Swing Trading Using Options

This option play made 400% on the way down to 72 from 110. The Call made 360% on the way up to 105 from 65.

When I first started out trading I was trading shares of stocks. As I learned more about the markets I switched to options instead on the underlying shares. The reason I did this was because I like the defined risk of the option contract. Let's face it, when we trade the shares not only do we have to have a big account, but we are at the markets mercy if the stock gaps against us at the open. When I want to trade stocks, I will actually use options 75% of the time.

When we buy a call or a put the most we can lose is the premium paid for the option contract. So even if the stock gaps 10 points against us, we have a "built in stop" which is the premium we paid for the option contract. On average, my option trades are 3-4 days with a target of 60% or greater. When buying option contracts they are sold in increments of 100 shares for 1 option contract. Remember that when trading options you should stick to buying the same amount of contracts as if you were buying the stock. Example: If you were going to buy 1000 shares of DRYS at $65.00 a share, you should only buy 10 option contracts, keeping the option position equal to the amount of shares you would normally purchase.

The way I trade options is very simple. If I see a trade to go long with a stop loss of $5.00 on the stock, I will buy a $5.00 option contract. The risk is exactly the same buying the option as if I were to buy the shares. Except buying the option I am not taking up $65,000 of my account balance, I am only taking up $5,000, leaving me $60,000 to purchase more options and be in multiple trades instead of just one.

My emotions match swing trading the options instead of the outright shares of the stock. My upside potential is unlimited while I am in control of the risk on each and every trade.

If you are new to options or have any questions please leave comments and I will respond to each and every one.

Steve

eMiniSchool

Blue Bar Chart

This is a quick picture of the system I am using from eMiniSchool. Whe the blue bars appear it lets me know that the move is either starting or the move is over. It helps me know multiple things at one time.

If the blue bar appears when the indicator is low it means the move is starting. If the blue bars appear when the indicator is high it means the move is most likely over. When the blue bars appear at the end of a move I know to stop going long or short.

In this picture of the ES on a 7 minute chart you can see that it is good at catching the beginning and the end of the moves. Knowing that the bars turned blue up at the top of the chart I would never go long if the price broke that high. It gives me confidence that I am trading in the correct direction. When the indicator is low and the bars turn blue I know that there is a big move starting. At that point I use other parameters that are in the videos to enter the trade. This is a 7 minute chart with the indicator set to a 10 minute interval (on their site it explains that in more detail).

When I can see a big move is going to start I usually find the direction and then use the Turbo Scalper to scalp in that direction.

Also eMiniSchool has 6 free videos that can be downloaded from their homepage. The videos show the charts in more detail along with free trading articles. If you are a serious trader it is worth the time to check them out.

I will post an intra-day trade tomorrow after the market closes.

Steve

eMiniSchool

Bracket Orders

Over the course of my trading career (six years) I have learned that the traders who make consistent profits are not hitting the huge home run trades that everyone thinks they are. In reality, they are trading more contracts profiting on smaller moves. The trick is finding the lower than normal risk and capitalizing on it. Getting the emotion out of the trade so you can actually stay with the trade and move your risk as the trade develops. Too often swinging for the fences with every trade leaves yourself open for huge losses, and you are taking on too much risk for your account size.

When I am scalping I have a defined risk on each trade (1.75 ES Points). I know the risk going into each trade. So knowing that, it is my job as a trader to wait for the right opportunity and all the confirmations to align. If one of the three confirmations is not there, I skip the trade and wait for a better entry.

The method I use is simple and forces me to only scalp in the bigger trend direction. Yes, I can see the counter-trend trades as they develop, but I stick to the rules and I skip those trades. Sean at eMiniSchool has done a great job in making a system that forces me to stick to the rules of entry. I have been trading for many years, but until I knew how to skip the counter trend trades with a clear plan, I was really just gambling more than trading.

Everyone has their own way of trading and this is just my experience, but what I have learned is every trader faces the same struggles no matter how long they have been trading. The trick is finding a system you feel comfortable trading with and then sticking to the rules of that system.

Having my bracket orders set and following the rules has helped my trading more than I ever thought it could.

Steve

eMiniSchool

Trading Systems

What I have found is that too often websites claim to have no losing trades. Is this even possible? I doubt it. Even the best traders in the world have losing trades, months, or even years. This is the problem when finding trading systems that claim to have no losers. I saw one website that said no losers in the last 3 years. I was intrigued so I checked out the site, and guess what? They did 2 trades a year for the past three years! Hmmm. I guess it is true they didn't have any losers, but is that the way you want to trade?

The trick is finding a "system" that you feel 100% confident in following. Let's face it, what good is a system if you are constantly changing the system rules to force the system to trade more often or trade less? If you "cherry pick" the trades, chances are you will miss out on some of the most profitable trades throughout the day.

I have bought many systems throughout my trading career in the last 6 years. Some good and some not so good, but I have the most confidence making my 3-4 points per day in the ES using the Kill Zone along with the Turbo Scalper. Also, they have just recently added 6 videos they are giving away free. It is definitely worth the time if you are a serious trader.

Steve

eMiniSchool