RTT working with support of the evidence

Today RTT said NFLX trend stats would start in 5 days. That meant to me to begin looking at NFLX. I could see that NFLX on the Daily had been building a launching pad. I could also see that the BB’s were tight on the daily which means the stock was preparing to pop. I could also see on the daily that NFLX was coming into a measured move off the gap from 1/23 -1.24. There was also a big gap up. My 4 charts that my S/O and I use said "TRADE!!!"

That was 6 confirmations for me to buy a call.

I look at my daily to see how my stock has been doing for several weeks. It allows me to figure where I think it will go and when to trade it off the 55. With the gap and other information there was no doubt for me that I was going to trade a call. I had to put my bid in 10 cents higher and sell 10 cents lower but I was in and out PDQ.

This morning when NFLX gapped up I was in on the trade at 9:40. I played a March 190 Call. I bought 16 contracts @ 1.85 = 3008.14 and sold out at and sold @ 5.95 =9543.23 (around 1:15 see red candle on 55 chart see measured gap info below) for a 217% gain.

I usually trade the month I am in until Wednesday during expiration week. After that I go to the next month so now I will be using April.

A measured gap move…yuck how do I describe it…Hope this helps. It is easier to do than explain.

If you have a gap up you have a space between the open of one day from the close of the day before. Generally I measure gaps off the daily for strength of the trend and then I use my 55 for the trade. I also mark gaps on my 55 since I use this almost year around.

Using NFLX daily there is a gap from 1/23/13 to 1/24/13.

Draw a ray line off the top of the candle on 1/23 and ray line off the bottom of the candle on 1/24 and then measure about half way between these lines and draw a ray line.

That center line is the “measured gap”.

I then take my line segment (supplied on our charts) and draw a line between the measured line (center line) and either the gap up line or gap down line but not both.

This is the next measured move which is half the gap distance.

I clone that line and put it on TOP of the gap line I drew off the bottom of the open daily candle IF THE GAP IS UP (reverse if the gap is down). That area is where my next up (or down) will most likely go.

So why did I get out on the little red candle on the 55? Now if you go to the 55 chart and measure the full length of the gap with your segment line. And then measure half the gap and then draw a ray line off from that 1 and ½ gap measurement you will see that it almost measures perfectly with the red candle on the 55 where I go out.

BTW if you read about gaps in the TAD book…you’ll find this info. It is called the average true range.

Excellent trade and explanation. Thank you and keep up the great work

Darcy,

Thank you for posting your thought-process with enough detail that those of us scoring at home can try to re-create the trade and learn from it. That said, I have some questions that I hope you wouldn't mind shedding some light on.

I think all of us readers are hoping to be able to trade like you do at some point. So don't take any of these points as criticism, rather I am just trying to learn.

-I see you purchased slightly out-of-the-money or right at the money calls instead of ITM (which would have been 185). Why is that? Do you have a way of seeing what your trade would have yielded if you would have purchased 185C?

-I'm having a hard time seeing what you entered the trade off of. I think we probably have the same indicator set-up (those taught by GW), but I don't see an entry off the 8-min at 9:40 - I see one at 10:26 that may have even been better, though. I actually see the stock price dropped $1.50 from 9:40 until the price recovered and the indicators (kind of) showed a trade around 10:20, though not perfectly on the 8-minute.

-Lastly, it looks like you enter a good number of your trades during "Amateur Hour." I think Rookie also said that he has found success trading at that time of day.

Based on your recommendation I purchased TAFD and am reading over the pages and sections you recommended. I'll have to think a little harder about it (it certainly can't be too complicated) and work some practice trades using this process.

One of my biggest pet peeves about GW's classes is that they were taught so many years ago that some things in the market have certainly changed in the intervening years. Case in point, yesterday I was on the phone with the folks from Investment House talking to them about some of their products, and I asked them about their stock split newsletter. The (very kind and helpful) lady on the phone said that before 2008 Jon Johnson was very successful predicting when certain companies would split their stock, just like GW talks about in his classes. But, that hasn't been the case for roughly 5 years. So some of the things you hear you have to take with a grain of salt - but which ones? And with GW's style of "just follow the rules and you'll have success, don't and you will lose big" mentality, it's not easy to know what to set aside and what to hold firm to.

So I guess that is a big reason why I ask these questions.

For those of us that shelled out significant dollars to take GW's classes, it would be nice if there was some free updated material. I mean I paid the man. Things like, well these things don't work, these things do. Etc, etc, etc. I live very far from NC and am not willing to give him another 1500-2500 of my hard earned to get yelled at some more even if I did. (Time to step off the soap box.)

I wonder if anyone else out there has these same feelings. Like I've said before, this forum is my "Success E-mail" since I never received even one from GW - but the Christmas Card was a nice touch.

Kars,
I copied off your remarks so it would be easier to follow. You won’t offend me by asking questions. I share with the hopes of all of you being able to take my info and applying it. But I can’t do it for you…or anyone. It takes study, study, study.

KARS: -I see you purchased slightly out-of-the-money or right at the money calls instead of ITM (which would have been 185). Why is that? Do you have a way of seeing what your trade would have yielded if you would have purchased 185C?

Actually 190 was in the money. The high NFLX reached on the first 55 candle was $191.43. My call was taken quickly at $1.85. The call offered was $1.80 but I wanted in PDQ. Why? Because of the 6 points I had of evidence that the trade would go my way I did not hesitate to enter off the 55. A basic rule of thumb is “trade in the direction of the gap”. As far as looking back to “would of could of” ….No. I do not bother with details that do not matter.

KARS: -I'm having a hard time seeing what you entered the trade off of. ….but I don't see an entry off the 8-min at 9:40 - I see one at 10:26 that may have even been better, though. I actually see the stock price dropped $1.50 from 9:40 until the price recovered and the indicators (kind of) showed a trade around 10:20, though not perfectly on the 8-minute.

I got in on that first candle on the 55. I did not wait for a candle close on the 21. This is the hard time and the action chart is the 21. If you look at the 21 chart there was no reason NOT to get into the trade since no candle went below the 5 moving average. This is one of the advantages of learning about moving averages.

Kars: - I think we probably have the same indicator set-up (those taught by GW)

No we do not have exactly the same set up IF you are using Gary’s instructions on his charts only.
My charts are: 55, 21 of Gary’s charts but I have a dark gray ADX line thickness 2 where Gary had it faded into the background and a 10 and 21 from the TAD book. I do have an 8, 5, and 1. The 8 is Gary’s charts and the 5 and 1 are from the TAD book. I also have a daily Gary chart and a daily TAD chart.

Those charts from the TAD book are a 5, 10, and 20 moving average ONLY and on the study… money flow. Why did I darken my ADX? I learned that the ADX line will tell me the strength of the trend. It will go up if the trend is strong… that means if the trend is UP or DOWN. I always look at the ADX. Darken your ADX on your 55 and look at it on the day I made my trade. As Gary says “See the steepyness?” Which way is the stock trending? UP…UP…UP and strong! The money flow on the TAD charts also supported UP.

KARS: -Lastly, it looks like you enter a good number of your trades during "Amateur Hour." I think Rookie also said that he has found success trading at that time of day.

I think the market has changed a little. I use to stay in trades for a few days. Now I get in and get out. I HATE trading from Thanksgiving in Nov and Dec up until after Christmas. That has been the time of my biggest losses.

KARS: -Based on your recommendation I purchased TAFD and am reading over the pages and sections you recommended. I'll have to think a little harder about it (it certainly can't be too complicated) and work some practice trades using this process.

Please do not read just the pages I recommend. Skip over some of the information such as line charts or bar charts. Why learn those when you do not use them? Read about Bollinger Bands, Stoch RSI, MACD, Directional Movement and Moving Averages. I am the type of person who needs to know why something works and how…so I went and found out why and how. If you do not need to know why or how…why bother?

Kars - One of my biggest pet peeves about GW's classes is that they were taught so many years ago that some things in the market have certainly changed in the intervening years. Case in point, yesterday I was on the phone with the folks from Investment House talking to them about some of their products, and I asked them about their stock split newsletter. The (very kind and helpful) lady on the phone said that before 2008 Jon Johnson was very successful predicting when certain companies would split their stock, just like GW talks about in his classes. But, that hasn't been the case for roughly 5 years. So some of the things you hear you have to take with a grain of salt - but which ones? And with GW's style of "just follow the rules and you'll have success, don't and you will lose big" mentality, it's not easy to know what to set aside and what to hold firm to.

Believe me what Gary taught years ago still works. Yes Gary was a little sharp in his statements…or loud… but I have followed his teaching and added a few things that helped me and I have done well. In all the books he gave about trading, I never read them cover to cover. Why? …Too much info makes me look like one of those cartoon charters with the spinning eyes. I read ONLY the parts that applied to what Gary taught. For me the best book was “The Market Makers Edge”. And as I said I fell asleep listening to Pring which lead me to TAD.

I do not know what you are meaning about "But, that hasn't been the case for roughly 5 years. So some of the things you hear you have to take with a grain of salt - but which ones?" so it is hard to me to reply to that. Are you meaning the things Gary taught...or what you hear on CNBC??? There comes a time when you are going to have to believe in what YOU SAY.

I did a BING search for stock splits. There is information on splits from Yahoo. It isn’t as in depth as Briefing.com but it is there.

My suggestion to you and others is find the charts you trade off the best. Right now in this market I trade off the 55 best. Gary did teach that you can use the 55 year round. I do not rest well holding an option over night now.

KARS: -So I guess that is a big reason why I ask these questions.
For those of us that shelled out significant dollars to take GW's classes, it would be nice if there was some free updated material. I mean I paid the man. Things like, well these things don't work, these things do. Etc, etc, etc. I live very far from NC and am not willing to give him another 1500-2500 of my hard earned to get yelled at some more even if I did. (Time to step off the soap box.)

I wonder if anyone else out there has these same feelings. Like I've said before, this forum is my "Success E-mail" since I never received even one from GW - but the Christmas Card was a nice touch.

I understand your frustration but you are in the right place to learn all you need. To be honest from your writing you sound like you are looking too close for a reason NOT to trade. I could be wrong. If I am right you are exactly where I was. If I am wrong it won’t be the first time that has happened. Our failure comes from IMHO trying to cut corners and that simply will not work. There is not a magic bullet and Success Emails or not... believe me would make little difference in the outcome you or others or I would have. I received only 2 success emails and as I understood it Gary couldn’t mail any if none came in.

I prefer to thank Gary for teaching me the basics I needed to get started. I understood when I took Gary’s classes that he was giving me “Wallstreet Basic’s” and I was responsible to take it from there. I also know from listening to his CD’s that people would have used him up until there was nothing left and would not have done the work needed themselves.

You simply have to do the work yourself because nobody knows how you think or operate better than you.

I share what works for me.



Edited 2 time(s). Last edit at 03/15/2013 01:15PM by Darcy.

Awesome post Darcy, thank you for sharing your experiences!

Darcy,

I know we all keep saying it, but thank you again. I'll take it as an honor that apparently your 100th post in these forums was a reply to my questions/rant.

You have given me a lot to think about. I think you may be right about me basically searching for reasons NOT to trade. I think that is a big part of why I have focused more on W&O. It feels safer and more controllable than the trading-leg trades. But it is interesting how many things have stuck out to me as I have re-listened to about 60% of the CDs again this last week or so. Many phrases that were almost throw-away have stood out as very important and I think will help me in my practice and trades.

I also thank GW for what he has taught me, though I've never met him. In 2006 a co-worker tried to get me go to his classes but I resisted since I wouldn't believe that anyone I knew could possibly make recurring money from the stock market. Fortunately I met someone else a few years later that vouched for the method and I was able to take the class on-line through GW's old website. Whenever I hear GW getting obnoxious, I realize that he probably evolved into that with many people not following the rules and blaming him - and just leeching onto him. So I do give him some slack. At least he hasn't outsourced it to try to multiply his earnings like "Rich Dad" dude does with his shady shenanigans.

Please continue to post your trades for those of us still in the arena or trying to get in.

One more request/idea: I seem to hear from people time to time how they raised their trading leg to $20K and lost it all when the trading zone changed. GW says on his CDs that the course is really about W&O, since that's what you retire from - NOT FROM THE TRADING LEG. But since he couldn't really spend more than, say, 30 minutes talking about W&O, he needed to cover other trading techniques. As a result, when you listen to his CDs, the message comes across that this is a trading leg class since he talks about that maybe 90% of the time. I would recommend moving money to the W&O leg sooner rather than later. Though you can certainly get nailed in that leg too (I certainly have - but I didn't follow the exit rules - and had the trade been a trading-leg trade I would have been crushed) it is much more conservative. Put $10K in a spreadsheet and compound those earnings (assuming you wouldn't be removing the earnings until retirement) at 5%, 7.5% and 10% (three separate columns), the numbers get big enough within just a few years - and that's without adding any money from the trading leg.

I just don't want any of us to be telling those stories about how well we were doing but didn't follow the money management rules so now we're stuck in a job when we could be approaching retirement choice.

So that is my way of asking for folks to post their real money or practice W&O plays in these forums. I will when I do one that I think is instructive.

I understand your concern. I would suggest that you stick with W/O because you are comfortable with that and practice the trading aspect of not only options but STO on your W/O. Some folks just aren't cut out for trading and that may or may not be you. There is nothing wrong with that. W/O is the retirement area. There's nothing wrong with you doing that and thank God you are able to do so. Perhaps you can share your W/O trades and we all can learn from you.

I remember my dad saying, "Before you walk you have to crawl", and that came from a man who could barely walk due to war injuries. Trading seems to be the area where most (crawl) can build their basket and get to the (walk) retirement area. I haven't gotten there yet but I am getting closer. One thing though... I do not want to start out buying only 100 shares of stock. If I have to buy 2 contracts for trading I feel like I need to buy 200 shares of stock for it to be beneficial. That's just me though.


I think what you may hear on those CD's is Gary's aggravation of spending his time and energy knowing 95% of his class wants him to either do the work for them or tell them on a regular basis what and when to trade. When I think of the 20 years or so Gary spent learning and then eventually teaching this process…..What a load! Just think he could have kept all this to himself and never shared a thing with anyone.

Good post Darcy!

I have been "up against it" lately. My first cousin who I grew up with, and is only 4 months older than me, just had a stroke that has left him paralyzed on his left side. If it happened to him at 43, it can happen to anyone. The cause is unhealthy diet, not taking blood pressure medication, lack of excercise, and high levels of stress. As we grow older, we must place more emphasis on taking care of ourselves. I am not trying to turn this forum into a social platform for other conversations. I know that most of america is overweight and many have health issues similar to my cousin- enough said....

Darcy, It has taken me awhile, but I am finally able to follow your trade from top to bottom. Your knowledge and way of explaining this stuff is second to none. Thanks for your time and help. I hope to develop more technical indicators that stand up during any trading period.

I have really missed trading, and I have peeked at the market everyday.

Kars,
I chuckled as I read your post. I was totally where you were. The difference with me is, I was so, so MAD! I lost my money, and I wanted more questions answered. Why did it start working and all of a sudden it stopped? How can I build my account from $2500 to over $7000 in a couple of months and lose it all in the next month? I have found times when my frustration levels would get so high, until I would nearly lose it. I cranked up the computer and get lost in my thoughts or previous posts from some of you. This forum is where I got my support. I have said it before, RTT is really good from top to bottom, but the opportunity to air your feelings and no one takes it personally is great.

I have dropped briefing! Through TOS, I have the option to listen to and watch CNBC live every day through trader TV (pretty easy to access). I have found that I can get very good information through CNBC. I am also saving $65 a month. Now my investment each month is limited to RTT only! I have charts through Strategy Desk and news through TOS.

Sorry to hear about your cousin Rookie. My prayers go out for your family. I am glad that you like TOS and SD as I have been using them for awhile now. They work great together. I have hit a wall not that I was knocking it down to start with but still trudging along hoping to one day get that 'aha" moment that everyone describes. Thanks

Rookie sorry about your cousin but know that your cousin can recover. My father had a horrible stroke and went through 17 hours surgery to repair his carotid artery and was able through hard work to regain all his motor abilities. However through love you need to tell your cousin unless he changes mode of operation he will have another one.

I know about up against it...I have about 15 things on my desk to get to since it is tax time.

About trading... I like to find support and resistance. This way I know if my stock will move like I need it to. Nothing is more agravating than getting into a trade and your option move barely enough to cover your cost of the trade. That's part of the reason I studied about finding support and resistance and gaps which become support/resistance.

To help you find simple support and resistance turn your candles to a line chart...click somehwere on your chart for the extended line....clone it and drag it to find at least 3 points where the line touches... click and the line should remain. When broken... change the color or remove the line depending on what chart you use. I remove mine from the 55 which I use almost all the time now. I use a green shade for up and a red shade for down. It works with TOS...

Instead of Briefing try Yahoo finance (it is free)...you'll be amazed of all the "stuff" that is similar to Briefing.