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GEVO. Manipulation Short squeeze. How short positions are reset.This example is on paper company Gevo inc - manufacturing. Chemical industry. Specialized chemicals. I will say that I combined the training idea with the trading one , how the stocks will be relevant for trading now, the potential first profit with confirmation of support can be about + 90%. Everything that happens now, goals, read below under the description of the manipulation of a short squeeze. But let's plunge into the past and in order to examine this detective story in order to evaluate this masterpiece of trading art by applying the punishment of the zombie crowd of believers “it should be like that” and “put sure Stop-Loss like a smart uncle wrote to us in a book.” It was like this ... It seems that the downtrend will last forever. After all, the price over the past 2 years has fallen by almost -99%! Dump from $ 245 to $ 3.30! This is what happens with real companies, but what about non-existent crypto projects? After all, almost all crypto projects are built on promises that this “nothing” will cost a lot. Buy and hold, and you and the plant employee will become a millionaire in a couple of months / years. The sweetest lie, the more willing poor John believes in it. As you understand, in many cryptocurrency projects for lovers of “buy and hold”, to become a millionaire and stop going to the factory is still ahead. It doesn’t matter whether these assets are pumped up yet or not, but their ultimate fate is the complete disappearance in the near future of the life of poor believing John. The graph shows a strong downtrend , merciless to investors. But among investors, one must not forget that there are very rich uncles who can also make a mistake. But those who want to fix it. Well, it is clear that after such a fall from $ 240 to $ 3, no sane person believes in growth already, how silly it is. Most traders enter only a short position. But there are more intelligent people who have thought and decided why we don’t make a lot of money on “100% faith” of people. The strongest downtrend. Drop from $ 240 to $ 3.30. Minus 99% for 2 years. As part of this trend, many sellers are going to expect a continued decline in the trend. But after all, everyone was taught that it is necessary to put Stop-Loss, and if you do not, then you should always close somewhere. Where will everyone have stops on this chart? Yes, everything of course depends on the point of opening positions, but the generally accepted approach - Stop-Loss who enters a short position will be put for the nearest resistance, that is, we will be interested in the zones above the selected levels on the chart. If everything is clear and the main crowd has so much faith and become accustomed to the eternal fall, why not take advantage of this and start the domino effect? After all, money is burned only initially to start the process, then only fantastic earnings. How everyone will be "trapped" in a trap. Any inadequate Stop-Loss sizes will be reached. Buy or margin Call. Gevo inc. Levels where the crowd of "shorts" puts Stop-Loss. It is in these zones that Stop-Loss of most market participants are behind the resistance. Large players understand this very well, it’s a sin not to use it if you have enough money on hand for this manipulation. Perhaps the biggest player is the company itself, which is very interested in getting out of a loss-making situation and making big profits. After all, having for this a certain amount of money you can start an avalanche-like process and get the most unattainable Stop-Loss, thereby moving the market up against the current trend on Stop-Loss. This is an avalanche-like process. You understand very well what will happen to those traders who have opened a short trend and the price will begin to rise against their position, and even grow rapidly impulse with no chance of pardon. Yes, everything is simple, when we reach a certain zone, the order is executed, that is, the position is closed by Stop-Loss. And we all know that a position is closed by opening a reverse position, which means that if we were on sale, then a purchase is opened to close, that is, we create additional demand for growth. And so on the chain. And it’s not scary that then the price will return very quickly back to the previous values, because the manipulators will be in big profit, and the trader who caught the margin will no longer enter a short position on this asset. This is what came out of the chart below. Gevo inc. Growth + 600% at closing short on Stop-Loss. As we can see, the first strong resistance was + 100% of the minimum value before the short squeeze. That's how you think who believed that the price will reach these values? It is clear that no one, well, especially since the price will reach the last Stop Loos zone. For such an action, money was needed only until the first Stop-Loss zone, after which the price moves according to the domino effect. Growth fuel is the closing of short positions. Virtually no one believed in growth, which is why the impulse was + 600%, due to the closure of short positions of those who did not believe. After a while, the price broke the line of the main downtrend. Price shifted to lateral movement. Wishing to enter the short was less and less, as everyone remembered the previous margin Call. A year ago, there were two more attempts to punish those wishing to enter a short position in this trading instrument. It was not possible to repeat the short squeeze situation on such a scale. The first short squeeze is + 67% and immediately after it + 27%. It can be seen that there are no more willing traders to enter a short position on this trading instrument. Gevo inc. The situation is now. Please note that only on short-squeezes did a large volume go out at the auction. Traders with short positions were squeezed out of the market specifically. In lateral movement, the price is now drawing a formation that could become a triple bottom. If support is confirmed , the growth potential to the previous local maximum and the first resistance is about + 90%. ___________________________________________ Manipulations. Someone thinks that manipulations occur only in the crypto market, this is not so, they are everywhere, only in the crypto market they are open and arrogant, as there is no responsibility for this. In other markets, there is price manipulation, but to a lesser extent, as if the relevant authorities prove guilty there will be huge fines, or the deprivation of a license for trading activities up to the prison. ___________________________________________ What is a squeeze on the exchange. Short squeeze. Long squeeze. Squeeze (eng. Queeze - squeeze out) - a situation in the financial market when Stop Loss is sharply collected. As a result of the sharp increase, part of the Stop Loss is squeezed out, and part is closed at the “what is” price, this leads to an even greater increase / decrease in the price. Since positions can be held both in purchase and in sale, both short-squeeze and long-squeeze are possible. Short squeeze - it happens when sellers (shorts) are forced to close their open positions in order to avoid even greater losses, which only spurs the price even higher. On the graph, the hairpin (shadow) is up. Long squeeze - exactly the opposite. A sharp decline in the price of assets, forcing buyers (longists) to close their positions. Here, the buyers are already the “victims”, who are forced to close open transactions at a loss in order to prevent even greater losses, which provokes a further drop in the price of the instrument. On the graph, the hairpin (shadow) is down. ________________________________________ Short squeeze on margin trading. If it comes to margin trading, the strongest buyer today is yesterday's short. The vicious circle for bears is called "short squeeze" - short squeeze. In order not to be trapped, market participants must understand the principle of short positions, see the potential for a situation that could provoke a “short squeeze”. Experienced traders know how to make a profit with a short squeeze. The strongest short-term growth waves often occur during periods when a large number of lower players find themselves locked in an unprofitable position due to an unexpected price increase for them. As a rule, these are mid-level traders and so-called “hamsters” market participants with a level of knowledge and experience that is close to zero and close to it. Unfortunately or vice versa, fortunately the bulk of the crowd of the crypto market is precisely this layer of society. In such a situation, in order to get out of the trap they have to actively buy this cryptocurrency in which they are locked at any price in order to save part of their capital and fix the loss. I will explain in more detail so that the mechanism of this phenomenon becomes more clear. A short position or short-term transaction (from impudent short) is an operation when a trader sells a borrowed coin with the intention of buying it back later at a lower price. After the return of the borrowed coins, the difference between the sale price and the purchase price becomes profit. You can borrow cryptocurrency from the exchange, which as a guarantee for such a loan requires an adequate amount of guarantee security in the account. As a guarantee, money, bitcoin or other cryptocurrencies, which are valued at a certain discount, can act. When the value of the coin in which you are in a position increases, the size of the required guarantee for short positions also begins to grow rapidly. If the amount of funds in the account is insufficient to cover the required amount of security, the exchange may forcefully close the position. Downgrade players usually try to prevent this situation and close the position before submitting a margin call request from the exchange. However, their tactics here are essentially the same - a quick purchase of a coin that has grown in price, and you are in a short unprofitable position on it. If the size of the positions of such participants is large enough, then this situation can lead to skyrocketing prices and the avalanche-like closure of other shorts. Scalper traders and intraday traders who often open counter-trend trades in the hope of a pullback after active growth can aggravate the situation even more. If the rollback is not realized, then their purchases may become additional fuel for the upward movement. ________________________________ The immaturity of the cryptocurrency market provides opportunities for manipulation. An important feature of the cryptocurrency market, which is often ignored, is its tendency to respond to the actions of individual bidders. By individual bidders, I mean large traders, the creators of individual cryptocurrencies on which manipulations occur, as well as exchanges, which naturally themselves are owners of large cryptocurrency assets. And also, if desired, can affect their price. Roughly speaking, these are market participants who are called “whales” in the slang of traders. The cryptocurrency market is more affected by the influence of these particular market participants than other markets, due to the lack of maturity and insufficient control of the relevant state financial control bodies. No fundamental does not work without money support, but money on the exchange without the influence of the fundamental works in such an uncontrolled market perfectly. For example, we are all familiar with such frequent phenomena in the crypto market as "pumps" (artificially pumping prices). Very often they occur even without the release of FUD news on a particular coin. Also, the entire crypto market is very much tied to the dynamics of bitcoin, which can lead it in the opposite direction to fundamental factors. In recent years, the market has become more “mature”: instead of the buy-and-hold trading strategy, many have begun to use more advanced methods. Futures contracts, trading with leverage, opening short positions are now available. The more powerful players appear in the industry, the more the community takes on them “tricks” from the field of trading. More and more traders are using short positions in a falling market, allowing them to earn money in such conditions. And naturally, in such conditions, short squids and long squises often occur. Since the majority of traders take short positions in the bear market, many receive big losses, some especially greedy and not experienced margin calls. Large investors can begin to behave dishonestly Short-squeeze can be carried out only by a large market participant, such manipulations are beyond the power of ordinary traders. How to do this you need a huge amount. As a rule, such manipulations are done by the exchanges themselves. This is illegal - but everything is legal on the cryptocurrency market! There are conspiracy theories that such manipulations are carried out by exchanges, thus getting rid of customers who will definitely be in the black due to short positions and withdraw money from the exchange ecosystem.
NASDAQ:GEVOEducation
by SpartaBTC
23
Stock Market AnimalsThe stock market animals roam the financial landscape, representing optimism or pessimism. These animal metaphors capture the sentiment and beliefs behind the market participants who often try to outsmart each other through their edge in the market. Here is a list of 7 most popular animal metaphors in the stock market. Maybe it can help some traders to look at themselves in the mirror. 🐮Bulls🐮 Its true that at some point everybody would have been a bull in the stock market but here we are talking about the hardcore bulls who are quintessential symbol of rising market. They never go short on the market and make money from the escalating prices of the stocks. This is because they are always overtly positive about the economy and the companies in which they invest. Undoubtedly, bulls are responsible for the buying pressure in the market. 🐻Bears🐻 Needless to say, bears are exactly the opposite of bulls. They never go long and make money from falling stock prices. Their pessimistic and cautionary view about the markets glue them to their short positions. Thus, bears keep on creating selling pressure in the markets. 🐕Wolf🐕 Wolves are neither bulls nor bears but at the same time they are the both. Wolves are shrewd animals who always seek profit making opportunities on both sides of the market. Due to their aggressive trading they quickly adapt to the changing market conditions. They are able to take advantage of momentum, volatility and short-term price discrepancies. They tend to quietly wait for opportunities rather than hopping on to them. 🐢Turtle🐢 Turtles by their very nature believe in slow money-making ideology. They are the most patient ones among all the other categories. Generally, they marry their investments with a longer-term perspective. They take stock splits, bonuses and pocket dividends to make money. Turtles are steady buyers as well as steady sellers. 🐰Rabbit🐰 Rabbits are the most popular trading creatures. They are Intraday hoppers who trade in both the directions. They may be bullish at 10am and bearish at 10:05am. They believe in small but quick money-making ideology. Characterized as least patient among all the other types of market participants, they are just the opposite of turtles. Generally, they are pushed by the market sentiment to take a large number of trades during the day. However, they square off all profit/loss making positions before market close. They don’t restraint themselves from using a whole lot of indicators and strategies to make buy and sell decisions. Unfortunately, most rabbits lose money in the market. 🐔Chicken🐔 They are risk-averse creatures who believe in preserving their capital. Market volatility and momentum are not their cup of tea. They invariably take small risk and make smaller money. A small price fluctuation, on either side, may throw them out of the trade. 🦈Shark🦈 Sharks are the market manipulators. With their exceptional potential to drive or hold the prices to certain levels, they look for opportunities to trap weak traders on the wrong side of the market and exploit their fear or greed. Trading pools, large traders and prop firms etc. fall into this category. What makes them different from the rest of the market participants is their access to more accurate market data and mammoth sized Gigabucks at their disposal. I would not ask anybody's (predictable) type but would say that there is always room for improvement. It just needs : ⚡Realization on your part to recognize yourself. ⚡Commitment to follow the discipline needed to transform yourself. Anyways, which one do you like to become. Write in the comment section below. Thanks for reading. Do like for more educational stuff in future. Disclaimer: These metaphors are not created by me but views are personal.
NSE:NIFTYEducation
by Bravetotrade
7
Seasonal Futures Trading Patterns S&P 500 Hey traders today I wanted to go over what I believe are the best Seasonal Futures and Forex trades during the year. There are many markets that have seasonal patterns. Such as Forex, Stocks, Futures, and Commodities. Knowing the best time to trade to look for these Seasonal Futures and Forex opportunities will help you in your trading. This series on Seasonal Futures and Forex will be ongoing with several videos. The first video will be about the S&P 500 futures and how to trade them seasonally. Enjoy! Trade Well, Clifford
CME_MINI:MES1!Education
by TradeTheIndex
Why Is The Stock Market So Difficult To Predict?━━━━━━━━━━━━━ Let’s assume stock prices have been rising for several years. Investors realize that a correction will come and stock prices will tumble. What we don’t understand is what will trigger the selloff or exactly when it will occur. Therefore, some investors will sit on the sidelines holding cash, waiting for the opportune time to get in. Those who are willing to assume the risk may jump in because the return on cash is so low and it hurts to earn zero while watching stocks move higher. This begs a couple of key questions. If you’re on the sidelines, how will you know when to get in? If you’re already in, how will you know when it’s time to get out? If the stock market was predictable, these questions could easily be answered. However, it is not. There are actually three issues an investor should consider. The first is understanding the point at which stock prices are fairly valued. The second issue is the event that will cause a downturn
NSE:NIFTYEducation
by dsp21486
What is Stock Valuation ? Stock Valuation ━━━━━━━━━━━━━ The actual price of a stock is determined by market activity. When making the decision to buy or sell, the investor will often compare a stock’s actual price to its fair value. For example, if a stock is trading at $30 per share and its fair value is $35, it may be worth purchasing. Conversely, if it trades at $30 but its fair value is $25, the stock would be considered overvalued and the investor would be wise to avoid it. What is a stock’s fair value and how do you calculate it? Ideally, it would be based on some standardized formula. However, there are many ways to derive this figure. One method is to combine the value of a company’s assets on its balance sheet, minus depreciation and liabilities. Another is to determine its intrinsic value, which is the net present value of a company’s future earnings. We have briefly discussed two methods. There are a number of others. Because the methods yield a slightly different result, it’s sometimes difficult to know if a stock is overvalued, undervalued, or fairly valued. And even if it is overvalued, that doesn’t mean investors will suddenly sell and the price will fall.
NSE:NIFTYEducation
by dsp21486
Sell In May and Go Away?You might have heard the saying “Sell in May and go away.” It is an old investing adage that has been around for decades, but does it actually work? In this blog post, we are going to find out what’s best to do. We will discuss: 1. What is the meaning behind “Sell in May and go away?” 2. Does sell in May and go away work? 3. Should you sell in May and go away? 4. Two reasons not to sell in May and what to do instead. Let’s get started: 1. What Is The Meaning Behind “Sell In May And Go Away?” The saying “Sell in May and go away” has been around for a long time. It was first recorded in 1937 by John Hill via The Financial Times of London. The original saying was “Sell in May and come on back on St. Leger’s Day.” This phrase refers to a custom of aristocrats, merchants, and bankers who would leave the city of London and escape to the country during the hot summer months. St. Leger’s Day refers to the St. Leger’s Stakes, a thoroughbred horse race held in mid-September and the last leg of the British Triple Crown. And it seems that American traders have adopted the saying. Americans are more likely to spend more time on vacation between Memorial Day and Labor Day. 2. Does “Sell in May And Go Away” Work? And indeed, for over 50 years, the stock market performance supported the theory behind the strategy. From 1950 to around 2013, the DOW has had an average return of only 0.3% during the six-month period from May to October period. In comparison, the Dow had an average gain of 7.5% during the November to April period. So it seems that “Sell in May and Go away” is a strategy that may have worked for many years. But In recent times, it seems like the strategy has fallen out of favor. Technical analysts at Merrill Lynch looked at historical data and found THIS out: Looking at 3-month seasonal data going back to 1928, the June-August period typically is the second-best of the year, with gains 63% of the time, and an average return of 2.97%! 3. Should You Sell In May And Go Away? With all this conflicting data, does it make sense to sell in May and go away? Is this a good investment strategy? You know me — I always say “Trade What You See And Not What You Think!” Always look at the market data! As an example, last year, between May 4th and August 31st, 2020, the Nasdaq rose 28% (refer to chart). If you would have sold in May and "gone away," you would have missed out on these gains. 4. Two Reasons Not To Sell In May And What To Do Instead Maybe it makes sense to sell in May and go away when you’re an investor. MAYBE... But as a short-term trader like me, May is a GREAT month to trade, and here’s why: I like to trade The Wheel Strategy . With this trading strategy, you are selling option premiums. And there are 2 factors that influence options premiums: - Volatility When volatility is high, option premiums are higher. The Volatility Index VIX for the past few month, has been pretty low in March and April. But now, in May 2021, it's spiking up again. This means that options premiums are higher, which is perfect for a seller like me: I can get more premium! - Down Days Step 1 of The Wheel Strategy is selling puts, and you get more premium for puts on “Down Days” for such strategies. According to the NASDAQ , thus far, in May 2021, we had 7 “down days” and only 4 “up days." On “down days," there are many more trading opportunities. Last week, when the Dow Jones Industrial Average had its worst week since February, I made $3,722 in profits. Here Are Some Of My Trades In May: Let’s take a look at these trades in more detail: - Trade #1: Snapchat SNAP Snapchat recently had some rough weeks. In less than 2 months, it traded from a high of 72.50 to around $50 where it found some support. Most retail investors would stay away from a stock like this but I saw an opportunity to “buy it at a discount” : I sold Puts with a strike price of 47 and an expiration of 4 days. If SNAP closed below $47 on May 14 (the expiration date), I would have gotten assigned and bought SNAP for $47. I would consider that a bargain. If SNAP closed above $47, I would have just kept the premium that I received for selling calls. In this case, that’s $525. SNAP did close above $47 on May 14, and I collected $525 for 4 days of exposure in the stock market. - Trade #2: Square SQ Square looked very similar: Mid-February, the stock made a high of $280, but then it retreated to $200. Most market participants would not trade a stock like this, but looking back over a six-month period, I saw some good support around the $200 — $203 level. I sold 5 Puts with a strike price of 202.50 and an expiration date of May 14th. I received $100 in premium for each put, so I collected $500 in premium. On May 14, SQ closed above $202.50, and I made $500 in only 4 days. That’s a very nice return. - Other Trades I Took I sold 119 Puts on Apple , sold 212.50 Puts on Boeing , And I sold 39.50 Puts on Dave & Busters . All of these stocks have lost in value over the past few months. Investors who follow a ‘buy-and-hold approach” would lose money in this scenario, but as an active investor, I can apply trading strategies that make money even if the stock is going sideways or even moving lower. Summary “Sell in May and go away” is an old Wall Street adage that might be useful for buy-and-hold investors. But active investors like me are always on the lookout for trading opportunities. And with the right trading strategy, the increased volatility combined with markets that are moving lower is a dream come true. You need to have the right trading strategy. I personally like to use the PowerX Strategy for markets that are trending, and I trade The Wheel Strategy in choppy market conditions as we experience right now. With such a strategy, I am able to make money even if the stock is going sideways or lower. I for one will NOT sell in May and go away!
TVC:NDQEducation
by rockwelltrading
2
Options vs Stocks: Which Is Better?If you are wondering whether to trade options vs stocks, then this article is for you. There’s no simple answer to that question because it depends on how much money you have and your risk tolerance level. This blog post will cover the 7 topics that you need to know to answer the question “Is Options Trading Better Than Stocks?” 1. What Is The Difference Between Buying Stocks and Buying Options? Let’s keep it simple: When you buy a stock, then you own a share of the company and get paid dividends. Buying options, on the other hand, means that you only have the right to buy or sell a stock at a specific price before the option expires. But you don’t own the stock (yet). As you will see in a few moments, options trading requires much less capital than buying a stock, and therefore it’s very attractive. But it can also very confusing. My goal is to make it simple for you. Let’s start with an example: 2. Which Is Better: To Buy A Call Option On A Stock Or To Buy A Stock? Let’s use Apple (AAPL) as an example. Right now, the market price (at the time of this writing on May 6th, 2021) of AAPL is 128.70. Let’s assume, you are bullish on Apple and expect AAPL to go higher. So you could buy 100 shares of AAPL, but this would come with a high price: 100 shares * 128.70 per share = $12,870 If you have a small account, this might be too high of an investment. The good news: You can trade options instead. When you buy a CALL option, you have the right to buy 100 shares of AAPL at a set price (the strike price) on or before the expiration date of the option. You could buy a call option that expires on June 18th. Today is May 6th, so you have 43 days before this option expires worthless The price of the option is $3.75. Options come in “100 packs”, so your investment to buy this call option is only $3.75 * 100 = $375 Why Buy Options Instead Of Stocks? First of all, it’s much cheaper: Compared to the investment of 12,807 to buy 100 shares, that’s only 3% of the money that’s required. And because of that, options more profitable than stocks. Let me explain: 3. Are Options More Profitable Than Stocks? Since you are bullish on AAPL, you expect the stock to go up. Let’s say that over the next few weeks, the stock goes to 140: Let’s take a look at the profits from your stocks first: You bought 100 shares of AAPL at a price of $128.70 per share. Now each share is worth $140. So your profit is 140–128.70 = 11.30 per share * 100 shares = 1,130. Based on your investment of $12,870, that’s 8.8% Return on Investment (ROI). That’s not bad, but let’s take a look at the call option: How Are Options More Profitable Than Stocks? The call option that you bought gives you the right to BUY 100 shares of AAPL for $130 before June 18th. So if AAPL shares move up to $140, you can buy 100 shares of AAPL at $130 and sell them immediately at $140. This means that your profit per share is 140–130 = 10. And since you are trading 100 shares, your profit would be $1,000. But keep in mind: You paid $375 for the right to do this, so you need to subtract this from your profits: 1000–375 = 625. Your total profit is $625. Doesn’t sound much, but based on your $375 investment, that’s 167% return on investment (ROI). In summary: You made more money in terms of absolute dollars on the stock ($1,130 vs. $625), but the money you needed to make this profit was much less: $375 vs. $12,870. And that’s why your ROI is 167% when trading the option vs 8.8% when trading the stock — even though the stock price is exactly the same. Pretty cool, huh? 4. How Much Money Do You Need For Options Trading? As you can see from the previous example, you need MUCH less money when trading options vs trading stocks. When trading options, you can get started with as little as $2,000. Check with your broker about the minimum requirements to open an options trading account. So if you have a smaller account, trading options might be much better for you than stock trading. 5. Can You Lose Money Trading Options? Let’s talk about the risks of options trading, specifically the question “Can you lose money trading options?” The answer: YES, of course! In the example above, you could lose the premium you paid for the option, i.e. $375, if the stock price does not move above the strike price of $130. If AAPL remains below $130 until the expiration date of June 18th, your option expires worthless. And here’s why: With a call option, you have the right to BUY 100 shares of AAPL for $130. If AAPL is trading below $130, let’s say at $128, you don’t want to exercise your right to buy AAPL at $130. Because then you would pay MORE for the stock than you would if you bought it right away. Making sense? So if AAPL stays below $130 until expiration, your option expires worthless and you lose the premium you paid for the right to buy the stock. Can You Lose More Than You Invest In Options? When you are BUYING options, you can not lose more than the premium that you pay when buying options. So that’s good. However, when you are SELLING options, that’s a different story, and we will cover that later. So in summary: When BUYING options, the maximum amount that you could lose is the premium you pay when buying the option. 6. What Are The Risks Of Options Trading? YES, there are risks when trading options: a) Selling Options Can Be Dangerous. As you have seen, when BUYING options your risk is limited to the premium you pay when buying the option. However, as a seller, there’s a lot more risk. In some cases, you can have UNLIMITED risk. We will cover this in detail in a later article. b) Buying Out Of The Money Options. Risky before the probabilities are low. c) Know What You’re Doing When trading options, there are a few more things to consider: Call options vs put options Strike Prices Expiration Dates … and then there are also these pesky “Greeks” like delta, gamma, theta, rho, etc. And when you have more things to consider, there are more possibilities to make mistakes. So make sure that you understand all these factors before you start trading options. We will talk about “The Greeks” later. Are Options Riskier Than Stocks? YES. Because it’s easier to lose ALL of your investment. Let’s continue our example from above: Trading Stocks You bought AAPL at $128.70 per share. If AAPL drops to $125, then you would lose $3.70 per share, or $370 for 100 shares. Based on your initial investment, that’s only 2.9% Trading Options You bought the 130 Call Option for $3.75. If AAPL doesn’t move above 130, you lose ALL of your investment, i.e. 100%. Yes, the investment is much lower, but instead of losing 2.9% as you would when trading stocks, you would lose 100%. Selling Options And when selling options, you can lose A LOT of money. Selling options can be very profitable. In fact, I made more than $75,000 in less than 5 months selling options… … BUT it’s also very risky. Compare options vs stocks like riding a bicycle and riding a motorcycle: Riding a motorcycle gets you to your destination quicker. And it can be more fun. But it’s also much riskier than riding a bicycle. 7. Can You Really Make Money Trading Options? Absolutely! There are many advantages to trading options, and it is possible to make money with options. Is there a safe way to trade options? You need to know what you are doing, and you need to have a solid trading strategy. Find a strategy that you understand and then practice it on a simulator. And when you are ready, start making money with it. Can Option Trading make you rich? When trading options, you will often see returns of 167%, 200% or even 300%. Therefore, it’s easy to believe that options trading can make you rich. But keep in mind: With these high returns, comes high risk. Yes, you can make 200% or 300% when trading options. And you can lose ALL your investment, as you have seen above. Don’t think of options trading as a “get-rich-quick-scheme”. But when used correctly, options trading is perfect to grow a small account into a bigger one. Summary: Should I Trade Options YES! Should I trade stocks or options? Why not do both? Best of both worlds! Is options trading worth it? YES! It can be very rewarding! As we just covered with trading options, there are many, many advantages. If you are not trading options yet, I highly recommend that you start looking into them.
NASDAQ:AAPLEducation
by rockwelltrading
1
When To Sit On Your Hands When TradingNow, as you know, I like to use the PowerX Optimizer to find the best trades according to the PowerX strategy, along with The Wheel Strategy. So here’s my morning routine. Usually, I’m in front of the computer at 8 a.m. Central Time. That is 30 minutes before the US markets open. I run the scanner on PowerX Optimizer, and it finds possible trades based on my criteria. My Criteria For Finding Stocks My criteria, for starters, is I like to look for long and short signals because I like to play the markets both ways. I want to see at least a 60% return on my investment. I also want to see stocks that have a closing price between $5 and $250, because I don’t like to trade stocks that are below $5. I want to see a profit factor that is higher than 3. This means that for every dollar that I would have lost trading the strategy, I would have made $3. I also want a risk-reward ratio of at least 2%. Usually, there are anywhere between 4 & 8 stocks that come up on my scanner every day. I use three criteria to find A-plus trades. So here’s what I’m looking for. Number one, I’m looking for gappiness. I look back to see if the stock had a lot of gaps over the past year. I look back over the past 13 months. Number two, I’m looking for is trendability. What does trendability mean? It means that I want to see nice trends to the upside and the downside. And the last thing, number three, is I’m looking at the P&L chart. What does the P&L chart mean? Now, this is one of the strengths of the PowerX Optimizer software, and this is why I use it every single day. The P&L chart basically shows you what would have happened if I had traded this stock according to the rules of the PowerX strategy over the past year. So I can take a look at the trading report where I see for the past few trades, what I would have made in profits & losses. When To Sit On Your Hands Anyhow, this morning (at the time of this writing) I just saw EVRI on my scanner and it passed MOST of my criteria. First of all, it did pass all my scanner criteria, otherwise, it wouldn’t have come up here. Also, it did pass 2 out of my 3 criteria in terms of gappiness and trendability. But when it came to the P&L chart, it didn’t meet my criteria. So this is where this morning I did the most difficult thing for a trader. I was sitting on my hands. You see, at the beginning of my trading career, I had this little voice in my head and this little voice in my head said, “If you don’t trade, you don’t make any money.” Well after I forced some trades, I realized, well, if you don’t trade, you also don’t lose any money. This is why it’s so important. In the beginning when I got a new tool, or when I had a new trading strategy, I wanted to trade it. All I wanted to do was trade. However, when there’s nothing to trade, DON’T TRADE. This is why I use the PowerX Optimizer. It a fantastic job of keeping you out of trouble. So now, as you know, I am trading two strategies. In addition to trading the PowerX strategy, I’m also trading the Wheel. So also for the Wheel, I started looking for trades. Let me show you what I was looking for this morning. One of the trades that I thought, ahh you know what, this might actually be a decent trade was Marriott, (MAR), but when I looked, however, there wasn’t enough premium in there to sell according to the Wheel. I looked at another stock that came up on my radar this morning, which was (PENN). There was some great premium in there but PENN sounded rather risky. You see, for me, it is very, very important that I have a great track record. Now at the beginning of my trading career, I would have forced these trades. I would have said, “Oh my gosh, I cannot be done working after one hour,” because this is what happens sometimes in the morning. I sit down in front of the computer at 8 o’clock, which is half an hour before the open, and I run through the PowerX Optimizer, and don’t find anything. Now, one of the things that of course, I do every single day, is that I check my open positions, and in the PowerX Optimizer, I have my watch list. So first I look for new trades, and secondly, manage my existing trades. I don’t, however, need to overmanage my account when there are days where there is nothing to trade. What I used to do way back when I was still new to trading, and nothing would come up, I would adjust my criteria. I said, yeah, you know what? Instead of getting a 60% return on my investment, why don’t I lower it to 50%, or why don’t I lower the winning percentage to 35%. Maybe lower the volume to 200,000. I had to learn the hard way early in my career not to do this. Summary So anyhow, in summary, there will be days when you’re all excited, but you see, in order to make money with trading, two conditions have to be met. Number one, you have to be ready, and number two, the markets have to be ready. You may be ready but if the markets are not ready, you got to sit on your hands. The beautiful thing as traders, it’s not that today is the trading opportunity of a century. No, tomorrow there will be more trades, on Wednesday will be more trades, on Thursday. Every single day I’m running the scanner according to PowerX Optimizer and I will find more opportunities to trade. So today, one of the hardest lessons, and this is why I wanted to share it with you, sit on your hands. Anyhow, if you enjoyed this video, do me a favor and click on like so that more people will see it.
TVC:SPXEducation
by rockwelltrading
How Earnings Season Affects OptionsAs most of you are aware, it is earnings season. So today we’re going to talk about how earnings season can impact options trading, because, as you know, I trade options. Now, just a brief intro. Earnings season happens quarterly, meaning four times a year, and this is when corporations reveal their financial results for the previous quarter. Now, the results of a company’s earnings report can have a major impact on the stock price, and options will often price in the expectations for a big post-earnings move before the event. This is why it is likely that options premium are more expensive during this time. Implied Volatility One thing to know about this and how it can impact your trading is implied volatility. See, there several things that make up an options price, including the market’s expectation for future volatility, and that is called implied volatility. So why is this important? Well, as the buyer of an option, higher implied volatility means that you are paying more for your contract. So if you buy an option before earnings and hold through earnings, you put yourself at risk for a so-called volatility crash. Now, part of the reason implied volatility goes up so much ahead of earnings is because traders don’t know which way the stock is going to go or by how much. I mean, remember Netflix at the beginning of March? Who would have known that Netflix would soar 17%? But you see, once a company reports earnings, there is no more uncertainty, and this is when implied volatility drops, and in some cases, so does the options price. So if you bought an expensive option, there’s a chance that you have to sell it to close at a lower price even if a stock moves in the direction you want it to. And let me show you a very, very specific example of a volatility crash and why it is so important that you understand the concept of volatility and how it can impact your options trading. So I want to show you right here we see Seagate. Seagate reported earnings last week. And so here is the pre-earnings options data. The day before Seagate, STX, was trading at $61.45, and an At-The-Money call with a 61.50 strike price was going for the last traded price of $1.74, and the implied volatility was 128%. On the other hand, the put was going for $1.82 and the implied volatility was also 128%. Now, this was the day before earnings. Now let’s talk of what happened the day after earnings. So again, here Seagate was trading at $61.45 before earnings, but then the next day, Seagate dropped to $59.33. So it fell dramatically and therefore, and the price of the 61.50 call is only a penny. So it’s not surprising that the call is not worth anything, but here’s the key. Even though the stock fell quite substantially, the put only went from $1.82 to $2.51 so it went up because puts go up as the stock goes down. So this means that the put only went up to $0.70, $0.69 to be exact. You see this is how the volatility crash affects the option price, because even though the put is worth more now, and is now in the money, but it also lost a lot of value due to the decline in implied volatility. See, the previous day, it was 128%, this implied volatility, and the day after only 96%. So you have to factor this in when trading options into earnings. How Is Implied Volatility Measured? So let’s talk about this implied volatility thing and how is this measured, right? You know me, I’m all about practical stuff, so I don’t want to bore you with the math behind it and I don’t have to. The good news is that there are plenty of places online that calculate the implied volatility for you, and I want to show you exactly how you can see if the implied volatility, is high, low, or average. Here is the easiest way to do it. You compare the implied volatility to the stock’s historical volatility for exactly the same time frame. The implied volatility measures the market expectation for future price action. Now, the historical volatility measures the volatility for a stock that already occurred over a specific time frame. All you have to do to see if the implied volatility is high, low, or average compare it to the historical volatility. We can use the implied volatility of AAPL Apple’s Q1 earnings season. Apple was trading at 142. For an at-the-money call, expiring in four days, the implied volatility was 71%, and for the put was 70%. The historical volatility of Apple. And this is something that you’re charting software can show you, it makes sense to look at it in 10, 20, 30, 40 days increments. So if we were to look at the past 10 days, the historical volatility was 37%. But the call was trading at 71%. So what does it tell us? It tells us that the premium on this call, and also on the put, was running more expensive than usual. So now we can see, how this is affected by earnings. Now, let’s take a look at the implied volatility of an at-the-money Apple call from the same time that expired later out at, let’s say March 19th. So for calls expiring March 19th, you see right now the implied volatility is much, much, much lower at 43% for the call, and 43% as well for the put. The historical volatility over the past 60 days was 40.69%. Now compare this to the 43% and we see that it is pretty much in line here. So this means that the premium that was on these calls and puts on options that had 53 days until expiration was pretty much average. Why You Shouldn’t Sell Options Into Earnings Options traders are always talking about implied volatility and historical volatility, and now you know what it is. Now I want to tell you why I don’t sell options into earnings. I mean, even though the stock moves in the direction that you want to, your option premium is getting sucked out of there because of the volatility crash. You see, and this where, as an option seller, you might say, “don’t I want the premium to be as high as possible?” and yes, of course, you do. But let me make you very clear why I don’t sell options into earnings. If you have been following me for a while, you know that I love trading the Wheel, and as part of this strategy, we are selling options. Well you see, earnings plays are hit-and-miss. Sure, everybody can get lucky and most people who start trading expect their account to explode from one or two big trades. This is where we have some stocks that are jumping just dramatically. Looking at Intel, INTC over the last three earnings. Huge gap down right when we had earnings, then there was another earnings play, and Intel really crashed down hard again. Then also here during the last earnings season, initially, Intel went up but then started crashing down. You see, some people like these earnings plays because they believe the hype that they can make a lot of money with very little work involved, but see, trading just doesn’t work this way because, in reality, the key to becoming successful in trading is consistency and growing your account systematically. That’s what I mean when I talk about generating SRC profits, right? SRC is an acronym that stands for Systematic because I like to trade what I see and not what I think. This is why I use indicators and have a trading strategy that tells me when to trade, what to trade, when to enter and when to exit. The R stands for repeatable and by trading my plan, I’m able to find repeatable profit-making opportunities. The C in SRC profit stands for consistency. You see, I’d rather make slightly less money more often than biting off all my nails waiting for a big winner. As you know, part of my systematic approach to trading is to use The Wheel Strategy and the PowerX strategy. Now, especially with The Wheel strategy that, where I’m trading right now with you here, the idea is to get paid while you wait to buy the stock, and because I’m collecting premiums on the puts that I sell, I’m looking for stocks with higher volatility, right? This means making more money, and as a rule of thumb, I look for stocks with an IV, implied volatility, of at least 40%. The Wheel strategy can relatively safely produce profits, but I don’t recommend you to trade into earnings, at least that’s not what I do. So I will not target options with an expiration date that includes the company earnings report. I am trading options before we are running into earnings. So this is why I think it is very important that you know when trading options, whether it is buying or selling, that you don’t trade into earnings. At least that’s what I do because earnings are a wildcard and there’s just too much uncertainty. Remember, I’m not looking for fireworks here, I’m looking to systematically grow my account through consistent and repeatable strategies. Where To Check For Earnings Now, I want to give you two more resources, if you want to see for yourself who is reporting and when. These are two websites that are pretty cool that I personally use. So the first one here is “stock earnings.” If you go to stockearnings.com or they even have stocksearning.com, they will show you see the notable earnings that are coming up this week. Now, another one that many people like to use is earningswhispers.com. So that’s another great source for finding out when companies will report earnings because this way you can make sure that you’re not trading right into earnings. It’s always good to know when they report earnings if you have any open positions, whether you’re buying stocks or selling stocks so that you’re not caught off guard. So I hope that this helped you to see how earnings impact option prices and why I never sell options into earnings.
NASDAQ:INTCEducation
by rockwelltrading
Emotions In Trading: Biggest Account KillerTrading is fun and every trader is happy when their trades move in the right direction, but when a trade goes against you, you will experience a lot of emotions: Fear, anxiety, regret, doubt, maybe anger… … and these emotions in trading can lead to some bad decisions that could kill your account. In this article, I’ll show you how to control your emotions in trading so that you become a more relaxed trader. 1. Recognize Your Emotions When trading, you WILL experience emotions. The main emotions are: Excitement Greed Fear Anger Frustration Let’s talk about these emotions and how to deal with them. Emotion #1: Excitement When trades are going in your favor, it’s natural for you to be excited. We all love to see “green” in the account, but here’s the problem with that: when trades are going in your favor, you may be too excited and take on more risk. I have seen this over and over again, especially when trading “The Wheel” options strategy. During the first few trades, traders are usually very careful. They do a great job in picking the right stocks, then they take a few good trades and their account is up nicely! All of a sudden, they get overconfident. It seems that the trading system can’t lose, and so they increase risk because “things always turn out for the best,” but that’s when trouble starts. You’re no longer looking for “the best” trades. You feel invincible and want to make as much money in a short amount of time as possible. You start trading with more & more risk, and start choosing stocks that you shouldn’t choose. Here are a few examples: TLRY, SPCE, WKHS, LABU The premium is attractive, and you thought: “I’ll be fine, and if not, I can fly a rescue mission like Markus usually does,” but then you get stuck in a trade, like some of you are. So please be careful when you experience excitement because it quickly leads to overconfidence, and the markets like to show overconfident traders who’s boss! Emotion #2: Greed Next on the list of emotions in trading is greed. Greed is okay as long as you don’t let it take over your trading. My P&L so far is $69,205 at the time of this writing: My goal is to make $15,000 per month, and thus far, I have made almost $70,000 in less than 4 months! I could get greedy now and say, “Why not $20,000 per month? Or $30,000?” But I am going to keep trading with discipline and make sure that my greed doesn’t get the best of me. Be humble! Be grateful for what the market gives you because if you are greedy and try to squeeze the last penny out of the markets, the markets WILL put you in your place! Emotion #3: Fear The next emotion on the list is fear. Fear is a natural human emotion that we all have. In trading, it’s easy to let fear take over because you can see your profits diminishing in front of your eyes! Here’s the problem with fear: it’s a very strong and powerful emotion that has the power to paralyze you, and cause you to have a bad day — a VERY bad day: You’re sitting in front of your computer all day staring at the “red” numbers — the unrealized losses. Your mind goes crazy because you’re already thinking about how bad your trading account will be when you realize all these losses. But what a difference a day can make. Have you ever realized how one day it looks bad, and the next day everything is green again? Here is what you should do when FEAR takes over: – Step away from the computer. Shut it down! Go outside. Do something else. – Take some deep breaths and relax. – Do not panic, this will cause you more harm than anything else! The market is always changing, it’s just out of our control; so instead of panicking, think about what we can control. Emotion #4: Anger Next on the list of emotions in trading is anger. It’s easy to get angry at the markets because it’s so unpredictable! You can never tell what is going on and when it will change. And why are there always losers? Dang, I should have bought 30 minutes ago… but now the price has gone up again?! Happened to me yesterday: Every single trade that I entered was timed wrong. I could have gotten a much better fill 30 min later! But: anger does not get us anywhere. Anger leads to revenge trading, which can lead to catastrophic losses. Keep in mind: Markets don’t know who you are. Markets don’t care who you are. Markets don’t know if you are in a winning or losing trade. Markets don’t care if you try to push them around. If you try to fight the markets, you’ll lose. It’s important not to let anger dictate your trades! Emotion #5: Frustration The last emotion on our list is frustration. It’s easy to get frustrated with trading for the same reasons that I just mentioned: You can never tell what is going on and when it will change. And why are there always losers? Dang, I should have bought 30 minutes ago… but now the price has gone up again?! Some people react to these events with anger, others with frustration. Frustration can lead to impulsive trading, and that’s not a good thing. The best way to deal with frustration is to take some time out from the markets for a few hours or even days until your head clears up. 2. Understand The Effect of Emotions While Trading In a moment, I’ll share a technique with you on how to control these emotions but let’s first talk about the effect of emotions on your trading. It’s ok to have feelings. It’s ok to feel these emotions — these are HUMAN emotions. The problems start when you ACT on these emotions while trading. As you have seen, each of these emotions is causing a reaction, and none of them is good. Emotions cause irrational behavior… … which leads to impulsive decisions, … which leads to and bad trades, … that often leads to losses or drawdowns. Emotions in trading can be the number one account killer, so you MUST be able to control them. 3. Control Your Emotions By using THIS technique I have been trading for 20 years, and I still feel these emotions. They say you shouldn’t have any emotions while trading, and based on my experience, that’s not possible! The important thing is to make sure that you don’t ACT on your emotions. So how can you control your emotions? Stephen Covey said it best in his book “The 7 Habits of Highly Effective People”: Focus on what you CAN control, and don’t worry about what you can’t control. And if you think about it, there are only 2 things you CAN control: Your Thoughts Your Actions You can’t control what the markets are doing, you can’t control whether Hindenburg Research is releasing a report on a company you’re in, you can’t control when a big hedge fund gets in trouble and has to dump a bunch of positions, but you can choose how you react. Let me give you a personal example: As you know, I am in RIDE . And the position is MASSIVELY going against me. I could be angry at short-sellers, especially Hindenburg Research. I could be frustrated with Lordstowns PR efforts, which suck. I could look at my unrealized loss every day and fear “What will happen it Lordstown doesn’t recover?” I could have a lot of negative emotions around it, and NOTHING would change — other than me getting bitter, and maybe even depressed. So I keep following my plan, which is selling more premium. This week, I will make $1,050 on RIDE , no matter what the price is doing. If it goes up, good. If it goes down… oh well, I can’t change that. I just know THIS: I won’t let emotions dictate my day, and I won’t let emotions dictate my trading. I believe the Serenity Prayer says it best: “God, grant me the serenity to accept the things I cannot change, courage to change the things I can, and wisdom to know the difference.“
TVC:NDQEducation
by rockwelltrading
3 Tips That Turned My Trading AroundHow did I get here? To moving from Germany in 2002 to the United States, and came here with $30,000 in my pocket. I put $20,000 in my trading account, and I put away $10,000 for a living. It wasn’t easy in the beginning. It was quite challenging. Now things are different. I mean, thus far in the first four weeks of 2021, I already made more money than I was able to put into my trading account in the very beginning. I know if you are there in the beginning right now, you may have $10,000, $20,000, or maybe even only $5,000 or less to get started. How do YOU get started? This is what I want to focus on in this article. You see, I’ve been trading for a long time and there are a lot of things that I’ve learned the hard way over the years, and I want to go over three very specific things that helped me to become a much better trader. Don’t Focus On The Outcome Of Just ONE Trade The first thing here is don’t focus on the outcome of one trade. You see, at the beginning of my trading career, I was really stuck on looking at what happens with just one trade, or what happened on just one particular day, but it is so important that you keep the longer range in perspective here. Trading is a marathon, not a sprint. One of the few certainties in trading is that there will be losing trades no matter how good you are, but instead of beating yourself up about the P&L (profit and loss) of one specific trade, keep your eyes on the bigger picture. For example, I woke up one day, and I saw my account was down $12,000 and it actually got worse over the day getting as low as $17,000. Now I could have chosen to panic and focus on the red, but you see, this is why I say trading is a marathon and not a sprint. You need to focus on the broader performance over the course of a few days, a few weeks, or even a few months. Usually when you look at your account and you look at the P&L, what are your eyes usually drawn to? The red, right? You will focus on the one trade that is not working out in your favor. I can relate to this because I was just like this in the beginning. Think about it this way, your hand has five fingers. If you take a hammer and you smash on one of the fingers, you focus on the finger that hurts, and not on the other four that are fine. It’s human nature to focus on the bad stuff. But you see, when you do this, you’re losing sight of all the other good trades and also how you’re doing over the course of the year. This is super, super important, and you see, one of the keys to my success in trading is consistency and growing my account systematically. I do this through SRC profits. SRC is an acronym. The S stands for systematic. I like to trade what I see and not what I think. This is why use indicators and have a trading strategy that tells me what to trade when to enter, and when to exit. The R in SRC profit stands for repeatable, by trading my plan. By trading and following my plan, I’m able to find repeatable, profit-making opportunities. The C in SRC profits stands for consistency. You see, I’d rather make slightly less money more often than bite off all my nails waiting for the big winner. So focus on SRC profits. Systematic, repeatable, and consistent. So remember, it is more important to focus on this than on one trade, right? We will have losing trades and it’s unavoidable. Don’t Trade On Emotions The second thing to remember is, don’t trade on emotions. When you’re trading with your hard-earned cash, there’s certain to be emotions involved. When trading there are two main emotions to deal with: fear and greed. So as traders, we fear that we’ll have a loss, and lose money. There are actually two ways to control this fear. Number one, you want to keep your losses small. While losses are part of the business, if you keep them small you won’t be afraid of them. So I like to use, as a rule of thumb here, the 2% rule. The 2% rule means you never risk more than 2% of your account on any given trade. Think about it, if you have a $10,000 account, this translates into risking $200 per trade. Let me ask you this. If you have $10,000 in your account and you’re risking $200, are you afraid of losses? Probably not, right? If you lose $200, it doesn’t wipe out your account. You can live to fight another day. Now, number two is don’t trade with money you can’t afford to lose. I know you might have heard this before, but I just want to tell you a story from when I started. In the beginning, I scraped together $8,000 to start trading. This is before I moved to the U.S. and got serious about trading, and trust me, I could not afford to lose this. This was 23 years ago, and at that time I was 28. And when I was 28, 23 years ago, $8,000 was a lot of money for me. It was everything that I had in my savings account, so this is why I was super nervous when I lost money. It made me cramp up and it paralyzed me. I was checking my account every few minutes, anxiously see what’s going on. Have you ever done this? You check your account every 30 minutes? This is why it’s super important that you trade only with money that you can afford to lose. I know easier said than done, but keep in mind, if you don’t do this it will actually hurt your trading. On the other hand, there’s the fear of missing out or FOMO. That is another type of fear, which is really, really critical. This also happened to me at the very beginning of my trading career. So you see, how many times have you seen a stock that has skyrocketed, and then you beat yourself up for not getting in? If you’ve ever looked at a stock, see it take off without you, and thought, “Oh my gosh, I should get in” then tried to chase the stock higher, you’ve likely realized afterward that this was a problem. A classic example of this that you might remember is the craziness that happened with GME, GameStop, not too long ago. People started getting in at $20, then $40, then some at $160. Another typical example is Bitcoin. If you look back at Bitcoin here, what do you think? Where did most people get in in 2018? Did they get in when it was trading at $600 or $700, or did most people get in when Bitcoin was trading higher around $14,000, $15,000 maybe at $10,000? Most recently Bitcoin went up from $10,000 to $17,000. Where did most people get in on this move? Probably closer when it was topping $38,000. See this is where it’s the fear of missing out. For me, when I trade, I’m not going for these hot stocks. I like to trade based on my PowerX Optimizer and The Wheel strategy because they help me to keep my emotions out of my trading decisions by telling me what to trade, the best time to enter a trade, and the best time to exit. You see, if a stock has moved past my entry, I’ll pass on the trade and wait for the next one, because there will always, always, always, always be another trade. Trust me on this one, because if you are looking at PowerX Optimizer, and you see when you run the scanner every day, it is showing you a bunch of symbols. So for today, The PowerX Optimizer brought up seven symbols that I could have traded. Tomorrow it will be another two to eight. So obviously there is always another trade and this is why you shouldn’t be too scared. This is the next one and it is a big one because after all, why do we trade? We trade to make money, right? But there’s a saying, “Bulls make money, bears make money, but pigs get slaughtered.” You see, as traders, we want to take the trade that makes the most money. We want to find the next Tesla, the next Bitcoin, maybe the next GameStop, but often times when we find them, we’re getting in way too late. So how do we battle this greed feeling? Well, this is where we focus on SRC profits and having a solid plan. Have A Plan This is actually the third thing that I’ve learned in my trading career. Have a trading plan, and don’t make it too complicated. A solid trading plan is a cornerstone of being a successful trader. There have been times when somebody will buy a stock, and when I ask them when they’re going to sell they say, “When I made enough money” or as someone said to me recently, “After it went to the moon,” right? When is this? Probably never. You got to have a plan and this is why I have these two trading strategies, which is The Wheel trading strategy, and it is the PowerX strategy. So what is a trading plan? A trading plan tells you three things, and I’ve touched on these already. A trading plan tells you what to trade, when to enter, and when to exit. When it comes to exiting, we exit either with a profit, or we are exiting with a loss because losses are part of our business as traders. So let’s take a closer look at the three elements of this trading plan. First of all, what to trade. This is in general, a decision that you need to make. Are you going to trade options, stocks, or futures? It’s important to define what you want to trade so that you don’t get distracted. See, for me personally, I trade stocks and I trade options. I’m buying options according to the PowerX strategy, and I’m also selling options, according to the rules of The Wheel strategy. Now, the next question is when exactly are you going to enter? And this is super important, think back to the idea of FOMO, the fear of missing out, right? You need to know at what price you want to enter a trade and you need to be able to move on it so that you get in, right? This is where limit orders come in handy. So this is where here for example, with when to enter I’m using again the PowerX Optimizer because it tells me exactly what is the option premium that I should be getting in order to achieve my goals. So for me, it is super important to have a tool that gives you this information and not guessing when you should get in. This is why for me, it helps me tremendously to do this on indicators, and the indicators that I like to follow are the RSI, the Stochastics, and the MACD. By doing this, you see, I can take the emotions out of trading which was rule number two. This is where, again, the PowerX Optimizer for me is an indispensable tool. Originally it was just programmed for me, my head coach Mark Hodge, and my son a few years ago. Now it’s available for everyone. It saves me hours and hours because it scans for me. Since I have my rules in place, I can quickly scan the charts to see what I’ll trade and what I won’t trade which makes my life so much easier. You need a great trading strategy, you need to have professional tools, and you need to have the right mindset. We can talk about strategies until we are blue in the face, but if you are not following the strategy, it is absolutely useless. What else does a trading strategy have to tell us? Well, this is where we’ll talk about exiting, and we need to know when to exit either with a profit, and in order to define this, we are using a profit target, or with a loss. For exiting with a loss, I always like to use, when it is possible, to have a stop loss. Using the logic “when I make enough money” is not a proper exit strategy. I know this because I did that in the beginning, and I was just swinging for the fences. I entered a trade risking $100 and I wanted to make $10,000, but it doesn’t work this way. Now, what are great exits? How can you define exits? There are several ways. You can use support and resistance, right? What are tools for exit rules? You can go for a certain percentage, it really depends on what works best for you. For me, it is a profit target and a stop loss based on the average daily range. The average daily range measures how much a stock move from top to the bottom, and a good rule of thumb is for a stop loss, you use one times the ADR, and for a profit target, you would use two times the ADR. For example, let’s pretend the ADR is 40 points, or instead of 40 points we could just say $40. So this means that my stop loss should be when the stock moves down $40. So if I have an entry of $850, we minus $40, this means at $810 I would get out. Now for my profit target, I would use two times my stop loss. So here in this case it would be $80. So again, if right now, my entry would be $850 plus these $80, right? So I would exit at $920. Now let’s just say I’m trading 10 shares, right? So this means that I would lose $400 if I’m wrong, but I would make $800 when I’m right. So I’m making twice as much on my winning trades than I lose on my losing trades. So stop loss and profit target based on the ADR. Now for The Wheel strategy, I do it slightly differently. For this strategy, I use 90% of the max profit. I can’t stress enough how important it is to be prepared when you are trading. If you’re trading without a plan, you’re failing. If not in the short term, then for sure in the longer term. Summary So brief summary. What are the three things that really turned my trading around? Let’s quickly summarize it. Number one, don’t focus on the outcome of one trade. Number two, don’t trade on emotions. And number three, have a trading plan. So these are the three tips that really turned my trading around, and I hope that this helps and that it helps you also to take your trading to the next level.
TVC:NDQEducation
by rockwelltrading
3
My Planning Process Revealed In 4 Simple StepsIn this article, I want to show you exactly how I am planning to achieve more in 12 weeks than others achieve in 12 months. First of all, I’m not saying that I’m an expert on goal setting, because I’m not. I’m just sharing the planning process that works for me, it might be completely different for you. The Most Important Thing For Me In My Planning Process One of the things that I have learned over the years that works best for me is, I don’t create a plan for everything. Let me explain what I mean by this. Many, years ago, I heard about a concept that they use in the military, which is called Backwards Planning. And you might have heard about this. Backwards Planning The idea here is that you start with the exact goal in mind and then plan backwards. I have heard this example many years ago where it was used in the military where they say, for example, let’s say you want to invade a camp on the enemy’s territory. So the idea here now, is to go backward and say, “OK, what exactly has to happen right before you invade the camp?” Well, this is where obviously you need to have your troops surrounding the camp. Then you go one step backward. What needs to happen before you have your troops surrounding the camp? And I’m making this up here as we go. I don’t recall this example exactly. I was not in the military, this is just an example that I’ve heard. So in order to surround this camp with your troops, what do you need to do? You need to get your troops to that camp that you want to invade. In order to do this, first of all, let’s assume that this is on foreign soil, so you need to get your troops to foreign soil. So this is what the military often uses, so I was told, which is backward planning. The idea here with backwards planning is that you create a detailed step by step plan of what to do. Here’s one of the challenges. I don’t do this, because based on my experience, the problem with this is what do you do if something goes wrong? So let’s say that one of the first steps is that you are getting your troops on foreign soil, well what happens if somehow you can’t because there’s bad weather or you’re getting attacked? This is where I found that often when you do this, the whole plan becomes kind of useless. This is where for me, I figured out that planning can be overwhelming. It can make the process daunting and can make me feel paralyzed. I don’t know about you, but what happened in the past before I did what I’m about to show you here is, I got paralyzed. I never achieved my goals because I couldn’t get over the first hurdle of planning. I want to show you exactly what I do these days to avoid this. 4 Steps To My Planning Process Step One: I write down my goal. Step Two: I plan the next two to three steps, and here’s why. My idea is, and this is what I found to be true, when I walk the first steps the path will reveal itself. Imagine walking down a foggy path. You don’t actually see the end of the path where it is leading. When I have a goal, I realized that when I plan out the first few steps and start walking, as soon as I get towards the end where I can see, the path will again reveal itself. So this is where, going back to my planning process, it works really for me to plan the next two to three steps. Step Three: I take action and complete these steps. Step Four: When the fog starts clearing and I see the next step, then I add more steps or to dos to it. Planning Process Example This article is all about my planning process and how to achieve more in 12 weeks than most people achieve in 12 months. So let me give you a very specific example of how I’m doing this. One of my goals is to buy a resort in Mexico. Goal & Overview Usually I write myself a quick overview of what is it that I want to achieve. I’m meeting with my private Mastermind members usually three times per year in exotic locations to trade, relax and make money together. In the past, we have done it in the Cayman Islands, Bahamas, Puerto Rico, and Mexico and other locations, but finding a hotel with reliable Wi-Fi as well as getting all of our equipment there has been really challenging. Right now I think that there’s a tremendous opportunity because I know for a fact that the travel and hospitality industry is hurt because of Covid-19. I don’t know for a fact, but there might be a possibility to buy a hotel or resort for $0.60 to $0.70 on the dollar. So if that’s the case, it would be possible to make a 50% ROI within one to two years and that’s not bad at all, right? It could be even more, it could be 100%. So this is now where I write down a few to dos. This is where it goes back to my planning process. So I write down my goal and an overview of what I want to accomplish. So now you know why I’m doing this, what I want to accomplish here, and now I plan the next two to three steps. Planning Process Steps My first step is I want to get an idea of what kind of investment is needed. Is a resort around one million dollars? Two million dollars? Is it more, is it less? Then I want to get an idea if this is at all possible to make money with, because ultimately if I can make money with it, why wouldn’t I do it? I mean, just having a hotel to have a hotel does not make sense. So what’s the best location? The location should be up to 1,000 miles away from Austin and here’s why. I’m planning to buy a plane, and this plane that I have in mind right now has a reach of 1,000 miles. So I’m looking at possibly Mexico, Puerto Rico, Belize, Dominican Republic, Honduras, who knows. This is where I first wanted to find out what a possible price point is? Last weekend I was in Sacramento meeting with my head coach Mark, my CEO Debbie, and marketing director Jared. I shared this crazy idea with them and we had some fun looking for hotels online. Based on my research, I’ve found it’s probably between 1 to 2 million dollars that I would have to invest for anywhere between 20 and 30 rooms. That was fairly easy and only took me a few hours. I can now move on to the next step in the planning process. Now the question is, is it possible at all to make money with this? Because if not, then I can stop right here. Does It Make Sense? I have been investing in apartment complexes for the past five years. To give you an example, I bought an apartment complex with 48 units here in Austin for 2.3 million dollars. I’m making $30,000 in rent per month so I know how to run this. $30,000 in rent per month is covering my financing, which is a mortgage, also insurance. This is also taking care of the property management, utilities, maintenance, renovations as well as capital improvements. Now I know, having an apartment complex is not the same as running a hotel or resort, but I just wanted to see if this is feasible, and in a moment, I’ll show you why this is making sense. So you see, I already know on 48 units, which is quite a lot, on $30,000, I can do all of this and I’m making a profit. So that’s good, not a big profit but I’m making a profit. Now the question is if I need $30,000, let’s divide this by 30 days because now we are going to the resort, this means that I would have to bring in $1,000 in revenue per day. The resorts that I started to look into were around 26 rooms, 17 rooms, 22 rooms, so let’s just say that I will find something around the 2 million dollar mark that has maybe 25 rooms. This is what I’m looking for. So the key question is, can I make $1,000 per day in revenue, not in profits, with 25 rooms? It sounds like it’s possible, right? Again, I have no clue. There’s probably more vacancy, but if I can rent out half of the rooms every day, so 50% vacancy, and I rent them out for $80 per day, this means that I would have rented 12 rooms for $80, which is $1,000. I know that there’s housekeeping, so there’s probably more than property management and maintenance, right? But I believe that these are quite realistic assumptions. If they are not, and if you have experience in this space, leave me a comment below and let me know. Summary Here’s the important thing. Let’s tie this back to what today’s show is all about, right? How I get more done in 12 weeks than most people get in 12 months. Now, here’s the deal. How long did it take me to do the first two things thus far? Well, I can tell you four to five hours. And now I know whether it makes sense to pursue it before I go down a rabbit hole. What is my point with all of this? My point is to stick to something really, really simple when going through the planning process. Keep it easy where you set a goal, then plan the next two to three steps. Or if you want to go crazy, as I did here, we could do three to five steps. Then the most important thing is to take action and complete these first steps. Once you do this, you’ll see whether it makes sense and you can plan the next three to five steps and complete this process.
TVC:NDQEducation
by rockwelltrading
Best Brokerage Account 2021Let’s talk about the best brokerage account, and in order to do this, I want to compare five different brokers for you. I’ll be comparing tastyworks, the current broker that I’m currently trading with, Robinhood because many traders are using it, TD Ameritrade because it’s wildly popular, Interactive Brokers because it’s great for international traders, and we will talk about a new broker that I’ve been using for the past couple of months, so I have an account with them. I want to talk about this and compare them to the others and tell you why I really like this new broker and why I’m in the process of switching over all my accounts. The first thing to keep in mind when you’re comparing different brokers, you have to pick criteria that fit your needs. These are my criteria and they might be great for you, or your criteria may be different. So what I’m looking for when finding the best broker. My Criteria For Selecting A Broker So the first thing that I would like to know is how much do I have to pay in commissions per month? I use a certain baseline for this. With my current broker, tastyworks, I looked back over the past three months and I wanted to see how much I spent. From 1/1 through 3/31 I made 150 trades and traded 1,665 contracts. So I use this as my baseline in order to compare these different brokers. I took to see what if I make 150 trades, or 50 trades per month and 500 contracts that I’m trading per month. Again, for you, it might be different, but we need to have somehow a baseline, especially when we are comparing the commissions per month that I’m spending right now, that I would be spending on Robinhood, TD Ameritrade, interactive brokers, and this new broker that I’m trading with. Now, every single broker has some other fees, and you need to see which of these fees are important to you. Here are the ones that are important to me. I want to know if there any wire fees and if so, how much are they? Also, are there any assignment fees? Assignment fees are important to me because I’m trading The Wheel Strategy, and part of this strategy is getting assigned shares, so I want to know how much this will be. Information about their customer support is also important to me. What happens if I need help and I need to call or e-mail them? Do they have an online chat feature? So this is important for me. What about the platform? Every single broker offers a platform for you, so which one best fits your needs? This is where we get a little bit more technical because I want to talk about levels three and four. What does this mean? Well, it means that, especially when you are selling options which you do with The Wheel Strategy, you need certain option trading permissions, so you want to know how easily can you get level three and four if this is important to you. Now, last but not least, I love having live data. I don’t know about you, but I want to make sure that live data available with these brokerages. I also want to know how much it costs if anything. So let’s get started and let’s talk about the first broker here, tastyworks. tastyworks I am currently using tastyworks, and I know exactly how much money I spent on tastyworks. On this particular account, I spent $550 dollars in commissions. For the baseline of 50 trades and 500 contracts per month, I spent around $180 in commissions. Now for tastyworks, how much are wire fees? When I wire money out, which is once a month, it costs me $25. What about the assignment fees? The assignment fees for tastyworks are $5. I want to explain to you exactly how they are charging. So with tastyworks, they charge $1 per contract and they do have a $10 maximum. So you’re never paying more than $10. Even if you’re trading 50 contracts, you will only pay $10. They also have no closing fees and this applies to options trading. For stock trading, these days, trading stocks is free pretty much everywhere. So we want to worry about options here because that’s what I’m mainly trading. What about customer support? I must say their support is good. The experiences that I have had thus far when I contact them by chat are very quick. When contacting them through chat, they usually only have me on hold for three to ten minutes. Now, what I do not like about tastyworks? You cannot call them, and sometimes I would rather speak with someone on the phone, so this is why I’m not labeling it “very good,” I’m just labeling it as “good” because you can’t call them. As for their platform, I think it is pretty good. However, I’m just using a fraction of the platform, so for me, the most important function is actually placing trades. I’m not using any of the complicated curves that you can have and all of the analysis tools, but again, if this is important to you, then you need to make sure that this platform meets all of your needs. For me, it does what I need it to do, which is entering trades. Now level three and four is actually something that is quite easy to obtain with tastyworks. So no problems there, and live data is actually free. Robinhood As for Robinhood, how much would you pay in commissions per month? Well, Robinhood has always advertised you pay zero commissions, and that is true. For options trading, you also pay zero dollars, which is actually pretty cool. Wire fees are a whopping zero dollars with assignment fees being zero dollars. So thus far Robinhood is really good in terms of commissions, right? Well, what about customer support? Now, full disclosure, I do not have an account with Robinhood, so I’ve never contacted them, but based on what I have heard, it is pretty bad. What about based on what I’ve seen? I don’t know if you’ve been following the news, but back when we had the GME craziness, Robinhood restricted trading for several days. I don’t think that was fair. I don’t think that they should have done that, but they did. This makes it seem to me they don’t have their customers in mind. Now, again, full disclosure, I don’t have an account with them and never contacted them. I’ve just heard that customer support is pretty bad. What about the platform? I don’t know first hand, but I’ve heard it’s good. Again, this is where I go from hearsay because I don’t have an account with Robinhood, never had one, & don’t want one. In terms of levels three and four, I heard from traders who have an account with them say it is fairly difficult to obtain levels three and four. If you’re trading The Wheel Strategy, this is super important. As for their live data, it’s free. TD Ameritrade Now on to TD Ameritrade. How much would you spend with TD Ameritrade based on my baseline? You would pay 65 cents per the contract that you trade. So if you’re trading like me, 500 contracts per month, times 65 cents, that comes to $325. What about the wire fee? The wire fees here are also $25, the same as with tastyworks, but assignment fees are zero. Now, what about customer support? Customer support used to be good. Right now I would say it is decent. There was a time when you could call them they would pick right up. These days you are probably on hold for anywhere between 15 minutes and 2 hours because they got bought by Charles Schwab. There seems to be a lot of consolidation going on and because of this, and because of this, it seems that customer support is suffering. What about the platform? ThinkOrSwim is probably one of the most powerful trading platforms out there, and it is fairly complex. For me, I just need to enter simple orders such as buy and sell orders. So for me personally, it is too complex. It took me a long time to learn it. For those of you who have ThinkOrSwim, you either love it or you hate it. Either way, it is so complex, so you probably had to spend hours and hours learning it. Levels three and four are fairly simple to acquire, and also live data here is free. Interactive Brokers Now with Interactive Brokers, I personally do have three accounts. I’ve been using them since 1999. They’re a great choice for international traders. However, Interactive Brokers charges 65 cents per contract. So very similar here to TD Ameritrade. If I would trade on Interactive Brokers I would actually spend $325. The wire fee here is a little bit cheaper, $10. The assignment fees, if you get assigned, are zero. Now their customer support, based on my experience is pretty bad. I’ve tried contacting them by chat, by phone, by email, and if you’re trying to contact them by chat, you will most likely be on hold for at least 20 minutes. If you try to contact them by phone it is not unusual to wait 30 to 60 minutes until you get connected. Their platform here is actually simple to use, but I find it’s pretty clunky. So just if you want my opinion and again, this is just my opinion. You on the other hand might find this platform blazing fast and think it’s the best trading platform there is. Now, in terms of levels three and four, yes, it is fairly easy to obtain, but they charge you $14.50 for live data, so just keep this in mind. This is a monthly fee so you just need to know what you need. So with the new broker, and I’ll tell you in a moment who that is, but when I saw all this mess going on in February where several brokers restricted trading, I said, “you know what, this is not fair.” When I heard from some of you say, “My broker suddenly raised the margin requirements and I didn’t have a margin problem before and now I have a margin call,” or that you’re on hold forever before you get any customer support, I set out to find a great broker, and here is the new broker that I’m currently using. Tradier The new broker that I’m using is Tradier. I will move all of my accounts over to them because of what they’re offering. The commission per month, it’s a $10 flat fee. $10 no matter how many options you trade. This is a special rate for those of you reading these articles, and following me on YouTube. So I think it is an absolutely cool model because it is a flat fee no matter how many contracts you trade. Now, this, of course, is great if you are trading a lot of contracts like me. You have seen it, 500 contracts per month, with 150 trades, so I’m a very, very active trader. I think it is absolutely cool that instead of paying $180 per month, all I’m paying right now is a $10 flat fee. That is pretty cool. Now the wire fees are a little bit more expensive. The wire fees are $35, but again, I’m using it once a month. So, therefore, if I’m adding this up, all right, and I say, well, that is $205 per month versus $45 a month, and for me, that adds up. Right. It’s only a $10 difference from tastyworks, and I’m not wiring money in and out like crazy. I’m just wiring it out once a month and that is okay. So the assignment fee here is a little bit higher, at $9 as of right now. So over the past three months, I had 3 wires and I had 8 assignments. This is for the year. This means that per month I have 1 wire and approximately 3 assignments. So as you can see, this is why the assignment costs here for me are not that important. Again, these are my numbers, your numbers might be completely different, and that is fine. This is where the cool thing is you have probably your brokerage account statement, so you can take a look at that, and then you know exactly how much you’re paying right now. So the customer support, I must say based on my experience, over the past two months that I’ve been using them, is awesome. What do I mean by awesome? By awesome I mean that I can pick up the phone right now. I can call them, and within two to three rings, somebody picks up. The customer support team is in North Carolina, so I’m not going overseas, they are here in the United States. They have been super responsive by email and by phone. I don’t even know if they offer a chat on the website because I was just so happy that I can finally talk to somebody. Again, I’m coming from tastyworks, and on tastyworks, I’ve never, ever been able to talk to somebody because their business model is that they’re all doing it by chat, so I love this. What about their platform? Their platform is simple, and in my opinion, it is super easy to learn. So you can learn this platform in literally 10 minutes because that’s what they do. They just say, hey, if you want to enter trades, which I want to do, it’s fine. They don’t have all of the bells and whistles that the other platforms have. So I would say it’s more comparable to Robinhood instead of a platform like TD Ameritrade because with Robinhood you just enter the trade and it is good. So it’s simple and easy, does the trick for me. Levels three and four are super easy to get. And live data is free. So this is what this new broker is all about. For our members, we have created in our private community a special discussion group, and in this discussion group, we are here to help you, support you, with this particular brokerage. Which again is called Tradier. So, for example, people have been asking if they open an account for business, an LLC for example? And the answer is yes. So you can ask us if you want to, of course, you can contact them. So this is what we have here. We have a Tradier discussion group. We do have tutorials for you such as videos on how to open an account, how to set up a paper trading account, and that reminds me, they offer paper trading. As you know, I highly recommend that you trade on a paper trading account first. There are also videos on how to fund your Tradier account, how to place a stock entry order for the PowerX Strategy, how to place options order for the PowerX Strategy, entering orders for The Wheel Strategy, how to check your positions. Summary OK. So, again, my promise is to show you the best broker and this is the best broker for my needs. Now, for your needs, it might be different, but I thought that I compare here that the top five brokers that most traders are using right now.
TVC:NDQEducation
by rockwelltrading
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
TVC:NDQEducation
by rockwelltrading
Why Options Are DangerousIn today’s article, I want to answer a few questions about why options can be dangerous. What are the risks of trading options? Are puts or calls riskier? Why is option selling risky? We’ll also talk about the safest options trading strategy. So let’s get started and let’s jump right in. Buying Calls & Puts First of all, you need to understand that there are different types of options. There are call options and put options. So calls versus puts, which one is riskier? Some people think that trading puts are riskier, while some people might think that trading calls are riskier, but this is not the case at all. The key question is that you should ask yourself is, are you BUYING options or are you SELLING options? There’s a huge difference between buying and selling, as well as different levels of risk involved between the two. So when you’re buying options, the maximum amount you can lose is the premium you paid. So let talk about a very specific example. Let’s look at a trade I took with TSLA and let’s say that we want to trade a call. So let’s maybe say a 700 call and right now the price is $700. What is the maximum that you can lose? Let’s say that we are bullish on Tesla and we believe that Tesla might go above $750, and we want to buy a call with a strike price of 750. So a 750 strike call expiring next week costs around $1.70 (at the time of writing this article on March 19th, 2021). Now options come in 100 packs, so this means that you’re paying $170 for this option. So in this case, if TSLA does not go above 170 by next Friday, you would lose the $170. So this is very easy, the maximum amount that you can lose is the premium that you paid. On the other hand, you are bearish on Tesla. You believe that it might actually go down to $560 so you’re thinking about a put option with a strike price of 560 that expires next week. A put with a 560 strike price expiring next week is $4.50 so a little bit more, pricier here. Again, since options come in 100 packs, this means that your total risk here is $450 per option traded. It’s the same risk here because it doesn’t really matter whether you’re buying calls or you’re buying puts. The maximum amount that you can lose is the premium. Now, on the other hand, there are SELLING options, and when you’re selling options, this is when your risk is almost unlimited. When you’re buying options, and let’s just say you want to buy a call, this means that you want the stock to go up. So going back to our TSLA example, if we would buy a call 750, that it is expiring next week for $170, if Tesla goes above 750, we make money. If Tesla goes below 750 or stays at 750, we lose the premium or $170. So not really a big deal. Now, how much money could we make on this one? Well, if we buy a call for 750, we have the right to buy 100 shares of Tesla for $750. So let’s say that Tesla closes at $800. So in this case, our profit is $800, minus the $750 that we bought Tesla for, which is $50 per share. Since options come in 100 packs, this means that we would make $5,000 in profits. This is why people love trading options. Because if you think about it, we’re risking $170 and can potentially make $5,000 if Tesla would go up to $800. Now, let’s quickly do an example here for buying a put. So buying a put and in this case, you want the stock to go down. Using our example for TSLA again, we will buy a put with the strike price of 560 for $4.50. So our total risk here is $450. So now if Tesla goes below $560, the strike price here, we make money. Now, if Tesla stays above 560, we lose the premium. But that is the maximum that we can lose. So even if Tesla rallies right now to 800, we would only lose $450. So that is pretty cool, right? Let’s say Tesla goes to $500. So we were able to sell the shares for $560, now we can buy it back for 500. So this would be $60 per share. Since one option equals 100 shares, it means that we would make $6,000 in profits. So as you can see, with options, you can benefit from a stock going up, as well as a stock going down, and the really cool thing is that you can risk a little to make a whole lot. Now, here’s the challenge with this. If you buy a call, you only make money if TSLA is really going above $750. So if it stays below, that’s not enough for the buyer of an option to make money. If Tesla goes sideways well, same here, right? Then you not only won’t benefit from it, but you also lose the premium. If Tesla goes down, you also lose the premium. So if you think about it, there are actually three ways how you can lose money and only one way how you can make money, and this is if Tesla really shoots up. This is why many people, including myself, are interested in SELLING options. Selling Calls & Puts What are the pros of selling options? The first pro is that you don’t need to be right about the direction of a stock to make money. Here is an example I’m in right now (at the time of this writing on March 19th, 2021) with LL Lumber Liquidators. So right here, Lumber Liquidators, I actually sold a put with a strike price of 22. When does the buyer of a put make money? Well, the buyer of a put makes money if it goes below $22. For me, the seller of a put, I make money if Lumber Liquidators goes up, it goes sideways, or it goes down. It can go down all the way to 22. This is a drop of a little over 10%. So if you think about it, if LL can go down by 10% and I am still making money and this is why again, this is why selling options is so fascinating. So you don’t need to be right about the direction and you can keep the premium. So here’s the deal, the premium that you receive is exactly what the buyer is giving you. So the premium is rather small, right? So the cons are the premium is rather small, and this is where your risk is almost unlimited. So back to our example here with Lumber Liquidators. I sold a 45 of the 22 puts, and I received $0.20 per share, so $20 per put option. $20 multiplied by the 45 options means that I’m making $900. So this is the premium that I receive. However, here’s the deal. The buyer of a put has the right to sell 100 shares at the strike price. So what does it mean for me? So the seller, which is me, has to buy LL at $22, and again, this is where one option means 100 shares. So for me here, since I’m having 45 options, this means that I would have to buy 4,500 shares. Because this is where we get to the risks of this strategy here. Now, again, Lumber Liquidators can drop more than 10% and I will be just fine. But what happens if it drops below, let’s say to $20 from $22. OK? So I would have to buy Lumber Liquidators at $22, and therefore I would lose $2 per share. Here, in this case, I have 4,500 shares times $2, this means that I would lose $9,000. Now you get the idea of why selling options is fairly risky, because I’m receiving $900, but if it only goes down by $2, I’m already losing $9,000. But what if it gets worse? What if LL drops to, let’s say, $15, right? Again, I have to buy LL at 22, so I would lose $22 minus $15, $7 per share. Since I have 4,500 shares, time $7, this is where I would lose $31,500. OK. So as you can see, it is super risky if you don’t know what you’re doing. Now, I have been doing this for a long time here, selling premium, and I’ve been doing really, really well. Analyzing Risk With RIDE Let talk about a particular trade that I made with RIDE . I sold the 21.50 put and RIDE dropped. I sold 47 contracts, 47 contracts, which means that I own 4,700 shares at a price of 21.50. RIDE right now (March 19th, 2021) is trading at $13.50. So right now, RIDE is at 13.50. So this means that I lose (21.50, minus 13.50) $8. So I’m losing $8 per share and I’m having 4,700 shares, bringing me down to a total of $37,600. Now, let’s talk about it. How much money did I make selling premium on RIDE? Just on RIDE here. I sold the puts initially, then I sold calls, I sold calls, and I just sold a few more puts. In total on RIDE, thus far, I collected $4,935 in premium, but I also have an unrealized loss of $37,600. So it’s super important that you understand that there is risk involved. Now I know my way out of this. I know how I can trade my way out of this if needed. So I collected $4,900, but right now I’m down that amount. However, this means that my net loss is if I would close it right now, which I’m not intending to do, would be $37,000 minus the $4,935, let’s just say $5,000 to make the math easy, is $32,600. That would be a real loss. This is why it’s super important that you understand the risks when you’re trading options. Safest Options Trading Strategy Now, one of the questions that I receive all the time is, “what is the safest options trading strategy?” The safest options trading strategy is covered calls, and here’s why. When you are trading covered calls, it means you own the stock, and now you are selling calls against it. So what does it mean when you are selling calls? When you are selling calls, it means you have to sell the stock at a certain price. Back to my example with RIDE I own 4,700 shares, and I own those at $21.50. So this is where if I sell calls at 22.50, so this means that I have to sell RIDE shares at $22.50. So how much money do I make? So I bought at $21.50, and I sell at $22.50, so this means that I’m making a dollar profit, $1 profit per share. And since I have 4,700 shares I would make $4,700 plus the premium I receive for selling the call. OK. So this is in addition, and therefore, covered calls are by far the safest options trading strategy. The only way how you can lose with this strategy is when the stock goes down. This is where you already own the stock, and therefore, if you want to sell calls against it, it is the safest option trading strategy, at least based on my experience and my opinion.
REducation
by rockwelltrading
1
Why 90 Percent Of Traders Lose MoneyYou might have heard this, “90% of traders lose 90% of their money in the first 90 days of trading.” This is known as the 90/90/90 rule. I don’t even know if this is true, but it seems that a lot of traders are losing money. So this is why today, we’re going to talk about what causes most traders to lose money. Then I’ll give you practical tips on how to avoid it so that you can be part of the few that actually make money with trading. What Do You Need To Become A Successful Trader? There are three things that you need to really become a successful trader. If you’re missing even one of these things, you already have a big problem. So let’s start, with the first thing you need. This is the most important thing that a trader needs and this is a trading strategy. Now, there are traders out there who are trading without a strategy, and the number one reason that I see traders fail is they don’t have a trading strategy. A trading strategy tells you what to trade, when to enter, and when to exit. So as you can see, a trading strategy doesn’t have to be super complicated, but you need to know what to trade. Here is what I see many traders doing since they don’t have a trading strategy. They are going for the flavor of the day, and the flavor of the day might be something that Jim Cramer is saying, something that Cathie Wood, the famous, or infamous hedge fund manager of Ark Investments is saying, or maybe something that they read in the news. This is the worst thing you can do. I’ve been talking a lot to traders, or not really traders, but people who are getting started in the market, and I ask them, “what are you trading right now?” They usually just name the most popular stocks that are being traded. These are stocks like TSLA , AAPL , AMZN , and NFLX . Then recently, as you know, with the GME hype, the GameStop hype, a lot came up there. But you see, if you’re not trading with a strategy, you are not a trader, you are a gambler. Now the second important piece that you need as a trader is that you need to have the right tools, and I can’t stress this enough. Here’s the deal, if you want to compete in what they call the game of games, if you want to really make it as a trader, you need to have professional tools. Think about it this way, if you only have a strategy without a tool, it’s like trying to win NASCAR riding on a lama, right? I mean, it doesn’t work this way. So it is super important that you have the right tools. You can’t win a car race on a lama or on a donkey, you get the idea, right? The third thing you need to be a successful trader is having the mindset. So you see, you can have the best strategy, you can have the best tools, but if you don’t have the right mindset, you will lose money. You see, in fact, I see it all over. Sometimes people think all they need is the right tool, and they will be successful traders. Or they think all they need is a trading strategy and they will be a successful trader, but that’s not the case. The reason why traders fail is not having the right mindset is because they let emotions get the best of them. The two main emotions that we have as traders are greed and fear. I mean, obviously, we are greedy. We want to make money this is why we get into this game of trading in the first place, at least that’s why I started trading. But then there’s also the fear, the fear of losing money, but you got to be able to control these emotions. We will talk about losses in a moment, but one of the challenges, because of greed, traders will often trade too often, meaning that they are overtrading. Have you ever been guilting overtrading? It happened to me at the beginning of my trading career. I remember when I was still a young trader and new to the whole trading game somebody told me, “if you want to make it as a trader, you have to take at least 100 trades a day.” This person was probably a broker because I tried this, and it is impossible. I traded on a one-minute chart, tried to make 100 trades a day, and I found it just didn’t work this way. Then there is revenge trading. Revenge trading is something that I did in the beginning because I thought, after I took a loss was the time for me to make back the money that I lost. Something important that you need to understand is that the market doesn’t owe you anything. Sometimes the markets give, and sometimes the markets take away. So this is why revenge trading is something that you need to avoid at all costs. The good news is in the long run, usually, the market likes to give, at least to those who are serious. You must understand that losses are part of our business as traders, and it is sometimes really easy to become overconfident. However, whenever you think that you have the markets figured out, is when the market is going to throw you a curveball. There will be always surprises and situations that you have never encountered. Some call these black swan events. Often what I see is that many traders who are new to trading simply focus on the wrong things. Most young or new traders focus mostly on the entry. They think if they can just time the entry, this is when they’ve figured it all out. Well news flash, money is made and lost when you exit a trade. So timing the exits is almost more important than timing the entries. Sometimes traders focus on just having a strategy with a high winning percentage, but this is another mistake. You don’t need a high winning percentage. In fact, you can make money with trading even if you’re wrong half of the time. The magic happens actually when all three things are coming together. So how can you do this? I want to share a little bit with you about what I am doing. Well, first of all, let’s talk about trading strategies. The Trading Strategies First of all, what you need to understand is that there is no “best” trading strategy. It amuses me actually when people argue with me about this. People will ask me what will you do if this or that happens. Well, you see this is where I’m not saying that you should trade my trading strategies. I show you what I personally do, and how I’m making enough money to trade for income to trade for a living, and let you make the decision if it’s right for you. I can’t tell you if my strategies are right for you or not, but I can tell you there is no “best” trading strategy. Either a trading strategy is making money or it doesn’t, right? So if a strategy is making someone money, I would never, ever criticize anybody who is making money with that strategy. Who am I to say you’re doing it wrong? When it comes to the strategies I use, sometimes people ask me, “why do you do it this way? Why don’t you do it the other way?” and I’ll be happy to explain to you why I do certain things. It’s always interesting to see that some people feel that I need to become a better trader, and I appreciate your concern for me, but I’m actually doing pretty good. A trading strategy must fit YOU. It must fit you in terms of capital requirements. There are some trading strategies that you can start with as little as $5,000. There are other trading strategies that require more money. So you need to make sure do you have enough money for this particular trading strategy. The other thing might be time requirements. Some trading strategies require you to sit in front of the computer all day long. Now, this is not for me. I personally like to watch the markets for 10 or 15 minutes before they open, and then for 30 minutes after they open. So personally my own trading is usually just 45 minutes in the morning. Now, fortunately, I don’t have a job, I have nothing else to do but watching the markets, this is why I do it. However, some of the trading strategies that I trade, actually don’t require you to watch the markets at all. So there are time requirements to consider, there are capital requirements to consider, but then also possible drawdowns you need to keep in mind. Without risk, there’s no return. No risk, no reward. See, if you don’t want to take any risks at all, and make sure that you never, ever lose any money, then you should put your money into a savings account. In a savings account your money will be safe, right? But it also earns only about a quarter percent right now. So if you want to make more money with trading, then you have to risk some money. So there’s a fine line regarding the risk and rewards ratio. So you need to be aware of the risk, and the more risks you’re willing to take, the higher the rewards will be. But keep this in mind when you’re looking at a trading strategy, there are a few things where it might make sense for you to trade the strategy or it might not make sense for you to trade the strategy. The PowerX Strategy There are two trading strategies that I like to trade, and the first strategy is the PowerX strategy. Now, for the PowerX strategy, there are a few criteria here according to whether or not it's the “best” strategy. So, first of all, the PowerX strategy is great for a trending market, and it doesn’t really matter if the market is trending up or down as long as it trends. It does not perform well in a sideways or in a choppy market. This is what we are having right now, and this is why right now I am not trading the PowerX strategy as much as I used to last year when we did have trending markets. Now, trading with the PowerX strategy requires a minimum of $5,000. So if you have five to $10,000, that’s actually perfect to get started with the strategy. If you have less than this, I don’t think that this strategy is for you. Honestly, I don’t know a trading strategy that you could trade with less than $5,000. This is where I’m not claiming that I have the best trading strategies. I have trading strategies that I personally have traded for many, many, many years that have stood the test of time and that are proven to make money, at least for me. Now the PowerX Strategy is perfect for growing a small account, and here is why. With the PowerX strategy, you can apply money management, and money management is the turbo boost in your account. It can help you to take your trading to the next level. Now in terms of time requirements, when we talk about this, it takes around 15 minutes per day and you can do this absolutely while the markets are closed. So if you have a demanding daytime job that doesn’t allow you to step away and look at the markets, then actually The PowerX strategy is perfect for you. Again, it does have some limitations so it doesn’t work all the time. So you need to know when to use this strategy. The Wheel Strategy The other trading strategy that I like to trade is The Wheel Strategy. So the Wheel Strategy is perfect for a market that going up, going sideways, even when it is choppy, or when the market is slightly going down. It is not good for a bear market where the market is going down. So you need to know when to apply what strategy. This is where, in the same way as you have multiple tools to fix the home, you need to have multiple trading strategies. So here, when you’re trading The Wheel Strategy, it is an options trading strategy only. Here specifically, you are selling premium. So this is where you could have a large drawdown, which is possible if you’re stuck in a position, as I am right now. I am stuck actually in two positions. So let me show you the two positions that I’m stuck in. One of them is AAPL , I bought it at 133. Right now, it is trading at 120, so I’m losing $13 per share that I own and I own 800 shares. So the question is, are we in a bear market? No, we are not in a bear market right now. Not at all. We are somewhat in correction territory, and correction territory is when a market is going from the top from the recent high to down more than 10%. That is how a correction is defined. According to the Nasdaq, we’re clearly in a choppy market. Since the beginning of the year, we have been grinding higher, coming back, going up, going sideways. In fact, year to date, the Nasdaq is down .37%. So pretty much haven’t moved since the beginning of the year, but we are not in a bear market. So you could have a large drawdown while you’re stuck in a position. Let’s talk about the other position that I’m in. The other position that I’m in is RIDE , and RIDE is not doing well at all. So I’m flying a rescue mission here right now. I bought RIDE at 21.50, and right now it is trading at half of what I bought it for. So obviously that’s not good at all, right? So what I need to do right now, is work my breakeven all the way down by actually doing dollar-cost averaging. Right now, I sold some more puts trying to bring down my cost basis from 21.50 to 18.70, then to 16. What I’m hoping for, and this is part of this strategy, is that I am getting a quick bounce. Now, absolute full disclaimer. What happened here with RIDE, to be honest, why I got into this is because I was getting greedy. This is where trust me, I’ve been trading now for more than 20 years, even after this, I love money. I saw a lot of premium on RIDE and I got blinded by the premium. This could be the one trade out of, I believe, now close to 150 trades where I have to take a loss. So it happens. Losses, as I said, losses are part of the business, and never let greed get into your way. So you could have a large drawdown. So here with this strategy, you need a minimum of, I would say, $10,000 in cash and you have to put it into a margin account so that you get $20,000 in buying power. If you’re trading an IRA, you need at least $20,000 in your IRA because in an IRA you don’t get any buying power. Time requirements for this strategy also require about 15 to 30 minutes per day. I think the best time to trade this strategy is during the open. So this means from 9:30 to 10 a.m. Eastern Time. If you have been following me for a while, then you know, I’m not standing here and telling you, “You have to trade this way. My trading strategies are the best.” I would never do it because they may, or may not fit your style, which is absolutely fine. The Best Trading Tool, The PowerX Optimizer However, if you choose to trade these trading strategies, this is where I believe that I have the best tool in the world for trading the strategies. I’m absolutely biased, but the tool that I have here is the PowerX Optimizer. Here is why I think that this is the absolute best tool for it because this software has been programmed for these two strategies specifically. Now, if you look at any other tools, for example, like TradingView, it is software with which you can do some backtesting and has a bunch of indicators built-in. So first of all, this software, I feel is very complex to learn because you have multiple functions. And it basically allows you to trade any trading strategy whether you use a moving average strategy, you can trade with it, or you’re using a MACD strategy, you can trade with it, or you’re using Bollinger bands, you can trade it with it. But you see, especially with the PowerX Optimizer, it has been designed to support the PowerX and the Wheel Strategies. This is where it shows you exactly the three things that you need to know when you have a strategy. It tells you exactly what to trade, it tells you exactly when to enter, and it tells you exactly when to exit. I’m using this tool every day, and I wouldn’t want to trade without it. I want to be absolutely honest. If you would take PowerX Optimizer away from me, even though I know these two trading strategies inside out, it would be super difficult to find the best stocks to trade. The other super important thing that PowerX Optimizer does is that it actually tells me what would have happened in the past if I had traded this particular stock group on here for example, according to the rules of the PowerX Strategy. This is important to me because it gives me more confidence. The trading report basically tells you if you had followed the rules of the PowerX Strategy, what would have happened over the past year if you had traded a stock. The summary it shows me actually the ROI, it shows me how many winning trades and losing trades I would have had, what is the winning percentage, the profit factor, the average win, and the average loss. This here is based on a $10,000 account. So see if you have a $10,000 account, and your average loss is $122, I mean you’ll be fine, right? You’re not wiping out your account. What is important to me in a tool? So first of all, what I want to have is a powerful scanner, because what the scanner does, a scanner tells me what to trade. Now, the second thing is I want to see what would have happened if I traded this stock with this strategy. This for me is super important. Then, of course, I want to get all the important data for trading. This means I want to know how many stocks or options should I trade, when to enter, and when to exit. So these are the important things. This is, of course, combined with what can I expect from this trade. It’s so important that I also see the risk and reward ratio. So here, for Groupon, I can expect to risk a dollar and trying to make $2.33. Now let me ask you, does this sound good? It sounds pretty good to me. With the PowerX Optimizer, I also have The Wheel Calculator and The Wheel Scanner. The Wheel Scanner shows me what are the best candidates for The Wheel right now. I’m actually super excited because we are about to release version 2.0 of The PowerX Optimizer. Within the software with the new update, we distinguish between the PowerX Strategy and The Wheel Strategy.
TVC:NDQEducation
by rockwelltrading
1
When To Take Profits on Options I’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. Options trading is really fascinating, and it’s a great way to make money, and I think it is very important to know when to take profits, especially if you like trading The Wheel as I do. So the question is, when should you take profits when trading options? How exactly do you figure this out, is there a formula for it? In this article, I’ll share some guidelines for how and when you should take profits on an option trade. We will answer the question of whether you should let options expire or take profits early. I will show you some very specific examples of two trades that I have going on right now (at the time of this writing on March 17th, 2021). One of them, I took profits today, and the other one I’m still holding on and I will show you exactly why. ]How To Calculate Profits On Options Firstly, let’s talk about how to calculate profits on options. In order to address this, there are two types of options traders. One type of options trader are ones that are buying options, and the other, which I feel is very lucrative, and this is what I’ve been doing for a long time, is selling options and collecting premium. I want to actually talk about selling options and receiving premium, because this is, as I said, what I’ve been focusing on recently with trading The Wheel Strategy. My year-to-date profits on this account so far are more than $54,000 selling premium on options, and I’ll show you exactly how to do this. So when selling options, you’re receiving premium, and for me, the most important metric here is the so-called premium per day or PPD. MARA Example The first example that I want to give you is my position with MARA. Looking over my transactions with MARA over the last 30 days. I sold puts at a strike price of 20, and for this, I received $0.28 in premium per option that I sold. Now options come in 100 packs, so this means that per option I made $28. Now, in this specific example, I sold 50 options total, so this means that I’m receiving a premium of $1,400. I put this trade on March 10th, and these options expired on 3/19. This is $1,400 in premium in 9 days. This comes to $155.55 in premium per day, or PPD. Now this includes weekends. My rule is I’m buying back the option when I can get 90% of the maximum profits, but there’s an exception to this rule. First, let me tell you what that means. So again, I sold each contract for $28, for $0.28. The idea is to buy back the option at $0.03, and this is exactly what I did today (March 17th). So we have another two days to expiration. So today, I bought back a total of 50 contracts at $0.03, and by doing so I made $0.25 in profits on MARA. Now, this is where again, we’re looking at 50 contracts, times $25, so this is $1,250. I was in this position for 7 days. So $1,250, divided by 7 days, means that I made $178.57 a day. Let’s just round to $179 per day. As you can see, $179 is more than the $155.55 that I planned per day. Now let’s think about it. If I would keep MARA right now, if I would keep this option until expiration, but what would happen? I would make an additional $150 in three days. This means that now my premium per day is only $50 per day. This doesn’t make sense to me because this here is actually bad, because my plan was to make $156 per day, and I was able to make $179 per day by buying the options back. If I would hold on to this trade and let it expires worthless. So this is where here, and let it expire worthless, right? This is what would happen. I would make an additional $150 in three days and the premium per day would only be $50. That does not make sense to me at all. This is why here in MARA, it made sense to buy back the put option because by doing so, it frees up buying power meaning that now I can sell more puts. So the idea here is that I’m selling more puts and making more money on the new puts than I would make holding on to MARA. DKS Example Let’s go over another example with a position I have right now with DKS . I sold the 66 strike on March 10th. I sold 15 of them and I received $75 in premium. 15 contracts times $75 comes to $1,125. So let’s do the math right now and see if it makes sense to close this trade today (March 17th) or if we should keep it, and we’re using very similar logic here. So we sold the 66 put expiring March 19th, and we received $75 per contract for it, $1,125 total. We then divide this by 9 days to get to our premium per day, which is $125. So right now, on March 17th, let’s see how much DKS is still worth. Right now, the bid/ask for DKS is $0. 05 over $0.10, and that’s really interesting because I want to buy it back at $0.07. Let’s say right now, if I would place an order right now, I could buy it back at $0.10. Should I do it? If I did this, I would make $75, minus $0.10 ($10 per contract), which is $65 per contract. For all 15 contracts, I would make $975. We find our PPD by dividing $975 by 7 days, which comes to $139. So if I really wanted to, and if I needed to free up some buying power, I could do this. But let’s see what happens if we hold this for a few more days. So if we hold DKS until expiration, we can make an additional $150. It might actually make sense to close it out because $150 over the next three days does not make a lot of sense. When I looked at the option earlier, DKS suddenly jumped from 78 to almost 79. This is a 10% jump in 30 to 45 minutes. When we opened this morning, first, we went down, and then we went a little bit up, and then we were hovering right around where we opened. Earlier this morning, the DKS put was trading at $0.25. So the question is earlier this morning, would it have made sense to close it? Earlier today on March 17th, I could have bought it back for $0.25. So that wouldn’t have made sense, right? Because then if I’m buying it back for $0.25, I would only make $0.50. So this here, $0.50, this is then $750 in seven days, and if we divide $750 by 7 days, this is $107 premium per day. As you can see, the $107 premium per day is less than what I expected. If I would hold DKS to expiration, we can make an additional $0.25, $25 times 15 contracts is $375. Now, if you take the $375 in 3 days, that would be $125 premium per day. So when I’m getting $125 premium per day, this is when it does not make sense to sell it just yet. Should You Take Profits Early? So this is the important thing because the question always is, do you take profits early, or hold until expiration? Well here’s my formula for this. So I want to give you a very specific formula that you can use if you want to. If the current realized premium is a premium per day, PPD, is larger than the planned PPD, this means close it out early. If the remaining premium per day is smaller than the planned premium per day, close it. Only if the current realized premium per day is smaller than the planned premium per day, in this case, hold it. If the remaining premium per day is larger than the planned PPD in this case, you want to hold it. Summary This is why today I wanted to show you my formula for when to take profits on options, especially when you are an options seller. You see, selling options and receiving premium is what we do with The Wheel Strategy, and the most important metric here is the premium per day (PPD). This where using the PPD, you can actually get down to a formula of when exactly you should buy or sell. This is where it’s just a good rule of thumb if you don’t want to do all these calculations. So the rule of thumb is I close a trade when I can realize 90% of the maximum profits.
NASDAQ:MARAEducation
by rockwelltrading
3
Why Most Traders Lose Money — Here Are The Top 3 ReasonsI’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. Anyone that has been around the markets and trading for any period of time has probably heard that most traders lose money. In fact, there’s actually an old trading adage that says: 90% of new traders will lose 90% of their account within 90 days. So after reading that, before you reach for your broker’s phone number to wire out all of your money… how about I let you in on a little secret: If you follow some simple rules and avoid these 3 mistakes, you can be in that minority of traders that actually make money consistently in the markets. And if you are currently making one or all of the mistakes, I’ll also show you exactly how to fix it. So let’s dive in! 1) Most Traders Enter A Trade Too Late The first thing on my top 3 reasons why traders lose money is: Most traders get into trades WAY too late! There are a lot of reasons this happens, but most commonly it’s because new traders are basically gambling. They’re buying stocks or options based on news, or a hot stock tip, which really isn’t what I would consider a strategy. So let me give you a great example with a company I’m sure you’ve heard of: Uber Technologies (Yes, enemy #1 for taxi drivers worldwide.) Last year UBER , known for its popular ride-sharing and food delivery services, IPO’d in May (2019). With the disruption this company caused, their IPO had a lot of hype surrounding it, bringing a lot of investors to the table. On the day of their IPO, UBER opened at $42/share and people poured into the stock. For a few weeks, the stock had a turbulent, roller coaster of a ride all the way to as high as $47.08/share, a little over a 13% increase since its IPO. And around this new high, more and more inexperienced retail traders piled in thinking that it would continue its bullish run with dollar signs in their eyes. The mainstream media was continuing to hype it and more and more and investors and traders gobbled up more of the stock. Looking at the image below, you’ll see after that high of $47 things got UGLY fast, with UBER falling day-after-day, week-after-week. It wasn’t until November of 2019, about 7 months after their IPO that UBER found a temporary bottom at $25.58, down more than 45% from its high of $47.08… and I would bet there were a LOT of people who bought near or at the highs and were still holding at that point. So what did retailer traders do when UBER made a bottom? Yes, once again most (losing) retail traders didn’t get in at, or even around the bottom… once again, they piled as UBER neared its previous highs. And as you’ll see yet again, UBER rolled over on its way to making another new all-time low this past March 2020 going all the way down to $13.71/share. That’s more than a 70% decrease from its ATH and yes, I’m sure some investors rode it all the way to the bottom. Now I want to share a second example with you, so let’s take a look at Amazon AMZN . So as you know, AMZN is a HOT STOCK and last year it has a crazy move where it crossed $2000/share…. and yes, just like our example with UBER , inexperienced retail traders piled in at the very top. Once again, in the weeks that followed, AMZN’s stock tanked leaving those who’d piled in dazed and confused, now holding onto sizable losses. So as you can see, the first of my top 3 reasons most traders are losing money is simply because they’re piling in way too late in a stock’s move, generally near a high. Now on to reason number 2: 2) Most Traders EXIT Too Late Yes, as you can imagine if people are getting in too late, well, they’re also typically getting out too late as well. So let’s talk about why this happens. Why do retail traders tend to hold onto trades way too long, either turning a small loss into a BIG loss or sometimes even more painful, turning a winner into a loser? Let’s take a look at another example with an UBER competitor, LYFT . Like UBER, LYFT also had its IPO in 2019, opening up at $87.24/share… but that didn’t last long. In less than two months, LYFT went as low as $47.17… and what do you think those who bought during the IPO are saying right about now: “Oh, I’m holding it because IT WILL TURN AROUND!” This is generally where I see traders get religious Instead of ‘taking their medicine’ and getting out when the trade moved against them, they held on and are now pleading and praying the stock will turn around. I hate to be the one to break it to you, but ‘hope’ is not a strategy… at least not one with a winning trading record. Now on to number three in our list of top reasons why most traders lose money: 3) They Don’t Have A Trading Strategy As you’ll see, I’ve saved the best for last as this one alone can help fix or eliminate the other two we just discussed. So first, let’s answer this question: What Is A Trading Strategy? Well, a trading strategy gives you three key pieces of information you need before ever entering a trade: 1) It tells you WHAT you are trading. Is it stocks, options, futures, cryptocurrencies? This is answered in your trading strategy. 2) It answers when you ENTER a trade. 3) It answers when you EXIT a trade and that’s exiting with a profit or loss. Now, let’s take a look at an example here using TSLA on how I make trading decisions. I like to look at three different indicators, that when in alignment, give me a clear signal to go long or short a stock or ETF. As you can see on the charts, back in December of last year (2019) my indicators gave us a long signal on TSLA at around $370/share. And the indicators told me we were good to go until around $850/share. All I had to do is let the indicators tell me when to get in and when to get out… no guessing, hoping or praying. Summary So as you can see, there’s actually no big secret to why most traders are losing money. It’s actually pretty simple to see and correct, but it takes a plan and a little bit of discipline. If you’re brand new and not sure where to get started, I’ve written The PowerX Strategy, a book that outlines my EXACT trading strategy for trading stocks and options.
TVC:NDQEducation
by rockwelltrading
1
How I’ve Improved Productivity in My Trading DayI’ve been trading for a long time, and over the years, I’ve learned different ways to make the most of my time. Today, I want to talk about three ways I boost productivity in my trading day: - Using my PowerX Optimizer to quickly scan for long and short trading ideas. - Using my Wheel Income Calculator to find attractive premium collecting ideas. - Having a trading plan and following that plan. In this article, I’m going to break down each one of these and explain what they are. I’ll also explain how they help me streamline my trading. This gives me more time to focus on other things I’m interested in, like my business and real estate. 3 Pillars To Trading I always say there are three pillars to trading: - You need to have a trading strategy. - You need to have the right tools. - You need to have the right mindset. For me, I trade two strategies: PowerX and the Options Wheel. And I developed my own software tools to help me trade these strategies quickly and efficiently. The PowerX Optimizer software shows me what I should trade, when I should enter, when I should exit based on my preferred criteria, and my Wheel Income Calculator tells me which option strike has the best risk/reward. If trading software doesn’t show me this, it’s not allowing me to make the best use of my time. Let’s take a closer look at these software programs, starting with the PowerX Optimizer. PowerX Optimizer With my PowerX strategy, I’m looking to buy calls on stocks trending higher or buy puts on stocks trending lower. The PowerX Optimizer is a software I programmed for myself, my head coach Mark, and my son. A few years ago, we made it available to everyone. This software answers the three questions I’m looking to have answered when I’m looking for stocks - What to trade. - When to enter. - When to exit. The PowerX Optimizer will answer all three of these questions for you. Now, I had the software programmed for myself because I wanted all my criteria in one place. With the PowerX Optimizer, I can scan for my basic criteria that I set within the software. For instance, I want to see a 60% return on investment over the past year, I also want to see stocks that are between $5 and $200, and I want a profit factor higher than 3 and a risk/reward higher than 2. This is the criteria I use for trading this strategy. Your criteria may be different. The scanner finds the best stocks and options for me based on my criteria. I certainly don’t want to just stumble across a stock or trade everyone on TV is talking about. Worst case scenario, if nothing meets my criteria, I simply move on. Every day this scanner produces a list of stocks that I potentially want to trade — in less time than it takes to make a cup of coffee! Talk about a time saver! In the beginning, I would just use charting software like TradingView, and I would go through a bunch of stocks every day to see if they met my criteria. It got to the point where I figured there had to be an easier way, which is why I had the PowerX Optimizer developed Instead of spending hours and hours sifting through charts and doing the math, I’m able to find a handful of stocks to look through every day in just minutes. This frees up my time to focus on other things. The Options Wheel Calculator With my Options Wheel strategy, the idea is to “get paid to wait until you buy the stock.” So I’m looking to sell a put and collect premium, and I want to pick a strike that coincides with the level I would feel comfortable buying the stock. Ultimately, I want to get assigned, and then I’ll look to potentially sell covered calls on the stock. The tool I use to identify stocks and options I want to trade with this strategy is the Wheel Income Calculator. The Wheel Calculator pulls up stocks and tells me the minimum option premium I need to collect to make this trade work for me, and the risk/reward setup for each strike. I have set aside $500,000 in buying power for this strategy. That’s what works for me. It does work with smaller accounts if that’s what you have to work with. That’s why I love these tools. They have made my life so much easier. I’m not just picking a trade based on a gut feeling. Instead, I’m trading with a systematic approach that’s based on data. Remember, I like to trade for SCR Profits. SRC stands for Systematic, Repeatable, and Consistent. Trading Plan And that leads me to the last thing I want to talk about today: having a trading plan. You see, having a trading plan is key to having the right mindset to trade. There are three key parts of a trading plan that I’ve already mentioned, but again, they are: - What you’re going to trade? - When you’re going to enter? - When you’re going to exit — both for a profit and a loss. This is also where those limit and stop-loss orders I mentioned earlier come in handy. Limit orders allow you to tell your broker the price you want to get filled, and if you get that price, you move on. Same with stop-loss orders. You tell your broker what point you want to get out of the trade, and if the stock hits that level, you’re out. This allows you to not be tied to your computer, watching every tick the stock makes and opens up your day to allow you to focus on other things. I cannot stress enough how important it is to be prepared when you’re trading — and to have a plan before you enter a position. So, as you can see, by defining my strategies, I developed tools like the PowerX Optimizer and Wheel Income Calculator to help me find trades quickly and efficiently that work with my rules and my plan. I hoped this helped and I’ll see you at the next one.
TVC:SPXEducation
by rockwelltrading
1
Trading With MarginI’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. Let’s talk about trading with margin. What is margin? Who should trade with it? Should YOU be trading with it? You see, when used correctly, margin can be your best friend, but when used incorrectly, it can be a disaster. Leverage is a double-edged sword, and it can work for you as well as against you. This is why I want to show you the responsible way to trade on margin. So let’s get. What IS Margin? So first off, what the heck is margin? Well, when opening a trading account, you can open a cash account or a margin account, but what is the difference between the two? With a cash account, if you put $10,000 into the cash account, it means that you have $10,000 in buying power, meaning that you can buy stocks and options for $10,000. Now, when you have a margin account, the difference is when you’re putting $10,000 in cash in there, the broker will actually lend you another $10,000. So in total, you’re getting $20,000 in buying power. How To Open A Margin Account This is how you open a margin account, with tastyworks because this is the broker that I personally use, & I have four active accounts with them. So when you go to tastyworks, it asks what kind of account do you want to open? Is it an individual account, an entity/trust, or a joint account? Then they will want to know what kind of account you want to open. Do you want to open a margin, cash, or retirement account? So with a cash and retirement account, this is where the broker does not lend you money. So whatever cash you have in there, this is what you have in buying power. However, when you use a margin account, you’re getting 2:1 buying power. Buying Power: Stock vs Options When it comes to buying power, there are two things that you need to know. First is there is buying power for options, and buying power for options is always non-leveraged. So if you put $10,000 in cash, even in a margin account, it means that you have $10,000 in buying power for options, and I’ll explain to you in a moment why that is. And then we also have buying power for stocks, and here this is where margin kicks in. So $10,000 in cash will give you $20,000 in buying power for buying stocks. There’s also something called portfolio margin, and we will talk about this in just a moment, but I first want to show you exactly what it means here to have the buying power for options and to have the buying power for stocks. How To Use Margin The Right Way So I want to give you here a very specific example for Apple AAPL , and we first want to look at what happens if you want to sell, while trading The Wheel. So let’s just say that you want to sell the 125 put for AAPL . What does that mean? It means that if you’re selling the put, you might be forced to buy AAPL at $125 a share, and for each put option that you’re selling, you would have to buy 100 shares of AAPL . So this means that you would have to bring $12,500 to the table per contract, right? Now here’s the deal. When you’re selling options, the broker is already giving you a discount. So let’s see how much the broker is charging us if we want to sell a 125 put for AAPL . So for AAPL I’m just choosing next week’s expiration because at this point the expiration and the price don’t matter right now, because all I want to show you is how much buying power is needed if I were to sell 1 put. So the buying power that will be reduced from your options is $2,202. So as you can see, if you are buying AAPL at 125, you would have to bring $12,500 to the table, but here the broker is only charging you $2,202. Now again, we want to assume a $10,000 account because this is what many people are starting with. So on a $10,000 account, theoretically, you could sell 4 of these options, and for this, if we are doing this, and edit our order to sell 4, we see that the broker will charge you $8,783. So on a $10,000 account, at first it seems that you have enough margin for this. Wrong! Don’t do that! So this is where we talk about the responsible way and the irresponsible way to do this. So when you do this, this would be irresponsible. So here is what I think you should do. Remember, on a $10,000 account, you’re actually getting $20,000 in buying power for buying stocks. So you have $20,000 for buying stocks, so if you are selling one option, and you would get assigned, then you would have to buy stocks for $12,500 and you still have $7,500 left, right? This is why you should only sell one option, even though your broker will only charge you $2,205 because if you’re assigned, you would have to bring $12,500 to the table. The good news is you have that because the broker gave you $20,000 in buying power. So this here is the right way to do this, and the right way means that you’re not over-leveraging yourself. How To Use Margin The Wrong Way So here’s what would have happened if you would have sold 4 options and got assigned. Well, in this case, you would have to bring to the table 4 times $12,500, so this is $50,000, but you only have $20,000 in buying power. So there’s a difference. So if you take the $50,000 minus the $20,000 that you have in buying power, you are $30,000 short, and these $30,000 become a so-called margin call, and these are the dreaded margin calls that you sometimes hear traders talk about. A margin call means that right now you have to wire the broker $30,000, which you probably don’t have, right? If you don’t do this, he will sell 300 of your shares. So you’re still technically fine if you have less than the $20,000. He probably sells a little bit less so because he wants to make sure that you are just overcoming this shortage. Portfolio Margin There's also portfolio margin. What the heck is the portfolio margin? Well, the portfolio margin is for bigger accounts, and when I say bigger accounts, it really depends on the broker. You see, some brokers request at least $100,000 in your account. Others request that you have at least $150,000 in your account, and even others request that you have $175,000 in your account. It really depends on your broker. Now, however, if you have the required minimum in the account, you can apply for portfolio margin. Why would someone be interested in doing this? Well, portfolio margin basically means, & again, it depends on the broker, that you are getting a 5:1 or a 6:1 leverage. It means that if you have let’s say $200,000 in cash in an account, it becomes a million dollars in buying power, or depending on the broker, it could even become $1,250,000 in buying power. So now you have a lot of buying power, and again, you have to use this responsibly. Just because the broker is giving it to you, you shouldn’t use all this. So the same principles for me personally, apply like if I were using a 2:1 margin account. I personally use this “excess buying power” when things go wrong when I need to save a trade that is in trouble. So this is when I have to fly a rescue mission. Summary Well, first of all, it is super important that you understand what margin is, what buying power is, and then that you also understand that your broker is only charging you a small amount when you are selling options. Don’t overleverage yourself, because when you do this you’re getting the dreaded margin call, and when you are getting the dreaded margin call you have to either wire money into the account, and this pretty much right away, the broker usually gives you 24 hours. Some brokers might be generous and give you 48 hours, but usually, it is within 24 hours. If you don’t wire the shortage to your broker, he will sell your shares until the margin requirement is met. So you lose full control and you don’t want to do this. Anyhow, I hope this has been helpful.
TVC:NDQEducation
by rockwelltrading