Edition 697 - October 20, 2017

Chart Scan with Commentary - Consolidation Part 3

by Master Trader Joe Ross
Author, Trader, Trading Mentor, and Founder of Trading Educators, Inc.
Developer of Instant Income Guaranteed

I’ve been discussing ways to spot congestion while it is still early in the game. Another way to know when you are in congestion is to see four bars with Opens, Closes, or both, inside the price range of another bar.  Typically, you will see a large magnitude price bar, followed by price bars that all Open or Close within the trading range of the larger bar.

Sometimes the large bar occurs within the consolidation and is not the first bar in the series.  However, the large bar usually occurs first.

This should not be surprising.  I have proven over the years that some form of consolidation typically follows large magnitude bars.

A gap beyond the range of the previous bar is also a large bar move.  Why?  Because, in effect, prices have moved from the previous bar's close to the open of the bar following the gap.  This, too, warns of an impending consolidation.

There is not enough room in this Chart Scan for me to show all the possible combinations of dojis, Open-high, Close-low bars, or Open-low, Close-high bars.  Just remember that when you see these things happening, the market is in, or is about to go into, consolidation.

If these consolidation areas hook together, linked at times by single-legged trends, you then have what I call Congestion (11-20 bars) or a Trading Range (21 or more bars).

The question becomes how to trade effectively inside a sideways market.  It's important for you to know, because at any time markets can and do go into prolonged consolidations — sometimes remaining in them so long that it becomes difficult to make a living without a good understanding of how to trade such markets.

In the next issue of Chart Scan we will take a look at how it might be done.

To be continued...

© by Joe Ross. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc.

Trading Article - Setting Goals

by Master Trader Joe Ross
Author, Trader, Trading Mentor, and Founder of Trading Educators, Inc.
Developer of Instant Income Guaranteed

Here's a piece of advice: Don’t set goals too high.

A few months ago, happy Harry started trading. He read and heard that it is important to set specific goals and to try to reach them. Harry thought, "I really ought to set high goals for myself; doing that will help me to try hard. I think I'll shoot for a 20% profit per month."

But has Harry set a realistic goal?  Dreams of getting rich can be a powerful motivator.  However, setting unrealizable goals and then failing to meet them can demoralize Harry and actually defeat his efforts.  There's a difference between high hopes and specific goals that you work to obtain, having a methodical and detailed plan. 

High performance goals are not always the best goals. Harry may not have the experience or skills to reach a goal that exceeds his abilities. For example, would you try to swim the English Channel if you can't even swim two laps in a swimming pool?  You have to avoid making overly high trading goals until you have the knowledge and skills to achieve them.

Nevertheless, here at Trading Educators we observe many novices making the mistake of setting their goals too high.  We can understand why they do it, but we always try to dissuade them.  Our culture teaches people who are ambitious to set high goals.  We are taught that it is necessary to set high standards for ourselves and go out and do whatever it takes to reach them. But studies have shown that what is most important is the way you go about achieving goals. 

When aspiring traders set high goals that exceed their skills, they usually fail, feel discouraged, and give up. So if you are an aspiring trader, like Harry, it may not be a good idea to immediately strive for a 20% profit per month.

If you're an aspiring trader, set yourself up to win, but don't set performance goals that are beyond your ability to achieve. Break your overall goal into specific steps, and pat yourself on the back after you succeed at each step. When you become a seasoned trader with advanced skills, you can set out to achieve your high performance goals. But in the early part of your trading career, it's in your best interest to focus on building your trading skills rather than on achieving a huge profit every month.

© by Joe Ross. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc.

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Instant Income Guaranteed - NTNX Trade

Philippe Gautier: Administration and New Developments
Developer: Joe Ross
 

On 27th September 2017 we gave our Instant Income Guaranteed subscribers the following trade on Nutanix Inc. (NTXN). We sold price insurance as follows:

• On 28th September 2017, we sold to open NTNX Nov 17  2017 17.5P @ 0.25$, with 49 days until expiration and our short strike about 24% below price action.
• On 12th October 2017, we bought to close NTNX Nov 17  2017 17.5P @ 0.10$, after 14 days in the trade for quick premium compounding.

Profit: $15 per option

Margin: $350

Return on Margin Annualized: 111.73%

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Philippe

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© by Joe Ross and Philippe Gautier. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc.

© by Marco Mayer. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc.

Trading Article - Don't Steam

by Professional Trader Andy Jordan
Educator for Spreads, Options, Swing/Day Trading, and
Editor of Traders Notebook Complete and Traders Notebook Outrights

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