Wednesday June 3, 2015

Can I put that trade into a few words?  Today the overall market was moving in an upward direction as indicated by the crossing of the SMA on the SPY Chart which was posted to the FaceBook group earlier.  This is my go forward signal. 

I do not trade against the market direction. Calls (BTO) in a rising market and Puts (BTO) in a falling market.  My strategy relies solely on Buying to Open (BTO) and Selling to Close (STC).  I do not, repeat do not write either Calls or Puts.

1)      With the go ahead signal I then calculate the number of contracts that will be traded based upon my capital allocation to this activity which is $10,000.00 per trade.

2)      Calculate the exit price and the stop loss price based upon spreadsheet which was posted.  The range values are derived by looking at the pivot points, delta and entry price.  I select the appropriate margin by reviewing this data in conjunction with the actual position of the entry price within the range.  Admittedly more subject than quantitative.

3)      Alert brackets are placed on the trade and when triggered I exit the trade. 

This is a day trading strategy, no overnight positions and no adjusting if the trade is moving in the wrong direction.  Exit and come back another day.

How Long do you usually hold before exit?  I have not averaged the length of time that the position is held, but a SWAG would be about three hours maximum.

When the trade does not go your way do you adjust or exit?  Exit, tried adjusting when I first got started trading this way and learned that I just needed to take my loss and move on.  I do not like to lose money but would rather take a calculated loss, lick my wounds and come back another day.  Nor do I chase the top, I exit when my target is touched and put my profits in the bank, here to I always remember that I have never lost money taking a profit, for me this piece of the portfolio is all about income.  It is an active trading strategy geared to provide income so that the remainder of the portfolio can continue to grow in a more conservative manner.

How do you place the trades?   Our personal accounts are kept at T.D.Ameritrade and I use their ThinkorSwim trading platform exclusively.  After years of using other platforms I fell in love with this one for ease of use and spot on support from the help desk. 

Within the platform I use the Active Trader utility to place my orders which enables me to execute trades quickly when the alerts levels are triggered.  You can use automated order entry here as well and I have from time to time but my preference in the manual mode.