(this is from my phone)
I was a bit bummed when I first opened my thinkorswim trading platform earlier this morning. The market had not been moving the way I want it too.. There was also some big news that came out Tuesday and yesterday, and some more coming out on Friday.
This usually causes people to be cautious and not trade strongly in either direction. (a strong move in one direction is exactly what I look for)
I look at this indicator first.. it's called marketwatch..
As expected, people were buying and selling their stocks.. about evenly.. no real majority market moves. (I did see that these 2 big companies were strongly bearish)
Luckily, I don't rely on this indie at all and moved onto the charts.
Here's the first one I look at.. the hourly chart of SPX (symbol for S&P 500), the only thing I trade.
A nice down trend was underway and the EMA's (colorful lines showing the Estimated Moving Average price for different periods) had clearly crossed each other and price was heading further down.
I want to see this happening on the 15-minute chart too.
Price was confirming a downward move within an ongoing down trend.
Last up is the 5-minute chart..
Now, this one gave me pause a little since price was confirming the same down trend, but price had fallen fast, hitting some support, and needed to continue its move down (crossing that support) before I would enter a trade.
It did cross a few minutes later and I entered by selling my SPX option..
(This shows the entire trade that I entered after price continued down, and then I got lucky and it hit my target right before price started up again.)
I wanted to show how the trade looked like on the option chain (this is where I actually enter my trades)
The delta (first column of numbers) shows that I sold the strike price at delta 12. Delta just shows the mathematical probability of failure of a trade at that strike price. I think of delta as showing the Probability of Profit.. just take 100 (%) and minus delta. So, my trade was sold at a 88% POP. (of course, this is just the computed % given by the broker, so it's not set in stone) I like a trade with a high POP.. a delta of 16 or less.
I know, it's still is confusing to me sometimes.. :P
