So starting out I simply want to give an overview of my strategy and I will start posting my trading plan and charts Monday. Feel free to leave comments, critiques, suggestions, or advise. I still feel extremely new to the trading world so any observations from people who have been doing this for longer than me is welcome. First things first I use Robin Hood as my trading platform and think or swim for all my charts and analysis. I currently only trade spy options, but I do analysis of different stocks and indexes when asked for my opinion on those. I do my best to stay as unbiased as possible when writing a trading plan. I hope this helps others as well as helps me. This journal is a secondary back-up to my written one I also post the same information on the stocktwits app. Starting out my trade rules. 1. Trade trends in the direction they are moving. 2. Hard stop at 2% loss per position on day trades. 3. Only trade good setups that you are 75% certain you know the outcome of. 4. Take notes during the trade day. 5. Do not chase,(sheep chase) make a plan and stick to it. 6. If you hit max loss on a trade you may not trade for 1 week(5 days). 7. Absolutely no trades when emotional. 8. Do not trade tips. Do not give tips. Trade facts and your system. 9. For Swing trades, decide on how much loss you are willing to take and accept it. 10. Always trade according to your trading plan do not deviate. 11. If you take major gains after closing your position on your account wait 2-3 days before taking a new position. 12. If the share price(sp) reaches your max exit range according to your trading plan(TP) liquidate your entire position. Trading plan development 1. Is the trend bullish or bearish? 2. Is the market bullish or bearish? 3. Has a pattern formed since the last pattern? 4. What is the current pattern? 5. What are the LOS and LOR in relation to share price? 6. Is dmi showing bullish or bearish signals? 7. Is macd showing bullish or bearish signals? 8. Is momentum growing or receding to zero plane? 9. Is the mesa sine wave showing buy or sell signals? 10. What is the range for entry? 11. What is the range for exit?(gains and loss) Next post will define my observations of the 4 main indicators I use.
The following are my observations of the indicators and what I believe they mean. Please do your own DD before using these observations they work well with my system and I have spent 6 years watching these and learning how they behave. This is not meant to be used as a tip for trading. DMI: observations. When adx is running below DI+/- be prepared for a significant move. If DI+ is below DI- the share price should be preparing for a bullish run. If the DI- is below the DI+ the share price should be preparing for a bearish run. However, this is only the case if A) the adx crosses above the DI+ on a bearish run or the adx crosses above the DI- on a bullish run. And B) there is a substantial increase to volume between the crossing of the DI+ and DI- and the secondary crossing of the adx and the lower DI. Macd: observation. When value is greater than average watch for bullish intent. When average is greater than value watch for bearish intent. When bullish value and average move above the zero line. When bearish value and average move below the zero line. Momentum: observations. When bullish momentum moves + of zero line. When bearish momentum moves - of zero line. When momentum turns from its current direction sentiment is dying off and direction could change. MesaSine wave: observations. When sine is above lead and moving above zero line sentiment is bullish. When sine is below lead and moving above zero line sentiment is bearish.
Monday, Feb. 10,2020 SP looks to have broken down from the previous bullish trend channel. And established a small bearish trend channel. Expected sp movement should continue along the bearish trend channel until the upper slope has been broken. Slopes downward from apx 332.45ish as the top slope and 330.5ish as the bottom slope. Expected rise should be to the bottom of the previous bullish trend channel slope @ apx 335ish. (This is continuing from the previous established megaphone pattern during last weeks bearish trend.) If the so does in fact rise back to the 335.15ath as expected. Probable significant further movement up to 350ish could be expected. If so does not continue higher and falls or breaks the 330ish support. Expected drop could fall to 325ish possibly 320ish and the megaphone pattern will have failed/broken.
Mondays charts. Note: from Daily charts Dmi: adx falling but has not dropped below both D+/- currently in between the 2. Viewed as consolidation. Macd avg/Val both above zero line w/ val>avg. Viewed as Bullish in the short term.
So I jumped in with some 3-335 calls exp.2/14. Holding with high expectations.added 3 more calls same as above. End of day sold half the position for $450 with expected rise over night I left 3 calls in to maintain my position. Hopefully I can add some more tomorrow but if not I shoupd have a decent profit. I feel I traded well today.
Sp looks to be continuing with another bull flag this morning in continuation from yesterdays run. The 6 point move from yesterday should result in a 5-6 point move either today or tomorrow. The bearish channel that makes up the bull flag has a top slope decreasing at around 335.78ish and a bottom slope decreasing at around 335.07ish the greater bullish trend channel has a lower rise at apx 333.35 ish and an upper rise at apx. 339ish. Today's expected sp movement should be similar to yesterdays movement. The sp should trade down along the bearish trend until a top side break out occurs. So should run to new highs expected 339-350ish. If so breaks down the probability that the market will begin to run flat within a range of apx 334ish-336ish is high.
Note: all analysis are done on Ticker#SPY Sp currently trading a cup and handle pattern in the premarket. Sp is following along the bullish trend's lower rise@ apx 335.18ish trading in a bullish flag w/ a range of 337ish-334.9ish. Expected movement(EM) of sp should break out from the top of the range and continue higher to apx 339-340ish. If sp breaks down through the bullish trend EM is below 334ish w/ a pull back up to 334.9ish then a further drop below 334ish.
I found an interesting observation today with one of my indicators. I am marking it as a theory to be tested and documented. DMI indicator Observation: If adx, di+, and DI- are all traveling equally down and below the zero line after a crossing of the di+& di- be on the look out for a possible trap. Bullish or bearish no defining which trap will be observed based on the indicator.
Sp looks to have broken down from the bullish trend channel. Expected em is for sp to drop to 323ish support pull back to 334ish resistance and then .... Aparantly this didn't post this morning so I will add in my secondary analysis from mid day. It looks as though a megaphone pattern formed and I expect the sp to bounce between the rise and slope of that pattern until one or the other breaks. And then we will go higher or lower based on which side breaks first.
The sp is trading along a slight bearish trend. Estimated movement(EM) to trade flat along the 338ish-335.5 ish support resistance. Waiting for the sp to reach the support from the rise of the megaphone pattern before moving bullish. Alternative support could break and a drop to 323ish is possible for the start of a h&s pattern to begin taking shape.
Sp is trading channel bound and flat w/2 significant ranges. First (minor) 337.7-335.5ish. Second (major) 338.3-335ish. em sp to bounce in between the minor range and will break the major range. A bull side break could run to 340-345. Abearside break could fall to 332-330.
(Asked for a TA on tesla so posting it here) Tesla looks like it could run up to apx 1100 Or 1200 if it breaks the ath resistance. I expect it to run up there and at least attempt it but if it fails to break through I expect the price to fall back down to the lower rise on the bullish channel @ apx 746.19ish and rising.
(Asked for a TA on O so here it is) The sp broke below the bullish trend channel and is currently retesting the ath. Watching for sp to reject or break up. Rejection could cause sp to fall to around 76ish over 1 or 2 weeks a continued rise in sp could bring the price to around 84ish if it can break 81 resistance.
So lessons given to you by the market are expensive. The lesson I learned today is one that I should have already learned, but I guess I am hard headed. When trading be aware that sometimes you are wrong. If you open a position and the market does not do what you expect that it should do close the trade. As soon as you suspect a problem with the trade or the trading plan itself close the trade. It is better to Sit on the sidelines and watch rather than to attempt to fix the mistake by taking another trade, or doubling your position, or averaging down. You will find that the chances are pretty good that your first mistake will be compounded by the second mistake of trying to fix the first. By sitting on the sidelines you may find that yes you were right and would have made money or you may find you were wrong and the end result would have been a knock against your account. Weighing the risk vs reward is difficult in the moment and in hind sight one can easily see what the right decision was. Takeaways from this lesson: 1) stop loss is your friend. Always set a stop loss at your acceptable loss for the trade. 2) when writing a trade plan only plan one trade at a time.(this may not be effective for moderate traders. This rule should be considered for begginer or novice traders.) 3) plan your trades in detail so there is no room for misinterpretation of what you expect will happen.
Sp is trading a bear flag pattern currently w/11 point flag. The break of 322.4ish support should trigger a drop of sp to apx 315-314ish Watching for (a) break of 322.4 or (b) break of the bearish trend channel 324.5 and declining. Tp : 1 put contract @324.6-323 1 week out if possible Friday as the earliest. Second put contract @ 323-322 3rd put contract @322-321.5 Ptr: 315-316 ( today only lacking day trades holding contracts overnight if PTr is reached purchase call contracts to hedge puts and hold. Some profits overnight)
Ok so I want to drop an update for today's trades and how they went. I followed the trading plan as I expected. Minus 1 contract that o decided not to take due to the volatility of the market making the contract far too expensive for my tastes. I watched as the market followed my prediction line extremely well. And then I hit a point were the sp exceeded my expectations. I still held strong because I realized I didnt have a choice. I coyld take profits and be marked as a daytrade and locked out of taking trades for the next 90 days or I could wait and see what happened. I decided to wait theorizing that if the sp looked like it might bounce or pull back from the trend I would take call options to cover my put options and protect most or at least some of my profit. ( I have no idea if this will work it is a working theory) the sp fell to 312 and started backing off making me nervous. As this was beyond my marker for the support. I went ahead and purchased 2 call options total cost was $200 after making apx $1000 paper profits on my put options. I assess that if I am able to close all contracts tomorrow at more than half my paper profits I will be satisfied and prepare for my next trade which probably wont be until next week.
Currently sp is trading within a support range apx 309-315ish. Sp is in a bearish trend that may or may not break down below the bullish market trend lower rise @ apx. 316.3ish and rising. The fact that the sp is currently tradong below that price point does not mean that the bullish trend has been broken yet, but we are in a critical point and caution is advised for all trades. Practice diligent risk management and set quick stops. Em imo is that the sp will (a) trade flat for a time within the range of 315-309ish until the so touches the upper slope of the bearish trend channel. At apx 318ish and declining. (All price points are marked at the current trading prices as I am writing this) I expect the sp to remain below the bullish trend channel resistance of the lower rise at apx 316ish and rising. After the so touches the bearish trend channel upper slope I expect a further drop down to 300ish. (B) trade flat along the upper part of the 309-315ish range before breaking oit of the bearish trend channel to climb to pax 326.17ish resistance and then stall in a range of 326.17-320ish to create a reverse h&s pattern.
