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Granting Profitable Trades Daily - Trade Genie

https://tradegenie.com - Empowering Your Success Daily: Our commitment to delivering profitable trades daily sets us apart. With a deep understanding of the markets, we provide you with consistent opportunities to capitalize on. Join us to experience a trading journey where success is a constant, and profits are granted every day.

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Granting Profitable Trades Daily - Trade Genie

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  1. TradeGenie.com

  2. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Contents . . . . . . . . . . . . . . . . 03 About Trade Genie Meet Our Founder - Noshee Khan . . . . . . 06 . . . . . . . . . . . 09 . . . . . Swing Trading Strategy . . . Earnings Play Strategy . . . . . . . . . . . . . . 10 Indexes, ETF and Ultra Short Trading . . . . . . . . . . 12 Understanding Position Sizing Part 1 . . . . . . . . . 14 Understanding Position Sizing Part 2 . . . . . . . . . 17 Position Sizing How much is enough? . . . . . . . . . 20 Dollar Cost Averaging . . . . . . . . . . . . . . 22 Understanding Targets . . . . . . . . . . . . . . 26 Importance of Red Target . . . . . . . . . . . . . 28 Executing the Trade . . . . . . . . . . . . . . . 30 Beating the Market Maker via Show or Fill Rule . . . . . . 32 Uptick and Upbid Rule . . . . . . . . . . . . . . 35 To Chase or Not To Chase . . . . . . . . . . . . . 36 Eliminating Greed through Conditional Order . . . . . . 38 Protecting Your Capital via Stop Price . . . . . . . . . 39 Understanding Expectancy . . . . . . . . . . . . . 44 Exiting the Trade . . . . . . . . . . General Guidelines on Selling Your Contracts Keeping the Trading Journal . . . . . How I Trade Gaps . . . . . . . . How I Trade Breakouts . . . . . . . . . . . . . . How I Trade Opening Range Breakout . . Importance of Volume . . . . . . . Life Cycle of a Stock . . . . . . . . . . . . . . . 48 . . . . . . . 49 . . . . . . . 50 . . . . . . . 52 59 . . . . . . . 62 . . . . . . . 65 . . . . . . 69 Money Market Mastery 2 TradeGenie.com

  3. Trade Genie Options Trading Strategies About Trade Genie Our Master Trader, Mr. Noshee Khan, has an extensive background in programming, systems analysis, implementation. He also holds an MBA in finance. In his capacity as an enterprise software consultant for the German multinational software corporation SAP, Noshee specialized in the implementation of business processes for many Fortune 500 companies including Intel and Applied Materials. software design, and “Although I enjoyed my work, all these positions of great responsibility did not really satisfy me enough in terms of a rewarding lifestyle, or a true sense of accomplishment.” In 2003 Noshee developed an interest in trading and the latest software being used in the brokerages. He soon found himself immersed in the subject and exchanging information with the leading industry experts through the early online trading forums. Noshee soon discovered that the analytical skills from his day job transferred perfectly to understanding and predicting the intricacies of the stock market. “I quickly started to make winning trades consistently and after seven years of learning, I was able to quit my $120 per hour job, start a career in trading, and begin my dream lifestyle of trading for a living” Before long, friends and family started asking Noshee for trading tips, and their friends soon followed. “In 2010 I founded Trade Genie to help other traders, as well as offering subscription services for my daily stocks and options trade alerts. I now look forward to each day with great anticipation and excitement, I have found my calling.” Money Market Mastery 3

  4. Trade Genie Options Trading Strategies Over the past decade, tens of thousands of individual traders and investors have joined Trade Genie’s subscription services and stayed with us due to the continual overall success of the trades Noshee recommends. “I take great pride in offering a premium service to our subscribers by replying to any questions clients have, personally.” Noshee is passionate about trading and his nearly two decades of knowledge and experience position him to be one of the most knowledgeable and successful traders in the US today. Noshee does not trade because he needs to, he trades because it is his passion and enjoyment. “The reason I started Trade Genie was that I realized that there is no greater satisfaction than helping others to achieve their financial security and their own greatest dreams.” Each day before the market opens, Noshee performs a psychological workout, developed over years in association with key mentors, as he prepares for the opportunities of the day ahead. During trading hours, he analyzes the markets and trades for his account and provides the trading alerts for our members. After the market closes Noshee goes through a debriefing process, reviewing the markets as he prepares himself for the next day. At the weekend Noshee prepares his teaching materials for the ‘free’ coaching webinars offered with all Trade Genie memberships. Between times, Noshee compiles our newsletter which is full of pertinent market information, comments on the previous day’s trades as well as masterful tips and insights to help you elevate your trading skills. “I realized that all my years of experience analyzing the markets to find the right trades to execute was so much more rewarding when I shared my knowledge with others who don’t have the time to do the analysis or the experience to trade successfully themselves.” TradeGenie.com 4 Money Market Mastery

  5. Trade Genie Options Trading Strategies At Trade Genie, we offer an elevated level of service, keeping in touch with you throughout the trade if the situation changes so you can make the most of opportunities as they arise. Our trades are hand-picked in real-time after analyzing the trade opportunities thoroughly with respect to the risk and reward ratio. We provide our members with the exact buy price along with multiple exit target prices which allow you to assess the relative risks of each in an easy to understand way. We then keep you updated throughout the trade if these exit targets can be adjusted to your advantage while the trade is in play. We give you precise trade management strategies and guidance along with the trade alerts that require it. All memberships come with our ‘Trading Systems’ guidebook and ‘Options Trading Strategies’ manual. These guides outline the recommended steps to take in order to maximize gains and minimize losses, and as such are essential trade secrets within themselves. Our trading statistics are live on our homepage where you can see our win rates, average percentage gain, and loss, as well as the average time it takes to close the trades. It goes without saying that these results are excellent, and naturally, the dedicated trader who judiciously selects trades based on focused analysis, can easily multiply the average percentage gain manyfold. However, it is our level of support, transparency, in-trade guidance, free coaching webinars, newsletter, and our markets trend and strength reports, that really take the weight off your shoulders and give you the knowledge and confidence you require to trade successfully like a pro. Take a look at our testimonials page and see what our clients say, then try us and see for yourself why we are undoubtedly the best stock options advisory service available in the US today. We look forward to welcoming you into our community of financially successful individuals, growing their portfolios and profits. while living their dreams and enjoying life to the fullest. TradeGenie.com 5 Money Market Mastery

  6. Trade Genie Options Trading Strategies Meet Our Founder Noshee Khan In March 2010 I lived in an ordinary world: • Working as a IT Consultant: Check. • Dealing with the early morning commute: Check. • Constantly reporting to my boss: Check. • Feeling as if the daily routine was sucking the life out of my body: Check. Here is my story I worked at an IT consulting job. So, I was doing the typical consulting work routine. I’d get up early to make the morning commute, run around all day helping clients, and attend long meetings. It was a stressful and unhealthy lifestyle. Whenever When I got any breaks, I would grab something quick and calorie-filled at McDonald’s and drink way too much coffee to keep my energy up. Once the day finally ended, I’d leave work at 6 pm, grab something again from a fast-food restaurant because traffic would back-up and I wouldn’t get home until 8 pm. Then I would crawl into bed without spending time with my new wife. It was definitely a trying lifestyle. I reached my breaking point in March of 2010 when I was told I was being laid off. At that moment, everything in my life came to a screeching halt. I had no money coming in. Yet getting back into the proverbial rat race was disheartening. I could find another consulting job where I would just become miserable again and not spend any time with my wife. And then, what about the future when kids became a part of our lives? I didn’t look forward to barely seeing them day in and day out if I went back to IT consulting. I would miss seeing them off from school or picking them up in the afternoons. I wouldn’t be there for school concerts or to sing holiday songs or attend Dad’s Donuts Days. They would grow up never really knowing who the man was that would rush out the door in the mornings and what part he had in their lives. TradeGenie.com 6 Money Market Mastery

  7. Trade Genie Options Trading Strategies “What a waste of life!” I asked myself. “Why am I working so hard? For whom?” I wanted to reclaim my dignity. I wanted to provide my wife with a happy life and provide my future children with the Dad that they deserved to know. I wanted to feel the inner satisfaction of helping others while being my own boss. I wanted to enjoy everything that I had missed out on before, such as traveling around the world and working at any location while choosing the hours I wanted to put in at the job. While I had that constant fear, about making a living, completely wrecking my life and possibly my marriage, I did the only thing that I could do. I evicted myself from the misery. I didn’t prepare my IT consulting resume. I shut down the recruiters trying to get me involved in various projects across the country and overseas. I burned that past bridge down. Yet I still needed to provide for my family’s financial security. So, I went to snipping down my monthly budget. Every unnecessary expense had to go as I focused on what was necessary for our lives. Then, I sat down and poured my energy into my life’s passion: becoming a full-time stocks and options trader. There was just so much more information I needed to absorb. Luckily, with the trading knowledge that I had acquired trading part-time while working as an IT consultant, I had enough to start my journey at full steam. I also lucked out and had some wonderful people, my guiding angels who provided me with mentorships that allowed me to go along the right track. I read all the online literature I could find about stocks and options trading. I soaked up the knowledge from books, as my angels looked on and admired my passion and talent for the trade. I quickly held my own as a stock and options trader and exceeded even my own expectations. It was at that time I founded Trade Genie to share my successes with others. My wife and I soon owned homes in several countries. I could now trade from anywhere in the world as I enjoyed creature comforts and outdoor activities. I could play on sandy beaches in the summer and go kayaking, zip-lining, and bungee jumping in the mountains. TradeGenie.com 7 Money Market Mastery

  8. Trade Genie Options Trading Strategies I even had the opportunity to go on exciting elephant rides in foreign countries during the day after putting in some hours on the stock market. It was a dream come true. After having received such an excellent mentorship, I paid it forward and offered advice to other traders so they could create their own fortunes through my stock market advisory services and coaching programs. As I further honed the techniques and my knowledge of the stock market, I started to notice an interesting pattern. Much of my time was being spent learning every possible technique out there, which forced me to expend a lot of time and energy trying to mesh together all of the different techniques. Instead, I learned that I could reach further success by changing my focus and concentrating on truly mastering just a few techniques that most professional traders use to reach financial success. Through this new stocks and options trading strategy, I saw enormous gains at a rapid pace and my portfolio grew at light speed. I was absolutely shocked. While I had mastered several chart patterns and trading techniques, there were three specific techniques that continually proved highly profitable to me. And now I want to share these three techniques with you for free. I want you to break out of the corporate cubicle wars and instead reach the same financial success with stock market trading that I have. You no longer need to worry about how to master stock trading. You can spend more time with your family and pursue all the luxuries that life has to offer. In my “Mastering the Stock Market” guidebook, I go into greater detail about these three simple trading techniques and how mastering these will transform you into an independent and highly profitable trader. Simply drop me a line via our contact page and I will send you your free “Mastering the Markets” guidebook today so that you can find the success that my trader followers and members have found. You can finally burn the bridges that are holding you back from true financial freedom and the happiness it provides. TradeGenie.com 8 Money Market Mastery

  9. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Swing Trading Strategy Successful swing trading requires skillful interpretation of the herd mentality that drives price change . Swing trading combines the better of two worlds – the slower pace of investing and the increased potential gains of day trading . By rolling over your money rapidly through short term gains you can quickly build your equity . The basic strategy of swing trading is to jump into a strongly trending stock after its period of consolidation or correction is complete . Strongly trending stocks often make a quick move after completing its correction which one can profit from . One then sells the stock after 2 to 7 days for a 5-10% move . When you combine options with swing trading the return could be somewhere 25 – 100% in a short period of time . This process can be repeated over and over again . One can also play the short side by shorting the stocks that fall through the strong support . In brief a Swing Trader’s goal is to make money by capturing the quick moves that stock makes in its life span, and at the same time controlling his/her risk by proper money management techniques . In swing trading or any form of trading knowing the exact stock target price to exit the trade will keep you in trade and minor pullbacks will not give you worries that you are losing the profit . Similarly knowing the exact stop price will also not shake you out in case the stock pull backs severely . These two price levels are crucial to one’s success . No matter how strong the chart looks if the stock does not have potential to move further up (in case of long trade) or down (in case of short trade) then there is no point in entering the trade as the risk is higher than the reward . At certain price point the buyers start accumulating the stock preventing from further fall and stock make a big move to the upside . The same phenomenon happens when the stock is making upside move and suddenly reaches a price point and collapses . Money Market Mastery 9 TradeGenie.com

  10. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y time we would enter into the trade which is coming up for earnings. Let’s assume that tomorrow morning CMI is reporting earnings. we bought out-of-the-money Puts May 65 for $1.00. Our basket Calls and Puts cost is $4.40 Forecast = CMI can gap up above 72 or gap down to 65. .30 and Let’s assume CMI gaps up enough that our call which we bought for $3.30 trades above $4. basket. . If Puts are trading near 10 cents then we don’t sell PUTS rather sell calls and hold PUTS. Selling PUTS for 10 cents do not make sense as some brokers may be charging you more than 10 cents to sell one contract. In case CMI pulls back the PUT S will gain some value and we can alue . However, PUTS could expire worthless too . get better salvage v Scenario 2 Everything same as scenario 1 above but it seems it is better to get out of Calls and PUTS at the same time to make decent profit in the basket . The volatility after earnings go away and even stock moves upward the options do not move . Money Market Mastery 1 0 TradeGenie.com

  11. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y For example, Calls may be trading at 4 .80 and Puts at $0 .40 and based on chart and volatility we decide it is better to sell both and get $5 .20, rather sell Calls and hold Puts (or hold Calls and sell Puts) and later PUTS expire worthless or Calls lose value . Scenario 3 Lets assume everything what we described above in scenario 1 happens but CMI looks so good after gapping up that it falls in gap trade criteria . In this case we can add more to CMI calls either May 70 or May 75 . We treat it as brand new trade and maximize gains . If we buy May 75 Calls then maybe we can hold May 75 Calls to sell near $75 but sell May 70 Calls to lock gains . Scenario 4 There are times that both Calls and Puts trade such a way that overall basket is in loss . In this case we try to salvage by selling one leg first by determining which way stock is headed and hold the other leg till we get the breakeven price on the basket . Money Market Mastery 1 1 TradeGenie.com

  12. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Indexes, ETF and Ultra Short Trading If you have subscribed to Index Options trading then this section is for you to read and understand . Depending on the market direction I trade the following fifteen symbols . 1 . DIA ($INDU) 2 . SPY ($SPX) 3 . QQQ ($NDX) 4 . $OEX (S&P 100) 5 . $XAU (Gold and Silver Index – Philadelphia Stock Exchange) 6 . $HGX – Housing Index 7. GDX–Market Vectors Gold Miners 8. DXD –Ultra Short DowJones 30 Pro Shares 9. SDS–Ultra Short S&P Pro Shares 10. QLD - Proshares Ultra QQQ 11. QID – Ultra Short QQQQ Pro Shares 12. DUG – Ultra Short Oil & Gas Pro Shares Money Market Mastery 1 2 TradeGenie.com

  13. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y 13 . SKF – Ultra Short Financials 14 . FAZ - Financial Bear 3x Shares 15 . TZA - Small Cap Bear 3x Shares $XAU . Different brokers and trading platforms have different symbols for these . For example, OEX, $OEX, $OEX .X, OEX .X etc . $OEX has weekly and monthly option chains . I buy monthly option . Please familiarize yourself with these symbols specially $OEX and To trade $XAU you must have access to Philadelphia Stock Exchange quotes . Otherwise you will get delayed quotes . In Trade Station platform I pay $1 per month to get the real-time quotes from Philadelphia Stock Exchange . Money Market Mastery 1 3 TradeGenie.com

  14. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Understanding Position Sizing Part 1 “He who thinks he knows, doesn’t know. He who knows that he doesn’t know, knows.” —Lao Tse In this Chapter, we will talk about Position Sizing - one of the most important concepts that will stop you from going broke on your first trade! Position sizing is simply the how much of trading . It answers the question such as “How many contracts or shares per trade you should buy for your account size?” When you enter a position, it is essential to know the point at which you will get out of the position in order to preserve your capital . This is your “risk” . It is your worst-case loss - except for slippage and a runaway market going against you . One of the most common position-sizing systems involves controlling your per trade size as a function of this risk . There are various Position-sizing model. In this chapter we will discuss position sizing based on Percent-Risk model. To implement position sizing concept you need to know three variables. These are your portfolio size, risk tolerance percentage and stop loss percentage. Risk tolerance is defined as how much you are willing to lose on one trade as part of your total portfolio amount. Stop loss is defined as how much you are willing to lose in a given trade. Please make sure to understand the difference between the two. Money Market Mastery 1 4 TradeGenie.com

  15. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y To illustrate position sizing lets assume your portfolio size is $50,000 . Let’s also assume that you do not want to risk more than 2 percent of your capital in any trade . This means you are willing to lose $1000 ($50,000 * 0 .02) on one single trade . Let’s say that based on your technical analysis you have determined that your stop loss percentage will be around 50 percent . Let’s take the example of AAPL . You are bullish in AAPL and are interested in buying AAPL Calls as you think AAPL will rise in price . Let’s assume one AAPL Call contract is trading at $20 . Since one contract controls one hundred share, therefore, purchasing one contract of AAPL at $20 will require $2000 ($20 *100) investment . As we know not all trades are successful and they hit our stop loss . Your technical analysis tells you that when AAPL trades at a certain price your Call contract will be trading at $10 thus you will incur 50 percent loss . This is your stop loss percentage . In other words you will lose $1000 ($10 *100) in this trade which is 2 percent ($50,000/$1000) of your starting capital . In other words your risk is defined as 2 percent and your stop loss is at 50 percent . Therefore based on your portfolio size of $50,000 you should not invest more than $2000 in AAPL trade . This investment amount is calculated as follows . Investment Amount = (Portfolio Size/Stop Loss Percentage) * (Risk Tolerance) Investment Amount = ($50,000/0 .5) * (0 .02) = $2000 The above equation for determining the Investment amount shows that if we increase the risk tolerance while keeping the Portfolio size and Stop Loss Percentage same we would be able to investment more in AAPL trade. Money Market Mastery 1 5 TradeGenie.com

  16. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y For example, if we increase risk tolerance percentage to 4 percent then the investment amount as determined by the equation will be $4000 calculated as follows: Investment Amount = ($50,000/0 .5) * (0 .04) = $4000 Similarly you can keep the risk tolerance to 2 percent but if you decrease the stop loss percentage to 25 percent then you would be able to invest $4000 in AAPL trade and is calculated as follows: Investment Amount = ($50,000/0 .25) * (0 .02) = $4000 As you can see your Investment amount in a single trade is a function of your portfolio size, risk tolerance percentage and stop loss percentage . It is suggested that risk tolerance level should remain constant (e .g . 2 percent) whereas your stop loss percentage and your portfolio size will fluctuate from time to time . As your portfolio size increases or decreases your investment amount per trade has to be adjusted accordingly based on your risk tolerance and stop loss percentage . Let’s say your portfolio has grown to $60,000 . Keeping risk tolerance and stop loss percentage same we would be able to invest $2400 in our AAPL Calls which is calculated as follows: Investment Amount = ($60,000/0 .5) * (0 .02) = $2400 Based on $2400 investment if you lose in this trade the loss amount would be $1200 which is 2 percent of your portfolio size . In summary proper position sizing will eliminate fear level, rate of errors and will build your confidence in trading . This will lead you to improvement in your success rate, and higher profits in gradual systematic way . Above all few bad trades will not wipe out your account and you will live to trade in the future . Money Market Mastery 1 6 TradeGenie.com

  17. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Understanding Position Sizing Part 2 Money management is a very confusing term . When we looked it up on the Internet, the only people who used it the way that Van was using it were the professional gamblers . Money management as defined by other people seems to mean controlling your personal spending; giving money to others for them to manage, risk control, making the maximum gain, plus 1,000 other definitions . To avoid confusion, Van elected to call money management “Position Sizing .” Position sizing answers the question, “How big of a position should you take for any one trade?” Position sizing is the part of your trading system that tells you “how much .” Once a trader has established the discipline to keep their stop loss on every trade, without question the most important area of trading is position sizing . Most people in mainstream Wall Street totally ignore this concept, but Van believes that position sizing and psychology count for more than 90% of total performance (or 100% if every aspect of trading is deemed to be psychological). Position sizing is the part of your trading system that tells you how many shares or contracts to take per trade. Poor position sizing is the reason behind almost every instance of account blowouts. Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. Money Market Mastery 1 7 TradeGenie.com

  18. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Imagine that you had $100,000 to trade . Many traders (or investors, or gamblers) may just jump right in and decide to invest a substantial amount of this equity ($25,000 maybe?) on one particular stock because they were told about it by a friend, or it sounded like a great buy; or perhaps they decide to buy 10,000 shares of a single stock because the price is only $4 .00 a share (equating to $40,000) . They have no per-planned exit or idea about when they are going to get out of the trade if it happens to go against them and they are subsequently risking a LOT of their initial $100,000 unnecessarily . To prove this point, we’ve done many simulated games in which everyone gets the same trades . At the end of the simulation, 100 different people will have 100 different final equities, with the exception of those who go bankrupt . And after 50 trades, we’ve seen final equities that range from bankrupt to $13 million--yet everyone started with $100,000 and they all got the same trades . Position sizing and individual psychology were the only two factors involved . Van says that this just shows how important position sizing is . So how does it work? Suppose you have a portfolio of $100,000 and you decide to only risk 1% on a trading idea that you have . You are risking $1,000 . This is the amount RISKED on the trading idea (trade) and should not be confused with the amount that you actually INVESTED in the trading idea (trade) . So that’s your limit, you decide to only RISK $1,000 on any given idea (trade). You can risk more as your portfolio gets bigger, but you only risk 1% of your total portfolio on any one idea. Money Market Mastery 1 8 TradeGenie.com

  19. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Now suppose you decide to buy a stock that was priced at $23 .00 per share and you place a protective stop at 25% away, which means if the price drops to $17 .25 you are out of the trade . Your risk per share in dollar terms is $5 .75 . Since your risk is $5 .75, you divide this value into your 1% allocation (which is $1,000) and you are able to purchase 173 shares, rounded down to the nearest share . Work it out for yourself, so you understand that if you get stopped out of this stock (i .e ., the stock drops 25%), you will only lose $1,000 or 1% of your portfolio . No one likes to lose, but if you didn’t have the stop and the stock dropped to $10 .00 per share, you can see how quickly your capital vanishes . Another thing to notice is that you will be purchasing about $4000 worth of stock . Work it out for yourself . Multiply 173 shares by the purchase price of $23 .00 per share and you’ll get $3979 . It would probably be around $4000 when you add commissions . Thus, you are purchasing $4000 worth of stock, but you are only risking $1000 or 1% of your portfolio . And since you are using 4% of your portfolio to buy the stock ($4000), you can buy a total of 25 stocks this way without using any borrowing power or margin, as the stockbrokers call it . This may not sound as “sexy” as putting a substantial amount of money in one stock that “takes off,” but that strategy is a recipe for disaster and very rarely happens . Therefore it is best left on the gambling tables in Las Vegas . To continue to trade and stay in the markets over the long term, learning position sizing and protecting your initial capital is vital . Van believes that people who understand position sizing and have a reasonably good system can usually meet their objectives through developing the right position sizing strategy . Money Market Mastery 1 9 TradeGenie.com

  20. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Position Sizing How much is enough? Start small . So many traders that are trading a new strategy start by risking the full amount that they plan on using for the long term with that strategy . The most frequent reason given is that they don’t want to “miss out” on that big trade or long winning streak that could be just around the corner . The problem is that most traders have a much greater chance of losing than they do of winning while they learn the intricacies of trading the new strategy . Therefore, start small (very small) and minimize the “tuition paid” to learn the new strategy . Don’t worry about transactions costs (such as commissions), just worry about learning to trade the strategy and follow the process . Once you’ve proven that you can consistently and profitably trade the strategy over a meaningful period of time (months, not days), then you can begin to ramp up your position sizing . Manage losing streaks . Make sure that your position sizing algorithm helps you to reduce the position size when your account equity is dropping . You need to have objective and systematic ways to avoid the “gambler’s fallacy.” The gambler’s fallacy can be paraphrases like this: after a losing streak, the next bet has a better chance to be a winner. If that is your belief, then you will be tempted to increase your position size when you shouldn’t. Don’t meet time-based profit goals by increasing your position size. All too often, traders approach the end of the month or the end of the quarter and say, “I promised myself that I would make “X” dollars by the end of this period. Money Market Mastery 2 0 TradeGenie.com

  21. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y The only way I can make my goal is to double (or triple, or worse) my position size . This thought process has led to many huge losses . Stick to your position sizing plan! We hope this information will help guide you toward a mindset of capital preservation on your journey toward successful trading . “I have talked to many folks who have blown up their accounts. I don’t think I have heard one person say that he or she took small loss after small loss until the account went down to zero. Without fail, the story of the blown up account involves inappropriately large position size or huge price moves, and sometimes a combination of the two.” ~D.R.Barton To further understand the concept of Position Sizing and more please purchase the Dr . Tharp’s book “Trade Your Way to Financial Freedom” . Money Market Mastery 2 1 TradeGenie.com

  22. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Dollar Cost Averaging The dollar-cost-averaging strategy is based on dividing the total amount to be invested in a trade into three lots and investing these three lots at different stock prices . The idea is to add to our open position on stock weakness rather than closing out the trade at loss . We will always begin our trade with the investment of 2% of our portfolio balance . In case we are wiped out in this trade for any reason, such as stock gapping down or gapping up, the maximum we would lose is 2% of our portfolio balance . By default the first profit objective is 20-25% . If stock pulls-back after our entry and hit our first pullback price then we invest the second lot at reduced cost . This will bring down the average cost per contract . After second purchase the profit objective is 30-35% . In case stock does not hit our profit objective and rather went to our second pullback price then we invest the third lot at a price per contract lesser than the second purchase . The third purchase will reduce the average cost per contract to even further . Once we purchase the third lot then we set the order to sell at profit objective of 35-40% . After the third purchase we also monitor our trade for our stop. If stop hits then we close our trade. The expected loss would be between 40-45%. Example – CF – January 185 Calls Let us assume the portfolio size is $26,500. We take 6% of the portfolio balance which comes to $1,600. Divide $1,600 into three lots which comes to $533. Let us also assume we are buying CF Jan 185 Calls which are trading at $530. Money Market Mastery 2 2 TradeGenie.com

  23. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y First Buy The amount of $530 will bring one contract . Set the sell order immediately at 25% profit or the target bid provided with the alert . In this example, the target bid is $6 .60 . There is no hard stop set at this moment . If target bid hit we would gain $1 .30 per contract and the trade will be closed . Second Buy However, let us assume the target bid did not hit and stock pulled back and hit our first pullback price . You will either be provided the pullback stock price in advance or real-time email alert will be sent . Lets assume CF contract at the pullback price is trading is $2 .90 . We would invest $580 to purchase two contracts . After this purchase the total amount invested will be $1110 ($530+$580) and we would have three contracts on hand at the average cost of $3 .70 ($1110/3) . After the purchase set the conditional good till cancel order to sell either at the stock target price or at the target bid provided . There is no hard stop set . In this example, the target bid is $5 .00 . If target bid hits the gain will be $1 .30 per contract . The return on investment will be 35 .14% and the trade will be closed . Third Buy However, let us assume the target bid did not hit and stock either pulled back and hit our second pullback price or went sideways . In this case third purchase will trigger and we would buy more contracts . Let us assume at second price CF Calls are trading at $2.40. This means we will buy two more contracts for the total amount of $480. After this purchase we will have five contracts at the average cost of $3.18 and total amount invested would be $1590. After this purchase set the good till cancel order to sell all contracts either at stock target price given or target bid given. In our case target bid is set at $4.30. If our target bid hits we stand to gain $1.12 per contract. Total gain will be $560. Money Market Mastery 2 3 TradeGenie.com

  24. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Stop Price Suppose after third purchase the stock further move down (in case of Calls) then our stop would trigger at either stock stop price given or the stop bid given . In our case the estimated stop price is $1 .90 . If stop hits we would lose $1 .28 per contract . Total amount we will be $640 . The loss percentage will be 40 .25% which will be around 2 .42% of our portfolio balance . Reward-to-Risk Ratio Reward-to-Risk Ratio = (Expected Profit * Probability of Profit) / (Maximum Loss * Probability of Loss) = (25% * 80%) / (40% * 20%) = (2 .0) / (0 .8) = 2 .5: 1 Assumption The assumptions are as follows: 1. Once we enter the trade – stock would trade such that it will give us 25% profit. 2. In case stock pulls back to our first pull back price – it will bounce back up. 3. If stock does not bounce after hitting first pullback price then there is a high. 4. Probability that stock will bounce back after hitting second pullback price . 5. If stock further goes down then the trend is changing and we need to close our Trade . 6. The expected win ratio in this strategy is 80% . 7. The first profit target is 25% . Money Market Mastery 2 4 TradeGenie.com

  25. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y 8 .The second profit target is 35% . 9 .The third profit target is 35% . 10 . Expected loss is between 40-45% . 11 . Expected loss as percentage of portfolio per trade is 2-3% Money Market Mastery 2 5 TradeGenie.com

  26. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Understanding Targets “The professional concerns himself with doing the right thing rather than with making money, knowing that the profit takes care of itself if the other things are attended to.” —Jesse Livermore When you fully commit to a goal, the focus of positive energy onto a desired result is like programming a missile to “lock on” to a moving target; the missile automatically pursues the target no matter how elusive it becomes . The act of commitment also attracts exciting, new possibilities to your doorstep, leading to dramatic changes in your life . 1 . Green Target - This is the immediate target which I expect the stock to hit very quickly and the probability of it hitting is 95% . I usually sell one-fourth of my position on this target . I expect stock to continue its journey towards next target which is “yellow target” . If the target is given in percentage then it means it is based on option buy price . 2 . Yellow Target - This is the second target after green target . The probability of hitting the yellow target is 85% . The difference between yellow and green target besides the probability is that after hitting the green target I expect stock to continue towards yellow, whereas, after hitting yellow target I expect stock to pullback somewhere in the middle of green and yellow targets . I sell 75% of my position on yellow target unless stock gaps up or down or blows through the yellow target without stopping . If I see reversal after hitting yellow or market direction changing then I liquidate my rest of the position which could be below yellow target in case of long position or above yellow target in case of short position . In other words the last one-fourth position could be liquidated at lesser price than what I sold at yellow . Money Market Mastery 2 6 TradeGenie.com

  27. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y When the stock is in the middle of “yellow” and “red” target my stop is set just below “yellow” target . 3 . Red Target - This is the third target after “yellow” . This is the target where I am expecting the stock to hit and pullback all the way to yellow target . Therefore, I sell all my contracts whatever I have left after selling at yellow target . The probability of hitting red target is around 70% . Once the stock travels towards red target my stop is set just below yellow target . The reason it is set below yellow is that I am expecting stock to rebound after hitting yellow target . In case it does not rebound then I am out of the position completely . 4 . Revised Red Target - If I am watching my trade and I see more potential in the trade and confident that stock will go through the “Red” target then I revised my “red” target . The stop is set just below “red” target to participate in further gains . 5 . Pullback Price - This is the price which I expect that stock could pullback after I enter the trade . This serves various purposes . For example, if I have spread trade long then I can close out the short leg once the stock hits the pullback price and starts moving upward . The second purpose is that there are trades where I do not put all my investment in the beginning as I expect that stock could pullback . Therefore, in this case I divide my investment into two lots . The second lot will be invested in case the stock pulls back to the “pullback price” and rebounds . The pullback price is determined based on various methods . Example, it could be purely based on charts analysis on candles, it could be previous support, it could be a simple moving average, weighted moving average or volume weighted moving average or a trend line . Money Market Mastery 2 7 TradeGenie.com

  28. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Importance of Red Target “The professional concerns himself with doing the right thing rather than with making money, knowing that the profit takes care of itself if the other things are attended to.” —Jesse Livermore In the previous Chapter I have explained green, yellow and red targetsIn this Chapter I will explain the importance of Red target . . Red target is the target where the stock is expected to hit and reverse or pullback severely . If you are long and stock gaps above at open and stays above the red target then you are safe . If it gaps above red target and reverses and goes down below red target then it is better to sell your contracts and lock your gains . The reverse phenomenon is applicable in case of shorts . You should pay more attention to the stock if it hits red target after market is closed. If the stock hits red target after market close then it must continue upward movement next day pre-market or at least when the market opens. This means it should gap-up and continue moving upward. If it does not then it is in your best interest to sell your contracts and lock your gains or minimize your loss or get out at breakeven. You can always get back in once the stock stabilizes. There is always a new trade around the corner. Preservation of capital is the first goal in trading. Making profit is secondary. Let me give you an example of how you can protect your profit and what you need to do. Suppose red target is $18.50 and stock closes at $17.40. After market is closed the stock jumps to $18.55. This means stock has hit the red target and red target is no longer valid. Money Market Mastery 2 8 TradeGenie.com

  29. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Next day the stock should continue moving upward beyond $18 .55 at pre-market and also after the market is opened . If it does not continue moving upward then you know must lock your gains within fifteen minutes of the market open . In short watch your stock after-market and pre-market for hitting the red target whether you are long or short and when market opens take the decision to hold or sell . Sometimes you may want to add to the position as it could be gapping up due to some extra-ordinary news . I usually send alert pre-market or right after the market is open advising members what to do in such scenario . The above concept is also applicable when you are short or have puts in your portfolio . This means if red target is hit when market is closed then when market reopens stock should immediately continue going down beyond red target, otherwise you have to sell and lock gains . Money Market Mastery 2 9 TradeGenie.com

  30. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Executing the Trade 1 . Determining which Option to Buy The option selection is based on target price and how fast I estimate that the stock will hit the target price . If stock is trading at $60 .00 and my target is $63 .00 and I am expecting that stock will hit the target within thirty days then I would buy next month and strike closer to the target which is $62 .50 in this case . This means when stock reaches $63 .00 my option will be in the money and the time value has been converted into intrinsic value giving me the most bang for the buck . However, sometimes it is prudent to buy in-the- money option for various reasons, such as out-of-the-money option does not look attractive due to far away from the target price, open interest or simply overpriced . 2 . Dividing the Capital into Two Lots No matter how good the trade looks, I never put all my money at once . I buy contracts worth 50% of capital as determined by position-sizing and the rest 50% after testing the water to see if I am right . I let the trade develop . Once I am pretty sure that trade is going my way then I buy another 50% of allocated fund (based on position- sizing) . 3 . Using Limit Orders Intelligently Watch your limit orders carefully . You cannot walk away from limit orders the way you can with stocks . Since the true value of an option directly depends upon the price of the underlying stock, your “bargain bid” of 15 minutes ago may eventually be executed at a very disadvantageous price . For example, let’s look at a stock at $50 with a 45 call option bid at $6 .00 and offered at $6 .50 . Money Market Mastery 3 0 TradeGenie.com

  31. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y You bid $6 .00, the stock drops quickly to $48 and you are the proud owner at $6 .00 . Unfortunately, you should not have paid more than $4 .50 at a stock price of $48 .00 . Therefore, you should watch your limit order constantly to check whether it should be revised or cancelled . 4 . Handling Partial Execution Don’t be overanxious on a partial execution . After you have placed an order to buy 10 options at $8 .70, you may get a message saying, “you bought five at $8 .70, it’s your bid at $8 .70 for the remaining five, and the option is offered at $9 .20’ . Instead of immediately paying the extra $0 .50 for the five options to fill your total order, wait a while . Since it is “your bid”, any options that come in to be sold at the market or at $8 .70 (or less) will be yours (up to a limit of five, of course) . Your chances are pretty good as long as the underlying stock remains in a reasonable trading range . Of course, you should remain in close contact with the broker or your online order screen so that adjustments can be made in your order to respond to significant movements in the stock . Money Market Mastery 3 1 TradeGenie.com

  32. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Beating the Market Maker via Show or Fill Rule “Show or Fill Rule” or “Limit Order Display Rule” is great help for those traders who buy twenty contracts or less . The rule was enacted through Exchange Act rule 11 Ac-1-4 . This rule requires the market makers to show or publish any order that improves the current bid or ask prices unless it is filled . Any order between the current bid ask spread will improve the market . Before we go into the details of this rule, we need to understand the basics of option quoting system: Lets say you (John) want to buy 3 contracts of February CAT 90 Calls which are trading at Bid $6 .00 and Ask $6 .75 So what does this mean? It means the market maker is bidding $6 for the option . This is the price he is willing to pay if you want to sell your contract . On the other hand he is asking $6.75 per contract to sell to you. In this buy and sell process he is making 75 cents per contract. In other words we, the option trader, always gets the worst price. This is our cost of doing the trading business, besides paying commission to the broker. Whereas market maker makes his money by providing liquidity in the market. When we get the quote, the bid price represents the highest bidder, and the ask price represents the lowest offer or seller. TradeGenie.com Money Market Mastery 32

  33. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y The general rule of thumb is that spread should not be more than 5 percent . Therefore, if the bid is $6 .00 ask should not be $6 .30 . So, based on this rule you do not want to pay $6 .75 rather willing to pay $6 .30 as you think this is the fair value of the option . Therefore, you placed the order to buy 3 contracts of February CAT 90 Calls at $6 .30 . This is your bid . You are bidding for the contracts at $6 .30 . Prior to the “Show or Fill Rule”, the market maker was not obligated to show your bid of $6 .30 . He would simply leave it as bid $6 .00 and ask $6 .75 . Under the “Show or Fill Rule”, the market maker has two options: 1 . Either he gives you three contracts at $6 .30 or 2 . Shows the Bid as $6 .30 and Ask as $6 .75 If he decides not to sell you at $6 .30 then when he shows the bid and ask the spread will be 45 cents and is reduced from 75 cents . As soon as you place your order, your bid will be shown on the top which is $6 .30 . Now lets say another trader (Tom) wants to sell 20 contracts of Feb 90 Calls but he does not want to sell at $6 .30 rather at $6 .50 . As soon as he places his sell order the Bid and Ask will be displayed as follows: Bid $6 .30 - Ask $6 .50 Spread is further reduced and now it is at 20 cents . Remember, you (John) are bidding to buy at $6.30 and another trader (Tom) is asking to sell at $6.50. According to the rule, the bid and ask is valid for at least 20 contracts. This means the market maker must fill your order of 20 contracts or less at the current bid and ask price. Money Market Mastery TradeGenie.com 33

  34. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y So, if you are buying three contracts of CAT Feb 90 Calls at $6 .30, the market maker is obligated to either sell you at $6 .30 or show the bid at $6 .30 . At this time market maker is thinking that if I do not fill the order at $6 .30 and rather show and post the order then by law I am obligated to honor the price of $6 .30 for 20 contracts . In this process the other seller (Tom) can sell at $6 .30 instead of $6 .50 or $6 .00 . Therefore, Tom will get better price which is $6 .30 instead of $6 .00 . Therefore, market maker will fill your (John) order of three contracts at $6 .30 quickly to get you out of the way and so he does not have to show your order to the market . The other seller (Tom) will not be able to get $6 .30 and has to sell at $6 .00 if he wants to sell or wait for the bid to improve . It is advised that first place the order in between bid and ask and see if you get filled . This will make huge difference on your profits in the long run . However, if the stock is moving fast in your direction and the potential in the trade is significant then fighting with the market maker is not worth, as the trade may slip away . If my order does not get filled within 15 seconds at my bid price I either improve my bid or pay at ask and move on with the trade as I do not want to miss out on the profit . Money Market Mastery TradeGenie.com 34

  35. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Uptick and Upbid Rule After the SEC reinstated a new version of the uptick rule following the 2008 financial crisis, there has been very little information available online . If you search for “uptick rule” most of the info you will find i s on the old uptick rule . The current version isn’t really an uptick rule at all, but rather an up-bid rule . This new version was first put into effect in November 2010 . Simply put, shares of a stock cannot be sold short at or below the best bid when the rule is in effect . The short seller must sell on the offer and wait for a buyer to fill his offer . The rule goes into effect when a stock’s price decreases by 10% or more from its previous day’s close . Once a stock has dropped 10% from its previous day’s close (even if just briefly dropping that far) the rule will then be in effect for the rest of the day and the next trading day . The rule can only be triggered during regular trading hours although if it is triggered it remains in force during after-hours and pre-market trading . For those who use Interactive Brokers’ TWS platform, a little red circle will appear to the right of the stock description when the uptick rule is in effect. If you mouse over the red circle it will say “Short sale restriction is in effect from [date] to [date].” Money Market Mastery TradeGenie.com 35

  36. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y To Chase or Not To Chase Most of the time alerts can be filled easily with the buy price provided . However, sometimes the trade seems to be slipping away fast . At this moment members have to decide to chase or not to chase the trade . The following guidelines will help you in knowing how much extra can be paid for the trade: 1 . If recommended option buy price mentioned is in the range of $0 .70 - $1 .00 then we can pay 5 cents over the buy price mentioned . 2 . If recommended option buy price mentioned is in the range of $1 .05 - $2 .50 then we can pay 10 cents over the buy price mentioned . 3 . If recommended option buy price is in the range of $2 .55 - $4 .00 then we can pay 15 cents over the buy price mentioned . 4 . If recommended option buy price is in the range of $4 .05 - $6 .00 then we can pay 20 cents over the buy price mentioned . 5 . If recommended option buy price is in the range of $6 .05 - $8 .50 then we can pay 30 cents over the buy price mentioned . 6 . If recommended option buy price is in the range of $8 .55 - $12 .00 then we can pay 40 cents over the buy price mentioned . 7 . If recommended option buy price is in the range of $12 .05 - $20 .00 then we can pay 50 cents over the buy price mentioned . Money Market Mastery TradeGenie.com 36

  37. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y It is also suggested that when you are paying above the recommended buy price for the option contracts as per guidelines given above then you should buy only one-half of the number of contracts as per Position Sizing . The rest of the contracts should be bought at much lower price to average down per contract cost . Another factor in deciding whether to pay extra is to look at the yellow target . If stock is still far enough from yellow target then it is ok to pay extra . However, if you see that by paying extra there is not much potential left in the trade considering yellow target then I suggest to leave the trade alone and either wait for the next trade or send me email . There is always something to trade . Money Market Mastery TradeGenie.com 37

  38. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Eliminating Greed through Conditional Order “My plan of trading was sound enough and won oftener than it lost. If I had stuck to it I’d have been right perhaps as often as seven out of ten time.” —Jesse Livermore After buy order for my contracts are filled I set the order to sell my contracts based on the conditional order taking into account the three targets and number of contracts I have purchased . The conditional order for Calls contract is set as follows: “Sell XYZ calls contracts at market when XZY stock price is equal to or greater than certain price” . In case of Puts contracts I set my conditional order as follows: “Sell XYZ puts contracts at market when XYZ stock price is equal to or less than XYZ stock price” . Setting the conditional order eliminates the need to calculate target bid prices as well as greed factor from trading . Some points to remember: 1 . Order is set at “market” not at limit 2 . Make sure greater than or equal is set for Calls and 3 . Less than or equal is set for Puts 4 . Test the Conditional order for one contract first and when it works fine and you feel comfortable then set for actual contracts you have . Money Market Mastery TradeGenie.com 3 8

  39. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Protecting Your Capital via Stop Price “Your protective stop is like a red light. You can go through it, but doing so is not very wise! If you go through town running every red light, you probably won’t get to your destination quickly or safely.” —Richard Harding You do not have a trading system unless you know exactly when you will get out of a market at the time you enter it . Your worse case exit, which is designed to preserve your capital, should be determined ahead of time . In addition, you should also have some idea about how you plan to take profits and a strategy for letting your profits run . Market legend William O’ Neil said “The whole secret to winning in the stock market is to lose the least amount possible when you’re not right .” Money Market Mastery TradeGenie.com 39

  40. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y There are many varieties of stop loss and depending on your risk tolerance and instrument you are trading you would select the stop loss method accordingly . Below are some of the few stop loss methods used by professional traders around the world: • Fixed Loss Amount Stop • Fixed Percentage Stop • Price Trailing Stop • Percentage Trailing Stop • Volatility Trailing Stop • Moving Average Crossover Stop • Support and Resistance Break Stop • Channel Breakout Stop • Trend Line Break Stop • Inactivity Stop • Time Limit Stop In this article we will talk about five stop loss methods and the rest you can do the research on your own and implement in your trading . So let’s begin . Fixed Loss Amount Stop Many professional traders suggest to use fixed loss amount stop . It gives them some psychological advantage . You determine before hand how much you are willing to lose on a trade and set that as a stop beforehand . For example, you invest $2000 in a trade and bought 100 shares of a stock at $20 per share . You have decided to lose $500 in the trade . This means when stock is trading at $15 you want to get out of the trade . Money Market Mastery TradeGenie.com 4 0

  41. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Fixed Percentage Stop Some traders set stops by allowing the price to retrace a certain percentage of the entry price . For example, you do not want to lose more than 10 percent in a trade . You bought 100 shares at $20 per share so you would set the stop at $18 . In case stock retraces and goes below $18 you are out with 10 percent loss . Since you’re trading can take you on a roller coaster of emotion, this discipline helps to calm those emotions and take them out of your trading, so that you’re trading with your mind again, and not your heart . Sounds good, right? However, there are a couple of problems with this approach . The first problem is that your stop loss may not take into account the daily movement of the stock (called the Average True Range, or ATR) . This is the daily fluctuation that a stock naturally oscillates through during a day . You can find the ATR of a stock by looking at a daily chart, and seeing how much the stock moves up or down in a day, and ensure that your stop loss is set outside of this range, to prevent you being taken out of a position due to normal market fluctuation and not simply a minor pullback . The second problem is that the stock may be on a short-term downward trend, but may be positioned to recover and climb back up to even higher highs, and by setting a very tight stop, you may lose out on the upswing by exiting early . There are a number of ways to implement stop loss rules to avoid the situation described above . One such way is to use a trailing stop that will move with the market as it advances but will stay static if the trade moves against you . A popular method is to trail the stop based on the low for long trades and the high for short trades or the open or previous day’s close can be used . The only problem with this type of trailing stop is that you have to move and set the stops manually each day, since there are very few trading platforms that can do this for you automatically . Some more automated solutions would be: price trailing stops, percentage trailing stop, and volatility trailing stop . Money Market Mastery 4 1 TradeGenie.com

  42. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Price Trailing Stop A price trailing stop uses a fixed price distance to trail each bar’s stop . This is useful especially where you may want to limit your stop distance to a fixed predetermined value, i .e . $0 .50, $1 .00, $5 .00 etc . One draw back of this stop is that $1 could be a large move for one stock and very small move for another . This is why the price trailing stop should mainly be used on individual stocks whose movement is well known to a trader . Percentage Trailing Stop For stocks with similar volatility levels, the percentage trailing stop can offer better results . Here you can start with say a 5% stop loss, but have it trail with the market higher while allowing for inter-day and intra-day volatility . However, similar to the price trailing stop, for some stocks a 5% is a large move, and for others not so large . Volatility Trailing Stop A third trailing stop option is the volatility trailing stop . As the name suggests the stop distance is matched to the volatility of the individual stock . A trader can obtain this information by checking the ATR (Average True Range) indicator . For those not familiar with ATR, the indicator measures the opening and closing prices each day over a 14 to 30 day period . It then averages out the movement to provide the average daily trading range for the stock . This ensures that whether the stock usually moves 1% or 10% daily, it will not whipsaw you out of the trade on normal trading movement . The best stop strategy and settings are best left up to you and your risk tolerance . I even know a number of traders that use a combination of strategies . They initially use a price stop to keep losses small in case they made a mistake on the entry . But then, once the trade is showing a profit, they give more room using a percentage stop . Ultimately, you want to keep another important rule of successful trading in mind when you set your stops: “Keep your losses small and let your winners run .” Money Market Mastery TradeGenie.com 42

  43. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Money management is a complex topic, and can certainly cover several more articles, but these are the basics, and you can start from here . The most important factor in determining the nature of your stop is to determine if it makes sense given your objectives, the instruments you are trading, and your temperament . You must use stop loss which makes sense . Money Market Mastery 4 3 TradeGenie.com

  44. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Understanding Expectancy “At the heart of all trading is the simplest of all concepts--that the bottom-line results must show a positive mathematical expectation in order for the trading method to be profitable.” —Chuck Branscomb What is expectancy in a nutshell? A trading system can be characterized as a distribution of the R-multiples it generates . Expectancy is simply the mean or average R-multiple generated . What does that mean? By now you should know that in the game of trading it is much more efficient to think of the profits and losses of your trades as a ratio of the initial risk taken (R) . But let’s just go over it again briefly: One of the real secrets of trading success is to think in terms of risk- to-reward ratios every time you take a trade. Ask yourself, before you take a trade, “What’s the risk on this trade? Is the potential reward worth the potential risk?” So how do you determine the potential risk on a trade? Well, at the time you enter any trade, you should pre-determine some point at which you’d get out of the trade to preserve your capital. That exit point is the risk you have in the trade or your expected loss. For example, if you buy a $40 stock and you decide to get out if that stock falls to $30, then your risk is $10. Money Market Mastery 4 4 TradeGenie.com

  45. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y The risk you have in a trade is called R . That should be easy to remember because R is short for risk . R can represent either your risk per unit, which in the example is $10 per share, or it can represent your total risk . If you bought 100 shares of stock with a risk of $10 per share, then you would have a total risk of $1,000 . Remember to think in terms of risk-to-reward ratios . If you know that your total initial risk on a position is $1,000, then you can express all of your profits and losses as a ratio of your initial risk . For example, if you make a profit of $2,000 (2 x $1000 or $20/share), then you have a 2R profit . If you have a profit of $10,000 (10 x $1000) then you have a profit of 10R . The same thing works on the loss side . If you have a loss of $500, then you have a 0 .5R loss . If you have a loss of $2000, then you have a 2R loss . But wait, you say, how could you have a 2R loss if your total risk was $1000? Well, perhaps you didn’t keep your word about taking a $1000 loss and you didn’t exit when you should have exited . Perhaps the market gapped down against you . Losses bigger than 1R happen all the time . Your goal as a trader (or as an investor) is to keep your losses at 1R or less . Warren Buffet, known to many as the world’s most successful investor, says the number one rule of investing is to not lose money . However, contrary to popular belief, Warren Buffet does have losses. Thus, a much better version of Buffet’s number one rule would be to keep your losses to 1R or less. When you have a series of profits and losses expressed as risk- reward ratios, what you really have is what Van calls an R- multiple distribution. As a result, any trading system can be characterized as being an R-multiple distribution. In fact, you’ll find that thinking about trading distributions really helps you understand your system and learn what you can expect from them in the future. system as R-multiple Money Market Mastery 4 5 TradeGenie.com

  46. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y So what does all of this have to do with expectancy? When you have an R-multiple distribution from your trading system, you need to get the mean of that distribution . (The mean is the average value of a set of numbers) . And the mean R-multiple equals the system’s expectancy . Expectancy gives you the average R-value that you can expect from the system over many trades . Put another way, expectancy tells you how much you can expect to make on the average, per dollar risked, over a number of trades . So when you have a distribution of trades to analyze, you can look at the profit and loss of each one of the trades that was executed in terms of R (how much was profit and loss based on your initial risk) and determine whether the system is a profitable system . Let’s look at an example: Entry Price, Stop, 1R, Actual Exit Price, Profit/Loss Trade One = $50 .00 $45 .00 $5 .00 $60 .00 = 2R gain Trade Two = $22 .00 $20 .00 $2 .00 $16 .00 = 3R loss Trade Three = $100 .00 $80 .00 $20 .00 $300 .00 = 10R gain Trade Four = $79 .00 $70 .00 $9 .00 $70 .00 = 1R loss Total=8R Gain Expectancy (Mean = 8R / 4) 2R So this “system” has an expectancy of 2R, which means you can “expect” to make two times what you risk over the long term using this system, based on the data that you have available . Please note that you can only get a good idea of your system’s expectancy when you have a minimum of thirty trades to analyze, and the preference would be to have 100 to 200 trades to really get a clear picture of the system’s expectancy . Money Market Mastery 4 6 TradeGenie.com

  47. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y So in the real world of investing or trading, expectancy tells you the net profit or loss that you can expect over a large number of single unit trades . If the total amount of money in the losing trades is greater than the total amount of money in the winning trades, then you are a net loser and have a negative expectancy . If the total amount of money in the winning trades is greater than the total amount of money in the losing trades, then you are a net winner and have a positive expectancy . Example, you could have 99 losing trades, each costing you a dollar . Thus, you would be down $99 . However, if you had one winning trade of $500, then you would have a net payoff of $401 ($500 less $99)--despite the fact that only one of your trades was a winner and 99% of your trades were losers . We’ll end our definition of expectancy here because it is a subject that can become much more complex . Van Tharp has written extensively on this topic and it is one of the core concepts that he teaches . As you become more and more familiar with R-Multiples, position sizing and system development, expectancy will become much easier to understand . To safely master the art of trading or investing, it is best to learn and understand all of this material . Although it may seem complex at times, we encourage you to persevere because like any worthwhile endeavor, as soon as you truly grasp it and then work towards mastering it, you will catapult your chances of real success in the markets . Money Market Mastery TradeGenie.com 47

  48. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Exiting the Trade “A man must believe in himself and his judgment if he expects to make a living at this game.” —Jesse Livermore There are two strategies to exit the trade with profit . These are: 1 . Based on Profit Objective If my target is to make 20% on the trade then I calculate the target bid based on 20% profit and place Good Till Cancel Order . I also put the sell order for 20% to 25% profit when I don’t have time to calculate the target bid and the stock is moving fast . If I am out on the same day with 20% to 25% profit then I am happy . The target profit objective varies based on option price . For option contract trading at $6 and above my profit objective could be 10% whereas for option trading at $3 my profit objective would be 20% . In both scenario I am targeting $0 .60 per contracts . 2 . Based on Target Price If I am basing my exit on stock target price then I place my good- till-cancel order to sell one-fourth at first target, one-half at second target and one-fourth at third target . If the stock has not reached its target after certain number of days of its upward movement and showing sign of pullback then I go ahead and liquidate my position and lock my profit as there is always a trade waiting for me around the corner . If the stock is not doing its thing after certain days have passed then I try to liquidate the position at breakeven too . Money Market Mastery TradeGenie.com 48

  49. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y General Guidelines on Selling Your Contracts Below is the general guideline on how many contracts to sell at what target . You can use the multiplier . For example, if you have 8 contracts then see number 4 below and multiply by 2 . If you have 1 contract then ideally sell at yellow target . If you have 2 contracts then sell 1 at green and 1 at yellow target . If you have 3 contracts then sell 1 each at green, yellow and red target . If you have 4 contracts then sell 1 at green, 2 at yellow and 1 at red target . Money Market Mastery TradeGenie.com 49

  50. T r a d e G e n i e G r a n t i n g P r o f i t a b l e T r a d e s D a i l y Keeping the Trading Journal The following excerpt is taken from Dr . Alexander Elder’s book “Trading for a Living” . Are you sabotaging yourself? The only way to find out is to keep good records, especially a Trader’s Journal and an equity curve . The angle of your equity curve is an objective indicator of your behavior . If it slopes up, with few downticks, you are doing well . If it points down, it shows you are not in gear with the markets and possibly in a self sabotage mode . When you observe that, reduce the size of your trades and spend more time with your Trader’s Journal figuring out what you are doing . You need to become a self-aware trader . Keep good records, learn from past mistakes, and do better in the future . Traders who lose money tend to feel ashamed . A bad loss feels like a nasty comment - most people just want to cover up, walk away, and never be seen again . Hiding does not solve anything . Use the pain of a loss to turn yourself into a disciplined winner . Money Market Mastery TradeGenie.com 50

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