e. the OTM option.
But you would have lost the whole option premium.
So should you pick the most expensive one?
As you can see in this example, picking the most expensive option (i.e. ITM option) would have yielded the higher DOLLAR amount.
But in terms of Return on Investment (ROI), the ITM option was best.
Based on the trading strategy that you use, I can give you several guidelines on how to pick the right strike price.
In a nutshell, when you are BUYING options, you want to buy an ATM or ITM options contract.
And when you are SELLING options, you want to sell OTM options.
More about that later.
3.) Three Important Things You Need To Know
There are 3 more things you need to know when about strike prices when trading options:
What happens when a call option hits the strike price?
What would have happened if AAPL would have traded above the strike price of $135 before expiration?
Nothing — unless you choose to exercise the option.
But if this happens before the expiration date, then it would be better to sell the option since you would make more money.
How do I change my strike price once the trade has been placed already?
You can’t.
You need to choose a strike price when you enter the trade, and you can’t change it while you are in a trade.
You can only “roll” the option, and here’s how it works:
Let’s say you bought the OTM option with a strike price of $135.
And you realize that it was too ambitious and that AAPL probably won’t hit 135 before the expiration date.
So you could “roll” the option by selling your 135 call and simultaneously buying the 132 call.
What Is Spot Price and Strike Price?
The SPOT PRICE is the current price of the underlying security, so using AAPL as an example, Apple’s current spot price, at the time of this writing, is $126.76 which is the price it’s currently trading.
The STRIKE PRICE is the price at which you can buy or sell the shares of the underlying security on or before expiration.
Summary
s you can see, picking the right option strike price is extremely important.
It will affect your returns and it could even make or break you in the market.
In a nutshell, when you are a BUYER, you want to buy ATM or ITM options since even a small move in the underlying stock price can yield double-digit returns.
When you are a SELLER, it’s the opposite: You want to sell OTM options that have a low probability of getting assigned.
[Gann Theory]There be any cycle in the stock market? Absolutely, the answer is yes, but we can't apply a simple and fixed model to all stock markets. Each stock market is an independent viberation with its own cycle and development laws. Therefore, the cycle and law of the stock market will be introduced before presenting the text of this book.
Since the 1900's, economists in western countries have engaged in the study the law of the cycle, and all believed that there was a long-term law in the economic growth or recession. There is noting new thing under the sun.
In 1930, the American economist S. Kuznets proposed a business cycle applying to housing construction, with an average length of 20 years. This long-term cycle is known as the "Kuznets" cycle, or building cycle. C Juglar, a French economist, published his Business Crisis and Cycle in France, Britain and the United States in 1862. In this book, he pointed out that the capitalist economy fluctuated every nine to ten years, as generally called "Juglar cycle". Joseph Schumpeter took this as the "medium-term cycle", or the "Juglar cycle".
Edward R. Deway, known as the father of cycle analysis, believed that the most statistically reliable cycles were 9.2 years and 3.83 years. He was also the founder of many institutions studying the cycles. Edward R. Dewey (1895-1978) dedicated his life to study the cycles (not limited to the business cycle) and in 1931, he was appointed as the Chief Economic Analyst by the U.S. Department of Commerce. Trying to find the cause of the Great Depression in 1929 and 1930 in the United States, Edward R. Dewey established the Foundation for the Study of Cycles in Pittsburgh in 1940. The following are some graphs about the cycles proposed by Edward.
Business cycles can be categorized into long-term, medium-term and short-term ones. You may ask, is there any business cycle in the stock market or the economy? Let's begin with the stock market cycle and then we will talk about the real estate cycle.
The 30-year cycle is one of the cores of Gann's cycle theory. When making a prediction, the 30-year cycle can be divided in further, including the following different cycles.
• 30-year cycle
• 22.5-year cycle - (360 X6/8)
• 15-year cycle - (360X4/8)
• 10-year cycle - (360X1/3)
• 7.5-year cycle - (360X2/8)
If this 30-year cycle is applied to calculate the stock market cycle, you will get an amazing discovery. For example, Hong Kong's stock market crash in 1987 followed with another one 7.5 years later, namely in 1994, because of the upsurge of red chip speculation by foreign investors in 1993 and the United States' increase of the interest rates for 7 successive times. 15 years later, around the year of 2002 and 2003, the stock market underwent a huge decline because of the outbreak of avian influenza. In 2009, namely 22.5 years after that, HSI hit the bottom as a consequence of the financial tsunami. When it came to 2017, exactly 30 years later, HSI witnessed a depreciation in 2018 after experiencing the bull market.
When the 30-year cycle is applied to Shanghai securities composite index, there will also come something incredible. As shown in the chart below, the first peak after the establishment of Shanghai Stock Exchange occurred in May 1992. Following Gann's 30-year cycle, another peak appeared in the half of 1999, exactly 7.5 years later. 15 years later, the year of 2007 witnessed the climax of the bull market. After 22.5 years, the year of 2014 marked the starting point of the bull market in 2015. It is thought that the year of 2022, 30 years later, will be another high or low point.
Just as the old chinese sayings go that "both people and things undergo great changes in a decade", "gold may become worthless in a decade" and "we cannot predict what will happen in a decade and don't laugh at poor people wearing rags". These sayings point out the essence of the 10-year cycle. Juglar proposed that there was a 9 to 10 years' cyclical fluctuation for the market economy in his book Business Crisis and Cycle in France, Britain and the United States in 1862. In Business Prophecies of the Future Ups and Downs in Prices, Samuel T Benner stated that the highest point of trade price followed a repeated 8-9-10-year pattern. The 10-year cycle also plays an important role in Gann Theory.
ericresearch.org
Shanghai Securities Composite Index with a Cycle of 120 Months
Take Shanghai securities composite index as an example. After reaching a low point of 998 in 2005, the high point of the bull market appeared in 2015, 120 months (ten years) later. After the low point of 1,664 in October 2008, another lowest point came in 2018, 121 months later.
Shanghai Securities Composite Index with a Cycle of 52 Weeks
The above chart shows that the Shanghai securities composite index also subjects itself to a 52-week cycle. In the weekly column chart of the Shanghai securities composite index, the time interval between the peak in October 2007 and the low point is 52 weeks. After that, there will be return in every 52 weeks, either the peak or the bottoming out of the market index.
Let's see the weekly column chart of the Shanghai securities composite index and take "7" weeks as a cycle. It is found that from the high point of 2015, there is a relative turn in a cycle of 7 weeks or its multiples, namely 14, 21, 28, 35, 42, 49, 56, 63 and 70.
Is this a coincidence or an accident for the above change in the stock market?
Now, one question. Whether the movement in the stock market is driven by events or the high and low points at the previous time point (cycle)? Therefore, China's stock market proceeds in a cyclical way. The turning point can be predicted as long as the right starting point can be realized.
There is also a cycle for real estate. Although economists all over the world hold different opinions towards the research of the real estate market, but they serve the same effect. I will state the opinions of the following economists for your reference.
·Michael Hoyt, the author of One Hundred Years of Land Values in Chicago, studied the price of real estate in Chicago in a time period of 103 years since there were only dozens of wooden houses, and he found that its price cycles about every 18 years.
·Edward R. Deway, known as the father of cycle analysis, believed that each real estate cycle lasts for about 18 years.
·Fred Harrison, a British economist studying the real estate market in the Britain and United States in the past 200-plus years, found that the housing price cycled about every 18 years.
·Simon Smith Kuznets believed that the building cycle is 15 to 20 years.
It is coincidentally acknowledged that the real estate market cycles every 18 to 20 years. Starting from 1965, it is generally believed that the real estate market in Hong Kong has gone through three major cycles, the first cycle from 1965 to 1981; the second one from 1981 to 1997; and the third one from 1997 to now. The housing price often goes up or down along with the change of both internal and external elements.
I have mentioned the Hong Kong real estate market cycle in different situations. It is not difficult to draw a conclusion from the cycle of Hong Kong's real estate market that the cycle works every six years. Since 1997, great changes occur every six years, including 2003, 2009, 2015, and 2021. With Gann's 50% segmentation method, we can get that three years constitute a secondary cycle, namely in 2000, 2006, 2012, and 2018.
The change of the real estate market can also be concluded with the 18-year cycle, which has worked since 1985. Undoubtedly, the real estate market in Hong Kong goes up after experiencing the lowest point in 2003. Predicably, that the year of 2021 is likely to witness the completion of an 18-year cycle. Stepping back again, the rise of the real estate market in 2003 can be explained with the 6-year cycle mentioned above since the signing of the Sino-British Joint Declaration in 1985.
It is likely that the upsurge of Hong Kong's real estate market will end in 2021, and then we should turn to the turning point that may appear from 2023 to 2024.
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Book: www.amazon.com
My experience as a breaokut trader on stocksFirst of all, what is a breakout trader?
It's a type of style in which we look for a clear consolidation period, and we aim to trade after the pattern is broken. Check the main chart on TSLA to get the concept. The main idea of this comes from the Elliott Wave principle, in which consolidations tend to be the beginning of a new motive wave or impulsive wave. Why are we saying "Tend"? Because it's a probabilistic scenario, we do not have certainty about any given trade outcome. (We will speak about this later)
Let speak about the main idea of this
There are 4 types of corrective patterns that you can use to wait for a breakout. We have seen that the best structures to trade are Flat, Zig-Zags and Triangles. Irregulars tend to be confusing situations. now we will check some key ideas that we have learned
Always trade above B and set your stop loss below the structure
By doing this, you will be able to avoid many fake-outs, which will increment your Win Rate. Also, you must look for situations where you have a risk-reward ratio above 1.7
Here you can check an image where trading above B would have saved you from a fake-out.
Context is Everything
Never trade a structure because looks nice. You need to find a beautiful context for every structure you are planning to trade. Take this situation as an idea of a great place to develop a setup.
What can you expect from this type of trading?
You can expect to have a win rate between 45% to 60% depending on your level of accuracy looking for structures. And you can expect an average risk rewards ratio of 1.7 / 2
Thanks for reading!
STOCK MARKET CRASH, MARKET CORRECTIONS, BEAR MARKETSSo alot of terms being throw around about a Market Crash. Some people saying the market needs a correction, and others saying we have entered a bear market. They are not the same so what do each one of these look like?
A Stock Market Crash
This is usually caused by some economic damning event. Anything that would scare an investor into thinking our country and market are in real danger. This will usually cause a sharp drop in price, indicating fear is driving the market.
Market Correction
Usually multiple sharp drops and bounces in the nominal price of the company, and can be cause by inflation fears as they are now. This allows the market to regain its footing at a less overvalued level. Generally when playing the corrections the price will be trading within a channel and continue to bounce and drop until investors sentiment changes
Bear Market
A bear market is when investor sentiment is pessimistic across the market and we can see up to a 20 percent pull back from recent highs. Described as more of a slow declined or controlled pullback.
Just thought I would post a quick elaboration on each. There are so many factors that can cause both but all generally center around these rules.
Greed, Indecision, Stupidity and HOPE!Hi,
Does it sound familiar to you? Everyday life? :)
Stay healthy,
Vaido
Trading For A Living: How Much Money Do You Need?In this article, we’ll talk about how much money you need to trade for a living. I’ll share with you my three-step approach and give you an example from my trading account.
“How much money do you need to trade for a living?” is one of the most frequently asked questions I get.
“Can I start with $5,000 dollars, do I need $25,000 dollars, or maybe even more?” You see, this is a super important question. Now, here’s the deal.
There’s no standard answer because making a living is different for everybody.
Some traders can live on $5,000 a month. For others, trading for a living means making at least $15,000 a month.
Let’s talk about step number one.
How Much Do You Want To Make Each Month?
Step number one is figuring out how much money you want to make per month. This is the first thing determining what your income goal should be, and it really depends on a few different factors.
For example, what are your monthly expenses? How many dependents rely on your income? That’s different for every trader. Additionally, what income do you need to buy cool stuff like cars, boats, whatever it might be?
These are just a few examples of what should be taken into account when you figure out how much income you need to generate every month.
Now, as boring as this sounds, it definitely helps to make a budget. You don’t have to account for everything, but you should list your major expenses.
So in your budget, there should be, for example, expenses for housing. In housing, you include your mortgage, your insurance, your taxes, and expenses for your house maintenance.
The next thing to account for is transportation. Unless you’re using a helicopter, for most people this is a car payment or a lease. This also includes car insurance.
The next major category is food. Food includes groceries and also restaurants.
Now, the next major category is utilities such as gas, water, power, Internet, TV, phone insurance. Some of you also buy your own health and life insurance. You also need to consider any medical expenses like co-pays.
The next one is a fun one, travel and entertainment. Where do you want to travel? How often do you want to travel? What else do you do for entertainment? You have to factor these activities in too.
This next one is not so fun. This is of course the dreaded taxes we have to pay.
Now you need to add all of this up and you will get to a number, which is the amount you need to make each much to cover your expenses.
For me personally, this number is $15,000. So you know what my number is, and I’ll show you how I trade for a living so that I can make this $15,000.
What Is The ROI of Your Trading Strategy?
Now that we have figured out what your number is, it’s on to step number two: factoring in the return on investment, or ROI, of your trading strategy.
I like to trade the PowerX Strategy, and I also like to trade The Wheel Strategy. These are my two favorite strategies, and for both strategies, I want to see at least 30 percent ROI based on my buying power.
Let me explain what this means. As an example, let’s figure out 30 percent of my buying power. I’m trading a margin account and this means that I can borrow up to 100 percent of my cash from my broker.
Let’s say I were to put $20,000 in cash in this account. $20,000 in cash into a margin account would give me $40,000 in buying power, so back to my ROI, the return on investment.
I want to see at least 30 percent based on my buying power. So in this example here, if my buying power is $40,000 and we want to find out what 30% would be, we take 40,000 and multiply it by 0.30.
This comes to 12,000, so this means that I want to make at least $12,000 per year with $40,000 in buying power in a margin account.
To find the ROI based on the cash I put in, which is $20,000, we take the $12,000 (profit we would make with margin) and divide by $20,000 (cash I put in), this comes to 0.60, or 60 percent ROI based on cash.
I know this sounds like a lot of numbers, but here’s the good news. This is the most complicated step.
Now, I know that for some of you 30% sounds low, doesn’t it? I know that most traders would like to see 50% or more ROI, maybe even 100–200%.
But you see for me, it’s more important to be able to generate SRC profits which stand for systematic, repeatable, and consistent.
I’ll take 30% in SRC profits any day over 100% in irrational profits trading stocks like GameStop. For me, 30% is good enough to support my lifestyle, but hey, every trader is different, just make sure that you use YOUR number.
By the way, if you don’t know your ROI yet, trade your strategy on a simulator first. After 40 trades on a simulator, you will get close to your strategy’s ROI.
Determining Your Account Size
Let’s move on to step number three because now things get exciting. So step number three is where you use a formula to determine your account size, and I want to give you the formula right now so that you can plug it in.
Everything that I do is very, very systematic. Now you know how much income you must make every month, this was step number one.
For step number two, you learned how to figure out how much ROI you can expect from your trading strategy.
Here is a very simple formula that you can use to calculate how much you should have in your trading account so you can generate the amount of money every month that you determine.
In order to determine the buying power you need in your trading account, all you need to do is take the desired annual income that you determined in step number one and divide it by the expected ROI that you determined in step number two.
Let’s say that you want to make $10,000 per month. If you want to make $10,000 per month, that would be $120,000 per year. For some, this might be very realistic. So this is step one where you used a budget to figured this out.
For step number two, say you’re using either the PowerX Strategy where you can easily make 30% a year, or you’re using The Wheel Strategy which can also help you to make 30% per year. You have determined that you can make 30% per year based on your buying power.
Here’s how you would figure out how much buying power you need in your trading account. Your buying power should equal $120,000 desired annual income divided by 0.3 (30% ROI). This means that you need $400,000 in buying power in your account.
Now, $400,000 in buying power would mean if you’re using a margin account, you only need $200,000 in cash. This might be more than you expected, and that’s okay. You can actually trade for growth in the beginning.
I just want to show you what your goal needs to be if you have a smaller account right now so you know at what level you can actually start trading for income, and at what level you can quit your job.
Have Realistic Expectations
If right now you’re looking at this example here and you currently have $10,000 or $20,000 in your account, that is really good, but don’t quit your job just yet.
I like to keep it real, right? With me, it’s real money, real trades, and also realistic expectations.
Well, that is possible if you have a decent-sized account, but let me cover another example so you can see how simple the formula is, and how it works in action.
The Numbers In Action
So let’s say in step number one you determine, like I did, that you want to earn $15,000 per month, $180,000 per year. Now, again, we are assuming that we’re using The Wheel Strategy and the PowerX Strategy, which gives me 30% ROI per year.
Here’s how I determine how much buying power I need to have in my account in order to make $15,000 a month consistently. Again, we take our desired annual income, which is $180,000, divided by 0.3.
So that would be $600,000 in buying power. Now, $600,000 in buying power means that you need to have, if you’re using a margin account, $300,000.
This is how this worked out for me. At the beginning of the year, on January 11th, 2021, I put $250,000 in cash into a margin account, and this gave me $500,000 in buying power.
So $500,000 in buying power, and at the time of this writing on April 26, 2021, my profit thus far this year is $72,908 in REALIZED profits.
This means that on average, over the past four months, I made $18,277 per month. Now, my goal was to make, as I told you earlier, $15,000 per month, which means my goal would have been to make $60,000 in a 4-month span.
Since I’ve earned $72,908 over the past four months, this means I’m overachieving this goal. This is the important thing because the question is “how much money do I need to trade for a living?”
Summary
As you can see it’s quite easy to calculate the money that you need in your trading account to trade for a living.
However, it is completely unrealistic to open an account with $5,000 and expect to trade for a living, unless making a living means making $125 per month.
And I know that there are many people who tell you that you can start with $5,000, and then they do some magic math and tell you they can show you how to turn that $5,000 into a million dollars within a year. This just isn’t realistic.
It’s probably not what you want to hear, but I know that this is what you need to hear. The good news is, if your account is not large enough yet to trade for a living, that’s absolutely fine. You can trade for growth and use money management to grow your account.
The main difference when you’re trading for income vs trading for a living as I do is, every month I wire profits out of my trading account into my personal checking account.
While you’re trading for growth, you keep all of the profits that you make and keep them in your trading account.
If you’re still at a smaller account, that is absolutely fine, but now you know what level you need to get. If you’re here right now and you need to get there, then during this time you might need other sources of income.
I wanted to do this article to show you a really simple formula so that you can determine how much money you need in your account to trade for a living.
Remember, it is possible to make a living trading. It is possible, it is doable. Just have realistic expectations and a plan.
How I Find The Best Trades Every Time: My 3 Step SystemOn my $500,000 margin account thus far, I’ve realized more than $65,000. Now, I put $250,000 in cash into this, and since it is a margin account I got $500,000 in buying power.
Today I want to show you my three-step process of how exactly I find these trades, and I want to show you two very specific examples of trades that I took today (At the time of this writing on April 15th, 2021). So let’s take a look at how I found and executed these trades with this three-step approach.
Step Number One: Find The Right Stocks
So step number one is where I use the tool, the PowerX Optimizer, and the Wheel Scanner.
I want to show you exactly what this does because the strategy that I use is called The Wheel Strategy. This strategy means that you are first selling puts to collect premium.
The second part of this strategy is, you may or may not get assigned the stock. If you do get assigned, you move on to the third step where you sell covered calls.
So here is exactly what I do, and what I did this morning. The scanner within the PowerX Software updates every two minutes and shows me a list of stocks that meet my criteria.
What criteria am I’m looking for? I want to make at least 30 percent annualized in premium that I would collect. So here’s what I do. First of all, I know that the stocks the scanner pulls up already meet my criteria.
Then I look at the charts to identify support and resistance, mainly support, which is actually step number two.
Step Number Two: Look For Support
I look to see if there is any support. This helps me figure out if I want to own the stock at the strike price that comes up on the scanner.
So for example, American Airlines came up with a strike price, as you can see, of 20 or 20.5. So the key question here is, “Do I want to own (AA) at the price of $20.5?”
Well, looking back at American Airlines to pre-pandemic levels in 2019. I see that American Airlines has been trading very solidly between $26 and $38.
So it seems to be a good company to buy at $20.50. Again, this is my main criteria here, deciding if I want to own the stock at the strike price. However, in the short run, I believe with all of the uncertainty that is going on with the pandemic right now, that the airlines might be hurt.
I mean, you might have heard a few days ago that Johnson and Johnson’s vaccine got labeled as potentially dangerous, and therefore it is paused right now.
It also seems that around the world, the outbreaks are flaring up here in the United States. It seems to be under control, but worldwide there’s a problem. So do I really want to own American Airlines?
They dropped down as low as $8. So is this a good price to own them? This is where I can flag them as saying yes, no, or maybe.
Now let’s talk about the two stocks that came up this morning that I liked (April 15th, 2021). The first one was (PLAY). So PLAY, Dave and Busters, came up with a strike price of 41.50. This is where I thought, “do I want to own PLAY at $41.50?”
I looked back and zoomed out a little bit to pre-pandemic times before the coronavirus hit. They have traded solidly around $38. They’ve been trading as high as $64. I thought about if I’d be OK owning PLAY, at $41.50.
So this is where I sold puts that expire next Friday. So the idea here is that we are staying above $41.50 by next Friday. So here is what happens if I’m right. I sold 24 contracts and I sold them at 50 cents each. Since options come in hundred packs, that’s $50. So the premium collected for 24 contracts, times $50, is $1,200.
$1,200 for a little bit over a week, with today being April the 15th. It expires on April 23rd. So in 8 days, this is not bad at all. Right? This means that I’m making $150 a day.
Now, if it closes below $41.50 I get assigned, and I am okay with this because this is where I decided I want to own the stock at $41.50.
The other one that popped up this morning was Schwab (SCHW). Schwab reported earnings and as a result of this. They plummeted down and there was some really good premium in there, so I sold the 63.50. I sold 16 contracts for 14 cents. Now, this is expiring tomorrow, so this is a different play, right?
The premium I collected here was $224. So obviously way less than the premium that I collected here for PLAY, but this is a play that expires tomorrow. So we want to make sure that tomorrow, April 16th, if Schwab closes above $63.50 I just collect the premium and have nothing else to do. If Schwab goes below 63.50 by tomorrow this is when I get assigned.
So the important criteria here is, for the Wheel Scanner, is the so-called premium per day, or PPD. So in order for my account size to make the 30 percent annualized in premium I want to see at least $100 per day.
So with PLAY, I’ll collect $1,200 in 8 days, when it expires next Friday. This means that we are looking at $150 per day. Then we had Schwab, and we collected $224. If we count today, this makes 2 days, so this brings our PPD to $112.
So my goal is to collect $100 per day, and I want to be in 5 positions at any given time. So if we can do this, this would be $500 per day. $500 per day (this includes weekends), for 365 days, comes to over $180,000 per year, and I’m doing this on a $250,000 cash account, which is a $500,000 margin account.
So, and as you can see, this is a little bit more than the 30 percent annualized, as you can see here.
If we divide $180,000 by $500,000, then we see it is 36 percent. So there we go. You know what, sometimes I achieve the goal, sometimes I don’t. Well so far, this year, I’ve realized $65,000 in profits. So this is REALIZED profits. Now I do have unrealized profits and losses, and we’ll see how this turns out.
And this is in 4 and a half months. So I’m basically on track to make a little bit more than the 36 percent here that I have as a goal. I’m on track to make probably around $200,000 for the year.
Step Number 3: Any Negative News?
This step involves checking to see if there is any negative news. Here’s how I do this. I just Google the stock and click on “News.” When you click on “news,” it shows you the Google searched for news articles, and you can scan these for any negative news.
What I’m mainly concerned about here are lawsuits, and clinical trials. When they have a clinical trial, they can either go very well or very badly. Possible bankruptcies, bankruptcy. So these are the key things that I’m looking for when I look for negative news.
Summary
So how do I find the best trades to trade? My three-step process is I like to make my life simple and easy by using the PowerX Optimizer and running the Wheel Scanner, because I want to make, on a $250,000 cash account, around $180,000 per year.
That would be $15,000 dollars per month. For me, this is trading for a living. I can cover my living expenses with $15,000 per month.
Step number one is where I get the technical criteria. Next is where you look for support and decide if you want to own the stock at the strike price. This is where you simply go through the scanner and say, “yes, no, or maybe.”
Finally, is there any negative news? Because if it is too good to be true it is. You should definitely look up stocks on Google, click on “news.” So you can just read through this fairly quickly and make an informed decision.
So that’s basically it. This is my three-step approach to finding the best trades.
The Power of Relative AnalysisGood morning guys,
I am going to explain here how to evaluate timing for any asset (crypto, stock, index), it can be extrapolated to any of them. Based on Technical analysis, Relative Analysis and Market timing:
Technical Analysis:
If you 're looking to buy an asset you can have a look at the chart itself, which will provide you a very good idea of the timing for buying it.
For that, you will use Moving Averages (21,50,200) depending on your timeframe, and you will also use other indicators such as RSI, MACD or SO .
If you want to give an extra boost to your technical analysis you can use Ichimoku, Pitchfork...
But in the end, less is more. Try to focus on 2-3 indicators and master them, it will be easier and more profitable than having lots of indicators.
From my experience, I use moving averages (21,50,200), MACD or RSI for market momentum and Fibonacci for retracement levels.
The most popular indicators usually are the most important, because there're the most used by traders and investors.
But sometimes that's not enough, sometimes you need to reassure with other tools what you see in a single chart...
Relative Analysis:
For example, if you want to buy a stock let's say $AMZN you can look at the chart but you can also have a look at the index which is listed in, in this case $NASDAQ100.
So you can see if the index itself is bullish or not compared with the stock. But what if I told you that you can make a ratio plotting both charts in only 1 chart.
Then you could see a ratio $AMZN / $NASDAQ100, where if the chart goes up it means that $AMZN is doing better than $NASDAQ100. And if it goes down, $NASDAQ100 is doing better than $AMZN.
So you can see now if Amazon is bullish itslef as a stock and if it's doing better than the index itself and evaluate new resistance support zones in relation to Nasdaq100.
As an example, if you consider Amazon about to do some big move, e.g breaking a triangle pattern, you can see if the relative analysis shows you some resistance against its index, so probably it will break the triangle on the downside.
In order to do this in Trading View, you should go to the search bar and write: NASDAQ:AMZN / CURRENCYCOM:US100 ; You've to manually put the slash and then search for the next value.
Other indicators:
If you surf the internet, you will find Fear & Greed indicators, telling you the market sentiment. You can also find market momentum simple indicators as well as Sentiment Surveys.
In reference to cryptos, you can find as wel Fear & Greed indicators (0-100) speedometer and Altcoins-Bitcoin Season indicator.
I'll leave here some links to these indicators:
money.cnn.com
alternative.me
www.blockchaincenter.net
stockcharts.com
www.aaii.com
I'll also link to this publication a couple of ideas regarding relative analysis NASDAQ/RUSSELL + BTC/GOLD published weeks ago.
Hope it's more or less clear. Don't hesitate to ask me any questions regarding the relative analysis or any other topics.
p.s: I did not talk about fundamental analysis because in my opinion chart graphs speak out loud, however you have to do your own research on each company. Fundamental analysis is another tool that we have to use to complement our analysis, specially if you're a long term investor. I am not diminishing it.
p.s.2: In the grapgh I explain Altcoin vs BTC index but as I previously said you can use it in any pair of your desire. e.g: Dash / Monero, BTC / ETH, Tesla / NIO...
Good luck everoyne and take care!
Cheers,
Are Trading Courses Worth It?So let’s talk about trading courses. Are these trading courses really worth it?
As you know, there’s definitely no shortage of them out there.
With all these free videos out there, do you really need to buy a trading course, and if so, what is the best trading course?
What Is The “Best” Trading Course?
Let’s actually start with the elephant in the room. Which trading course is the best?
This is one of the questions that always hear, as well as, “Which trading course should I buy?” and “What is the best trading course?”
Here’s something that may surprise you. There is no “best” trading course. You see there’s only “best for you.”
So what does this mean? This is where many traders make a mistake in the beginning. You need to know what you want from a course before you buy it.
So what do you want from a course? You probably want to make a lot of money, and that’s cool, but how exactly do you want to do this?
Criteria To Consider
Let’s go over some criteria. What do you want to trade? I mean, do you want to trade stocks, or do you want to trade options?
Maybe you don’t care and you just want to trade whatever makes the most money, and that’s cool, we can talk about this.
Do you want to day trade or do you want to swing trade? What’s the difference? When day trading, you need to be able to spend time in front of the computer.
You might not be in the position right now to be able to do this, to be in front of the computer. So, therefore, swing trading might be better suited for you.
Another important factor to consider, your account size. Do you have a small or large account?
This is important to consider depending on your goal. Are you trading for growth, meaning that you want to grow your account, or are you trading for income?
So do you want to have a strategy that you can trade on a larger account, like a $200,000-$400,000 account, or are you in the stage in your trading life where you have a rather small account of maybe $5,000 or $10,000 and you want to grow it?
These are important criteria to consider when deciding what the best trading course is for you. There is no one-size-fits-all trading course.
I mean, I would love to tell you, “you know what? I have the perfect trading course for you.” This actually might be true depending on your criteria. It’s really super important that you understand what to look for when you look for a training course.
Let me give you just a few more criteria that I think are universal criteria for any training course.
For example, is the instructor of the training course a real trader? I mean, is he actually putting money on the line?
Is he trading a real account? Or is he just showing you woulda, coulda, shoulda trades and say,
“You know what? Here is how much money you could have made if you bought Tesla last year and now it is up, 500%” or something like this?”
So is the instructor actually placing real trades so that you see he is actually trading for income?
That’s actually a bonus, right? So I would say, are they trading for income? How is the instructor making money?
Because honestly, I think if you can’t make it as a trader, if you cannot trade for income, you have no business teaching others.
In my opinion, one criteria of great trading courses are those that provide coaching and support. Now let’s talk about are trading courses worth it?
Are Trading Courses Worth It?
So let’s talk about this and let’s be honest. There are many free resources available out there.
Especially on YouTube. This is where I think it is very important that you don’t feel pressured to buy anything just yet, especially if you’re a beginner or new to trading.
You want to have a basic understanding first.
You want to learn some basics like how to place an order. You should learn the difference between a call option and a put option?
What is theta in options? So for basic stuff like this, I don’t believe that you need to pay anybody anything.
I mean, on my Youtube channel there are probably more than 700 videos you can watch, all for free.
Here’s the important thing. Trading courses, or no trading courses. Trading courses are not the magic bullet that will solve all your problems, and here’s why.
You see, trading is a skill. Think about it, how do you acquire a skill? Do you acquire skills from just reading a book or watching a video? No, you actually have to do it.
If I wanted to learn how to paint, is it enough if I just read a book on how to paint to become a great painter?
No, I have to try it. If you want to learn how to play golf should you just get a book that tells you how to play golf, and you read the book and now you can magically play golf and participate in tournaments?
No. Same in trading, right?
Trading is a skill like everything else, and so I hate to break it to you, but there are no shortcuts to success.
You have to put in the work. It not what you want to hear, but if you were hoping that I give you the magic course that automatically makes your money hand over fist, honestly it doesn’t exist.
A trading course teaches you the basics and it teaches you some tips, but you have to learn how to trade for yourself.
How do you do this? The best way to do this is on a simulator. I want to give you a very specific example from my personal life right now.
My daughter is 15, her name is Vivian, and Vivian has a learner’s permit. She would like to get to her driver’s license once she’s 16.
Now, there is the possibility that parents, here in Texas at least, can teach their kids how to drive.
So I am Vivian’s instructor, and so I am sitting next to her in the car, but she has to drive. What we are doing right now, we are putting in 50 hours of driving.
Vivian has a little spreadsheet on the back of her door to her room where she’s marking off every time that we are driving for an hour.
I wish that this would exist for traders, that they have to put in at least 50 hours on a simulator with an experienced instructor before they trade live, but unfortunately, this is not how it works.
We do 50 hours of driving, and out of these, we have our goals.
For example, we will do 10 hours of night driving, because driving at night, as you can imagine, is different than driving throughout the day.
We will also do 10 hours of interstate driving. If you’re on the interstate you need different skills because now suddenly everything is much faster.
This is how we have broken it down into different skills that she needs to acquire.
So are trading courses worth it? To recap what I mentioned earlier, I believe that trading courses are worth it, and here’s why, with a few “IF’s.”
I believe a trading course is worth it IF the instructor is an experienced trader. Think about it, I mean, in order to be able to teach my daughter Vivian how to drive, I need to be an experienced driver.
I need to have a driver’s license. I need to have a spotless record otherwise, I wouldn’t be allowed to teach her, right?
If you want to learn golf, wouldn’t you hire an experienced golfer instead of just asking, your neighbor? I believe this is important because after all, we want to make money with trading.
Now, the other important thing is, trading courses are worth it if the instructor can give you shortcuts.
So what do I mean by this? I mean, you can acquire any skill on your own.
I believe this. I believe that probably you could learn how to play golf if you read a book, watch a few videos, and then just put a lot of time and effort in there, but what do I mean by shortcuts?
Shortcuts are there to save you time and money, especially when trading, right? I mean, if the trading course, and if the instructor can help you to avoid a few losing trades.
Losing trades are easily a few hundred dollars, sometimes a few thousand dollars. However, if you could trade losing $1,000 versus investing a few hundred dollars in of course would you do this?
Or if you could avoid losing $20,000, would you invest $2,000 in a course? Probably, right?
I also think that this is super important, especially for trading, but I believe trading courses are worth it if there are coaching and support involved, and here is what I mean by this. Most of you already know I am offering a trading tool, it’s the PowerX Optimizer.
Some of you have seen me using it on my “Coffee With Markus” Live streams on my Youtube channel, and I use it every day in my trading.
But here’s the deal. A tool is just helping you a little bit, right? I believe that this is a bonus. So a trading course is super helpful if there are tools involved.
Back to the golfing example, if you want to learn how to play golf and you get lessons from a pro let’s say, he says,
“Oh, yeah, and by the way, before you diddle around and get the wrong clubs, I actually have the perfect clubs for you.”
I mean, wouldn’t that be much easier?
So this is where the tool that I personally use and that is available to you is the PowerX Optimizer, and I love it.
We are coming out with a version 2.0 soon.
So I think training is very important. So this is where, for example, a training course is helpful if it gives you the important things about getting started, but then also of how exactly do you trade stocks, and how exactly do you trade options.
If we are looking at trading stocks, you need to know what are the different order types, how do you place a stock to the long? How to short?
How to set profit targets and stop losses, right? So this is one of the things where it’s really important that a trading course shows you how to do this, but that’s what I mentioned earlier.
I think the coaching and support here are super important, right? Because this is where you need ongoing handholding. For me, this makes a lot of sense.
Summary
So are trading courses worth it? Which trading course is the best? It really depends on what do you need.
I know that some of you have wasted a lot of time and money on various training courses just to find out that it is not for you.
This is why I say before you buy a course, okay, know what your goals are. Know what you want from a course.
I think that is super important. Know exactly what do you need help with. Then you choose the right one because again, there’s no one size fits all.
Trading is a skill, you have to put in the work. I wish I could tell you,
“Oh, you know what? All you need to do is invest in the PowerX Optimizer and tomorrow you will be the best trader in the world.”
No, you know that I’m giving you a 90-day money-back guarantee because I believe that it takes maybe a week, two, three, four weeks to really learn how to use this tool, to practice on a simulator, and I don’t want you to feel rushed at all to say,
“Oh, I’m under the clock and I only have 30 days to evaluate this tool and this course,” right?
I mean, take your time. Take 90 days, because most traders fail in the first 90 days and I want to make sure that you are succeeding
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How to Draw Support & Resistance Lines for StocksIn this video I use simple easy to learn processes to mark out support and resistance levels. And importantly analyse if buyer or sellers are currently in control of the market.
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Options Trading For A Living In this article, I’m going to show you how I made $52,138 in 8 weeks by trading options (at the time of writing this article March 12, 2021).
The key question that I’m always asked is, “Is trading for a living possible?” For me, this is a resounding YES!
I’ll break down all the steps from how to trade like a pro, where and how to find great trades, how patience is extremely important when making money, and more.
What Do You Need?
You might be thinking, “How the heck does anyone make that much money doing something so risky?” The answer is simple.
You need:
Number One a solid trading strategy, which we will discuss in this article. We will talk about the trading strategy that I personally used to make more than $50,000 in the past two months, and I’ll show you how to do this step by step.
Number Two you need the right tools. You will see why that is so important, and I’ll show you the tools that I’m using.
Number Three you need the right mindset. I know that mindset is probably the most boring thing to talk about it, so I will not spend a lot of time on this, but having the right mindset is important if you want to trade for a living.
Now, there’s one more thing that you need, and this is money. I hate to break the news to you, but if you don’t have any money you can’t put money into your account, and you won’t be able to make money.
And yes, I made more than $52,000.
Before we talk about the trading strategy, let me just add a very, very important disclaimer.
No, these results are not typical. Yes, I am very good at this, and I’ve been doing it for over 20 years. If you start trading this strategy, do not expect the same results. I will talk about this later, but it is super important that you start paper trading on a simulator first.
How Much Money Do You Need To Trade Options?
The key question that you might be wondering is, how much money did I need to put into this trading account to make this much?
For this account, I deposited $250,000 in cash. This is a margin account, so this gives me $500,000 in buying power.
Let’s dive in.
The Wheel Strategy
If you have been following me for a while, you know that I like to trade using The Wheel Options Trading Strategy.
There are three steps to this strategy.
Step Number One , what we are trying to do here is sell puts and collect premium. When selling options, I typically like to go with expiration dates 1 to 2 weeks out.
The idea here is to collect a “weekly paycheck.” I’m putting this in quotation marks because this is where some people say you can collect weekly paychecks with no risk, and that is simply not true. When trading there IS risk.
You want to make sure that you trade only the best stocks. What do I mean by this? Well, currently in my account I have positions with companies like AAPL, AMD, DBX, DKS, GDXJ, HAL, HAS, IBM, and JWN.
These are all super solid stocks. These are not fly-by-night stocks. You will not see any GME, AMC, BB, BBBY, or any of these meme stocks in my account.
We’re talking about super solid stocks, stocks that you have to be okay with owning if you’re assigned the shares.
So let’s look at DKS , which is Dick’s Sporting Goods. They are a solid retailer. The idea here is that we are selling puts at a strike price that is at support.
Here I looked at short-term support. You want to see at what price level did prices touch several times and then bounce back. They were at the 66 level, so I sold a 66 strike.
If DKS closes above then I keep the premium, if it closes below, we would get assigned.
Now, another stock that I am trading right now is SNAP , Snapchat. Here we are looking at a strike price of 49.
Again, this is where you want to pick super solid companies. I don’t know about you, but do you have kids? My kids live on Snapchat. They’re not on Facebook, Twitter, or Instagram, but they’re on Snapchat.
I believe SNAP it is a super solid company. We see that we had support four, almost five times. So this is where I sold a strike price at 49.
You want to make sure that you’re only trading the best stocks and that you always look for support. The support that I like to see is a support level that held at least over the past 8 weeks.
So, again, step number one is where we’re selling puts and collecting premium. The basic idea here is that we are buying stocks at a discount, or as many people would say right now, “buying the dip.”
This is something that has been working really, really well. It’s a tactic that Warren Buffett has been using for many, many years to scoop up stocks at a discount.
Step Number Two is where you may or may not get assigned. This means that if the price at expiration of the stock is below the strike price that you sold, then you have to buy the stock at the strike price you sold it.
In this case, if this is happening, then you would go to step number three, which I will share with you in just a moment.
Now, if the price is above the strike price at expiration, then you don’t get assigned.
You just keep the whole premium and you would go back to step number one.
This is why it’s called “The Wheel,” because we keep doing this, right?
Step Number Three is when we are assigned, we will sell covered calls and collect more premium.
This is the strategy in a nutshell. As you can see, it is not really complicated. The trick is to trade only the best stocks with solid support levels in case you are assigned.
Using The Right Tools
The second thing that you need is powerful tools. Let’s talk about the tools that I personally use.
If you have been following me for a while, you already know that the tool that I use is the PowerX Optimizer.
Now, here are the two things for me personally that are super important when we are picking the right tools.
First of all, I want to have a scanner built-in. A good scanner not only finds the best stocks to trade, but also tells me what strike price to trade, and at what expiration.
When it comes to expiration, I already told you in broad strokes, I’m only trading one to two weeks out.
But should I trade this week’s expiration or next week’s expiration? This is super important, and this is where a tool helps me.
The second thing, which for me is super important, is that the tool has a calculator.
With this calculator, it tells me exactly how much premium I should get, how much risk is involved in this trade, right?
These are the important things you need to know.
Then, of course, a calculator should tell you how many contracts should I trade based on my account size.
When trading options, you know the important things are, that you know what is the underlying stock, what is the strike price, what expiration, what is the minimum premium you want, and of course you want to know the risk.
So let me show you exactly how I am finding these stocks. So here we see the PowerX Optimizer.
The scanner actually gives us a bunch of symbols that are candidates to consider right now. Now, one of the things that we need to do is we need to make sure that we only pick the strong stocks, and that we only pick those that have a good support level.
So one of the examples of a stock that I’ve traded recently is NIO . The scanner actually shows me in the data window what strike prices I should consider right now.
It also shows me what premium I can get, and how much this would be annualized.
What PowerX Optimizer told me is that right now I could sell at a strike price of 36.
And I would get some decent premium for this. Now, we always want to go back over the past few weeks, and if we look over the past 6 to 8 weeks, we see the support see, it touched the level three times.
So it looked like there was strong support at 36.
Now, the next thing is, and this is where PowerX Optimizer helps you, that you see exactly here how much premium you can get, especially if we are looking at it annualized, right?
For me, the minimum option premium that I should get to get at least 30% annualized.
For me, that’s what I want to do. This is how I was able to make more than $50,000 thus far this year, and it is only March 12th, and I started on January 11th.
Now I also want to know how many options should I trade based on my account.
How much in premium would I collect, and what is the premium per day that I would make? So how much money per day do I make when trading this?
This is where we go back to why it is so important to have a tool that shows me all this because let me ask you, how else would you find all this out? I mean, if you tried to do this manually, I don’t know, I mean, for me, this is almost impossible to do it.
So and believe me, no professional trader does this with only a calculator or a cell phone in his hand.
You must know your numbers. Trading is a numbers game, and if you don’t know your numbers, it will be really, really difficult for you to make money.
Another key question is, if you don’t have a tool, how else would you find these trades?
I mean, every single trade that I did in this account here, that you see over the past eight weeks, that have yielded $52,000, has been taken from this scanner.
I mean, if you would force me right now to trade without this tool, I couldn’t do it.
This is where I believe that having powerful tools like the PowerX Optimizer is giving you an unfair advantage.
Think about it, when trading you are trading against other traders, but you don’t have to be the best trader in the world, you just have to be better than the other trader.
You just need to have an edge, and this is where I must say this tool is actually giving me an edge.
If you want, you can even say that it is not only an edge, you could call this if you want to, an unfair advantage, but when it comes to trading, you need to play every ace. You don’t want to show up with a knife to a gunfight, you’re trading against the smartest traders in the world.
Traders Mindset
Now, this brings me to the last point here of how to trade for a living, and this is having the right mindset. This is something that many traders underestimate because they think, “Hh, you know what, that’s fine, I just need a strategy and I need a tool and I will just be fine.”
Having the right mindset is important, especially if you want to trade for a living. You must be focused on what I call SRC profits. This stands for systematically, repeatable, and consistent.
So this is what SRC stands for, and this is why this so important. You see, as a trader, for me, at the end of the month, I’m wiring money out of my account, out of my trading account into my personal account.
I mean, it's great when you have windfall profits. If recently you participated in the GME hype, and you double, triple, quadruple many maybe 10x your account, then good for you. Congratulations, and I really mean this.
However, can you do this again this month? What is the next stock that is going crazy like this?
Or if you were able to capture the Tesla ride all the way up, good for you, but what happened when Tesla went from 800 to 500? Did you take a hit in your account? See, this where it is super important to have these SRC profits.
When it comes to trading for a living it is also important that you have patience, and here’s what I mean. You’ve got to grow your account systematically. So, and how do you grow your accounts systematically?
If you don’t have a trading strategy, this is why it’s so important to have a trading strategy that produces these SRC profits, the systematically, repeatable, and consistent profits.
So you see how it all comes together. I mean, this is why there’s these three pillars, the trading strategy, the tools that are supporting your trading strategy, and the mindset.
Now, the other thing is that when you are trading, patience means that you can’t panic. You see this is where recently, people started talking about these diamond hands, but I think the way how some people talk about diamond hands is just holding on to a losing trade.
No, this is not the case. It basically means you let the trade play out. How do you let the trade play out? You follow your plan, but to follow your plan, you must have a plan.
So this is where it goes back again to having a trading strategy.
Summary
To sum things up, first of all, is it, is it possible to trade for a living? The answer for me is yes because that’s what I’m doing. Now, does it mean that you can do it?
Again, this is why it’s so important that you practice on a paper trading account first. So you’ve got to have the right trading psychology.
For the trading psychology here is that you are aiming for SRC profits and not the YOLO-windfall every now and then profits.
To start trading for a living, what are the things that you need? You need to have a strategy, you need to have the right tools, you need to have the right mindset.
Now, if you are looking for a strategy, today I presented to you The Wheel Strategy, which I think is a great trading strategy because it’s simple to understand and it gives you an edge, right?
You also want to have the right tools, and for the right tools, I might be biased, but I think PowerX Optimizer is the best tool not only for trading this strategy but also for trading the PowerX Strategy here.
The Wheel Options Strategy: 29 Things You MUST KnowI’m Markus Heitkoetter and I’ve been an active trader for over 20 years.
I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails.
They start trading and realize it doesn’t work this way.
The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically.
Real money…real trades.
Those of you who have been following me know I love trading The Wheel Strategy, in fact, with my $500,000 trading account that I’ve been trading on since mid-January, I just $50,000 in REALIZED profits for the year.
The Wheel Options Trading Strategy is a powerful trading strategy that can be fairly low risk IF you know what you’re doing.
This is why, in this article, I wanted to give you a complete squad of trading tactics for trading The Wheel Strategy.
I look through all of the comments on my YouTube videos & the questions that I get in my live streams, and I have compiled a list of the questions I get most often.
So today we’re going to talk about the 29 things you must know when trading the Wheel Options Strategy.
The Wheel Strategy Overview
So let’s briefly talk about the basics, and the basics of the Wheel Strategy, are actually pretty simple.
So let me just tell you the three steps that we need to do when trading this strategy.
Step Number One: We want to sell put options and collect premium.
Step Number Two: Here, we may or may not get assigned.
Step Number Three: If we are getting assigned we will sell covered call options and collect more premium.
If we are not assigned, then we will just stay at Step Number One, and keep selling put options to collect more premium.
So as you can see, it’s really not that complicated. I mean, wouldn’t you agree?
Now I divided this into 3 sections: The Basics, then Picking The Right Stock, because there’s a lot of questions about this topic, and then we will also talk about Selling Calls After Getting Assigned, as well as What To Do When a Trade is in Trouble.
The Basics
1.) I have around $30,000 in my Interactive Brokers account. Is it enough to start trading the Wheel?
Here is my recommendation. You should have at least $10,000 in cash so that you can get $20,000 in margin.
I highly recommend that you are trading a margin account.
If you have less than $10,000 in cash, I do not recommend that you trade with the Wheel Strategy.
Now, if you have a smaller account, I recommend that you do a maximum of three positions in your account.
As your account grows, you can go up to five positions in the account.
2.) What is the best expiration date when selling options?
What I personally like to do is go 1 to 2 weeks out, so this also means that I like to trade weekly options.
So I’m looking for a really short fuze here because I believe that this is where you have the most control over the prices here.
The idea is actually to collect so-called “weekly paychecks,” and I put this in quotation marks because it always sounds so glamorous, right?
However, it’s really important that you know what you’re doing here.
Now, the next question that I receive all the time.
3.) Should I use margin to increase my buying power?
My answer to this is yes, absolutely. I highly recommend this, however, keep in mind that margin is a double-edged sword, which can work for you as well as against you.
4.) How do I know if I have enough capital if I get assigned?
It’s easy. So let’s say that you are selling a 100 put, which means a put with the strike price of 100.
This means that when you’re getting assigned you have to buy 100 shares at $100 each totaling $10,000, so this is how much capital you would need.
So all you need to do is basically just take the strike price that you are selling of the put, times 100 because options come in 100 packs, and multiply this number by the number of options that you’re selling.
Let me give you an example. I recently sold 8 put options of Apple at a 133 strike price. So how do you know whether you have enough money in your account?
Well, this is where we are taking the strike price, 133 times 100, times 8. This means you would need to have $106,400 in your account.
So please make sure that you are sizing your account appropriately. The good news is, if you do have the PowerX Optimizer, which is the tool that I’m using, it will show you exactly how many shares you can trade.
So what you need to do here is that you are actually filling in your buying power, and again, your buying power might be different.
How many positions you want to take, and this is where I said if you have a smaller account fill in three, if you have a larger account you want to fill in four or five.
Then based on the strike price that you are selling here, it will tell you exactly how many options you should trade, and based on how many options it also tells you how much money you need, and how much margin is required if you were to get assigned.
I highly, highly, highly recommend that you do use a tool, because you see, if you do all the math in your head, it can go horribly wrong.
The tool that I personally use is the PowerX Optimizer. Many of you already have the tool, many of you are familiar with it.
5.) Is there a certain percentage you buy to close at? Some people say 50% profit is best statistically to close.
I like to close a position at 90% of the max profits. So as an example, this morning (March 10, 2021) I sold puts on DKS, Dick’s Sporting Goods, and I sold them for $0.75.
So this is where right now I have a working order in there to buy this back at $0.07, which is 90% of $0.75. So, yes, if I can get 90% of the max profit here, this is when I want to exit.
6.) So is there a rule of thumb of what percentage this account is tied up with the strategy?
It really depends on how many trading strategies you use, right? So right now I trade two strategies. I trade the PowerX Strategy and The Wheel Strategy.
The PowerX Strategy is perfect for a trending market, but the markets right now, are far from trending. They are super choppy going up and down, so, therefore, right now I’m dedicating all of my money in the account to the Wheel Strategy.
Once I start trading the PowerX Strategy again, this is where I would just decrease the buying power here and say instead of using the $500,000, I might just use, let’s say 400K, and use 100k for the Wheel Strategy.
7.) What screening criteria does the PowerX Optimizer use for the Wheel Strategy?
The PowerX Optimizer has a built-in scanner to find the best candidates for the Wheel Strategy, and there’s a conservative scanner as well as an aggressive scanner.
For my criteria, we are looking for stocks between $5 and $300 here. We are also looking for stocks that have a down day because when you’re selling put to collect premium, you want to make sure that you’re selling when the market is going down.
We are also looking at the implied volatility because want to make sure that there’s enough premium there.
Then most importantly, we want to make sure that the annualized premium is actually at least above 30%.
There are a few other minor criteria. First of all, we only look for stocks that have weekly options. This is what I explained briefly a little bit earlier, I’m not interested in trading stocks that only have monthly options.
8.) What can I expect? 30% yearly annualized based on what capital?
The capital here this would be based on is the buying power. So in my account, I have a $500,000 buying power.
This means if I’m looking for 30% based on the buying power, so this would yield into 60% based on the cash that I put in the account because the cash that I put in the account was $250,000.
So when I’m talking about the 30% yearly annualized, it’s based on the buying power. If you don’t trade with margin, then this would be based on your cash.
Picking The Right Stock:
9.) Do you have a defined universe of stocks that are your “good list?”
Well, first of all, I want to make sure that I’m trading the stocks from the PowerX Optimizer Scanner, and then I just look for stocks that I like overall.
These are some of the stocks I've traded thus far this year:
There's been DBX, DKS, GDXJ, HAL, HAS, IBM, JWM, LL, MARA, MNST, NIO, RIDE, RIOT, SNAP, and many more others.
These are stocks that I really like to trade, and as you see, most of them are very well-known names so I’m not trading any exotic stocks.
You also will not find meme stocks like GME or AMC on this list here.
10.) Is there a certain level of IV, implied volatility, on a stock that you won’t go to? I’ve traded some 200% plus of IV is that too high?
Just as a rule of thumb, the higher the IV the higher the risk. This means that now stock can really swing back and forth. So for me, what I feel is a sweet spot, I like to see at least 40% IV, but no more than 100%.
Sometimes I do take trades that are higher than 100 but honestly, for me, the sweet spot where you find most trades that are fairly safe is anywhere between 60% to 80% implied volatility.
This is where I don’t have hard rules here, but I need to like the stock.
11.) Markus, have you changed from your “When I started I just wanted to know the symbol. I did not want to know anything about the company, as it might cloud my view. Trade what you see, not what you think” mentality?
My answer is NO, for the PowerX Strategy. I absolutely do not want to know anything about the symbol. However, for the Wheel Strategy, the answer is YES because when trading The Wheel Strategy I only want to trade super solid stocks.
12.) So I noticed that some of the stocks on your list for the Wheel have very illiquid weekly options. Do you watch for options liquidity or just the credit limit and hope to get filled?
For me, I don’t care about open interest and volume, and here’s why.
I am selling premium and I’m fine letting the option expire worthless, so I don’t need to buy it back.
If I can buy it back I will, otherwise no. So this is where here I don’t care about the open interest.
But again, it really depends on the strategy. I mean, if you’re trading a different strategy, open interest and volume might be very important to you. For me, it is not.
13.) Besides technical support/resistance levels, how do you objectively decide which are the best stocks? Do you take into account any fundamental analysis to filter out which underlying to trade?
No. So here is what I do, and this is it’s pretty subjective, so I don’t have objective criteria here.
I must like the company, because the point is, you must be OK owning this company, and I must like the story of the company. Yeah.
This is where I always use Peleton as an example because I know that many are trading Peleton and it has lots of premium in there.
But you see for me, Peleton, it’s a company that I believe can easily be ripped off, and at some point, a major competitor might swoop in.
So I must like the company and the story of the company. This is fairly subjective here because the key is that you must be OK owning that stock at the strike price.
14.) Since you are suggesting not to sell puts on leveraged ETFs, why are they then included in the Wheel Scanner?
You know what? This is a great question and we actually might exclude them in version PXO 2.0. So right now I thought you’re all adults, and as adults, you can do whatever you want.
I did not want to restrict you, so but we might exclude it or, we might add an asterisk as a warning sign.
It’s a good suggestion, and I know that some get blinded by premium on leveraged ETFs. So I do not trade leveraged ETFs, anything that has 2x or 3x in the description I stay away from this.
15.) Why do you select growth stocks only instead of a mix of value and growth stocks? Seems that growth is in trouble due to interest rates.
Growth stocks offer attractive premiums, but value stocks rarely do. I want to give you a very specific example here, and let’s actually go to IBM, because IBM is one of the value stocks that I have traded.
I traded IBM after a massive drop where I sold the 117 strike. Usually in IBM, you won’t find enough premium in there.
The implied volatility lately, is usually around 34 or 29. So this is the very simple reason why I’m going for growth stocks because I’m looking for a minimum of 30% annualized in premium.
Selling Calls After Getting Assigned
16.) If you sell a call lower than your original put strike price can you still make money?
This is actually super dangerous, and here’s why.
So when you sold a put you got assigned, and you had to buy stocks at the strike price.
I’m using an example of AAPL, and I was assigned Apple at $133 per share.
Now, if I’m now selling a call, it means that I have to sell stocks at the strike price, so if I’m selling, let’s say a 125 call, it means that I have to sell the shares for $125.
Now here’s the challenge with this. I bought them for $133 and now I’m selling them right now for $125.
This means that I’m losing $8 per share. Now when you’re trading options, they come in 100 packs.
So this means that you would lose $800 per option. So this is where you need to be careful when you’re selling a call lower than your original strike price.
If you do this, make sure that it is above your cost basis, and we’ll talk about the cost basis here in just a moment.
17.) Why are covered calls more profitable in your experience than cash-secured puts?
Are you targeting a different percentage return?
No, I do not. Here’s a rule of thumb for what I do. Let’s jump to PowerX Optimizer and go to the Wheel Income Calculator.
Here is something that I did today (March 10, 2021) where I sold calls on RIDE.
Yes, and let me, let me quickly double-check before I do this, what did I sell on RIDE?
So on RIDE I sold calls that expire March 19th, and I sold them for $0.35, and the calls that I sold were at 23.
So by doing this, this actually gave me an annualized return.
By default, I am not going as many strikes out, because all I need here right now is a rise in 7%.
So if you are rising seven percent here, then I will be able to make money not only on the premium that I collected, the 16.45, but also an additional $7,000 on the stock, right?
So this will be a total of $8,500.
It’s just the nature of the beast because when you are selling calls you’re usually closer to the strike price, and therefore, usually higher premium for a higher ROI.
This is why I keep telling you, I’m always looking forward to getting assigned because selling calls is actually more profitable.
18.) When you sell calls to reduce the cost basis, do you also include the premium received from selling first the put to reduce the cost basis?
Yes, I do include the premium.
19.) Is there a risk of the portfolio becoming nothing but stocks and not being able to sell covered calls out of the money (OTM) to hit your targets?
The answer to this is absolutely yes.
When trading there’s risk, and there is a possibility that you own a bunch of stocks and you cannot sell calls against.
So you have to hold on to these, and so for a few weeks, it could absolutely happen that you’re not making any money.
I was recently assigned shares of AAPL, and have not been making any money with them because I have not been able to sell calls.
But you see, even though I have one dud in my account, it’s only one of my positions, and I still have been able to make almost $51,000 in about 8 or 9 weeks.
So, therefore, it’ll even out. So is there a risk? Absolutely.
When trading there is always risk. If you are not willing to accept the risk when trading, do not trade, because there’s always the risk of losing money.
20.) Markus, if you haven’t sold a call against the Apple 103 strike price haven’t you been missing out on money?
Not really, and here’s why. Right now, if I would try to sell a 133 call on Apple, that is, for example, expiring this week, I would get $0.01.
I’m not missing out on any money, right? $0.01 translates into $1. So, no, I’m not missing out.
Even if I would go out next week and I’m looking at the 133, I would only get $0.14.
That’s $14. For me, it’s not worth it, and again, everybody’s different, so you might have different rules. For me, however, it’s not really worth it.
21.) When running a rescue mission on margin, how does one sell a covered call? My broker requires cash for any call that I sell.
If this is true, change the broker immediately, and here’s why.
So I own Apple shares, and if right now I want to sell calls against these Apple shares, let’s say 8 calls, it would not have any effect on my buying power.
It’s the opposite
So here I highly recommend you change the broker if this is true. Your margin requirements should be reduced when selling a covered call, this is how it works.
22.) Why not still sell calls at your cost basis after the stock drops?
Because sometimes there’s not enough premium.
If there is enough premium, I will do it, but sometimes there is simply not enough premium and then you are sitting on your hands.
This is why I said I have this, the one dud in my account, AAPL, is not making me any money, but everything else IS making me money.
I was able to sell calls against GDXJ and RIDE. With DKS, MARA, and SNAP, I sold puts.
So everything else is making me money. I mean can’t change the wind, I can only adjust my sails and this is what I’m doing here.
What To Do When A Trade Is In Trouble
23.) What do you mean by “rescue mission” for those who have not heard it before?
But a “rescue mission” is where you have been assigned shares, and now the trade is going against you. You sell more put options below the assigned strike price.
By doing this you collect more premium. If you are assigned, you lower your cost basis, making it easier to get out of that trade.
You only should consider flying a “rescue mission” if the stock is down at least 30% from your assigned price.
24.) Why not still sell calls after your stock drops?
Because there might not be enough premium in there.
So very simple, right? If there is, we will do it, if not like with AAPL for me right now, then it is what it is.
25.) What happens when you run out of buying power and can’t sell calls at your target?
So first of all, you can always sell covered calls, because you will not run out of buying power for selling covered calls.
What they probably meant is what about not being able to sell puts, and there are two things that you can do.
Number one, you can either wire more money into your account, which is probably not always feasible.
Number two, you can simply close some positions to free up some buying power.
26.) Is it possible to buy options rather than sell options because selling options is supposed to be very dangerous?
Well, of course, and that would be the PowerX Strategy.
So with the PowerX Strategy, you are buying options if this is what you prefer to do, and if you’re trading the Wheel Strategy, this is where you’re selling options.
So pick your poison. I mean, you got to do one thing, either you’re buying options or you’re selling options.
So I have a strategy for each of these.
27.) Any point in waiting to make sure that the market has stopped dropping before flying a rescue mission?
Yes! You don’t want to try to catch a falling knife.
Wait until you see that the market or the stock is stabilizing here.
28.) I understand starting the rescue mission when the stock drops 30%, how do you determine the new put strike price to enter? The next support level?
Yes, absolutely. This would be the next support level that you’re looking at.
I got assigned at 21.50, and the next possible support level is right around 12,13, so this here it would be a strike price of 12–13, so this is where I would do it.
If we go to Apple, which is another stock that I have, I did get assigned here at 133 and the next support level is around 108, right?
So I would probably be most interested in selling the 108 strike price.
29.) It’s hard to make money on a small account unless you get assigned.
Yes, it is hard to make money on a small account, period.
I know that many want to start with a smaller account, like $500 or $1,000, but honestly, it is super, super, super difficult to make money on such a small account.
In order to do this, you would have to trade this account way more aggressively, which means that you are basically risking a whole lot.
So if you want to try to double a $500 account, you basically have to risk the full $500.
This is what many Robinhood traders and these YOLO’ers do.
It’s all-in and maybe it doubles or you lose all of the money. So, yes, it is absolutely difficult.
So this is why the capital requirements, I highly recommend that for the PowerX Strategy if you want to trade it, that you have at least $5,000, and if you want to trade the Wheel Strategy, that you should have at least $10,000 in cash, which gives you $20,000 in buying power we talked about this at the beginning of the show here.
So this is super important.
If you do have smaller accounts, there might be trading strategies for you.
I want to be honest with you though if there are, I don’t know them.
When I started trading, I started with an $8,000 account and I saved until I had $8,000.
Now, I shredded that account into pieces, down to $1,600 and then I saved money up again.
Then the second account that I was trading was $16,000.
Now that one, I also lost more than half. So I lost, I traded this down to $8,000 and this is when I put some more money in, brought this up to $12,000, and this is when it finally clicked.
So again, if right now you have a smaller account, good luck, there might be strategies out there. I wish I had some for you.
I promise, if I knew how to grow a $500 account I would tell you.
If right now, if all I had to trade was with $500 to trade, I wouldn’t do it.
I would probably find a way to save money or make extra money with Door Dash, Insta Cart, or something like this until I have at least $5,000.
I wish that I could tell you something different, and unfortunately, I can’t.
I’m not saying that it is impossible. All I’m saying is that I’m not the right person to teach you these strategies because I don’t know them.
Summary
If I didn’t cover a question here in this article that you may have, I promise I’m reading through all of the questions that you have, and I will answer them in one of the upcoming Coffee with Markus episodes.
I hope that you enjoyed this article because I love talking about trading.
Anyhow. Have a fantastic rest of your day and I’ll see you on the next one.
My Tradingview Setup!Detail explanation on my indicators, what they are, and how I use them!
EMA
20 EMA (BLUE)
50 EMA (PINKISH)
200 EMA (ORANGE)
Rolls Royce Trade Review - 20% profit in just 3 weeks!Hi traders,
This is the first in a series of trade reviews that I will be doing for TradingView viewers where each week I will review one or two of my trades. We will outline why we entered them and also how they went.
This is meant only for educational purposes for you to learn some of the skills that I implement when trading.
In this trade I used a very simple break and retest of a key level as the investment strategy.
If you have any questions then please let me know in the comments.
Algo makes me happy. ALGOs are here to stay. They obviously cannot be taken for granted. One thing I tell friends that purchase an Algo in the form of a Tradingview Script, is that it will help their trading decisions and confirm technical Analysis made by them.
On my quest of finding a good Algorithm, not only for signals and accuracy, but supporting instruments, I came to Elite Signals Algo .
Again, the goal if an Algo is to support your own Technical Analysis. With almost 80% accuracy, this instruments can help your decision making and maintain emotions on the control level.
One of the coolest features is the auto drawing of Support and Resistance level. They are VERY accurate and combined with Candlestick pattern recognition, your day trading becomes very powerful.
Is the Algo making me a lazy Trader? No, not at all. Its a supporting tool, same as any indicator.
Are you interested in this great tool? Follow the link and send me any question you have.
Enjoy your day trading!
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only. You can use the information from this post to make your own trading plan for the instruments discussed or other instruments. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
BUYING THE DIPS Made SimpleBuying dips can be tricky, the issue is knowing if it's an actual dip or a full trend reversal. I used to think buying at a lower price to double down on an investment going the wrong way was a good idea. However, after reading a book called the Zurich Axioms by Max Gunther - the penny actually dropped. In essence, profit is profit. It does not have to be made from a stock or instrument that you are currently losing. Know when to run, when to cut losses and when to stick with it. Unfortunately by the time you understand true hedging techniques, you will be too late.
Kenny Rogers said it best - "You've got to know when to hold 'em, Know when to fold 'em, Know when to walk away, And know when to run"
I highly recommend both the Zurich Axioms book and a listen to Kenny Rogers - The Gambler.
The logic behind buying the dips
🍒 Buying the dips refers to going long an asset or security after its price has experienced a short-term decline, in repeated fashion.
🍒 Buying the dips can be profitable in long-term uptrends, but unprofitable or tougher during secular downtrends.
🍒 Dip buying can lower one's average cost of owning a position, but the risk and reward of dip-buying should be constantly evaluated.
Simple Ideas for buying dips
Use an arsenal of tools to help you spot opportunities.
You will see in this image RSI and MACD have different ideas - there is no wrong or right, it's up to you to work on the things that work for you. However, you don't want tools that either do more or less the same thing or conflict. So as per the first image - using a moving average for (up or downtrend) this could be a larger period such as a 200.
Envelopes
Utilizing envelopes of sorts will help visualize channels - this could be tools such as Bollinger Bands or Regression channels. Much like Moving averages - you won't need both and there are thousands of tools I have not used. So you need to experiment with something that you like or suits your needs and style.
Like all trading strategies, buying the dips does not guarantee profits. An asset can drop for many reasons, including changes to its underlying value. Just because the price is cheaper than before doesn't necessarily mean the asset represents good value.
Trend lines can be very subjective and educators and mentors teach them in a million different ways. They can be used, but again - back test and find what works for you.
- you can see the difference between a simple trend line and conflict with Bollinger; this is what causes doubt. The subjective trendline says one thing and the calculated/measured tool says another. Which do you follow?
The problem is that the average investor has very little ability to distinguish between a temporary drop in price and a warning signal that prices are about to go much lower. While there may be unrecognized intrinsic value, buying additional shares simply to lower an average cost of ownership may not be a good reason to increase the percentage of the investor's portfolio exposed to the price action of that one stock. (Investopedia)
🎲 If trading stocks there are other tools available that are not accessible in trading currencies or other instruments - things like EBITDA or P&L sheets to give further confirmation of continuation in the trend.
ISSUES
As many new traders don't yet understand the losses are part and parcel of trading, seeing your account in red plays on the human emotions (we have all been there) and this makes us do crazy things - doubling down on trades, adding more money to avoid margin calls, buying into a losing trade again and again.
I wrote an idea recently on how the mindset is represented on a chart.(click for post)
Simplicity
You can use simple price action to spot key levels - over the years one thing I have found is levels such as Order Blocks and imbalances. Plenty of info online for this - no need to go into here, save for another post,
Then when combined with regression channels you can start to paint "expected" levels of interest.
Just to show an example I have added EMA, Bollinger, Hand drawn regression and an imbalance level.
🔢 Elliott Wave Theory 🔠
Another awesome tool for finding directional bias - If combined with other techniques, indicators and tools, this can be mighty powerful as a whole.
A simple explanation of Elliott wave from another previous post (click for post) -
In Summary - you need a belief and a reason that you assume the stock is going higher. It does not matter if it's SPX, Bitcoin or Apple. Secondary you need a directional bias confirmation such as a 200 EMA. I would say to include an envelope (channel) of some description, Something to help you confirm the trend (Elliott) for example. And then a trigger, this could be a candlestick formation, an RSI or MACD overbought/sold signal. Something that suits you and your style.
I hope this helps. Be great to get other ideas, comments or strategies from others below!
Have a great weekend!
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Random Walk Index Indicator (RWI)This is a perfect indicator to determine the trend direction!
💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲
✅ Uptrend strategy:
When RWI high (purple in this video) is above the RWI low then the trend is up.
Combine this indicator with the Fisher Transform indicator, then open long positions as per the Fisher Transform when the trend is up.
✅ Downtrend strategy:
When RWI high (purple in this video) is below the RWI low then the trend is down.
Combine this indicator with the Fisher Transform indicator, then open short positions as per the Fisher Transform when the trend is down.
Uptrend strategy:
When RWI high (purple in this video) is above the RWI low then the trend is up.
Combine this indicator with the Fisher Transform indicator, then open long positions as per the Fisher Transform when the trend is up.
Downtrend strategy:
When RWI high (purple in this video) is below the RWI low then the trend is down.
Combine this indicator with the Fisher Transform indicator, then open short positions as per the Fisher Transform when the trend is down.
Sector Rotation March 2021Recent market sector rotation coming out of the COVID crash has confirmed Sector Rotation theory. I made this video to give viewers a brief introduction to the theory and provide some actionable investing ideas based on what Sector Rotation suggests will be the next stocks to potentially outperform.
Sector Rotation theory suggests that from market bottoms the two sectors that should lead are Consumer Discretionary and Technology. These two sectors did in fact lead the market out of the COVID crash. The next sectors to lead as the market matures are Industrials and Materials. These too followed the theory through 2020 as the bull market grew. At the market top Energy is supposed to lead and sure enough we have seen quite the run on Energy related stocks. What that means going forward if the theory holds is that Consumer Staples and Healthcare should outperform the market.
