Friday 2 October 2020
The best pattern for trading breakout
Saturday 26 September 2020
Top Six Candle Concepts
- Changing of the Guard™ - COG
- Wide Range Body - WRB
- Narrow Range Body – NR
- Narrowing Range Bodies - NRB
- Topping Tail - TT
- Bottoming Tail - BT
1. Changing of the Guard Bar - COG
A Bullish COG is defined as three or more consecutive
red bars followed by a green bar.
A Bearish COG is defined as three or more consecutive
green bars followed by a red bar.
While there are different variations, the message is always
the same ! A reversal in momentum has occurred!
example Dark Cloud Cover, Piercing Pattern, Bullish Engulfing, Bearish Engulfing, Counter Attack Lines Thrusting Lines C
2. Narrowing Range Bars - NRB
A series of bars in which the difference between the highs and lows is
Narrowing.
While there are different variations, the message is
always the same ! A slowing in momentum is occurring!
3.Narrow Range Bodies - NR
Bars in which the body of the candle is small relative to the overall length
of the candle. They may have Tails on either side of the body.
While there are different variations, the message is
always the same ! A slowing in momentum has occurred!
4.Topping Tail Bars - TT
Bars in which prices had been higher, then supply forced prices
lower into the lower part of the bars range.
While there are different variations, the message is
always the same ! Distribution has occurred!
5.Bottoming Tail Bars - BT
Bars in which prices had been lower, then demand forced prices
higher into the upper part of the bars range.
While there are different variations, the message is
always the same ! Accumulation has occurred!
6.Wide Range Bar - WRB
A Bar in which the Candle Body is relatively wide compared to the
most recent bars .
A Wide Range Bar after a period low volatility ignites momentum in
that direction.
A Wide Range Bar after an extended advance or decline typically
happens near the end of a move. An NR or NRB will signal the turn.
Thursday 24 September 2020
Calendar Spread
Calendar Spread
A Long Calendar Spread is a low-risk, directionally neutral strategy that profits from the passage of time and/or an increase in implied volatility.
Directional Assumption: Neutral
Setup: A calendar is comprised of a short option (call or put) in a near-term expiration cycle, and a long option (call or put) in a longer-term expiration cycle. Both options are of the same type and use the same strike price.
- Sell near-term Put/Call
- Buy longer-term Put/Call
Ideal Implied Volatility Environment : Low
Max Profit: The maximum profit potential of a Calendar Spread can’t be calculated due to both options being in different expiration cycles. One of the most positive outcomes for a Calendar Spread is for the trade to double in price.
How to Calculate Breakeven(s):The break-even for a calendar spread cannot be calculated due to the different expiration cycles being used. A guideline we use is within 1 strike of the Calendar Spread’s strike price.
Wednesday 23 September 2020
Iron Condor Option
Iron Condor
An Iron Condor is a directionally neutral, defined risk strategy that profits from a stock trading in a range through the expiration of the options. It benefits from the passage of time and any decreases in implied volatility.
Directional Assumption: Neutral
Setup:
- Sell OTM Call Vertical Spread
- Sell OTM Put Vertical Spread
Ideal Implied Volatility Environment : High
Max Profit: The maximum profit potential for an Iron Condor is the net credit received. Maximum profit is realized when the underlying settles between the short strikes of the trade at expiration.
How to Calculate Breakeven(s):
- Upside: Short Call Strike + Credit Received
- Downside: Short Put Strike - Credit Received
Iron Fly Option
Iron Fly
An Iron Fly is essentially an Iron Condor with call and put credit spreads that share the same short strike. This creates a very neutral position that profits from the passage of time and any decreases in implied volatility. An Iron Fly is synthetically the same as a long butterfly spread using the same strikes.
Directional Assumption: Neutral
Setup:
- Buy OTM Put option
- Sell Straddle (short call and short put at the same strike, typically At-The-Money)
- Buy OTM Call option
Ideal Implied Volatility Environment : High
Max Profit: Credit received
How to Calculate Breakeven(s):
- Upside: Short Call Strike + Credit Received
- Downside: Short Put Strike - Credit Received