- My 4 Favorite Trades - Essential Trades of a Professional Trader

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1 presented by Thomas Wood MicroQuant SM Divergence Trading Workshop Day One - My 4 Favorite Trades - Essential Trades of a Professional Trader

2 Risk Disclaimer Trading or investing carries a high level of risk, and is not suitable for all persons. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. This content is subject to change at any time without notice, and is provided for the sole purpose of education and assistance in making independent investment decisions. ValueCharts.com has taken reasonable measures to ensure the accuracy of the information contained herein; however, ValueCharts.com does not guarantee its accuracy and is not liable for any loss or damage which may result directly or indirectly from such content or from an inability to access such information or any delay in or failure of the transmission or the receipt of any instruction or notification in connection therewith. Any past performance results are shown for illustration and example only, are hypothetical and as such have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Past performance is not necessarily indicative of future results.

3 CFTC Rule 4.41 (Hypothetical Disclaimer) U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures, stocks or options on the same. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR- OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED WITHIN THIS SITE, SUPPORT AND TEXTS. OUR COURSE(S), PRODUCTS AND SERVICES SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE USED TO INVEST REAL MONEY. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS SHOULD BE YOUR OWN.

12 Year Senior Advisor Vanguard Asset Management

4 About Me Dave Aquino 1995 Graduate of Vanderbilt University Full Broker at Age 23 with Merrill Lynch 12 Year Senior Advisor Vanguard Asset Management Service 31 months in Stocks & Options Live Trading Room

5 - My 4 Favorite Trades - Essential Trades of a Professional Trader

6 4 Essential Trades of a Professional Trader The Consistency Trade The Explosive Trade The Continuation Trend Surfing Trade Do It Everyday Trade

7 The Consistency Trade

8 4 Essential Trades of a Professional Trader Weekly Credit Spread Routine, consistently performing weekly income trade. Sell Credit Spreads based on 60 min & Daily timeframe Selling Option Premium : Theta (time) Decay

9 4 Essential Trades of a Professional Trader Weekly Credit Spread Trades on Mon, Tues or possibly Wed Selection based on Daily chart Momentum trend Protected by at least one, better two: price action setup, significant daily EMA level, daily high/low

10 4 Essential Trades of a Professional Trader Weekly Credit Spread Trades on Thurs or possibly Wed Selection based on 60 minute chart Momentum trend Protected by at least one price action setup, significant daily EMA level, daily high/low Bonus : Daily chart s momentum trend is in agreement with 60min

11 4 Essential Trades of a Professional Trader Weekly Credit Spread Selling Spreads requires looking at charts from a different point of view. Focus on selling (short strikes) Away from projected price direction Where will prices most likely NOT be at expiration.

12 4 Essential Trades of a Professional Trader Weekly Credit Spread

13 Weekly Credit Spread STEP 1 : Look at 60 min Chart / Daily Chart Check for Momentum Direction & Strength MQ Momentum or MACD Squeeze histogram direction Bonus : for 60 min Charts, Same direction as daily Determine if the daily chart is also in same direction

14 Weekly Credit Spread STEP 2: Review last bars of stock s Price Action Look for obvious setups Divergences, Double Top/Bottom, Channel breakouts Change in momentum : MQM or MACD

16 Weekly Credit Spread STEP 3 : Look for Active Protection Did Price Action setup create obvious support & resistance levels Plot Daily EMA levels on 60 minute chart Daily highs & lows create high & lows

18 Weekly Credit Spread Step 4 : Does it pay a decent credit? Historical average, $ $0.70 Conservative Sweet spot : Don t be too aggressive Bigger credit = bigger risk Less credit = extra distance & extra protection

20 Weekly Credit Spread STEP 5 : Risk management / Long Term success Once you sell the credit spread, determine risk Recommend 2x 3x max gain, stoploss Active Traders : Mental stops (b/c Fri opening gaps) Set&Forget Traders : Put stops in now

21 Weekly Credit Spread STEP 6 : Friday AM Watch for reversal gaps If gap against watch momentum strength & possible gap fill If positive or neutral open, maintain position time decay will very likely generate jump in profits at open

23 Weekly Credit Spread STEP 7 : Exit Phase Friday Afternoon Optimum exit = Spreads expire worthless Keep 100% of Premium No exit commissions If you can t watch, partial profits are OK Try to get commission free close out of positions

24 Weekly Credit Spread Set & Forget Traders : Extra notes Be selective on candidate OK to have more requirements : clear momentum, clear setups, daily high/low support & resistance levels Decide on Risk Control / Stop Loss levels Too narrow : stopped out early Too wide : too expensive losses In both cases, reduce # contracts What we can control : Being Selective

25 Questions on the Consistency Trade - Hourly Credit Spreads -

26 The Explosive Trade

27 4 Essential Trades of a Professional Trader The Explosive Trade Directional Breakout Squeeze Trade Situational Trade : Compression -> Breakout These trades, especially in hourly & daily timeframes, can be start of major moves

28 4 Essential Trades of a Professional Trader The Explosive Trade Any Trading Day, Any Timeframe Trade Based on breakout of a Momentum trend

29 The Explosive Trade STEP 1 : Look at Chart, any Timeframe (5 min, 60 min, Daily) Check for YELLOW VBT Squeeze Signal dots

30 4 Essential Trades of a Professional Trader

31 The Explosive Trade STEP 2: Look for obvious quiet consolidation Horizontal Channel Pattern Pennant formation Review last bars of stock s Price Action Change in momentum : MQ Momentum or MACD

32 4 Essential Trades of a Professional Trader

33 The Explosive Trade STEP 3: You can enter once MQ Momentum or MACD signal lines are favoring a bullish/bearish side. Or you can wait until breakout occurs across support/ resistance level

34 The Explosive Trade STEP 4: Monitor Momentum Signal Line slope, look for building momentum strength Verify Heavy Volume (dark blue) in VBT on Squeeze fire, watch for increasing VBT histogram

35 4 Essential Trades of a Professional Trader

36 The Explosive Trade STEP 5: Hold Trade until Momentum Signal Line slope, goes flat VBT Histogram Bars switch or start moving back to mid-line Get reversal setup in opposite direction

37 4 Essential Trades of a Professional Trader

38 Questions on the Explosive Trade - Directional Squeeze Breakout -

39 The Bull & Bear Flag Trade

40 4 Essential Trades of a Professional Trader Bull Flag & Bear Flag Trade Ever feel disappointed that you missed a trade? Still want to jump on, but didn t know how? The continuation trades : Bull Flag & Bear Flag can get you in on the price action, and help you more safely enter a trade.

41 4 Essential Trades of a Professional Trader Bull Flag

42 Option Trading Ninja Bull Flag & Bear Flag

43 4 Essential Trades of a Professional Trader Bear Flag

44 4 Essential Trades of a Professional Trader Bull Flag & Bear Flag

45 Bull Flag & Bear Flag STEP 1 : Look at Chart, any Timeframe (5 min, 60 min, Daily) Check for Verified Breakout or Reversal Strong directional momentum

46 Bull Flag & Bear Flag STEP 2: Bullish Trend Bull Flag formation Look for lower high / lower low bar Pattern (3 Bar) - Look for entry at first break of previous bar high

47 4 Essential Trades of a Professional Trader Bull Flag

48 Bull Flag & Bear Flag STEP 2: Bearish Trend Bear Flag formation Look for higher high / higher low bar Pattern (3 Bar) - Look for entry at first break of previous bar low

49 4 Essential Trades of a Professional Trader Bear Flag

50 Bull Flag & Bear Flag STEP 3: Continue to hold through subsequent bull/bear flags Possible to Add positions, 1 st or 2 nd flag Trend usually has 3 4 Flags before reversal

51 Questions on Bull & Bear Flags

52 The Do It Everyday Trade

53 4 Essential Trades of a Professional Trader Mid-Morning Reversal Within the framework of the Opening Range, the Mid-AM reversal is one of the most consistent intraday trading patterns. You trade against a consistent trending move that runs some time in the first trading hour.

54 4 Essential Trades of a Professional Trader Mid-Morning Reversal Between 10:15 10:30 10:45, look for a reversal pattern against the O.R. Move Highest probability move is a 50% retracement. Next highest 61.8%

55 4 Essential Trades of a Professional Trader Mid-Morning Reversal

56 4 Essential Trades of a Professional Trader * The OPENING RANGE * - Opening Range of the trading day - Defined by the first 30 minutes (9:30am 10am Eastern) - Opening Range High the highest price the index traded in the first 30 minutes - Opening Range Low the lowest price the index traded in the first 30 minutes

57 Opening Range

58 4 Essential Trades of a Professional Trader * The Mid-Morning Reversal* - 10:00 10:45 AM : Likely range of Mid-AM Reversal - If Index moving +45 inside O.R. Box it will emerge at the top of the O.R. Box - If Index moving -45 inside O.R. Box it will emerge at the bottom of the O.R. Box

59 4 Essential Trades of a Professional Trader Mid-Morning Reversal

60 Mid-Morning Reversal

61 Quick Reversal at 10AM

62 4 Essential Trades of a Professional Trader Trade Setups for Reversals - Double Tops / Bearish Divergence : still common, higher probability of success because of 2 points of momentum & prices to compare, higher probability against O.R. High or against previous Daily Highs - Double Bottoms / Bullish Divergence : higher probability of success because of 2 points of momentum & prices to compare, higher probability against O.R. Low or against previous Daily Lows - Enter at the Second high/low price in direction of divergence

63 4 Essential Trades of a Professional Trader Trade Setups for Reversals - Head & Shoulders Pattern : Triple Top/Bottom - Decreasing Momentum Setup - Watch for Double Top / Bearish Divergence pattern to possibly develop into H&S pattern - Watch for Double Bottom / Bullish Divergence pattern to possibly develop into Inverse H&S pattern - Enter at the Right Shoulder as bearish trade

64 4 Essential Trades of a Professional Trader Mid-Morning Reversal Watch for a trending min O.R. Move Between 10:15 10:30 10:45, look for a reversal pattern against the O.R. Move Highest probability move is a 50% retracement. Next highest 61.8%

65 4 Essential Trades of a Professional Trader Mid-Morning Reversal

66 Questions on the Do It Everyday Trade Mid-Morning Reversal

67 Thank You for your Attendance

The Launchpad Strategy

presented by Thomas Wood MicroQuant SM Divergence Trading Workshop Day One The Launchpad Strategy Risk Disclaimer Trading or investing carries a high level of risk, and is not suitable for all persons.