Lets Talk Stocks
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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.
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.
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;
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.
February 28th, 2019
February 21st, 2019
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Right now we're going to take a look at the double top reversal pattern.
We're going into some technical analysis basics and share with you the double top reversal pattern.
What Does It Look Like?
This is the first thing you might want to know. It looks like something like this. We create a two peak system. We have our resistance level and our first and second swing points on it.
You'll also get this supporting level here under the stock as well. We have two swing points that create a double top.
Where is the strength and where is the weakness is what you're looking for in these patterns?
With this pattern, you have the initial trend - to the upside. What happens is that as we move to the upside with the stock price, you don't have enough buyers. That weakness comes in, and people start selling or taking profits. Then more people come back in and then it goes into the second top.
People think it might be a good value and they'll go back in and buy some shares. And that's what happens - not enough people come in. When not enough people come in it reverses, and that's why you get that second top. You get the double top, and then stock comes back down.
From time to time it may test these levels here and get some little bounces here and then roll back over.
Then eventually you'll see it roll further over into lower prices. And that's why it's known as the reversal pattern. Some things to watch for as you're looking at this is that you want the volume to pick up on the selling movements. That's where the trend or the pattern confirms itself a little more.
Anytime you're getting these selling off movements (pink lines), you'd like to see a little bit of higher volume in that spot. Especially as you get into the break, and if you're looking to enter on that position one of the entry points could be just after it breaks that support.
That could be your initial entry point if you're shorting the stock. Sometimes what also will happen is after this break you might get a retest of that support level. That support level is now resistance. As you retest that level, you'll get that rejection.
If you missed that earlier entry opportunity, you could get a second entry opportunity right after. That could give you another opportunity to short the stock. If you're looking to buy on value, this is a little bit difficult to do with this pattern. That's because you're looking for it to go much lower in price and then give it some room and time.
How Long Does It Take for This Pattern to Evolve?
Sometimes it could happen in two to three weeks. Other times I would say more or less four to six to eight weeks. That is more common in the stock market world.
If you're looking for a two-month time span that's more healthy. Or even one month around there.
How Far This Pattern Could Go?
If you're looking for the distance of how far this pattern could go or the projected move, this is what to do. Take the peak right over here; draw a line down to the support level that you have over at this point where we hit the support and bounce. And that gives you a distance. Take that distance and move it right at that break and go again right there.
That way your projected move is right at that same amount. And that gives you an indication. Sometimes these things could go a little bit lower. Sometimes they're a little bit shorter.
It just depends on something else. But that's a rough area. Because it's the number of buyers and sellers that are over at this level will probably be around that level. And that's why you can't be that precise because that may change and some people may get in it earlier some people may get in it later.
Some of the Issues That Can Happen
Sometimes it evolves into a triple top. If you look at another pattern here, you could get a triple top in this pattern as well.
You could get four tops. This may even break out to the upside. Instead of bouncing and rolling over you may get this distribution and consolidation for sideways. That way this pattern could slowly start moving to the upside. Eventually, jump higher.
When you see two points where the stock is rejecting it doesn't mean all of a sudden it's a double top. What you're looking for is this - the volume picking up to this selling side and the selling pressure. That could give you an indication that there's more selling pressure that's coming in.
That could mean that with more selling pressure you could get this thing to roll over even further. That's what you're watching for. In some situations, it does have a double top, but they actually will continue. That's because you get enough consolidation and more buyers will step in because of the digestion, and it goes higher.
Your whole point behind this pattern is to recognize two peaks. That means there's resistance and that says this is a little bit of a difficult level to break through.
And if that's a difficult level to break through and if we continue moving lower and we break below that support level that could be a longer-term downtrend. That can be a place where I may want to hold off on the stock.
On the other approach is if you're looking for a bullish movement. You could wait for that to break out - that resistance level. And this could be a bullish or a buy area up there. That could happen from time to time as you recognize the whole situation with two peaks.
Just because it's a double top doesn't mean it's going to move higher or lower. But it will be classified as that pattern double top reversal once it starts moving into the other direction that it came from. The whole point behind the patterns is to name the chart movement and way to reference one thing or another in our discussions easily.
Otherwise, as you look at the stock, your primary goal is to decide if that stock is going higher or lower. And what you're looking for is where is the weakness which you can get and understand from the volume. Is it selling off on huge volume or weak volume? If it was weak volume, you might see it digest and move higher.
Example of Double Top Reversal Pattern - Groupon
Let's take a look on screen at this double top reversal pattern. We're taking a look at Groupon.
You can see from the stock we first sold off around 2012. Then finally we're trying to move higher into higher prices in 2013. We didn't do so well, and you can see that around August, September, and November time we've created two peaks.
At those two peaks, we have a little bit of resistance, and this is our double top. If you look at our support level, we have slight support that gets retested individually at this swing point at lower prices right around $9. Our high range is just right above $12, and we're moving into from $9 to $12 range.
The stock broke through and then came back up to retest that $9 range. And then it continued moving lower. You'll also notice the volume how big and accelerated it was on that break.
It did pick up. Initially when we were digesting the volume did decline just a little bit. And then we picked up in a big way after that at least with one bar. And then slowly with a few surges in prices or surge bars later on in the bearish sense.
That's our double top right there. As far as our distance goes, you can see the distance from here to here, and then you take that, and you can see the projection will go there.
Groupon ended up going much lower than that. But as far as that pattern goes it's you should expect a little bit lower, but it didn't work out in this case.
Example of Double Top - TRIPADVISOR
Here we're going in from lower prices to higher prices. We get to a specific peak. Stock, as you can see, was very extended at that time. It just moved too far and too fast. You created one peak there, and we'll draw a line across, and you can see we created a second peak a little later.
Once we digested this move moving sideways when we got into the second peak again there was just not enough volume. Notice that volume was declining. We almost created a bowl-shaped pattern, and then we started to pick up the volume.
But it was the bearish volume. That's what created and made the stock roll over. You're shorting opportunity. It didn't last too long because we got positive news and insights shortly after. But then with the time that stock eventually creates another double top that rolled back. That created further lower prices.
As you can see sometimes, they only work for a short period. That's the case because you get more news and hype and then, later on, you'll get that further rollover. That happens with many patterns in general. It's not that they all work out perfectly just to show you what could happen.
Triple Top Example
Let me show you a triple top example. You can even get a quadruple top. Here is our example of STX. We're looking at the year 2006, 2007, 2008. You can see the stock had a tough time breaking above the 27.5 range.
We created a triple top between those few years. Because it was not sustainable and it didn't have enough energy that stock rolled over. Finally, there's your break so your entry point would be right around this point which would be about $18.
That stock continued into about a $3 range. Think of that massive sell-off that happened there. Anyways that's a triple top very similar to a double top. You can see it was moving to the upside for a short time. We did get acceleration in 2003 (very steep), so that's why it came back down as we continue to move into higher prices.
We got that triple top and eventually that stock broke lower because it couldn't break through to higher prices. And that's what happened. Then finally climbed to further higher prices or back in the triple top area.
I hope this pattern was helpful for you to learning and understanding the double top and maybe even a little bit of the triple top. And if you like this video and you want to see more great videos like this then go ahead and subscribe to our newsletter list.
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.
- The way based on vehicle
- The way based on a timeframe
- 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:
- Double 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.
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.