Trading Tops and Bottom s

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Kelley Leonard
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1 Trading Tops and Bottom s How To Trade Like A Professional Series I, Long Calls & Puts

2 Why Do We Want To Trade Like a Professional? Once proficient, small sums of money can turn into large sums We can do that because we trade in products that allow us to employ capital in the most efficient manner possible

3 Why Do We Want To Trade Like a Professional? We can fish in a pond where the most explosive moves occur on a regular basis Options Penny Stocks Low Price Stocks Futures

4 How To Trade Like A Professional Program Objective In six months develop proficient traders capable of selecting winning trades in penny stocks, low-priced stocks, defined-risk options and futures using a combination of chart patterns and by focusing on one successful strategy and entry technique

5 Series I Long Calls & Puts Objective Develop traders into a proficient long call & put trader Provide traders with a blueprint for profitable trading that includes the use of position sizing, incorporating a method with a statistical edge, selecting the right stocks, how to select options for the trade and hone basic skills to a razor-sharp edge

6 Agenda The Professional Trader s Profile Money Management Techniques The Statistical Edge Trader s Mechanics

7 The Professional Trader s Profile Money Management Velocity Position Sizes Employs a Statistical Edge Uses a Proven Method Applies Method to Right Trading Vehicles Masters the Basics Trading Platform Option Selection Order Entry

8 Money Management Techniques True Keys to the Kingdom Example technique from a business plan: Normal Environments: I will only commit < 35% of my trading capital to trades that meet my criteria and will commit no more than 1.5% of my trading capital on any trade. Take profits at 25% & 50%. Exit trade at a 50% loss.

9 Money Management Techniques Money management plan must address the following: Percentage of your trading capital you will allocate. How much per trade you will allocate. Where you will take profits. Where you will take losses. You will need to address how you trade in a normal trading environment and how and when you will alter your bet size

10 The Statistical Edge Use a method with a better than 50% win-rate For the Trading Like a Professional program we ll use Concept-1 (indicator- based) and Entry Technique-2 (chart pattern-based) Match the method to the appropriate vehicles; in this case it s stocks with options

11 Concept-1 Trades with the trend Uses the MACD for trend identification and the CCI to measure the pull backs and rallies inside the trend MACD settings changes to 24,52,9 vice 12,26,9 CCI settings changes to 3-periods vice 14 and the line changes to a histogram

12 Concept-1 Example Bullish Setup, Betting that a Stock s Price will Rise In this chart, the MACD indicator is overlaid onto price. When the CYAN line is above the YELLOW line, a bull market is underway. Take only bullish trades. The trade setup for a bullish trade entry occurs when the MACD is in a bullish configuration and the CCI slaps the floor at When this setup occurs, the setup is complete. Now you switch over to your favorite entry technique.

13 Concept-1 Example Bearish Setup, Betting that a Stock s Price Will Drop In this chart, the MACD indicator is overlaid onto price. When the CYAN line is below the YELLOW line, a bear market is underway. Take only bearish trades. The trade setup for a bearish trade entry occurs when the MACD is in a bearish configuration and the CCI slaps the ceiling at 100. When this setup occurs, the setup is complete. Now you switch over to your favorite entry technique.

14 Entry Technique-2 Entry Technique-2 (ET-2) is a chart pattern. You can use ET-2 with Concept-1 on any combination of timeframes. For our T&B service, I use a daily timeframe for the Concept-1 setup and a 15-minute chart for the ET-2 entry. Trading two timeframes is a two-dimensional approach. The chart pattern for ET-2 is present at EVERY turn point in the market!

Entry Technique-2 Example Bullish Entry When Concept-1 triggers a set up in a bullish configuration, switch down to the 15-minute chart. Step-1 is to wait for the 15-minute chart to make a low.

15 Entry Technique-2 Example Bullish Entry When Concept-1 triggers a set up in a bullish configuration, switch down to the 15-minute chart. Step-1 is to wait for the 15-minute chart to make a low. Step-2 is to let the market rally and put in a swing high. Step-3 is to place a bullish trade when price moves above the 15-minute swing high. Look at the example below. Top chart is the daily timeframe. Lower chart is 15-minute timeframe. Bullish setup on daily Step-2. Step-1. Step-3. Buy above the swing high (white horizontal line)

Entry Technique-2 Example Bearish Entry When Concept-1 triggers a set up in a bearish configuration, switch down to the 15-minute chart. Step-1 is to wait for the 15-minute chart to make a high.

16 Entry Technique-2 Example Bearish Entry When Concept-1 triggers a set up in a bearish configuration, switch down to the 15-minute chart. Step-1 is to wait for the 15-minute chart to make a high. Step-2 is to let the market drop and put in a swing low. Step-3 is to place a bearish trade when price moves under the 15-minute swing high. Look at the example below. Top chart is the daily timeframe. Lower chart is 15-minute timeframe. Bullish setup on daily Bearish configuration Step-1 Step-2 Step-1. Step-2. Step-3. Buy puts or sell short below the horizontal line Step-3. Buy above the swing high (white horizontal line)

17 Mastering The Basics Understanding Expiration Cycles The three main expiration cycles we ll trade in: Short duration Avg duration Long term 7-14 days days 6 months 1yr Used during volatile market periods Applies to all setups Used when market is complacent Applies to all setups Speculative Special setups & situations

18 Mastering The Basics Selecting the Call & Put for Directional Trades 1-option contract represents 100 shares of stock Options chain and expiration cycles Options chain layout in your trading platform OTM // ATM // ITM options Deltas and Implied Volatility

19 Mastering The Basics Order Entry Buying to open calls // Buying to open puts Limit orders for Buy to Open option trades Price discovery Calculating profit targets for call/put option trades GTC orders for entry and exiting

20 Summary Trading Long Calls and Puts Long calls and puts are directional trades We trade long calls and long puts to take advantage of explosive moves due to efficient use of capital in leveraged products The professional trader captures outsized gains by employing money management techniques in combination with a positive expectancy method

Trading Tops and Bottom s

Trading Tops and Bottom s How To Trade Like A Professional Series II, Buying Debit Spreads Why Do We Want To Trade Like a Professional? Leverage small sums of money can with potential to turn into large