Trading System Rules

Do you have what it takes to follow the rules of a system? Most people can't.

Example:

1. Stock  above the 200 Day Moving Average;
2. RSI (4 Period) close below 20. Buy 1/2 on close;
3. Buy a second half if RSI closes below 15;
4. Exit when RSI closes above 60;

What do you think?

I will show next how to improve the exit.

Thanks,

S.

Gold retracement

Gold retracement by steveoliveira on TradingView.com

We are near the completion of an ABCD pattern. Following the harmonic rules, a C point retracement leaves up with a 200%BC projection

I think we could see some downside, which is confirmed by a hidden price divergence (not on the chart).

Please take notice, that there were very strong sell offs and we are still in the bears zone.

Thanks,

S.

Climax Selling

Climax selling... by steveoliveira on TradingView.com

This is a perfect example of a parabolic movement, which normally ends with a 61.8% retracement.
Volume was there for confirmation.

What about credit spreads?

So many write about credit spreads, but what about them? Are they reliable, are they risky, are they adjustable? Can I trade it on the weekly options? All this questions seems to arise when someone puts some kind of effort to try this strategy.

I’ve been doing this for a while and I must say that the first problem you face when you start trading credit spreads, is the risk you take. Normally you start looking to high price stocks like Apple and start with out of the money options.

So let’s suppose you want to place a trade in Apple very far away from the current price.

Assuming a 10K account.

You pick 430-420 (21 September):

  

Theoretically you get 45 USD (112-67) for every 1000 risked. If you place an order for 10 options contracts, you are gaining 450 USD for the 10.000 USD at risk. That's 4.5%! You just need that Apple stays above 430 to cash in the premium. If you do this every month then that's 54%!!!!

This is what everyone is selling in the webinars.

But what if the stocks falls to 440 in the next 10 days...

430 strike will start trading at 5 and 420 will trade at 2.5, which means that you're down around 2000 USD.

And if in the process Apple shows some kind of problem and the stock falls to 420? The 430 will start trading at 14.7 and 420 at 9, that sums around 5000 USD loss, which if we are speaking of a 10K account, that will be gameover for you.

So the question is: Does it make sense to risk so much for such a return?

No it doesn't...

So what's the problem?

The problem is called leverage! You are trading a possible exposure of 430.000 USD with a 10K account. Eventually it will end bad... It's a question of time.

The right mindset for a credit spread it the same for a naked put, which means you are willing to buy the stock if you get there. That's it! Don't expect the 4.5% steady income month after month.

Like a covered call strategy, you don't buy 100 shares and sell 10x more call options. You trade 1 option for each 100 shares.

Remember, leverage is the fastest way to blow up an account. Then again, many are doing it and are successful and that is the reason that in the end you will ignore everything i just wrote.

Good investing,

S.

Italy can retrace?

Italy can retrace? by steveoliveira on TradingView.com

We have here a retest of the resistance zone while showing a very bearish combination of candles.
I expect to see some downside in the next days, probably testing the 16600 zone which was a previous rotation area. It could develop in an ABC format.

Bearish Gartley

Bearish Gartley by steveoliveira on TradingView.com

I still think the odds favor the upside break, however we must not ignore the price action and right now we are testing resistance in confluence with a bearish Gartley. I'll be looking for confirmation and watching it closely. Tks, S.

Big Range...

Big Range... by steveoliveira on TradingView.com

We are trading at resistance (1.3450/1.3415) and if we clear it, we could go to 1.37. This would be the next stop. However looking at a 12 month Market Profile Chart, we see that right now we are trading at Value Area High and this is important because if we fail to breach it, then the next stop will be the point of control at 1.3050.
We can see also that divergences are present and oscillators are overbought, which means that we need to have a lot of strength to get through the current resistance zone.
Safest thing right now if to go down to lower time frames to figure what the tape is telling us.

Trade well...

S.

SPX - MY BEARISH CASE

SPX - MY BEARISH CASE by steveoliveira on TradingView.com

We have two rotation zones or box of prices as you wish to call it. What i think it is important, is that we have two distinct moves that end very similar at the top of each rotation box. So we could have some downside with a very strong support at 1549, which is my Point of Control for the last 6 months (market profile chart), and then if Mr. Market wants, we could head down to the bottom of the box. The movement until 1549 will be an ABC on the current Elliott Wave Count, and i think it has a good probability to happen. The movement from 1549 to 1400 is a low probability and we have to check the chart again after 1549 is tested. If 1549 is breached, there will be a projection that will take place and that's where i'm basing my analysis on the downside target. One other important detail is that the gap at 1700 is still there to be filled.

Setup

Trading Setup (Example) - Harami by steveoliveira on TradingView.com

A good trading setup have to show us a confluence of signals, so in this example we have: 61.8% Retracement; Good Hidden Divergence; Oversold; And an inside bar pattern. The Inside Bar Pattern is traded by entering in the breakout direction. It is best to name it harami, as we are looking to a candle chart. In this example i would say, that the entry point would be 15.000, with a stop around 14.879. The target will be set around 15.250, corresponding to the mid point of the selling bar. which leaves us with 2/1 return ratio.