Ready. Aim. Fire!
Do you want to become a profitable trader? We want you to as well. So first, you must develop a recipe for success that has a healthy blend of three ingredients: Ready, Aim, and Fire! In that order.
Before you just fire away, or even take aim, you first need to prepare. What is your aversion to risk? How much time do you have to dedicate solely to monitoring your trades? How much experience do you already have trading? These are the types of questions you must ask yourself before you aim for a position.
Next, take aim. Successful traders can spot opportunities in the market that statistically point to a profitable decision with minimal risk. When your technical and fundamental analysis point to a potentially fruitful position in the market, it’s time to execute your vision, entering, or exiting the position.
After you have prepared and taken aim, it’s time to take the shot. Fire! This is when you execute your vision effectively, and with efficiency.
In the world of options trading, this process is a continuous cycle as determining when to enter a position is just one aspect; determining when to exit is just as important—and requires the same Ready, Aim, Fire! mentality.
Time is Money
The Trading Analyst uses the “ready, aim, fire” approach with its alerts. Based on a number of different technical analysis and macro indicators, our team of analysts constantly monitor the markets to aggregate trades that are statistically likely to result in a profitable trade. Those opportunities are then measured and put through additional screens to determine risk. The end result is a number of trades with the highest likelihood of being profitable—meaning, the least risk.
Many individuals know options trading can be profitable. Yet, they also know how much time (and headache) is required to successfully navigate the market. Having a full-time job can provide an individual with enough capital to participate in trading, but not enough time to day trade. This is where we come in: We want to help such individuals use their capital effectively by assisting them in executing a sound vision through swing trading, thus saving them time that would otherwise be spent watching the markets continually.
Even if you do have the required time to spend, you remain susceptible to an unfortunate side effect of trading: after spending a significant amount of time screening stocks and conducting analysis, you can still be wrong. And there’s no worse feeling than losing a significant amount of funds on a trade that you spent hours researching.
Not to mention, the time spent analyzing a losing trade could’ve been spent finding a successful trade. As you can see, trading can quickly become a downward spiral.
The tools we use help take a huge weight off your shoulders—this is what our system was designed to do. With swing trading alerts, you can execute a reliable vision with ease, taking advantage of valuable opportunities while maintaining your job, time obligations, and precious capital.
Swing Trading is Key
Swing-trading is the strategy we use to select viable market opportunities. We’ve spent more than three years developing our own unique strategy which utilizes technical analysis to take advantage of swings in the market. Swing trading is a way to make large gains in even turbulent markets, and cuts profits much faster than traditional value investing.
This strategy differs from day trading also. In day trading, you execute buys and sells intraday, which requires an enormous amount of attention. Otherwise, your gains can be slashed with one lapse in concentration. You can think of swing trading as a technical analysis-fueled happy medium between intraday trading and traditional value investing.
One notable benefit of swing trading is that you can profit if the market is moving up or down. A swing trade, on average, is held anywhere from 3 – 30 days. Even if the market is in a downward trend, you can use options positions with a swing trading strategy to find opportunities for profit.
Let’s dive into an in-depth overview of our formula.
Our Methodology 💡
The fabrication of our technical analysis empowers us to transmute telltale indicators into profitable positions. We screen for these using thousands of data sets, and aggregate the information into potential positions:
Also known as market cap, this is the first piece of information we look for. We search for active, large, to midsize securities. Smaller cap securities are less liquid, having fewer shares, typically lower volumes, and oftentimes less information about the underlying company. These factors regarding smaller cap securities vastly increase risk that we make sure to avoid in our strategy. Thus, larger caps are a much more viable option with added statistical data available to fuel our formula.
Initial Consolidation Period
After we find our large to midcap securities, we look for periods of consolidation. This is when the security is bouncing between support and resistance lines, without any breakouts. We choose a security after it has been continuing this sideways trend for a predefined period of time.
The support and resistance lines show us where a security’s price might be hesitant to break through. Usually, when a price goes over the resistance line or below the support line, it will change directions quickly and move back between the two lines.
As briefly mentioned before, we like to examine the history of the security to be exhaustive in our strategy. We look for repeating patterns of strong breakouts, and also focus on previous trade volume.
Heavy Trading Volume
Next, we look at trade volume. Specifically, potential positions that have an abnormally high volume compared to their near-term historical average, and are within the consolidation period. We’re looking for an acceptable number of heavy volume days that fit into our strategy within the consolidation period. Not only does this make the security more liquid, but we believe volume helps to identify relative tops and bottoms in a securities trading range.
A daily close which results in a breakout of the resistance/ support line—coupled with the satisfaction of certain trading volume criteria—is one of the final signals to enter into a position. After the aforementioned indicators are met, we turn to the stock’s previous performance for a final confirmation.
Historical analysis helps us to ensure we are making the most effective choice for our portfolio. It’s not as simple as entering a position just based on the indicators described above, as 4 out of 5 breakouts fail. Our historical analysis includes a combination of both technical factors, and macro indicators. These important indicators give us a sense of what will happen to the price of the security we are analyzing, while also reducing overall risk in our decision making.
It is not until the stock’s historical performance is analyzed before we finally jump into a position and broadcast alerts to our subscribers. Sometimes, we can be following a certain stock for weeks, or even months, before all indications finally point towards “fire”.
These alert notifications are sent in real-time via text message. We’ve found this to be the best and most efficient way to share alerts among our membership in the fastest manner possible, ensuring no one misses out on a potential opportunity.
All of the indicators described above must check out before we enter a position. In short, once we find an active security with a large to mid size market cap, we look for a series of supporting indicators that fit within our strategy. These include a period of consolidation, or sideways trading for a set period of time, an adequate number of heavy volume days within that period, and historical information that reinforces the other indicators and hedges overall risk.
Exit Strategy: Profit Target Calculation and Risk Management 🚀
Indicators to Sell
Now let’s get into our strategy of exiting positions. The indicators we have described so far apply only to entering a position, which is just half the battle. Knowing when to sell is key, and it actually starts with the time we enter the position.
Namely, upon entry into a position, we already have a target of when we’ll sell half the position. Again, risk management is the backbone of our portfolio, so we don’t want to sell the entirety of the position.
Selling the other half of the position has its own unique set of criteria. Here are a couple basic processes we use in our selling strategy.
First, we calculate the difference between the top and bottom of the range in the resistance and support lines, that number is our target to sell the first half.
For example, if the top end of the range is 10 and bottom is 5, then our target to sell the first half would be 15.
The second half isn’t as cut and dry. There are a number of variables at play, which all differ on a case by case basis.
We always implement stop loss orders. These prevent further losses whenever we see that a stock’s activity is diverting from our initial analysis. In the world of options trading, it’s OK to be wrong—everybody is wrong from time to time. What’s not OK is egotistically holding onto an existing position that is clearly going off course only to increase losses. The stop loss mechanism helps with this.
Options or Stocks?
The majority of our trades will feature options. This isn’t all the case, however.
We will opt for a common trade for a few different reasons:
- If the market environment is unfavorable, meaning general market volatility is high and options are expensive
- The particular stock options are expensive and the majority of our members could not afford it (AMZN for example)
- If the options on a potential stock are illiquid (big spread, poor option interest)
Risk Management: Our Key Component to Profitability 📈
As I’m sure you’ve seen by now, we strongly view risk management as the backbone of our long-term success.
By employing disciplined risk management, we can realize more consistent gains within our portfolio in varying market conditions. Important metrics such as the annualized return, beta, and Sharpe ratio are used to ensure that there are suitable position sizes within the portfolio, and also to help manage its overall profitability. This produces impressive results in TTAs portfolio that are strong on both an absolute, and risk-adjusted basis.
Since risk management is so important, let’s recap some of the ways we incorporate this key ingredient into our strategy:
Our intricate process in selecting securities for our portfolio helps diminish risk tremendously. The vigilant selection process begins with finding securities with large, to mid-size market capitalizations. The underlying companies in larger market caps are more established with safer liquidity levels when compared to stocks of smaller market caps.
Once a security has caught our attention through a high number of initial screenings surrounding price action and trading volume, we look at the history of the stock. Our formula has discovered that certain historical activity statistically increases the chances of an upcoming trend. This historical screening is another important aspect of risk management.
Once we enter a position, neither the analysis nor the risk management stops. First, we use stop losses to minimize losses. Unfortunately, we can’t always win. We accept this. But what we won’t accept are unnecessary losses. Therefore, as soon as we see that our initial analysis is off, our stop loss orders will be triggered to minimize the burden.
We also use our own target profit calculation to determine when to sell the first half of a position. This helps us to hedge risk, and allows us to take profits in a safe manner. In the long-run, this has proven to provide greater returns than holding the position in anticipation of increased movement in the favorable direction.
A Quick Wrap Up
Ultimately, the combination of risk management, systematic analysis, and a proven formula, allows TTA’s portfolio to achieve consistent results, helping you beat the market even in any environment. Say goodbye to monitoring the markets for new opportunities, and the costly headache of an unsuccessful trading strategy.
The Trading Analyst was designed to help you make better trades. As emphasized above, the key to our success is a long-term strategy with a strict focus on risk management.
But don’t just take my word for it: To date, we’ve helped more than 11,450 traders see success in the market. Just look at our performance from January 2018 – July 2021:
- Starting equity (Jan 2018): $100,000
- Equity (July 2021): $842,744.71
- Net profit: $742,744.71
- Winning trades: 301
- Losing trades: 248
- Average win: $4,526.05
- Average loss: -$2,498.37
- Profit factor: 1.81
- Win rate: 54.8%
So what are you waiting for?
Say goodbye to trading’s headache, confusion, and time requirements.
Get started with The Trading Analyst today.