How Do I Trade Options – How To Trade Options Video 42 part 5


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Let’s take a look at some other examples. Here’s an Inside Day. It also has a small, real body. We can go ahead and draw our channel on that. All we do is start at the top of the bar – let’s draw it all the way across, just to give a sense of how important these Inside Days are. This particular Inside Day – you can see that it has a lower high than the previous bar, and it has a higher low than the previous bar. It does qualify as an Inside Day.

We would have gone long, just above the high here, which was $67.97. We would have gone long at $67.98. It never broke the low of this particular day. We would have gotten filled right in here, right around $67.98. The first profit target probably would have been someplace right in here, and the second profit target would have been right in here.

We would have hit two profit targets. We would have had Day 1, Day 2, Day 3, Day 4. We would have gotten out on the open on this particular day.

That would have been a very successful, profitable trade. Take a look at this Inside Day. If you take a look at the channel that we’ve drawn across here, we’ve just extended it. It turns out that the high of this Inside Day was also support for this particular bar here, in which the stock actually traded higher. Can it act as resistance and support?

Let’s take a look at some other examples. This does not qualify as an Inside Day. I started looking at this, but it does have a higher high than this particular day in front of it. Let’s take a look… Inside Days are fairly frequent. You can find them, but you just have to go through it.

Pretty soon, you’ll have a very good grasp and understanding of the Inside Days. Here’s an Inside Day here. It does have a fairly wide body. It’s probably 60% of the previous bar. It turned out to be a good trade. We went long here. Our first profit target was here, at $83.12. We got a little bit over the high of that bar. It was $81.74. We would have gone long, at $81.75. We have about a point and a half here, in our first profit target.

As I mentioned, sometimes this provides support and resistance points. The trade actually did start to come down a little bit. It broke through here. Upon reentering to this 25% area, you could have gone through again, and then exited, someplace down in here. It traded back up into this area again, and sold off dramatically after that.

Let’s take a look at some more recent ones here. This is a good trade. The high on this particular Inside Day was $68.38. We could have gone long, at $68.39. We hit profit target #1 and profit target #2, on this same day. This is Day 1, Day 2, Day 3, Day 4. We would have exited on the open on Day 4.

We would have hit a couple of different profit targets on that one. This target here actually turned out to be a fakeout. It went higher, and then it gapped lower, taking us out of the trade here. That one didn’t work out so well. Let’s take a look at some other stocks here, just at random.

Let’s take a look at Starbucks, for a second. Let’s see if there are any good opportunities here. There was a nice red bar here, although the size of the bar preceding the Inside Day doesn’t really matter. I have noticed that if it has a large real body, and then a small real body afterwards, the trades tend to be a little better in quality. In this particular trade, we had our entry at $17.44.

It traded down. It hit Target #1. It didn’t hit Target #2. This low, right here, turned out to be $16.88. Our target was $16.82. You could have anticipated that it wasn’t going to hold that low, or go lower at any point, and you could have exited your position. Otherwise, you would have exited at the open here, on Day 4, on your position.

Let’s see what else we can find. Let’s go over to Sandisk. There was a profitable situation back here in January. I’m sure there were many more. Sometimes I get bored with a stock and move on to other ones. In this particular day, we had a fairly wide bar here. It was a small real body, followed by a small real body, a narrow Inside Day bar. Our entry was here, at $28.74.

The very next day, it hit our Target #1. The very next day after that, it hit our Target #2. At that point, the stock started selling off. It probably would have been a good idea, if you did see this particular day’s sell-off, to exit your position at the close of that day, when you see that kind of reversal going on. You really want the price to continue in the direction of your trade.

If it doesn’t, and if it reverses below – many times, what I will do is set 50% of this bar here. In other words, if I get an entry here, and I have a nice large bar here, where I hit 50% of my first target, I’m going to set that bar as my target, not to go below. It did hit our Target #2. If you had multiple shares – for example, if I was doing this trade, I would sell 500 shares at $29.79. I would sell out the remaining half of the 250 shares at $38.82.

Then, as it started pulling back, at around 50% of this white bar here, I would sell the remaining 250 shares. That turned out to be a very profitable trade.

Let’s take a look at some other trades, including some other stocks. Let’s take a look at a really high flyer, like Potash, which is a very high-priced stock. Normally, I find that we get a lot more, and you get much better signals and setups on trades on stocks between $20 and $40, even $60, is fine.

Let’s take a look at this, just in case you like to trade higher-priced stocks. This one, in particular, it looks like there’s an Inside Day right in here. All we have to do is go in and take our channel line, and set these up at the high and low of the Inside Day. In this particular instance, we would have entered a short position right here, which is one cent lower than the low of this particular Inside Day.

We would have gone short at $177.71. Right now, it’s at $170.20. You can use different types of stocks. You can use high-priced stocks, and you can use low-priced stocks. It doesn’t really matter.

Let’s take a look at Nvidia. This stock has been all over the map. Let’s take a look and see if we can find any Inside Days on this particular stock. We’ll go back here, to July of 2007, and see if we can find any setups here.

There’s one right here. We had a long red body. We have a small body Inside Day right here. We can set up our channel lines right here. Remember, for these particular trades, we don’t care if the stock goes up or down after our entry, because we have orders on both sides. In this case, we had a long red bar, and we had a small red bar following it, which was our Inside Day.

We would have gone long right in here, which was just above our high price on our Inside Day, at $22.56. We would have gone long. It looks like it did trade down below the low here, and we may have gotten stopped out right in here, before hitting our profit targets. If we had stayed in this, it would have been 4 days, and we would have had a nice little profit here.

Many times, depending on the stock – the stops that I set are one cent below the low here. You can actually set different types of stops, depending on your comfort level. In this particular case, you might have wanted to set your stops a little bit lower, maybe even the price of the prior day’s bar. Especially if this particular bar is on the lower end of the bar that precedes it.

You can set your stop down here, rather than setting it to the low of this particular day. It does increase your risk a little bit. It does give it a little extra room to move, as well. This would have been a profitable trade, if you had done that.

Let’s take a look and see if there are any additional opportunities in Nvidia here. We’re looking for Inside Days that look particularly good. Normally, if you take the higher-range bars here, and try to find an inside bar against those, those tend to work out more often.

This is totally random, and totally unplanned, on my part. Here we go. Here’s an interesting one. We have a long-range red bar here, which I tend to like, when setting up these types of trades. The Inside Day on this one is actually a fairly large bar, and a fairly solid bar. In other words, it has a fairly large real body here.

Let’s take a look at this one. Like I said, none of these are particularly perfect. But they do work out. You would have had an entry one cent above the high of this bar, which was $32.68. You would have entered at $32.69, right in here. This did reverse and go back down, but it didn’t go back into the lower 25% channel range.

You would have been able to stay in this trade. I would have set my stop limit at the low of this channel, at the low of that bar, which was $31.47 minus a penny, which is $37.46. The trade did actually go higher, and it looks like you probably would have hit one target, maybe even two. You probably would have gotten out on this date, right here.

Let’s continue on Nvidia, and see if we can find any other opportunities here, as they’re presented. Remember, you can do this on any stock. If you’re scanning several different types of stocks, you can also do this on multiple issues.

Here’s another Inside Day. Let’s take a look at this one. You can see that there are plenty of opportunities out there. This particular Inside Day is quite interesting, because it actually ended at the high of the day. In this case, because this has a high upper real body, and is a white bar, I may have set my stop a little bit differently – maybe down here, or in the 25% range. We would have gotten filled just one penny above the high here, at $36.14. The high of this inside bar is $36.13. We would have gotten filled at 36.14, right in here.

We would have hit at least one profit target. Certainly, on Day 4, we would have hit our second, and maybe even our third profit target. It looks like a very good trade that was set up here.

Let’s continue to go down here, so we can find additional trades. The trades that you do find are all over the place. Let’s take a look at more random stocks, maybe from some of my watch list. Let’s take a look at some highly liquid stocks, like Proctor & Gamble, and some of the trades that have been set up, that we may have been able to get into here.

Here’s one that I see immediately. We’ll take a channel line, and go up here. There is a high low. It doesn’t look like it violated the low. We would have gone long, right in here. We would have hit at least one, and maybe even two profit targets, right on that.

Let’s keep skimming along here, and see whether we can find any additional opportunities. Here’s one right here. We take the high of that, and bring it across. We’ll take the low. Our entry would have been just above the high of this inside bar day, which was $60.24. We would have gone long, at $60.25.

Like I said, you can set your stop below this bar here, of your Inside Day, or the day before that. You could have set your stop down in here, if you wanted to give it a little more room. In this case, we wanted to hit Day 1, Day 2, Day 3, Day 4. We would have hit at least one, maybe even two profit targets, on this particular day.

For aggressive traders, if you think this particular stock is an up-trend, here’s something very interesting. I have a 20-day moving average here, that appears to be support for the stock. If you wanted to, you could have a little more confidence in this position, by just exiting a portion of your trade, and maybe saving a small lot to continue higher in the trade.

Let’s scan along, and see if we can find additional opportunities in Proctor & Gamble. Here’s one. There are lots of opportunities for doing this. Very few people actually try to pick up on doing these, though. It’s unusual.

I would have picked up this Inside Day here. It looks like it did break through, but it was a fakeout. It did end up closing in the lower 25% range here, in which you probably could have gone short at that time. You probably would have hit at least one profit target down here.

It’s not the ideal set-up, though, because this bar is particularly weak. It’s not a large, solid-body bar. This one is not a small-body bar. They’re about equal. It’s not a strict criteria. The criteria really is that, as long as it’s an Inside Day, you can trade it. But once you start doing these more often, you pick up on the type of bars that you would like to trade.

Your appetite for risk, your aggressiveness, and other factors, will probably indicate which setups you actually want to take, and those you don’t want to take. For example, this is a very large red bar here. This fits the definition of an inside bar, but I don’t think I would take this one, because of the size of the red bar. Also, the size of the Inside Day bar – normally, this bar would be much larger than any of the bars preceding it. I would not consider this to be a narrow inside day bar. It is an inside day bar, but it’s not a narrow one. I would not take that trade.

Here’s one that looks particularly good, that you could have traded. Let’s just check and make sure that the high of this particular day is $60.14. The high of this day is $60.13. You had a potential trade there. You would have gotten filled at $60.14 on this trade, and you would have hit at least one, two, or maybe even three, profit targets on this one.

The low on this, the stop level on this – I probably would have set it to the low of this bar, the previous bar. That would have been my stop, right in there, only because it closed in the higher end. I probably would have preferred a stop down here, just to give that trade a little bit more room.

If I had gotten filled on the short side, I probably would have set the stop on this. Actually, these are pretty close to being similar, but I would have set it up there, as well.

Let’s take a look and see – if you’re getting bored with Proctor & Gamble, we can move on to another stock. I just want to give you some examples of how frequently these happen. These are not rare occurrences. They actually happen quite frequently in the markets, and they are tradable events.

Here’s one that – I don’t want to give you examples of only ones that would have worked out very well, and always perfectly. Let me give you this as an example. The high of this was $61.92. If you have equal highs, like these two bars I’m talking about right here, the highs are identical. $61.92, and $61.92. That is not an Inside Day trade. I would not have taken that trade. It looks close, but I would not have taken it.

Here’s one, in particular, that looks interesting. We have a long red body with a tail. We have an Inside Day that actually has a small real body on it. I’m trying to find some losers for you, if I can. I don’t want to give you as many examples, without any kind of rehearsal on these. These are totally random picks, on my part, just to see if we can find Inside Day trades.

This one, in particular – you would have had a short entry at the low of this bar, at $59.74. You would have had an entry on the high of this bar, at $60.18. You would have gotten filled right in here. You probably would have hit at least one, two, and maybe even three profit targets, based on Day 4. You have Day 1, Day 2, Day 3, and Day 4. You would have hit all three profit targets, probably, on this particular trade.

That was a nice one. Let me see if I can find some that are failures, and total losers, here. Here’s one that probably would have set up okay. You have a white bar and an Inside Day. This Inside Day is fairly large, but it is tradable. You would not have gotten filled on the very next day, at one penny below the low of this bar. The low of this bar was $61.45. You would have entered your order to go short, at $61.44, or long, at the high of this bar, at $61.88.

That would not have gotten filled. This would not have gotten filled, because it gapped down. It did not trade back up, so that you could get filled. It did trade back up to get filled on this day, which is interesting. You would have gotten filled on your short position here, at $61.44. It would have never gone into the upper 25% range. It would have never triggered your stop loss.

You would have hit maybe one profit target here, and exited the position, because it was Day 4 of the position. You would have gotten out at that time. That wasn’t a big winner, and this is kind of an unusual setup. That was a good example for you, that sometimes these things do happen.

I’ll pick out a loser for you. I don’t think I would have traded this, because the prior day was kind of an odd, small-body day. I like large, real bodies in my candlesticks, prior to my Inside Day. But this one, in particular, would have gotten filled on your long side, here. It would have gotten stopped out the very next day.

However, it had an opportunity for a reverse play. You may have hit one or two targets back on the fourth day. This would have gone up and gotten filled, and it would have gotten stopped out down here. It would have been a losing position for you, and a losing setup. However, if you were interested, you could have reversed the position and gone short. You would have hit one, or maybe even two profit targets, on the other side of that trade.

Let me take a look at some more. If we want to, we can change stocks. Let’s go over to IWM. You can also trade this – it doesn’t necessarily have to be a stock. It can be an index, like the IWM. In this case, we have an Inside Day here. We could have gone short here. We probably would have hit at least one, maybe even two, profit targets.

In this case, I used this Inside Day as a support and resistance point. As I mentioned, you can use Inside Days as support and resistance points. As soon as this came above this top channel here, I used this an opportunity to go short on the IWM, only because it looked like it was establishing a new down-trend.

That’s one side benefit, a nuance, of Inside Days. They do act as support and resistance points, and prices tend to vacillate around them, sometimes. At this time, I was looking at shorting the IWM. It was a great opportunity, because it did dip above this particular high of this Inside Day. It closed below it, and it offered an opportunity to sell what turned out to be a very good trade, just beyond that.

Let’s see if there’s anything else available in the IWM. It doesn’t necessarily have to be a stock. It could be an ETF, as well. Here’s one, right here. I don’t think it’s gotten filled, though. It has a nice, ideal set-up, because it has a large red body. If it was a large white body, it would have been the same thing, but it’s a red body, with a white-bodied, spinning top candle. It has a fairly fat, white, real body in here.

You would have entered your position to go long, just above this bar, and short just below it. You would not have gotten filled on either one of those. After Day 4, you would have closed your order entry positions, and not gotten filled on this particular setup. But it did trade higher, and if you did have an opportunity to get into it, it would have worked out well, and probably hit one or more profit targets.

But in this case, it gapped much higher, and it did not trade back down. You would not have gotten filled. And that’s fine. Like I said, don’t chase these trades. Just let them go. There are always opportunities.

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