Lets Talk Stocks

Trading Goals vs Intentions: Mindsets of a Master Trader Ep 226

March 7th, 2019

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Today's we're going to take a look at some mindsets that are trading goals vs. trading intentions.

What are the Trading Goals?

I think goals are exciting when it comes to trading. A lot of people set goals, and they're pretty easy in the sense of because their numeral, right there are numbers that are attached to goals.

Trading Goals - Mindsets of a master trader

Let's say the leaders, the people who are pushing you to be better; hey you got to be able to do five times your gross revenues, i.e. five times well. What's your goal? Well, it's $1,000. Means you should be able to do that five times better now or how do you improve it while you're making, let's say you know three hundred dollars every single day from trading well how you grow that by five percent.

You know these goals when it comes to a number based thing that you're doing here that's trading. They're very very black-and-white because they're all numbers related and that's good on the one hand. Because you can actually see; hey did I hit the goal oh or not? So it's a binary situation, and the answer is going to be either a Yes or a No! Now, on the one hand, that's good because then you know, you're accountable did you hit it or just not. Did you make your thousand dollars this month or did you not? Or did you make your fifty dollars this month or did you not.

You're really accountable for it, but the downside of that is; goals will constantly shift right, i.e. goals are continually changing, and they should also be evolving. Which means, they grow and you grow as a trader. You're growing, your goals, those are increasing your account should be growing; maybe you're struggling, and you need to fine-tune your goals, and it's difficult in the sense of well if you're not hitting your targets then you kind of feel like a failure.

What are the Trading Intentions?

There's the other approach to this, which I like looking and thinking about and that is intentions. An intention, when we look at intentions it's much different than goals. It's kind of like your desire for what you want to accomplish internally. A goal a lot of times, when I look at it it's external right! What did you make, what did you hit, you know what's outside of your control, and that makes it very difficult.

Trading Intentions - Mindsets of a master trader

Take for example a dancing competition. If you have intentions and we look at a dancing competition, your goal might be to go ahead and get first place in the race. Those could be gymnastics as well but any event where you know you're being judged, or you're trying to compete in the sense of that's not clean-cut right(It's somebody else's opinion).

When you're looking at a dancing competition who performed better, who had better lines, who was more on the beat, all of these are subject to someone's interpretation. It's very tough to say, hey did he get first place, that couple get first place or did that couple get second place yes you might have experts evaluating, but it's tough to really say that.

When you look at intentions, they're much different. If we look at goals like if you didn't get first place, you're a failure, if you didn't get second place you're a failure, they didn't get the third place you're a failure right. You're looking at all of these things just on the goal side like you didn't hit your medal or your mark or your placement because those were not in your control.

Looking at Intentions at a Deeper Level...!

What about, when we look at intentions? Let's say; you're dancing, well the critical question is; if you evaluate yourself, were you better at hitting the beat than you were before. Means that could be one way looking at things were you able to land that move that you were working so hard on that, maybe you couldn't do in practice as well were you able to do that quite well and if that might be a yes or no right.

You're looking at things that are more internal to you; were you able to do those things and accomplish those things and if you were then now, you've kind of won, and you're successful. Whereas over here, if you got second place and you didn't get first, you kind of already is a loser and that's sometimes can play on you psychologically, which is not always the best thing.

If you want to go even more internal right if we go even deeper well you could say hey well rather than looking at placement look at doing the things that will get you to placement what are the things that you need to do to get to first place;

Trading Example - Mindsets of a master trader

Well to get to first place, I'm going to say:

  • I need to practice five times a week
  • Also, go and to build up my cardio for dancing
  • I need to go running
  • I need to go ahead and make sure I get a coach to evaluate me at least three times
  • Two different coaches( so a second coach, i.e. they can determine my moves and what I'm doing right or wrong)
  • I need to look good - seamstress or stylists or whatever to overlook things

All of the above things now are in my control... Very direct control. Now if I still don't get first if I did all of these things and I made my list, I was successful now you might say hey well you even didn't get first place, but at least you're making progress and this is the way I want you to start thinking about it.

You know these external goals are great and sometimes it pushes people to hit i.e. I gotta make $1000 a month, I'm trying to hit fifty dollars a month and try to hit a hundred dollars a month. Whatever your goal is and even if you're shooting bigger fifty thousand a month or 100,000 a month or whatever your case is that's all good and great. But if you don't hit it are you feeling like a failure is you struggling, and the question is; are you doing the right internal things to reach those goals and that's a little bit more important to me.

Because for me, when I looked at doing and trying to hit these goals, I always felt like a failure; the goals kept moving the goalposts kept running. You always try to hit more and bigger instead now, what I try to do is look at; hey am I putting on the whatever number of trades that I want per week or a month based on my current living situation. Am I managing them correctly? Am I adjusting them at the appropriate times? Am I waiting too long or am I doing them at the right time?

Internal Concept - The Right Path:

You start looking at the internal concept of it and if you're doing the internal things correctly, eventually maybe not in the first competition or not the first few trades or the first few months you're going to be successful. But perhaps a few months later and then eventually you keep getting more and more consistent more and better, and that starts to build up, and you start in a way winning more of those dance competitions.

That's what, I want you to think about when it comes to goals versus intentions and if it helps start focusing on what's your intention. Because now, you can control it and you can focus on it and rather than focusing on your goals and eventually the goals the external things that you set up will be the result of doing the right internal things.

How Option Traders Can Diversify & Minimize Their Risk Ep 223

February 14th, 2019

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>> Options Mastery #4 - Calendars <<

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Today we're going to take a look at how you can diversify your trades and investments if you're an option trader.

If you're trading stocks or investing in the stock market, it's easier to diversify because you get a few telecom companies a few oil companies and now you're diversified.

In simple words, you could buy an ETF or a fund, and now you're pretty much diversified. But when it comes to trading options, it's a little bit different.

That's where we're going to go over in this post, so stay with us.

Most Common Scenario If You Are an Option Trader

Let's take a look at figuring out how you can diversify if you're an option trader.

An average investor or an ordinary stock trader typically diversify things in different areas. It might be something like this: they have some in an oil company, tech, retail, food-related and utilities. That's an overall picture of how people diversify in general with a stock holding.

If you have an overall portfolio this is the case: You might only have some overall in stocks, in real estate, or some other investments. It could be gold, gold coins, and other things.

Any other case, which you're really looking at usually, you have a distribution of funds. And that's the way ordinary people do it.

But when it comes to options, it's a little bit more difficult.

How To Properly Look at Option Diversification

You have three ways to diversify when it comes to options and split the risk.

  1. The way based on vehicle
  2. The way based on a timeframe
  3. The way based on the volatilities

If you apply all of this, you will get a pretty good mix between these three different mediums.

1. Way Based on Vehicle

You could diversify based on the car or vehicle that you're trading.

You might have a Netflix, Apple, ExxonMobil, AT&T. Or it could be eBay and Under Armour or something else. The critical thing is that you're looking at the difference of your vehicle.

2. Way Based on a Timeframe

The other way you could do it is looking at the time frame that you're trading on.

With time you have some options that are you're doing 30-day trades. That way you can split your risk and diversify. This specific trade means - more money every month trades.

Or you could do 60-90 day trades, or you might even do 350 plus days (more long term investor type trades). Which means this might be longer term investing.

By diversifying based on your time of the holdings (and when you're putting on the trade), that can split things up and reduce your risk.

3. Way Based on the Volatilities

That is the third way to do that, and it's based on a strategy that you use.

For example, you might be doing some trades that are iron condors and some traits that are Butterflies. These are all negative Vega trades.

Now, to combat that (the volatility risk) we need some positive Vega trades.

Positive Vega trades would be something like:

  • ┬áCalendar
  • ┬áDiagonal
  • ┬áDouble diagonal

But, what's important is that this would combat the iron condors or the butterflies.

If you effectively combine the first two, it is going to give you some diversification. But, the real thing is when there is this one as well.

The third is gives you the opportunity to create negative Vega strategies and positive Vega strategies. After that, all of a sudden, you have harmony between these three different mediums.

What it gives you all of this is an excellent variation to a portfolio when you're trading options.

A Quick Example of Creating Something on a Trade

Let's say you went ahead with Netflix and you did an Iron Condor and you made a forty-day trade. Then on Exxon Mobil, you did a calendar, but you made a 360-day trade. At this moment, you can see how this starts to diversify you quite a bit already. And then let's say you do SPY and maybe you do a Butterfly and something around 180 days.

You start to see that you can mix and match short Vega and some shorter term, medium term, and longer term trades and something that's already ETF and two stocks.

You can see how that diversification plays an excellent role within your option trades. And it works a little bit different than a portfolio because you have more elements in there. You have a time element, a volatility element.

Conclusion

This is what I would look at if you're trying to evaluate your option for a portfolio. Take a look at the vehicle you're trading, look at diversification of that; 3 to 5 vehicles is more than fine.

Look at the time horizon and then of course look at the volatility. Some could be shorter-term strategies and others could be longer-term volatility strategies - like a double diagonal or a calendar spread.

Pennant Stock Chart Pattern (Continuation) & How to Trade it: Technical Analysis Ep 218

January 10th, 2019

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Hey, this is Sasha and welcome to another episode of "Let's talk stocks."

In this episode, we're going to go back and take a look at some technical analysis basics.

We're going to take a look at that Pennant pattern.

It is a continuation pattern which means it's a pausing pattern. It pauses and then it continues moving in the same direction that it originally came from.

We'll look at the:

  1. Bullish side and the bearish side;
  2. What does it look like;
  3. Some of the previous trends;
  4. Volume;
  5. Projections;
  6. Entry point; and
  7. Few tips

When we look at the Pennant Pattern

You can think of it like a triangle pattern just a lot more compressed. It's a lot smaller of a trend.

Usually with a Pennant pattern, what happens is let's take a look at the bullish case scenario -- is it runs up very quickly. So the movement is very fast on the bullish scale.

Then, what happens is you create this triangle a tiny triangle, symmetrical triangle pause. What this does is it hits one point here. This will be resistance one, and it slowly isolates here for maybe four bars. It could be eight bars depending on what you're looking at, but it separates here for a couple of points.

We could do maybe three or four points.

Then eventually, it'll break out very quickly to the upside.

The pause is very short, and that's the critical difference here comparing it to let's say a symmetrical triangle. This is much shorter a symmetrical triangle maybe two or three times longer or takes a lot more time, and this is much more violent here.

Again, this could come back and retest this supporting resistance level. So it'll go back and then go higher, but that's what the pattern looks like.

Previous trend

Of course, it's going to be in the same direction that it's moving in because it's a continuation pattern. The volume, if you're looking at the volume, you're going to have much more substantial volume. This is heavy in the movement of the direction of the stock.

Then once we get into this little digestion period, it might die down or get a little bit lighter or weak. Then again, you see a massive amount of volume coming in as we get another breakout move to the upside.

If you're looking for Projections

What you're looking for is the distance here that we've gone from the initial breakout point to that resistance level.

That's typically an excellent level to go with and then move that to them from the breakout of the resistance to the next stage. It'll probably be somewhere up at this level will be. The target area that you're looking to hit is somewhere right around that point.

It doesn't always work out that way. That's a guideline. I also think of it that it's going not to hit those levels because we've already moved with such great steam and power. And when things move like a rocket ship, eventually, they pull back.

Typically, the target from what I've seen is -- it doesn't always hit those targets. Usually, a little bit less especially with these fast acceleration movements.

It just runs out of steam. It runs out of energy. It runs out of fuel. It's just flooring the gas pedal, so the movement is it doesn't always hit those targets.

If you're looking for entry points

I would take a look at just right where it breaks out these levels or retest those levels.

So this could be your entry point one and two and that might be an excellent level to get in is right after the breakout.

The issue if you get in earlier is --

During this digestion, a pattern sometimes it could turn into a longer consolidation pattern and then it'll roll over.

That's why you typically wait for that high volume.

And once that high volume comes in along with the breakout in price, nice full price bread, that's a much safer entry point.

If you take a look at the bearish case scenario

It's very similar so again. We'll look at this tight pennant pattern, and if I draw it a little bit backward here, you can see we're coming from higher prices. We move lower, and we get this little pause move around in here a little bit. Then you know we break down and move lower.

That's the way it works on the bearish case, very similar to the bullish case just flipped a little bit volume the same thing.

You're looking for a tremendous significant volume anytime that you're moving lower. So that would be high volume, this might be lower volume and then higher volume again on the breakout or the breakdown. Just because still there's more selling pressure that comes in.

Anytime that the movement is strong, just like here, we're moving down anytime the movement is strong. They'll probably get the higher volume.

If you're looking for the entry point

Here for the shorting side, this would be your shorting entry opportunity.

If you're looking to go long on this, I will wait till you follow through and continue all the way down and create a consolidation pattern down here somewhere or find a reversal pattern before you look to enter in an extended position.

But that's the bearish case scenario. The projection on this one is similar to what we do with the bullish. You look from where it started that sell-off to where it began to do the bounce and consolidation pattern. And then, take a look at that and move that range to the next stage from where we're breaking that support level in the pennant.

As far as tips go

Sometimes, these things can look a little more like a sideways digestion pattern.

Sometimes, they might look like this and then move lower. This could be considered maybe a flag like a pattern just because there's not a lot of ticks and not a lot of candlesticks in that area. But again, very similar to the flag pattern.

If you haven't seen that video, take a look at that, but sometimes these can look similar to a flag pattern where they're just a tight consolidation range that's pausing and allowing the stock to continue moving in the same direction. That's why it's a continuation pattern.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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