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What to Trade?
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What to Trade?

  #1 (permalink)
Trading Apprentice
Interlochen, MI
 
Futures Experience: Intermediate
Platform: FreeStockCharts
Favorite Futures: options
 
Posts: 2 since Jan 2015
Thanks: 10 given, 1 received

What to Trade?

Hi,
I'm Gary. I've been trading stock options for a few years, have tried and not done well with most online services, and am now becoming a day trader. I may retire this year and be able to devote myself to it more.

I like day trading because I find that chart directions are easiest to predict in the short term, and I've had bad results exposing myself to adverse overnight events, and also suffered from the time decay of options.

My approach is to trade Deep-In-The-Money weeklies with a high delta. Trade may last five minutes to a couple hours. I started trading high average-true-range stocks (a basket of about a dozen), but have gravitated to trading options on SPY, QQQ and IWM. The main reasons are that it is easier to monitor a few ETFs than it is a basket of stocks, plus the bid/ask spread tends to be smaller. I am still working to get better, so I haven't settled on a specific trade size. I usually do between ten and twenty contracts. So a ten cent move on the option nets me a $100 or $200 gross profit. I usually do best in the morning, often trading an opening gap the opposite direction. Timing of entry is usually based on resistance or support levels, but I also look at Bollinger Bands, long candles and tails MACD and stocho.

I like using FreeStockCharts, and my broker is Fidelity, where I have negotiated a 60% discount with a $6.95 minimum.

My win rate is pretty good. About 80%.

My biggest problem is that my losers are bigger than my winners. I go into a trade intending to be disciplined with stops, but it happens sometimes that by the time I enter the order and check my position, I am already down more than I want to be. So I end up hoping for a rebound. Often it comes, but not always. I usually do get the direction right, but not always the timing. I think I get into trades too early, before the reversal has really shown itself. So I am trying to work on that by being more mindful of support levels.

I'm wondering if I should trade smaller, allowing for more wiggle room. Or trade tighter, taking losses and profits more quickly.

My goal is to do one or two trades a day for extra income of a couple hundred dollars. I need to tighten up in order to keep my losses smaller. Easier said than done.

NOW MY QUESTIONS:
1. I don't know very many people that do what I am doing, and I can't really find any mentoring services that focus on refining such short term trades of ETF options. I'm not looking for a signal service of hands-holding. But I imagine there are people ahead of me on the learning curve and I would like to benefit from their experience. Or is there something basically flawed with this approach, which accounts for not too many people doing it?

2. I want a simple, reliable method for booking frequent small gains while minimizing risk. I am wondering if this is the right market for me. I don't know much about OEX options or e-mini trading, but those seem to be the rage of expensive advisory services. Is there something about OEX which makes it a better options day-trading vehicle than SPY? Are e-minis more of an ideal vehicle for the quick-hit short-term trades I like to do?

3. I don't even know how to go about learning about OEX and e-minis. Many of the advisory services seem pretty scammy. Day Trading Academy looks good at first, with great reviews on investimonials. But it quickly becomes obvious that most of those reviews are manipulated and paid for - and the proprietor Marcus even popped up on this forum in disguise. I read about some guy's KING system, another site called OEXStreet, and many others - most wanting a few thousand dollars. I'm thinking that such expense is probably not necessary, but I don't know which books or free sources to turn to. I don't even know anything about the mechanics of e-mini trading. Since I have some trading experience, I want too avoid the kinds of mistakes that would cost me thousands in the learning. I would like to hear from some of you who have traded various markets on whether I am fine trying to refine my trading of ETF options, or whether there are genuine advantages in looking at e-minis and OEX options.

4. Some of these sites have free trials, and once I get some time it will be a good idea to get my feet wet that way. But if it doesn't even make sense to explore these different markets, then I will just try to get better at what I am doing. Are there clear advantages to these other markets?

----I look forward to feedback and opinions. Perhaps there are others daytrading ETF options or stock options? Perhaps there will be a very clear answer about exploring OEX and e-minis. Or perhaps an interesting difference of opinion. Any guidance is appreciated.

Thanks

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  #2 (permalink)
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  #3 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
Big Mike's Avatar
 
Posts: 46,238 since Jun 2009
Thanks: 29,350 given, 83,221 received


Nice job with the detailed post, but unfortunately you are on the "normal" path of making a lot of mistakes.

I see you are new here. If after a few months you decide to become an Elite Member, you'll have access to this thread:

https://futures.io/elite-circle/11125-ask-any-trading-question.html

I would say it's the single best thread on the site, in my opinion, but that's probably because I spent an enormous amount of time answering hundreds of questions like yours in the thread, from users.

The nice thing about the thread is it should be quite obvious where everyone makes mistakes (you can see the pattern when looking at the data all at once), and then you can make plans of your own to avoid repeating many of those mistakes, hopefully.

Please stay away from buying anything from a vendor selling mentorship or indicators or strategies.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

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The following user says Thank You to Big Mike for this post:
 
  #4 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
Big Mike's Avatar
 
Posts: 46,238 since Jun 2009
Thanks: 29,350 given, 83,221 received

BTW, most users here are futures traders, but the take away advice will be nearly the same regardless of what market you trade.

Read my signature and follow the steps to start your learning process.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

Reply With Quote
The following user says Thank You to Big Mike for this post:
 
  #5 (permalink)
Trading Apprentice
Interlochen, MI
 
Futures Experience: Intermediate
Platform: FreeStockCharts
Favorite Futures: options
 
Posts: 2 since Jan 2015
Thanks: 10 given, 1 received

Thanks,
I tried to go to the webinar and the post in your signature, but they are both in the elite area and not accessible to me. If they are for beginners, perhaps they should be easier to access. I will have to look around to see if there is a true beginners' section. I am not against subscribing if I can discern the value.

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  #6 (permalink)
Market Wizard
Switzerland
 
Futures Experience: Intermediate
Platform: Investor/RT
Broker/Data: IB / DTN
Favorite Futures: Futures
 
Posts: 4,128 since Feb 2012
Thanks: 3,780 given, 7,651 received
Forum Reputation: Legendary


edanfx View Post
Hello all, can you tell me what is webinar??

A webinar is a seminar on the web. The recorded versions can be seen here.
GFIs1

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  #7 (permalink)
Trading Apprentice
Sydney
 
Futures Experience: Advanced
Platform: NinjaTrader
Favorite Futures: ES
 
Posts: 13 since Oct 2014
Thanks: 2 given, 13 received


glworden View Post
Hi,

1. I don't know very many people that do what I am doing, and I can't really find any mentoring services that focus on refining such short term trades of ETF options. I'm not looking for a signal service of hands-holding. But I imagine there are people ahead of me on the learning curve and I would like to benefit from their experience. Or is there something basically flawed with this approach, which accounts for not too many people doing it?

2. I want a simple, reliable method for booking frequent small gains while minimizing risk. I am wondering if this is the right market for me. I don't know much about OEX options or e-mini trading, but those seem to be the rage of expensive advisory services. Is there something about OEX which makes it a better options day-trading vehicle than SPY? Are e-minis more of an ideal vehicle for the quick-hit short-term trades I like to do?

3. I don't even know how to go about learning about OEX and e-minis. Many of the advisory services seem pretty scammy. Day Trading Academy looks good at first, with great reviews on investimonials. But it quickly becomes obvious that most of those reviews are manipulated and paid for - and the proprietor Marcus even popped up on this forum in disguise. I read about some guy's KING system, another site called OEXStreet, and many others - most wanting a few thousand dollars. I'm thinking that such expense is probably not necessary, but I don't know which books or free sources to turn to. I don't even know anything about the mechanics of e-mini trading. Since I have some trading experience, I want too avoid the kinds of mistakes that would cost me thousands in the learning. I would like to hear from some of you who have traded various markets on whether I am fine trying to refine my trading of ETF options, or whether there are genuine advantages in looking at e-minis and OEX options.

4. Some of these sites have free trials, and once I get some time it will be a good idea to get my feet wet that way. But if it doesn't even make sense to explore these different markets, then I will just try to get better at what I am doing. Are there clear advantages to these other markets?

----I look forward to feedback and opinions. Perhaps there are others daytrading ETF options or stock options? Perhaps there will be a very clear answer about exploring OEX and e-minis. Or perhaps an interesting difference of opinion. Any guidance is appreciated.

Thanks

Hi - I trade options, as well as futures. They're a different beast in many ways. Big Mike is right, you are going down a well worn path, so don't feel like you are the first person to have ever taken these steps. We've all been there before. I'd suggest if you want to trade options to get to understand how they're priced and the various risk measures (greeks). If you understand delta, gamma, vega theta etc, then you are well on your way to trading options. In tradin options you are trading volatility - essentially you are hoping the volatility of what you have is going up (cause you're buying vol). Slow and steady will kill you, as you noticed when you bought options and the time decay wiped out your profits. Spreads can also be a problem in many options, as they are so wide. Learn to price options and use limit orders to enter.

On point 2 - if you find this I will pay you a billion dollars to teach me

On the rest of the points - don't buy any services. There is lots and lots of free stuff on the internet, if you have time to look. Just google option pricing. You can even do entire courses on it for free through iTunesU or one of those.

Finally, wanting to try everything is a normal feeling. Try them and get it out of your system ASAP. Then settle on a method and become the best in the world at it. You are playing against the big boys (imagine shooting hoops against the best players in the NBA). You can do it, you just need to be better than they are.

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