Member FAQ's
(Updated Sep 30th 2020)

Here is a list of questions that I get asked on a frequent basis. I will keep adding more notes and answers to help all of you in making good Trading decisions.

What Stop-loss should I use on my Option trades?

Defining a set stop-loss on Option prices is very difficult as an option can loose as much as 50% value and still come back up within the same day. It depends on other factors like the number of contracts you have, your level of risk aversion, and account size etc. I personally base my stop-loss on chart levels.

 

Keep in mind the option decay factor as well. If the stock just goes sideways for half day, the option can still loose value to hit your dollar or percentage defined stop-loss.

What is the correct way of entering a trade once a Price level is triggered?

First of all - there is NO set rule around this. But based on my trading experience and to avoid the probability of being faked out - I like to see at least a 2-minute candle confirmation above or below the Trigger price. However, in the morning hours when trading is volatile, prices can move fast so even if 2-min candle is not complete, but it is deep above or below the trigger point, and 2-minutes are about to be over - I have entered trades right there and then. Once you start trading, you feel the move and look at the volume to decide instantly. 

How do I make use of Target prices?

Target prices that I provide are my view point on how far a stock price can go after crossing a certain price level. Of course I base it on various factors and historical price action to give it realistic expectations. I provide various targets above or below my alert levels. Based on the number of contracts I trade, I like to trim as the price moves toward my first target. Don't like holding too long. Once the target is hit, I close out majority of the position and if it still looks good, I may hold for some more time to see if it goes toward my next target. That is a smart way of ensuring that you are protecting your profits.

What time frame should I use for timing my entry as we approach the trigger price?

 

I like to use 2-min charts to take an entry. If you like you can also use 5-min charts, but in the morning when stocks are moving fast, 5-minutes can be a life time. So again, there is no perfect way - you just go with the flow, but some sort of confirmation is always good.

How many trades should I take from the morning Pre-Alert summary?

 

I personally like to focus on 3 to 4 names from the list after preparing my pre-alert levels. I look at pre-market price action, daily and hourly price bars, volume and the general market sentiment to come up with at least 2 stocks on the call (long) side and 2 on the put (short) side. That way I am not predicting the move but only reacting to pre-determined price levels. If A happens, I will do X. If B happens, I will do Y. Take the guess game out. 

If the price level gets triggered the second time - do I still take the trade?

It depends on: - 

  • Time of the day

  • Volume on which that level is being taken out

  • How is rest of the market doing compared to the stock I am looking to trade

Should I wait for Entry/Exit Tweets to get into a Trade?

 

Absolutely not. The whole reason I do the hard work of coming up with price levels and trigger prices is to avoid the lagging feature that comes with following my exact entry tweets.

 

You will not only avoid slippage, but it helps with learning and giving you the confidence to trade. It actually improves your order execution and entry price. As I already share what option contract will I enter and at what stock price level - there is no point of waiting for my tweet. Waiting for my tweet will only delay and minimize your potential profits. Time is money when it comes to Options trading.

What is your ideal holding time in an Option Trade?

 

It is hard for me to suggest as different stocks have different ranges. I am a fast trader and have my trading screen laid out to support order execution for options. My trades usually last from few minutes to may be half an hour. With most of them definitely under 20 minutes. Few trades take time to play out if the stock is sticky. I like to take profits early, and if a second or third level plays out, one can always enter again to scalp. 

What is the best way to select the stocks for trading from my morning pre-alerts? 

 

Always good to read my corresponding notes to get a little bit of view point. Check pre-market prices compared to the price levels I have mentioned.

 

  • Are we already trading close to that level?

  • Does that mean the entry will trigger soon after open?

  • Are we too far from both the upside and downside trigger levels? If so, ignore that stock for morning trade as it is not likely to get triggered soon.

 

I know few members like to check notes on the same stock from the day before. Helps them in forming an opinion and a market bias. That is a good approach. I do majority of the work for you. But you have to take responsibility of your own trade and its final result. If something triggers and reverses - its market. That is what it does. It is not anyone's fault. So position size according to your account size. 

What are TBF, Pressure Zone and Weak Pullback setups?

 

Please check iTradePrice website under "Alerts and Setups" to access these Chart-based Trading setups. I use these setups all day long to scalp and take quick profits. 

Which Strike price and Expiration should I choose?

 

Usually from Monday thru Thursday - I like to pick the same week expiration. On Friday I can enter the same day expiration OR the next week - depending on which stock I am trading and how confident I am on the stock to move towards my target level. That said - it is good to pick next week's expiration on Friday - just in case a trade gets stuck and you have to manage it. That way time is on your side.

Where can I find the on-boarding document that I received when I joined iTradePrice platform?

 

You can click here to get that information.

How do I setup Trigger levels on my Trading platform?

 

I set price triggers around 50 to 70 cents before the actual trigger price. That way I have some time to get ready and be on a look out for candle closure. For example if morning notes say to get into AMZN puts at 1785 trigger price. Put a price alert at 1786 or something greater than the actual trigger price. That way you will get alerted few moments before a stock tries to make that move down. It helps with order execution and get you in the trade faster as the criteria is met.

What does your ThinkorSwim Trading screen look like for faster execution?

Everyone has their own way of putting their Trading screens together. Whatever feels comfortable to you. I like to have two-monitors at least. Looking at real-time charts is a must. My trading screen shown below is from ThinkorSwim platform by TD Ameritrade. The columns represent an individual stock name that I would like to trade, and the rows contain the exact call and/or put I am likely to enter. Basically I already know what option contract I will execute BEFORE my trigger.

Trade Screen on TOS.png

Click on the Image to Magnify

 

If you want to see how to setup a screen like this in ThinkorSwim platform - Click here.

Should I use market or limit orders?

 

Most of my trades can be classified as "Break out" type trades. Therefore, I like to use market orders or at least try to get the 'Mark' price, which is a price between the Bid and Ask. Usually in fast moving market, limit orders are hard to get filled. You can put a 'Sell' order at limit price as you decide to close your trade.

If the stock price moves down after getting executed, what do I do next?

 

Definitely at some point you will face that situation as the stock gets faded from a break out point. In that case, decide if you like to close OR trim your position to minimize any loss. To avoid making emotional decision, position size your trades according to your account capital. 

Why do you trade 6 to 8 names only?

 

I like to keep track of multiple price levels on a stock, and one can only do that consistently by focusing on few names. It helps to remember key price levels where a certain stock has resisted before or is likely to be supported. The idea is to make money. So why not keep it simple and repeat your process every day with the same names. Every stock has its personality, and I would rather be best at reading those few stocks than trying to browse and scan everyday which stock to trade. 

What kind of trading profit you look for?

 

Considering the number of contracts I trade given my account size and my lifestyle with kids - I don't like to sit in front of the computer staring at charts all day long. Therefore I like to capture profits quick and only go for a certain amount of move as the alert gets triggered. See example below.

TTD example.png

How to place a Conditional order in Think or Swim platform using a 2-minute candle close as confirmation?

 

A conditional order is an order that includes one or more specified criteria before an order gets executed. The video clip below shows you how to create a conditional order in ThinkorSwim platform based on 2-minute candle closing above (or below) a certain price level before your order becomes active. I have shown 2-minute candle close as an example. You can pick any time frame (1-min 4 or 5-min etc...)

How to evaluate a trade if the Stock price is already above the initial Trigger level before market open (Pre-mkt hours)?

 

A conditional order is an order that includes one or more specified criteria before an order gets executed. The video clip below shows you how to create a conditional order in ThinkorSwim platform based on 2-minute candle closing above (or below) a certain price level before your order becomes active. I have shown 2-minute candle close as an example. You can pick any time frame (1-min 4 or 5-min etc...)

  • Twitter
  • YouTube

How can you trade Rejection and Bounce plays that I mention?

  • Twitter
  • YouTube

©2019 by MommyTrades. Proudly created with Wix.com

BullsBEars.jpg