The 2nd Law all Options Traders need to know
Aug 27, 2022
Law 2 - Plan the trade then Trade the Plan
Only about 10% of the traders are truly successful. The Options Hunter blueprint is a cornerstone to this success and can be distilled in 4 simple steps.
1. Identify the Chart Patterns
Scan the major markets or ETFs for double top or double bottom price patterns. Remember to look for “M” price pattern at tops and “W” patterns at bottoms. On the daily, weekly or monthly charts. If you see exactly what you want, then tag the chart into a special group or just write it on paper to review at the end.
2. Check for MACD Divergence
If you see the price double top or double bottom, then look at the MACD to see where the second bottom is on the indicator. Is it strongly diverging from the price?
Patterns can exist on the daily, weekly or monthly charts. If you see exactly what you want, then tag the chart into a special group or just write it on paper to review at the end
4. Monthly, Weekly, Daily in Sync
If you see the price double top or double bottom pattern, then note the time frame of the chart (daily, weekly, monthly). When there is a daily divergence, look at the weekly chart and even the monthly chart to be sure that neither is strongly leading your stock the opposite way from your divergence. If the weekly is at least flat on the MACD fast line, then you can feel confident that your move will take place as you expected.
That's it. It couldn’t be any easier and the only cost is time and a sheet of paper. Conversely too many traders pay too much attention to rumor, news stories and talking heads. These traders are swayed by emotion rather than following and sticking to a trading plan. They buy and sell the wrong tickers at the wrong time. Don’t be in the 90%. Stick to your blueprint.