Most clients of Options Trading Coach Jo struggle with support. Support is an area rather than an exact magical number.
A strong support area is an area that the stock has frequently gone down to and either pops back up or hangs out at that area until it eventually pops back up. The more times that the support area is hit, then goes back up, the stronger the support area.
Traders that look at a chart can easily see the support area. In fact, they may make the decision or tell their broker to buy the stock once it hits the support area and starts back up. Many traders seeing this same pattern will make the same decisions to buy at support. Due to this high volume of buying, the stock price will raise and continue to raise as more traders see the stock bounce up from support.
Support can be a horizontal area, an ascending area or a descending area. Pay attention to these support areas. Start by drawing lines on your chart where you see a support area.
Determine support areas for 3 stocks by drawing lines on their charts. Watch to see if the stock respects the support area and bounces off and back up.
Of course, the support area can be broken. In this case, watch for the next lower support area and watch to see if your stock respects the new support area.
Determining support can be seen as an art rather than a science. Train your eyes to see support areas and your trading profits will greatly be improved.
Here’s to you,
Some Trading Coach Jo clients have been asking me about how they can best measure momentum. With the current market, I have been using the previous 2 day high/low plus the first 30 minute OR. I use this as a validator just before opening a trend trade. Let me explain:
When a ticker meets all my written entry rules for a trend trade, I then take my last step before entering. I open up a 5 minute, 2 day chart. Part A and Part B both must be met before I will open a trade. The order of Part A or Part B does not matter. They just must both be satisfied. Part A = the stock price is above the high for the previous 2 days. Part B = the stock price is above today’s 30 minute Opening Range (OR).
This type of momentum checker has been very useful to me. It has kept me out of trades and gotten me into the right trades. Hope this tip will be useful to you.
Hey traders – I don’t know about you, but once my December option spreads expire this Friday, I will take a break from trading until a few days after the New Year. It is very important to me to take a break. I encourage you to do the same. Spend time with friends and family. Acknowledge yourself for all that you have learned and accomplished this year. Thank those that have supported your efforts.
If you find yourself reacting to this idea, stop and think about it. Is trading the goal or is it the means to an ideal life style? Have you turned trading into a JOB? I surely hope not!
I wish you and your family a very happy and restful Holiday Season! See you in the New Year!
Ho, Ho, Ho!
Trading Coach Jo’s clients are taught to strictly follow proper Money Management Practices. Here are 2 of the MMPs:
1. Each trade amount must be a maximum of 10% of your account.
2. Each trade must have a maximum stop loss of 20%.
Two simple rules, yet so difficult for some to follow. When those trading emotions flare up, even these two simple rules often get thrown out the window. Traders get so excited thinking about their “sure” trade. I am certain that you have never done this, but you may have a friend….
Take a 3×5 card and write: “Think you know what the market is going to do? NOT” Tape this card to your monitor.
Be aware of the effects that unchecked emotions have on your trading judgment. If you are sooooo sure of a trade, you may find yourself entering this trade using 20-30% of your account. If the trade does go against you, your losses will be great and your trading account will suffer needlessly.
Trust me (ask me how I know), follow these 2 rules and your trading account will stay live so that you can trade another day!