Here are some principles that I use to swing trade many different markets on a one week to five week time horizon. I hope that these principles help you in your trading and investing goals!
After a stock index or commodity reaches one of my over-sold or over-bought signals, I will begin stalking it for a long or short trade. Ideally, I will trade in the direction the daily trend after one of my sentiment signals has been triggered.
- The daily settlement price is the most important price for each market.
- I don’t attempt to predict price, but instead react to it once it “gets there.”
- Extreme price moves up or down can and will continue longer than you would ever expect. Be patient and wait for the setup.
- I believe that the more that I trade, the less likely it is that I will win. The financial services industry profits in many ways, including from commissions, the bid-ask spread, dark pool trading and stop-running algorithms.
- If I have a time horizon of a week or more, I will often buy covered calls (or sell covered puts) in order to profit from both volatility and time decay.
- My stop loss orders can be based upon price or time. In the absence of a specific price-based stop loss order, I will cut my losses by exiting the position on the option expiration date.
- Click this link for an introduction to my Option Sentiment Report.