Newbie Lessons - All your questions answered

[Sir Osisofliver]

To the best of my knowledge, increased volatility generally denotes a downtrend.
Or uncertainty.

Have a look at the SP action prior to the very significant touch I've identified in the price action. How volatile was it? This is an example of consolidative volatility or simply uncertainty, prior to the bullish trend. If you compare this with say.....



You should be able to see the visual difference between consolidative volatility and trending (in this case corrective) volatility.

When you look at the corrective volatility, you should note that a) it occurs much faster in comparison to impulsive volatility and b) the ranges of that volatility are wider.

How would this change the way you approach the potential trade in comparison to the bullish trend?

Now I'm uncertain.
Oft I have heard that volatility presents opportunities.
If only I knew what opportunites (IDEAS)
and how (STRATEGY/SYSTEM) to profit from them.

That would make me a Vice-Demi-God!?

Perhaps it's more accurate to say a change in volatility (the volume at which people shout in the auction) presents opportunities...

Is now a good time to throw up some trading jargon?

e.g. Descending Triangle forming.

Interesting. What does this emergent pattern mean to you?

Cheers

Sir O

 

[Sir Osisofliver]

Please Sir,

I would be purchasing a PUT Option.
But would I anticipate a breakout to maximise potential?
Or would it be more prudent to wait for confirmation?

You could also use a CFD (contract for difference) if your anticipation was for a downside break. What's the pro v con of using an option over a CFD?

I have stated that for me there is no signal yet present in the price action, and am using this as a teaching example. Turning points, like pivots and compounds represent the greatest potential profit points. This is where the auction changes, from where the buyers yell louder than the sellers or vice versa. These points due to their very nature however also represent the greatest points of uncertainty, at these points there is little technical evidence to base an anticipation upon.

We therefore get to risk/reward. For me, I require technical and fundamental evidence (although what I look for fundamentally isn't necessarily what others look for) so rarely do I perfectly pick the top or bottom of a movement. (It's been known to happen and I get chuffed when I do so, but it is not an expectation) I trade off potential gains for increased certainty in accordance with my personal risk reward profile. To some degree, so must you.

Cheers

Sir O

*Takes scotch and heads to the corner again*

 

[burglar]

What's the pro v con of using an option over a CFD? ...

Give me option trading any day! They far more interesting anyway - and their flexibility and limited risk makes them a much safer way to trade.

My bold.
Options vs CFD trading

 

[burglar]

Interesting that you use different jargon to other pattern traders.

If it is going sideways, would that be consolidation or would it be a channel?
If it is in vigourous uptrend, would be that be impulsive or bullish?

I suppose if you more closely define the terms, we would need to do less thinking.
It might even give the game away!

I could not separate these:
propose a possible direction
predict
expect
anticipate

Missing is:
protect
holding your nerve

 

[Sir Osisofliver]

My bold.
Options vs CFD trading

From your link....About 3 years ago, I made a lot of money in a short time, trading options, once I had learned how flexible they were. Then I got greedy. thought I could make more money trading CFDs because the leverage was higher, so I signed up and went for it. Within a month, I had lost most of my trading capital and had to go back to work.

How do you think the above has impacted the authors emotional bias?

Cheers

Sir O

 

[burglar]

... How do you think the above has impacted the authors emotional bias? ...

Is he wrong, should I research further?










I am in his corner, drinking Strongbow Sweet*

 

[Sir Osisofliver]

Interesting that you use different jargon to other pattern traders.

Probably because a) self taught for much of the technicals b) I don't like to overcomplicate for the newbies. Sideways is sideways.

If it is going sideways, would that be consolidation or would it be a channel?

A channel is merely support and resistance bands that define the directionality of the movement, whether that movement is ascending, descending or neutral (sideways). A neutral channel frequently exhibits consolidative characteristics, but then, many different patterns also indicate consolidation, such as flags.

If it is in vigorous up-trend, would be that be impulsive or bullish?

Impulsive = no direction, ascending or descending
Bullish = up

I suppose if you more closely define the terms, we would need to do less thinking.
It might even give the game away!

I could not separate these:
propose a possible direction
predict
expect
anticipate

Really?

I think the share is going down. (propose a possible direction)

I think JBH will hit $2.11 (predict)

I expect JBH to hit $500.00 (financial risk is based upon our expectations)

I anticipate JBH will go ?? (financial risk is based on expectations - anticipate just feels like a better word to me, because you always have to consider...what if I'm wrong?)

Missing is:
protect
holding your nerve

I did ask this previously...So higher risk due to leverage (among other things), what actions will I take to offset this additional risk that was not present in the pure equity transaction?

and also mentioned stop losses and personal psychology sooo many times.

Cheers

Sir O

 

[Sir Osisofliver]

Is he wrong, should I research further?


I am in his corner, drinking Strongbow Sweet*

I question his approach. Did he maintain stop losses? Did he maintain correct position sizing methods? Was he doing his CFD investing as part of a system? Did he increase his risk minimisation with the increase in risk associated with leverage? Did he have a plan of any kind? I cannot answer any of those things and now that the author has burnt himself, he never wants to burn himself again (perfectly normal human reaction) but from my reading of his article has lost his objectivity.

Simply put, if the instrument didn't offer something that options couldn't meet...they wouldn't exist.

Cheers

Sir O

 

[burglar]

Probably because a) self taught for much of the technicals b) I don't like to overcomplicate for the newbies. Sideways is sideways ...


Really? ...

I meant no harm ...

 

[tech/a]

If you don't mind---when I have a little time
Id like to comment on your chart from my
perspective of what it is I see and in the past what it
would have been that I saw.

 

[Sir Osisofliver]

I meant no harm ...

Hey no worries Burglar I'm not offended, and if you had the question, I'm sure someone else did as well, so its all good.

Cheers

Sir O

 

[burglar]

... and also mentioned stop losses and personal psychology sooo many times.

Cheers

Sir O

Yes. You have, in many many posts, both here and in other threads.
I was referring to the absence of protection in the current scenario of taking additional risk associated with derivatives.

You have since brought up the case of Mr. Burnt Fingers.

So here I am ... harping about protecting because
in my minds eye I am still expecting to go short with a PUT option.




(I know about burnt fingers, I work in a kitchen

 

[Sir Osisofliver]

If you don't mind---when I have a little time
Id like to comment on your chart from my
perspective of what it is I see and in the past what it
would have been that I saw.

Not at all Tech, If you remember back on post #622 I said...

That would be great Tech. I won't be doing any current examples.....but you could. JBH is looking like a target at present. ~24% of the issued capital is in short's. I'm sure that the newbies and myself would appreciate your technical analysis of the stock at this time.

Cheers

Sir O

I had Trembling Hand say at the time the technicals indicated it was going to sleep (and they did for quite a while, it was only my second entry that was profitable). I've got a more complex chart I can break out as well, but it might be better for the newbies to keep it simple for now.

Cheers

Sir O

 

[Sir Osisofliver]

Yes. You have, in many many posts, both here and in other threads.
I was referring to the absence of protection in the current scenario of taking additional risk associated with derivatives.

You have since brought up the case of Mr. Burnt Fingers.

So here I am ... harping about protecting because
in my minds eye I am still expecting to go short with a PUT option.

(I know about burnt fingers, I work in a kitchen

Well Burglar, what kind of approach would you take? I know what my approach would/will be, but my brain doesn't = yours.

Cheers

Sir O

 

[burglar]

Well Burglar, what kind of approach would you take? I know what my approach would/will be, but my brain doesn't = yours.

Cheers

Sir O

Ok?! I'll bite!

I predict a breakout! It may go up, down or even a reversal.
It will be a big move (BOLD statement).

I would want to hedge my bets.
I would go long with a CALL Option and short with a PUT Option.

You were hinting CFD's.
I should research CFD trading.

 

[Sir Osisofliver]

Ok?! I'll bite!

I predict a breakout! It may go up, down or even a reversal.
It will be a big move (BOLD statement).

I would want to hedge my bets.
I would go long with a CALL Option and short with a PUT Option.

You were hinting CFD's.
I should research CFD trading.

Now I know what you are doing, care to explain it in more detail for the newbs? Why would you place an option on either side of the transaction?

I was merely pointing out that Options aren't the only way of skinning that particular cat.

Cheers

Sir O

 

[burglar]

Now I know what you are doing, care to explain it in more detail for the newbs? Why would you place an option on either side of the transaction?

I was merely pointing out that Options aren't the only way of skinning that particular cat.

Cheers

Sir O

On the balance of probability, I would say that most newbs including self, have never traded derivatives.

I now know that JBH is breaking to the down side.
(Yes folks, it has broken through the green line at the bottom of the triangle)


What if I am wrong? What if it is a reversal? I have never dealt with one.

Obvious to me that I should protect against an up move.
Especially as I have made a bold statement that the move will be big.

craton predicted an up move. What if he is wrong? Might he also, like to have insurance?

 

[Sir Osisofliver]

On the balance of probability, I would say that most newbs including self, have never traded derivatives.

I now know that JBH is breaking to the down side.
(Yes folks, it has broken through the green line at the bottom of the triangle)

DYOR THIS IS NOT A RECOMMENDATION. SERIOUS LEGALESE HERE, and I will be having Joe check this post out to make sure he is comfortable.

Disclaimer
I am currently not in the position! Whilst it appears that there will be further downside, with articles in the Fin review, brokers reports coming out etc, this is not guaranteed and the stock has yet to break that line in a meaningful manner (to me). Burglar may not have accounted for "noise" as opposed to trend. Some of the strongest movements are Broken pattern movements.. link, particularly if the break occurs within "noise".

FYI
IF I trigger into the position I will refrain from commenting and will go dark until the trade completes, just as I did for my entry. This is why the previous discussion at Post #676 ends abruptly, (my original entry on 28th).

What if I am wrong? What if it is a reversal? I have never dealt with one.

Obvious to me that I should protect against an up move.
Especially as I have made a bold statement that the move will be big.

craton predicted an up move. What if he is wrong? Might he also, like to have insurance?

Ok I might just stop there for now until I hear back from Joe.

Cheers

Sir O

 

[Sir Osisofliver]

Ok spoke to Joe, we're all good. In future if you make a statement like burglars, (I think x), please back it up with your own reasons and don't use my chart and I will be very happy.

Not to put too fine a point on it guys and girls but I have to take extra precautions in making sure what we are doing here is clearly understood as training and not a recommendation for a given action in any form.

That said...

So Burglar, can you run a trailing stop behind your proposed transaction?

Cheers

Sir O

 

[burglar]

Ok spoke to Joe, we're all good. In future if you make a statement like burglars, (I think x), please back it up with your own reasons and don't use my chart and I will be very happy.

Not to put too fine a point on it guys and girls but I have to take extra precautions in making sure what we are doing here is clearly understood as training and not a recommendation for a given action in any form.

That said...

So Burglar, can you run a trailing stop behind your proposed transaction?

Cheers

Sir O

I am in frontier territory when discussing derivatives.

options_trailing_stop_loss

How Does Trailing Stop Loss Work?
Trailing stop loss is an advanced options order where your options broker system automatically tracks the continuously changing prices of your options and then triggers a market order to sell when those prices retreat a predetermined amount from the highest price achieved. This saves the options trader from having to monitor the prices whole day long in order to achieve the same outcome.

By proposed transaction, I am assuming an option on either side of the transaction.

If there is a trailing stop on both options, one will stop out on a big move, the other would trail the move until retracement of a predetermined amount. I think if volatility was high, that predetermined amount would be difficult to calculate.