Today I took Advanced Technicals with Investools or the second time. It never ceases to amaize me that I learn something new each time I take a new investment class.
The tip I learned today is on how to calculate where to chose your strike prices on your legs of your iron condors. What Mike Follett taught us today is you look at the premium value of the at the money straddle, This is where the market makers see the market possibly move in either direction. To also see this possible range pull up a 5 year chart(I use think or swim's charts) and on a monthly time frame. Apply the average daily range study on your chart and you will see what the average daily range is for the month and how far you can expect a possible move in either direction of the underlying equity. Use this range to pick strike prices on the call side and on the put side.
For example: the SPY today was valued at about 87 dollars. Checking on tos charts the stradle was valued at over $13.00 looking at the average daily range on the monthly time frame on a 5 year chart the range was about 14 points. so taking 14 points as your possible expected move over the next month you would chose to short the 73 january put (you want 20-50 days until expiration) and you would buy the 71 january put for a credit of .35. On the call side, you would sell the january 101 call and buy the 103 january call for an aditional credit of .35. You'd bring in a total of .70 in credit with a risk of 1.30 for the trade.
Now this example is not a recomendation and is just an illistrative example to share a trading concept. I am not a licenced broker.
On another note I found out that my think or swim has a blog called the daily swim which I've provided a link to in my link section.
Tomorrow is the second day of the advanced technicals class, I'll post again if I learn anything new.
Wednesday, December 3, 2008
Friday, November 7, 2008
Cappy’s Zone trade
Cappy’s Zone trade lesson given on 7/25/2008
A zone trade is a scalping trade. For this type of trade you should go with the trend. The reason Cappy gives for going with the trend is that your success rate is higher. So its not in your best interest to go short in a positive market, and to always try when scalping to go with the trend. If you do decide to take a contra trade, Cappy recommended that you be really cautious, go only on major supports and resistances for example the midline and s1 or r1 depending on the direction of the market, and don’t be in the trade long.
The zone is a range with xxxx.50 being the mid zone with ¾ point above xxxx.25 being the upper zone and ¾ point below xxxx.75 being the lower zone.
For example a zone trade with the trend, Cappy got in long at the lower zone at 1261.00 then again at 1260.75 for a two point scalp. The concept of the zone is that the trade will stay in the zone and travel up to the upper side of the zone filling your target. Should the trade break the zone and go to 1260.50 as it does in the example, you would want to look at getting out of your trade with as little loss as possible.
Mchugh created a 3x5 index card that explains the in my opinion is in the most simplified manner that it could be explained:
ZONE ENTRY / EXITS
####1.50 move short stop to exit
Long Profit Point ####1.25 Still in zone
Long Profit Point ####1.00 Short Entry
Long Profit Point #### .75 Short Entry
####.50
Long Entry ####.25 Short Profit Point
Long entry ####.00 Short Profit Point
Long Still in Zone ####.75 Short Profit Point
Move Long Stop to exit ####.50
Cappy did a zone trade against the trend. He shorted at 1258.75 just one tick above the mid zone for a two tick target. If the market had moved to 1259.50 he would have looked to get out of the trade.
Important points Cappy made, not necessarily tied with the lesson, were,
• Only make trades on the 1 minute chart depending on what the 5 & 10 minute charts are going. Pay attention to the guerilla of the market. Which way is the market moving? Don’t forget the old tired adage that the trend is your friend.
• When reading the tape (the bid/ask on the ladder), large numbers on the bid side push the markets up, large numbers on the ask side push the markets down.
• Cappy recommended the book “Pit Bull” by Marty Schwartz
• 8 & 21 minute moving averages are good to make plays off hits on.
• Its best to have targets within the zone for the best chances of success
• Enter at whole number
• This is a good method for cutting losses
• The range always starts at xxxx.75 and ends at xxxx.25 and are 1 ½ point ranges.
Authors:
Jessica Quick 7/26/2008
A zone trade is a scalping trade. For this type of trade you should go with the trend. The reason Cappy gives for going with the trend is that your success rate is higher. So its not in your best interest to go short in a positive market, and to always try when scalping to go with the trend. If you do decide to take a contra trade, Cappy recommended that you be really cautious, go only on major supports and resistances for example the midline and s1 or r1 depending on the direction of the market, and don’t be in the trade long.
The zone is a range with xxxx.50 being the mid zone with ¾ point above xxxx.25 being the upper zone and ¾ point below xxxx.75 being the lower zone.
For example a zone trade with the trend, Cappy got in long at the lower zone at 1261.00 then again at 1260.75 for a two point scalp. The concept of the zone is that the trade will stay in the zone and travel up to the upper side of the zone filling your target. Should the trade break the zone and go to 1260.50 as it does in the example, you would want to look at getting out of your trade with as little loss as possible.
Mchugh created a 3x5 index card that explains the in my opinion is in the most simplified manner that it could be explained:
ZONE ENTRY / EXITS
####1.50 move short stop to exit
Long Profit Point ####1.25 Still in zone
Long Profit Point ####1.00 Short Entry
Long Profit Point #### .75 Short Entry
####.50
Long Entry ####.25 Short Profit Point
Long entry ####.00 Short Profit Point
Long Still in Zone ####.75 Short Profit Point
Move Long Stop to exit ####.50
Cappy did a zone trade against the trend. He shorted at 1258.75 just one tick above the mid zone for a two tick target. If the market had moved to 1259.50 he would have looked to get out of the trade.
Important points Cappy made, not necessarily tied with the lesson, were,
• Only make trades on the 1 minute chart depending on what the 5 & 10 minute charts are going. Pay attention to the guerilla of the market. Which way is the market moving? Don’t forget the old tired adage that the trend is your friend.
• When reading the tape (the bid/ask on the ladder), large numbers on the bid side push the markets up, large numbers on the ask side push the markets down.
• Cappy recommended the book “Pit Bull” by Marty Schwartz
• 8 & 21 minute moving averages are good to make plays off hits on.
• Its best to have targets within the zone for the best chances of success
• Enter at whole number
• This is a good method for cutting losses
• The range always starts at xxxx.75 and ends at xxxx.25 and are 1 ½ point ranges.
Authors:
Jessica Quick 7/26/2008
the bollinger band play as taught by cappy rossen
Notes on Cappy's Bollinger Band Plays (June 19, 2008)
-Use on 10 minute chart
-on bullish days go long when the candle hits the bottom bollinger band
-on bearish days go short when the candle hit the upper bollinger band
-Cappy doesn't recommend going trading both directions he hasn't had good luck with that in his experience
-80% of trading days you can use bollinger band plays (yesterday wasn't one of them) -Cappy is rarely wrong on these plays and has a 90-95% success rate on these types of trades
-The trend could change at the mid line so watch for that
-For these types of plays use group B or C on infinity
Cappy also said the book written by Bollinger is long and deeply technical.
Other tips he mentioned was that 7.50 is a major resistance/support and 2.50 is a minor resistance/support
-Use on 10 minute chart
-on bullish days go long when the candle hits the bottom bollinger band
-on bearish days go short when the candle hit the upper bollinger band
-Cappy doesn't recommend going trading both directions he hasn't had good luck with that in his experience
-80% of trading days you can use bollinger band plays (yesterday wasn't one of them) -Cappy is rarely wrong on these plays and has a 90-95% success rate on these types of trades
-The trend could change at the mid line so watch for that
-For these types of plays use group B or C on infinity
Cappy also said the book written by Bollinger is long and deeply technical.
Other tips he mentioned was that 7.50 is a major resistance/support and 2.50 is a minor resistance/support
The beginning of my trading blog...
It seems the yahoo group I began for the futures trading chat room @ incomtrader.com is beginning to look extinct... the activity levels have dropped 99%. I think that I'm one of the few that ever post there... So I thought I would start this blog to archive some of the tips I've written there and the tips that others have shared as well.
So thus begins my trading blog.
So thus begins my trading blog.
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