For more than ten years, the stock markets were moving upward and allowed for trend trading, but what do you do if there is no trend to make your friend?
The answer
is: Momentum trading; however, it is easier said than done? What momentum to
trade for and how?
Read on and watch the movie…click.
-
What
momentum, meaning the price distance to trade for
-
How,
meaning with which risk-limiting strategy
We simplify
life for you with the NLT Timeless Swing Trading Concept: The chart will tell
when to buy or sell!
A new price results
from a change in supply and demand. In other words: The price express where supply
and demand are finding the equilibrium or match.
The following graph shows a situation with an additional demand for a stock at $100. If no additional supply occurs, the equilibrium will move up to match supply and demand at 110.
Supply
and Demand Schematic
All decision
making dimensions are specified at once:
-
Entry Conditions: When to trade and probability, with buy-stop or sell-stop orders
-
Exit Condition:
When is the target reached
-
Stop Condition:
When are you wrong and exit
-
Risk Management: Risk limiting and risk-adjusted
by considering the Relation of (Entry - Exit) / (Entry – Stop)
-
Time: For how
long to maximum stay in a trade
-
Options Conditions: Strike price to choose, time to expiration, maximum price to pay for the
option
Why do
options come into play? I want to trade stocks only?
Momentum
trades are typically swing-trades, and positions are kept open for a couple of
days. Trading stocks only exposes you to the risk of overnight gaps. Your stop
is a market stop, and if you considered a 2% risk and the stock gaps overnight
by 10% or more, you book that loss because you accepted an unbalanced risk.
Drawdowns are the biggest threat for building up a swing trading account.
The solution
to this problem is:
· Trading for the stock price
development buy choosing options: in our case, buying Puts or Calls
· Trading stocks in combination with
options: Long stock or short stock, together with a protective option
Why do
options offer a limited risk trading strategy?
In the
strategies we choose, the maximum risk to take is limited by the premium to
pay.
But how to
know if an option is reasonably priced or overpriced?
This is
where the NLT Timeless Tick comes into play: A proprietary algorithm for NLT
concept owners that tells you:
· Price-move, not time based when to
enter and exit
· Acceptable price range: NLT Timeless
Tick ± 20%
· Strike price to choose
· Minimum time to expiration to select
The
underlying stock reaching the target will define the exit or the stop, all
auto-executed by conditional orders, not requiring you to be in front of your
computer.
Best
explained by an example:
Here is how
the chart looks like:
AAPL, NLT Timeless Swing Trading Chart, 1/20 – 2/24/2021
· There were seven trade situations:
five winners (71%) and two losses (29%), which was in spec. with our minimum
expectation of 65% winners (NLT high probability base)
· Entry condition: when the spelled out
price threshold is surpassed in the price development of the next candle:
o
Example:
Situation-1, Buy > 136.20 was fulfilled in the next candle and lead to a
price move to the target: dots on the chart. Targets are also spelled out in
the upper left NLT dashboard.
· Stops at the red crossbars
· Never enter a trade at the exit
candle: stop or target.
· If buying Put or Call options, never
pay more than the NLT Timeless Tick + 20%. Expect an option return of about 60%
with similar risk, staying for a maximum of four days in a trade.
· Profit calculation: 0.6 x 5 – 0.6 x 2 = 1.8 or 180% ROI (return on investment) in 30 days
SPY, NLT Timeless Swing Trading
Chart, 1/26 – 2/26/2021
Situation-1: Sell threshold confirmed and came to target the same day.
Situation-2: Sell threshold confirmed and came to target the same day.
Situation-3: Buy threshold confirmed and came to target at the opening of the next
day.
Situation-4: Buy > 385.94 came to target the day after entry. The signal after
would not be considered by being three price increments away from the buy
initiation candle: Buy > 375. 52. We teach those rules in the hours of joint
training and coaching
Situation-5: Sell < $388.56 was confirmed the next day and allowed a solid
opportunity to buy Put options for following the price development that came to
target three days after. Further price indications along the way to target or
stop will not be considered.
Situation-6: Buy > $389.73 was stopped two days after entry, and we would not
enter at the signal of the exit candle.
Situation-7: the trade is still open at the point of writing this article.
In total: five winning trades, one
loss, and one open trade: high probability as we strive for with short-term
swing trading opportunities.
The NLT
Timeless Swing Trading Concept is only one element of what we teach in the
hours of working together. Here a short
overview of what you will all experience by operating with automated trading
decisions in all of your accounts:
NLT
Learning Program Overview
Let us be your
guide to a consistent trader and investor and schedule a free consulting
session, where you can see live what our systems can do for you:
contact@NeverLossTrading.com Subj: Consulting Hour
Working one-on-one
spots are extremely limited: Do not miss out!
For more of
our free publications and webinars…sign up here.
We are looking
forward to hearing back from you.
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