RSI Trendline Trader

One of the traders I followed a lot and studied has been Alex du Ploy from Australia. His EAs have helped me in my own trading and his trading technique has made the most sense to me. He also has a colleague Barry Thornton who has graciously shared his techniques with Alex and he has provided them as a course when you purchase some of his EAs.

Barry has made millions using this technique and is living on an island somewhere enjoying his success. This technique of his is very simple and gives just enough of an edge in the market that if you trade it consistently you will have success, he’s proof.  

This EA automates the trading process created by Barry and makes it so you don’t have to be in front of the computer all day waiting for the setup. Now of course no EA is a set and forget EA. what you need to identify is the market phase that you are in (trending, ranging) before you turn on the EA and then have the settings for that type of market saved as a set file that you can load into the EA and use for that market. I personally create 3 set files (up trend, down trend, and ranging market) for each currency that I trade.I use the 4 hour timeframe to determine the market phase and then turn the EA on using that set file. I’ll even go so far as to have only buy orders allowed for up trending markets and only sell orders allowed for down trending markets.

Here is the link to the RSI Trendline Trader EA

https://expert4x.idevaffiliate.com/idevaffiliate.php?id=228&feed=12

 

 

Back Again

 

I’ve been away from posting for a while because I needed to update my strategies and I switched my focus to forex and crypto trading.

I’ll be posting more material that will show some of the strategies that I feel work best for me and my style of trading and I’ll be also providing links to some useful trading tools that have helped me become successful.

New York HS Student Allegedly Made $72 million From Trading

The recent article about the Stuyvesant High School Student Mohammed Islam making $72 million is now under question but he still supposedly made a few million trading on the stock market.  

The reporter stated that she saw his account statements but didn't verify that all the money was from trading.  Either way the story of a high school student trading on his lunch break and netting millions is an inspiration to many who have dreams of being a successful trader.

I am the first person to champion the benefits of trading but I also want people to be safe and not lose their life savings.  I do believe that it is possible to build wealth in the markets and that if you plan and strategize effectively you will be successful.  

Here's the article:

NY Post Article

*Update: This story has since been debunked 12-16-14

Current Market Conditions

There seems to be a bias to the downside in the current market because of the bottoming oil price fear mongers.  I personally (and apparently many others) think low oil prices are a good thing because the general consumer has more money to spend.  Many pundits on the other hand think failing oil companies will cause loan defaults that will bring down the banks and that will somehow reach other markets.  

I don't think low oil prices are going to be a problem but the market has it's own reason for moving which may or may not coincide with my belief.  Because my current strategy is bullish I am going to proceed with caution and look to time my trades after pullbacks.

Yahoo and Alibaba are Climbing Higher

Alibaba and Yahoo have been steadily crankin' these past few weeks even when the rest of the market has been chopping up.  I've been trying my new strategy on YHOO options and have been doing well.  I also picked up some BABA too.  Technically they are both on a trend and the "trend is your friend." Fundamentally they both are sound companies and trading at low multiples,Yahoo especially. The P/E for the technology software service industry is 20-60 and YHOO is at a bargain rate of around 6.  With all that new 6-8 billion in cash from selling some BABA IPO shares, that is a serious discount. 

Bull Put Spread and Cash Secured Put Strategy

Sorry I’ve been a little absent but I wanted to refine my new option strategy before I shared it. I made a couple of trades that went south on me and I didn’t want to share a strategy that didn’t work.

After some losses and then some wins after doing some tweaking I feel that this strategy is something that will have a high success rate.

As I started my strategy I originally only wanted to trade ETF’s because of their improbability of going under.  However I feel that you can successfully trade this strategy on reputable stocks that are trading at a discount.  

Here’s the strategy in a nutshell:

• Decide what you are willing to risk and then divide that by 100 for the 100 shares you may have to buy for on options contract. 
• That will give you the price of the underlying stock you are going to scan for.  So for instance if I am only willing to risk $4,000 then I need to look for stocks that trade around $40 a share.
• I only look for reputable companies or ETF’s and that’s about the lowest price range you will find.  A good range to trade at is around $60-$100 a share.
• For this cash-secured put strategy you need to have the money to buy 100 shares of the stock just in case you get assigned.  Our goal is to not get assigned but in case you need to save a trade that went bad you have another option of selling a call to make back some money.
• Make sure the stock is on an uptrend – the trend is your friend.
• Check the weekly options chain and look for a Bid price on the Put side of at least .60 (it can be .50)
• There should be less than a .30 difference between the Bid and Ask price.
• The strike price should be at least 2 strikes out of the money.
• Check probabilities to make sure that the probability of the option being in the money is less than 30% and the probability of it touching that price is less than 50%
• You want to execute your trade between Monday and Thursday before the next week’s option expiration to get the most premium and to take advantage of the accelerated time decay.
• Sell the put close to .60 and buy the closest put that costs .05 or less.  This is for insurance in case the trade moves against you but you don’t want to pay too much for insurance.  It makes this a bull put spread.
• Set your alerts on your trading software to notify you of 10% moves of the stock either way.  This way you can go about your day and not have to watch the stock until the end of the day. 
• If the stock starts moving against you, get out of the trade and find another stock.  But don't be too scared if the stock moves down to a technical line of support, let the trade play out especially if it's in an up trend.
• If the stock price moves in your favor be patient and wait for the next week Wednesday or Thursday before expiration and then close your positions to get as much profit as possible.

Win in Any Market … Play the Opposite Side

I know a lot of people have been hit with the market sell off over the past week or so.  I started my options strategy at this time and got hammered on a bio tech stock that had bad results on a failed trial.  This got me focused on really tightening up my strategy to make it work with a higher percentage of success.

At my level of trading I’m looking at ETFs that trade around $40 a share that preferably have weekly options with a high premium.  I am trying to sell puts for the premium on Thursday and use the time decay to make my buy back price lower thus netting me a profit.

With the whole market on a downward tailspin right now the only ETF that fits this criteria is VXX.  The VXX is an ETF that follows the volatility of the market and it moves in contrary motion to the S&P 500. 

I got into a position on Monday and closed today making a decent profit.  I just got into another position and hopefully with all of this volatility I can get out today with another profit. 

My New Volatility Strategy

So for the next few months I am going to focus on a volatility index, specifically VIXY which is an ETF that is supposed to follow the VIX.  If you look at the yearly chart it is moving like the VIX but it is also going down.  

Since its creation several years ago, VIXY has plummeted to around 27 points when it originally opened around 400 points.  There is definitely upside potential to this ETF and since I bought it in the middle of the day I am already up a few 10ths of a point.  

My observation is most every time the market goes up the VIX goes down and most every time the market goes down the VIX is up.  I am buying at a very low point now so as the market goes down I will wait till I make my profit target then sell.

This is a contrarian play and is basically a hedge against the market.  I am strictly playing the stock this way to make short term money.  I want to see how well I can time my entries and exits for the most profit.  Wish me luck and join me if you would like.  Let me know your results in the comment section below.

Thoughts on Day Trading

I day traded for about 6 months last year and it definitely is a full time job, you have to analyze charts, moving averages and pick your strategies but you can make some good returns if you focus. I used to listen to Daytrading Rock Star (I still do off and on) and his radio show is cool during the day to help you feel connected to other guys that are trading. You can make money off of $500-$2,000 it depends on your methods. If you trade options you get more bang for your buck but I suggest starting out with simple bid/ask trades before going into greeks and option jargon. I made some good trades and then some bad ones and in the end for me at this moment I don't have the time to follow things like I should so I focus on dividend stocks to get a steady return.

Great simplified approach to trading

I know I mentioned this guy's trading technique before but I want to post another one of his more recent videos that describe in more detail his trading style.  He has also developed a software service that gives his daily setups.

OPTION TRADER makes $105MM PROFIT

This lady has uncanny skills in picking option trades.  Her basic approach is not too complex at all.  She started out just shorting stocks as they go up, making money on the corrections.  Seems like a very successful and efficient way of trading, no iron condors, butterfly spreads, etc. just a basic wait and pounce approach.

This approach actually makes a lot of sense.  You can almost always guarantee that any stock will go down at some point in time over a two month period.  There is enough drama happening to make all stocks sink down at some point during any given week.  So by placing a put on a volatile stock when it rockets up you can almost guarantee some sort of profit during a two month window.  All the successful traders I've researched recommend a two month window for options trades.  I tend to agree unless you are strictly trying to gamble as in the case of binary or weekly options.  No one knows what's going to happen in the short term but you can almost guarantee the market will go in either direction in the long term.  She's just playing the downside.

Day Trading and Taxes

Great information on how to deal with taxes and day trading.  The wife of Mr. Day Trader Rock Star is a CPA and she gives some great advice and answers some questions on taxes and day trading.  Some of the key things that traders deal with are the "wash sale" rule, what software to use, and mark to market filing with the IRS.

Her blog is: http://daytradertaxes.blogspot.com/

Stochastic Price Divergence

Here's a great video from Day Trading Rock Star talking about stochastic price divergence set ups.

Always Remember to Take Profits

Today was a good reminder to always take profits. Even when you are up a modest profit you never know what’s around the corner.  There’s also the psychological affect that knowing you made a profitable trade has on you.  When you see a lot of green on your balance sheet it looks better to you psychologically then looking at a bunch of red or even worse, nothing on the balance sheet.  This whole game is psychological.  The market responds to people’s emotions around any given stock and what they think might happen to the company.  The key is to know yourself and be able to talk yourself up when there are down days and talk yourself back when there are good days.  Having a lot of green on the balance sheet helps you to have confidence in yourself as a trader and know that you can be successful.  Nothing breeds success like success.