In this episode we demonstrate how to use professional style income trading for consistent results. This type of trading is different from many of the other Winning Trade episodes where we are reviewing trades strictly by their proven profitable guidelines regardless of what is happening in the stock market.
As we describe it, in a professional style trade, the experienced trader takes into consideration the market situation and applies concepts from multiple different trading strategies to keep probabilities heavily in his favor. This permits us to trade with the flow of the market thereby allowing a well educated trader to increase their returns and consistency.
Different trade concepts take advantage of different types of stock market conditions. The trades types used in this example for instance:
The X4V17 was designed to take advantage of a bullish market cycles.
A Bearish Vertical takes advantage of a bearish market movements.
The X4V14 was designed to take advantage of a neutral market where a larger move is likely but the probability is that the move will be up.
The X4V22 was designed to take advantage of certain types of implied volatility shifts.
A Bullish Vertical takes advantage of a bullish market movement.
Each of these trades has their own strengths and weaknesses. Knowing those strengths and weaknesses, along with understanding the context of the market, will help you stay positioned in a way where you are most likely to exploit the market conditions.
This is the key to becoming a trader who produces the most consistent, highest returns you are capable of.
There is no holy grail trade. Knowing this, it is our intention that traders will trade non-subjectively for a period of time in order to learn the trading strategies and how they react to market conditions. Eventually our hope is that our students will progress to learn the skills of trading with the flow of the market. This is what you will experience in Episode 55 of The Winning Trade.
Subjective trading when done effectively, can:
- Increase your returns
- Improve consistency
- Create very high probably trading structures as they relate to the current market environment
- Allow for flexibility and adaptability
- Make more money with less work and fewer adjustments
- Make trading less stressful and more enjoying
Conditions to consider for a PRO trade in a trade cycle:
- Market conditions at trade entry
- Anticipated market conditions during this trade cycle
- Identifying key areas where conditions change
- Trade length
- Creating a written trade plan that maximizes the strengths of the trading structures and includes alternatives to changing market conditions.
For this trade cycle the risk parameters that have been chosen are:
- Maximum Trade Size: $35,000
- Anticipated Return: About 20% ($7,000)
- Exit Loss Trigger (ELT): ($2,500)
- Trade Structure: High probability, high return, X4V17 with Bear Vertical hybrid
- Asset: SPX
This trade cycle will start with a trading structure that is similar to an X4V17. It starts as a 60 / 40 broken Wing butterfly at 31 days to expiration which an X4 trained trader may determine is a good entry point. The X4V17 is a bullish bias trading strategy.
Trade 1: This adaptation of the X4V17 returned about $2,110 at 28 days in the trade.
The next trade in this episode, we entered a Bear Vertical at 12 days to expiration.
Trade 2: This trade was closed after 7 days in the trade for about $2,310.
The last trade for review is an X4V17 conversion trade. This trade started as a bullish vertical and as the trade progressed the pro trader decided that due to a change in the market movement that the highest probability for profit would be to convert this trade by using the X4 trading strategies to give a nice return.
Trade 3: This trade was closed at about a $7,100 profit.
The combination of this Trading With The PROS example with the three trades give about an $11,520 profit or about a 33% return on $35,000 planned capital in 60 days.
Become a PRO and trade for consistency and returns. It can be done. We can show you how. Just join Trading With The PROS!
*The result shown is from real-time, hypothetical trades such as those shown in the Options Trading for Income weekly webinar or Trading With The PROS biweekly webinars. Simulated trades are believed to be represented as accurately as possible, however, live results may have been different. The result is shared as an example for educational purposes ONLY.