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Live Day Trading SPY Options - Simple Beginners Strategies For Daily Profits - YouTube
Channel: SPY Day Trading
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In part 1 of this video, I shared about聽
how I entered this trade with $540聽聽
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in my account and made $724 in profits.
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I entered the trade with a strong trading聽
gameplan by building the market context聽聽
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with as much information available as聽
possible and setting realistic stop losses.
聽
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In this video, I will also聽
explain one very important factor聽聽
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often missed out when determining risk reward聽
ratio and stop loss for most day traders.
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If you missed part one of the聽
video, here's a quick recap.
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I was expecting overall selling聽
pressure for the day, but not before聽聽
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initial buying pressure, due to unfilled orders聽聽
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from the past two days which broke through聽
all time highs for a few days in a row.
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I was also expecting buyer pressure due to聽
institutional investors propping up the price聽聽
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before selling and taking profits. Also given that聽
it's a Friday, weekly options are expiring and聽聽
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traders would want to take profits to wrap up the聽
week. Which explains the overall selling pressure.
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At all time highs, there were no聽
past levels to take reference to.聽聽
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So these were all the available information聽
to set up a market context for trading.
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True enough, buyers took control early in the day,聽聽
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and upon sensing weakness at 9.45am, I bought聽
4 put option contracts, to enter the trade.
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I placed my stop loss at 471.29, cautious聽
that a trap may be laid at round number 471.00聽聽
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for institutional investors to stop out retail聽
investors. My risk tolerance per contract聽聽
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is about $50 at that level.
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Just 15 minutes later at 10am, the chart聽
reversed and put me at a approximately $70 loss.
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This is why pre-determined stop loss and risk聽
tolerance is so important. So that we are not聽聽
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affected by fleeting price movements and our聽
decision making is dependent on our gameplan.
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It is easy for beginner traders to be flustered聽
by candles not going the direction we want to,聽聽
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or by seeing losses in the P&L and聽
materializing the worry of realizing the loss.
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It was much easier to cope聽
today, because within 10 minutes,聽聽
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the chart regained momentum聽
in the direction I wanted.
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In other days, the chart may聽
consolidate between our buy-in聽聽
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and stop-loss, and hover with uncertainty聽
while our unrealized P&L stay negative.
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We will run out of willpower聽
to worry about the loss,聽聽
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and most beginners will just sell聽
out to end the mental torment.
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We don't do that here.
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We remain steadfast to our game plan,聽
and have an acceptable risk tolerance.
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Having the mentality that you are聽
already paying this amount of money聽聽
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to enter the trade. It must be聽
money you are ready to lose.
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The market consolidated within a 0.6 price聽
range until 11.25am. And it will be unrealistic聽聽
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for anyone to be staring at the screen for 1 to 2聽
hours just looking at candles rising and falling.
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It may be thrilling for a beginner at first,聽
especially if the candles are going your way.聽聽
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But trust me, It will get tiring and聽
it saps precious energy away from you.
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This is where we set alerts. Learn how聽
to set alerts in your trading platform.聽聽
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They are the next best thing to setting stop loss.
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Please leave a comment if you would like me to聽
create videos on setting stop losses and alerts.
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So at 1025am, once the chart is about 0.50 points聽
from where I bought in my put options, leaving me聽聽
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with an approximately $25 profit per contract,聽
I adjusted my stop loss from 471.29 to 470.58.
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Remember, do not stop loss at a round聽
number. The reason for adjusting my聽聽
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stop loss is because I'm already up with an聽
unrealized profit. I can lower my risk now.
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For beginners, I will recommend selling聽
some contracts here to lock in profits.聽聽
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It will help you with your confidence聽
as you grow to become a better trader.
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For me, I was certain of my analysis of a聽
sell off, and I anticipate SPY to drop to聽聽
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the next 2 available levels - the pre-market聽
open at 468.06 and yesterday's close at 467.16
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With every new lower low or lower high, I聽
will adjust my alerts. So I do not have to聽聽
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check in too often. Alerts are free to set聽
up, so do them strategically and abundantly.
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At about 1235pm, we start to see聽
the selling pressure increasing.聽聽
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This is where our patience and hard work of聽
preparing the gameplan will start paying off.
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Emotionally, instead of fear,聽
greed with start to take over.聽聽
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And the worst cocktail is a blend of聽
these two. This is exactly where you聽聽
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will face both and learning how to cope聽
is going to be a long term endeavor.
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You will fear the chart reversing聽
and losing your profits.聽聽
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You will fear with every moving candle.聽
Or, you will be greedy of bigger profits聽聽
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and have this confirmation bias that the聽
candles will continue going your direction.
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This is why a gameplan pre-determined before聽
the trade is important. To keep us in check.
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Mine was stop loss of $50 per contract at聽
the start of the trade. With an expectation聽聽
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of minimally $100 per contract聽
profit based on my gameplan.
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Of course this remains fluid and I will聽
take smaller profits if I observe any聽聽
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price action indicators - such as聽
early consolidation, or low volume.
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With every lower highs or lower lows, adjust聽
the stop loss. Eventually, the stop loss聽聽
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will become a profit taker. In this case, I聽
adjusted my stop loss to around the 469.90 level.聽聽
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And everything from here now is profit to me.
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Please also leave a comment if聽
you would like me to make a video聽聽
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explaining how to adjust stop聽
losses and alerts along the trade聽聽
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so that you do not have to spend 7 hours staring聽
at the screen and monitoring every candle.
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At this point at 12.40am, the fear of loss聽
is very much thrown out the window. We are聽聽
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already up $40 per contract, with an聽
overall $160 profit with 4 contracts.
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The chart is registering聽
lower lows and lower highs,聽聽
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and there is still evidence聽
of overall selling pressure.
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And this emphasizes why it is聽
so important to enter a trade聽聽
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with a good gameplan to bolster your聽
confidence of a winning trajectory.
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The trades you are in should get easier聽
with time. If it gets more difficult and聽聽
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you need to crack your brain to squeeze聽
profits, you's going to make mistakes.
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But of course nothing is in the bag until we聽
close our positions. So we still must be cautious.
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So when I mean confidence, I聽
don't mean arrogance. It is 80%聽聽
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confidence with underlying 20% cautiousness.
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This is why we adjust our stop聽
losses. The chart can still reverse聽聽
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in large volumes if an institution takes action.
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Im summary so far:
Create a strong trading聽聽
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gameplan for the day by building the market聽
context with as much information available,聽
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then set a realistic risk reward ratio so that聽
on one hand, the trade is worthwhile to enter聽聽
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and you will enjoy that calmness and excitement聽
of a profit before you close your position.
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This also entails setting a good stop loss,聽聽
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so that you are stopped from entering a bad聽
trade that taxes your mind and emotions.
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Preserve your funds, your emotions聽
and your mind for another trade聽聽
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instead of focusing on a bad trade.
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Set your stop loss strategically to ensure聽
you are not stopped out from profits.聽聽
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This also means to adjust them聽
accordingly along the day,聽聽
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and learning how to set alerts as聽
your eyes and ears while you are away.
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Treat them as your soldiers聽
to watch the market for you.聽聽
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You are the general. You need to make strategic聽
decisions - not spend 7 hours staring at candles.
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And at some point of your trading career,聽聽
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you will be fighting 10 to 20 battles聽
at once as you trade more stocks.
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So the chart eventually did breach聽
the levels that I was expecting and
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In the next part, I will explain on closing the聽
position. Which is the most important step of the聽聽
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trade. I will explain how to maximize our profits聽
while managing our risks and emotions carefully.
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See you in the next part. Thank you.
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