Make More Money Waiting

Making money with the stock market in the long term is a buy and hold strategy utilizing stocks with great dividends like Verizon. When you day trade, you must wait for the right buy signals. If you are not disciplined, you will be buying early and late and selling early and late. When you see certain patterns, you have the tendency to buy expecting that pattern based on the day of the week or just plain wishful expectations.

Not waiting does not only shorten your earning potential, it can cost you for your day profit and create a loss you can't dig yourself out of for the day. Let's break down expectations and timing utilizing JP Morgan activity for the day.

Initial Move for the day

The first movement of the day may not be more than a reaction in the opposite direction from the prior day's movement. If this is the case, the theme is likely to continue from the prior day. Alphabet (GOOGL) was a perfect example of this today.

On the other hand, some stocks like JP Morgan go up and come down in the same day which ultimately create net gains for the day. Today looked similar to yesterday for JP Morgan as it moved sharply up from market open. When that happens, you wait for the pull back to  a near open price to buy calls for the upside. On my chart drawing, I mark it with a yellow "A."

Now you are going to let this run until you get 2 consecutive red candles which designate resistance when looking at your daily chart with 5 minute intervals. This is not the time to sell as it must retest the top. When it does, it typically goes slightly higher. You can sell at this mark or place your trade when it retest that mark again. You will know it is a retest when it reaches the same spot, but the stochastic lines have peaked at a lower mark. The second way is based on peaking in the price chart with space between the top of the Bollinger Band (B).

Secondary Movement of the Day

When you have noticed the top has formed. You locate the first out of the money put option and buy at or near the lowest price of the day. Once you are in on the opposite direction, you must be patient and withstand upward movement as long as it doesn't move dramatically above the pre-established ceiling for the day.

Now to determine the exit of this 2nd position of the day, you should look at where the area was that you bought the call option on the first movement of the day. It is almost safe to aim for the point to take your profit and get out. There are many days the reversal is stronger than the upward movement. It is nice expecting it, but if you enter and exit at the right locations, you make profit and are not holding like I did today just to break even.

Further Notes

The strategy works with many stocks, but not every stock has 2 sharp movements in the same day. You can say that most stocks move in one direction and give part back towards the end of the day, but then there will be that one day that it doesn't give back towards the end of the day and you were expecting it. The key is do your research, know your favorite stock tendencies, get in and out to take your profit daily.

Why I Broke Even and Didn't Profit Today

I bought my 8 initials calls at the right moment today. I freaked out with the 2nd large red candle instead of waiting for the retest as I have seen almost every day. Although the stock was higher than where I bought the calls, because the calls were out of the money, I ended up selling at a break even minus commission. I would have been up over $120 if I were patient and sold at the 2 peak.

On the secondary movement, I bought my puts before waiting for the top to form. I have made this mistake before, so you would think I would have learned, but this is why I am writing this blog. No matter if anyone else reads it, I expect it to create a more powerful memory to act appropriately in order to profit off small movements rather than break even or lose money.

So I bought these 108 strike puts in a market order at .48. If I had waited, I could have placed my order to buy them at .36 and would have bought a third more contracts. I did buy more at a lower amount, .44 which is still not .36. I did not panic although I did have 15 contracts with an average cost of .48 that were worth .36. My account was negative $200 at the worst part.

As I mentioned, I did not panic and knew the downward movement was due with all of the red candle following the peak of the day of 109.30. It moved in my direction, but unfortunately the highest these puts were worth today was .54. I did not sell there because I thought it might fall move sharply towards the end of the day. I was greedy and disappointed based on not buying at the right time. If I had bought at .36, I could have sold at .50 with a different of .14 times 20 contracts for a profit of 280 minus commission. Instead I sold at close for .48 to end the day break even minus $20 in commission.

Day Trading with Options Fresh Start Rule

Part of day trading with options is closing out your position by the end of the day. Each day goes by, the options are worth less if the price of the stock opens tomorrow where it closes today. The only time the option is worth more is when it move substantially at open the next day. Most of the time, even if it opens in your direction, you can buy those options for the same price you sold them the prior day. Therefore the odds say, you are more likely to lose money holding options over night. Like anything, holding options over night could work one time, but more times than not it will not work in your favor.

Tomorrow is a new day and as long as you did not buy options based on hope instead of indicators, you can make tomorrow twice as good as today.