Date: 2/3/2023
Author: Chris Hood
The past few weeks of day trading have been good for us.
In the Trade Command room, just yesterday, we landed a 132% gain on an SPX call in an hour and a half.
I’m sure that sounds amazing to some, while others may wonder what took so long.
After all, aren’t day traders furiously clicking buttons and tracking patterns on a 30-second chart?
Personally, I don’t know anyone who trades that way – even intra-day. For the most part, only computers trade that fast.
Some young guns far more agile than me may trade using the 1-5 min charts, but that’s a subspecialty of day trading called scalping.
I don’t do that.
It’s been my experience that for me, the gains made are eaten up by commissions and fees.
My method is different – and more relaxed.
Here’s how it works.
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This basic system is what has allowed us to make several triple-digit gains over the past couple of weeks.
First, I prefer day trading with 0DTE options. Same-day expiration options are cheaper and give you the movement you’re looking for.
The key to remember is that you’re fighting time decay.
If nothing happens your option is bleeding value.
When day-trading options you a flat choppy market is your worst enemy. The price needs to move for your call or put to make money.
Second, wait until the morning volatility subsides and there’s an established range.
Getting in before 10:30 means you’re going to lose some value due to volatility crush. As the market settles down options prices go down.
That’s perfect if you’re selling 0DTE spreads or condors, but if you’re buying calls or puts you’ll overpay.
Finally, make sure you set your stop levels and follow them.
I never suggest you enter stop losses into your platform – it’s a bad idea to show your broker where you’ll fold.
Price manipulation and stop-hunting are very real.
If I start my trade early in the day, I’ll give the trade a bit more room to move because I have time on my side.
Trades during the last couple of hours are different.
A single candle moving too far in the wrong direction can kill your option. If you’re managing on the 15-minute chart, then ignore the others and use the previous candle.
If you’re trading puts then the stop is the high of the last 15-minute candle, and if it’s calls then the low of that candle is perfect.
Use a trailing stop and move it after each candle.
Give these ideas a try and reap the rewards.
Cheers,
Chris Hood
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