🔼Entering Trades
Last updated
Last updated
There are additional things you can do when an alert comes in beyond the strategy guide.
Where is the alert vs the blue line?
You need to know what territory you're operating in.
Bulls above the blue = + territory and higher equals more risk
Bears below the blue = - territory and the lower equals more risk
Bulls (call options) are easier to trade than Bears (put options). New traders should stick with Bulls below or at the blue line.
What is PS (position score)? How does it compare to other alerts?
PS tells us what has happened with the price action.
Positive PS = moved higher (more risk for BULLS)
Negative PS = moved lower (more risk for BEARS)
SPY 3/8/24 example: These BULL BOMBS are -10.56 and -11.01 (extremely negative) and they return 237.95% and 211.57% in one hour.
Less than an hour later we see two more BULL BOMBS.
But PS is much higher (less negative).
They do not return as much!
That’s the power of position score.
When an alert comes in, check the score and look at the strategy guide.
If you're late, go smaller size or look for a better entry.
If you're early, trade it but prepare to be wrong or add to the position if it’s a winner.
What is volume? Do I think this alert can go 1, 2 or 3 strikes in my direction?
You know your position, now use volume to determine how far price could go (on average).
Low volume = 2 strikes
Average volume = 3 strikes
High volume = 3+ strikes
Look at BL (blue line) and then volume to estimate how much further it can go.
Example alerts: Alert A: 10:53 - SPY 621 BULL BOMB - Strike 512 - BL 1.2 - V 120% Because we are up 1.2 from the blue line and volume is high, it’s possible we go to three strikes.
Take the trade!
Alert B: 10:05 - SPY 398 BEAR BOMB - Strike 514 - BL -2.59 - V 98.51%
Because we are down -2.59 from the blue and volume is low. Do not take the trade.
The strategy guide told you as much but it's always good to understand the concept!
You've checked the strategy guide and everything matches.
You're ready to take the trade... but first there's one more thing!
Before you buy any calls or puts, you need to know how much you are willing to lose if you are wrong.
Pick a percentage 10 - 20% and stick to it.
Do not add to a losing trade.
Repeat... do not add to a losing trade.
Have your risk level set before you start.
Generally we want to buy slightly out or slightly in the money.
BULLS (call options) below the strike price ex: 449.80 and buying the 450 call option
BEARS (put options) above the strike price ex: 451.20 and buying the 451 put option
Remember patience is next to godliness.
You can typically find a better entry if you wait.
However sometimes the price action is just insane and you just can't resist. It's okay... you can enter the trade with smaller size but be prepared to exit if wrong!
Always know how much you're willing to lose.
Never add to a losing trade, cut it and move on.
Be patient and look for a better entry!
