My Trading Rules
My Trading Rules
These are the rules I live by and how I trade on a daily or even swing basis regardless of what ticker
This post was last updated on 6/2/2024…
What is my trading style? Finding key levels - such as dealer hedging levels - and waiting for breakouts or breakdowns of these levels. We can't predict, but we wait #paytiently and will be paid handsomely then!
I focus on a few key tickers... $SPX, $SPY, $AAPL, $TSLA, $NVDA, $ADBE, $ENPH, $NFLX, $MFST - basically tickers with larger options volume
I try to avoid trading in the first 5-15 minutes of a session UNLESS I am in a trade from the prior session and looking to close the trade or we have a major gap or a key level already broken
I let the initial balance do its thing - I am just a small fish in a large ocean of traders so let's let them fight it out
I then wait for key levels targeting one level to the next and taking profits at each one.
If there are key levels that are 10pts apart that is when I have scalping mindset and anything above 10pts I want to give it the room to hit the price target with a 5 pt buffer to take profits once we reach within 5 pts of a target - I also tighten my stop loss once at 10-20% profit with the goal of never allowing trades to go red when I have a nice profit)
My goal is not to be right, but to lock profits and reassess where I can enter into trades or roll up if we have continuation
My bank growing is more important than my ego…
Additionally I use these criteria’s as well to determine if I take the trade prior to this half hour mark
Do we have any new catalysts coming up at 10am est?
Did we have all of our news catalysts in the pre-market?
Are we breaching or has one of our trade ideas broke out?
What is my risk tolerance if I do take the trade before the half hour?
Options Trading Details
SPX
I mainly trade SPX options - certain occasions will I trade SPY (big vol days and want to reduce risk, etc)
If I am playing for a weekly plan I will buy at least that weekly if not the next weekly expiry
If I am trading intraday I will buy at least 1DTE unless I see some news catalyst or continued trend that will push us in a certain direction with certainty
Individual tickers
Always the weekly if NOT the next monthly or quarterly OPEX strike
I supply options greeks with OB (order blocks) and FVG (fair value gaps) otherwise known as Smart Money Concepts
When I am scalping - ie targeting 10pt trade levels I will take profits and never go more than 10% red. Simple as that, know your trade plan strategy and the risk. When you are wrong you are wrong and reset
For 15-20pt trade level targets I will increase my stop losses to 15-20% and allow more of the trade to play in the event I entered too early
I try - key word try ha - avoid trading after London close and lunch hours defined as 11:30am to 2 pm est. Money for the most part unless you are scalping - is made in the first 2 hours of the trading day and the last 2 hours
I always stick to two EMA’s on my chart and that’s the 10/50 EMA’s
When the 10ema is above 50ema we are bullish
When the 10ema is below the 50ema we are bearish
Go put these on your charts and when you view them on timeframes less than the daily timeframe you will see the power they provide
For scalpers out there the smaller timeframes provide great opportunities to scalp 5-10pt moves
For details on how to spot a breakdown or breakout check out my YouTube video
Using Volland For Tickers & Swings
I shared the below details in Volland’s Discord and sharing here for our readers.
besides using Volland I am using Volume Profile and Smart Money Concepts - orderblocks - to identify key levels or areas of accumulation by whales - most times key vanna levels overlay OB's. I then compare that analysis from my chart with the vanna levels on the ticker - i am looking at the aggregate expiry's and i also want to look at the weekly expiry and the OPEX monthly and quarterly expiry. why the weekly expiry? That has provided some key levels where price may overshoot an aggregate vanna only to find support/resistance on a weekly expiry. I then look at the vanna levels with the most value at a given strike to create my "boundaries" and then use those to compare what orderblocks are in agreement with them. What happens in between then is where I rely on key vanna levels near spot - since the ATR on some individual tickers are a couple of points or less a day when I enter a trade on a ticker I want to see if it fails a breakout or breakdown. These give amazing trade ideas that you can then trade intraday or start a position post 2 pm est and ride into the morning the next session.
ADBE's ticker is a prime example - it is always overshooting key vanna levels - only to retrace and find the next vanna level below. Over the past week - week and a half - the negative vanna on 540 had been accumulating and I now feel comfortable to trade this in the future is that anytime you visit large notional negative vanna level and it holds is when you can swing trade a week or two out. ADBE did have news release on a new PT that same week and that notional value kept increasing even as we passed it so while I trade intraday I now know that once that level broke again - meaning it went below 540 - fireworks can occur and a nice opportunity for a swing trade. If you look at ADBE's chart you can see it was the high, then gapped up on news and then sold off since then. It's almost similar to how the 510 level has been acting - it shifted multiple times from negative to positive vanna as it held and finally when it broke this week the total notional value increased and it flipped red once we broke it and held it.
I want to add that I am paying close attention to delta as well - individually puts and calls not aggregate of them. I keep notes on major changes to see where positioning is occurring and the larger the value the stronger those areas of interest are and where I think the swing trade ideas can be formed. I will also look at DAG for key levels where dealers may buy/sell and I start to monitor the weekly charm. I don't think charm is as strong on individual tickers as we know that as time passes closer to an expiry charms weight holds stronger. Even at a weekly charm view there isn't much there or at least yet that has guided my direction - instead I will rely on SPX and QQQ charm 0DTE to give me guidance on what the ticker may do.
Additionally, I am not looking to immediately jump into a trade when a key level is taken out unless it matches some of my criteria's such as:
If my trade idea is to hold no more than a couple of days I am still trading at least one week out and if price breaks a key vanna levels - like 510 or 515 on adbe - then i am waiting for its retest to see what it does. Does 515 hold to short it or is it going to chop around between 510 and 515? On friday ADBE tried to overtake 515 couldn't and immediately fell to the next key vanna level of 510 and 505
as of late I have been swinging trades and i hate to use the word "swing" here for no more than a day or two and that's cause a lot of tickers are decaying premium quite a bit unlike when we had our rally the past few months - if your timing is right even some of your swing trade ideas could hit in a given day/2 days/week and i will evaluate whether I close them and consider a new trade to roll up/down my option strike - for example if i bought on adobe 500p's 2-3 weeks out and see below on my profit targets I am going to take it and then wait for another entry to roll down 2-3 weeks out. this allows me to lock my profits in on shorter timeframes while still "riding" it to the boundary I mentioned
i keep a strict stop loss or profit taking % - if it hits 20% up I start trimming to lock profits and let it ride to the price target. If i am down 20% I look at what my stop loss level was and make a quick decision plus time to expiry
i am always trading at least one week if not 2 weeks out - i do not do weeklies - this market is just decaying premiums way too fast
i use market seasonality for some of my bias - ie the month of August into september is one of the more weaker months for the market and so I will look into vanna to see what levels above spot even could fit my bias and where i can find some entry
i have noticed that unlike SPX - some of these tickers such as the 505 level you want to start locking in or closing the trade around 508 or a few pts out in the case of ADBE. Some of these tickers can mean revert before the key vanna level so that is why with my PnL % target and this I don't always ride till the desired price target and why i compliment the Volland data with VP or OB's
I only trade tickers with larger options volume - the data in Volland is amazing, but when options are not heavy in volume the picture is not as clear and you need to rely on other things like dark pools for key levels. Thus why I usually trade ADBE, ENPH, NFLX, MSFT as the data is clearer on some of these tickers than others
There are more we could discuss including volume profile, low volume nodes that I think are great strategies to compliment option greeks. Maybe in the future we can include more details.
Trading is not for the unprepared. It is critical you abide to a strategy and checklist and walk into every trade with a plan. Without a plan you are simply gambling and have a better chance at the slot machines. There are more nuances to my weekly and daily checklists, but I think this provides a good read for now and we will/can continue adding to it.