(binned per thread starter's request) Market bottom rotation trad

MCHP 2 R loss, was thin trader, shouldnt have been played as noted initially.

Hi, Janpec, i read one article recently, it is mainly about an idea of directional trading of stock options. and hence a question from me, (could be very dumb)

let's say Tesla is a classic-bottom-rotating up, and i want to buy (real quotes below):

i don't have money to buy tsla, because its face value 280$ too high;
so i buy its call with strike @ $280 for $13.5 (exp. Sept 28). so one call option, only cost me $1350, (which can only afford 5 shares of tsla, if buying the stock itself).

let's assume this works well, by this weekend, tsla reached $290, my 1 option of $1350 will become $1850 (approximately, due to 0.5 delta).
so that's approximately 40% gain using only $1350 capital.
in other words, to realized $500 profit ($1850-$1350), i either need a much larger capital to buy 50 shares of tsla, or much longer time (target at $380 maybe).
in fact, number wise, due to TSLA's volatility, potential of 100% ~ 200% gain can easily happen in 1~2 days.

is this "trading option using stock price chart" more efficient than "trading stock shares"? in terms of capital requirement and RR?


i'm a beginner on options, i know options is better for those complicated strategies focusing on "sell high volatility and buy low volatility". but not sure if option trading is applicable to your method. therefore that article makes me wondering.......

Thanks, as always!

Hey, it is not, in theory that would work but only on heavily performing pattern. The higher your risk is relative to your capital inputed, the stronger has to be performance of success rate of the pattern that you trade. Realistically if you would only wait for A quality plays on high TFs, you would be waiting long time and in that long time period you would not make enough profits to be worth it. As side income or hobby yes, as consistent profits it would be a no.
With such method you would have to trade 80% plus reliable patterns and i dont know for any such pattern on high liquid assets, the only heavily reliable patterns that i trade are on low cap equities. So even if you would make 20% gains but you had to wait 1 month for a play, it would not be worth it on small account, which realistically is what would happen.

Technically you are approaching it from wrong side, which is usually the problem of many traders, they try to force to make things work on liquid assets, instead you have to focus on success rate of play and let that guide you to which market you should pick. First is to pick a consistent play, then second is to pick type of market.
So with your method above instead of going into options, you should go with direct shares into low cap stocks and you have have same efficiency (small capital requirements for decent large gains) but instead you would be trading either a short squeeze (short) or morning panics (buy). Those are the only two plays with strong success rate where such strategy would work. You wouldnt need more than 1k to execute such plays and make 20-30% on each.
But the problem for each of such plays is that you need to have access to market at first 2 hours of NYO that is a must, and if you have full time job not sure if its case for you, but for many that becomes an issue. Without access to market at proper time none of that matters, as one wont be there when its time to be there.
So for example with 1k deposit capital you would buy 1000 shares of NLST and either average shorted with scale ins partially, or fully short on demand failure around the price of 1,0 and cover the gains at 0,5 which would give you 50% return on 1 play with risk of 3-5% (or a bit higher risk with average scale ins).
It would require some decent US broker for that, so that you can actually get shares to short on those plays. Suretrader sometimes has and sometimes doenst have them.


I have been trading digital options with my patterens , there are many posts in this thread on it, but the edge is thinner, more work for less profits, and the room for error in options is much smaller, because in options you really have to hit the play on 0 DD, as soon as it goes against you you have to sell the option early, otherwise the edge on 60-70% win rate plays becomes negative. For tech traders, and most traders in general options are the hardest asset to trade.

For the method you mentioned, its a must to have high performant pattern, and from my side i only know about 2 of such patterns, supply takeouts arent one of them, you have to go in low cap equities for short squeeze.

If you look it from simpler perspective, the average data that i have from traders that have been consistently profitable for years is that data is heavily outperforming on low cap equities vs any other instrument or market. Traders who trade low caps trade with smallest accounts and make the largest % gains, heavily outperforming FX traders, or especially options traders (both FX and equities). And its not random its actually very good reason why that is the case, it is simply the efficfiency of plays that dictates it or efficiency of instrument (options are much more difficult to extract edge vs futures or stocks). That is why with metod you suggested it is highly unlikely to make consistent gains, you have to flip it and go into low cap.

Strategy that would work for your the best would most likely be shorting short squeezes with average entries. Waiting for play, and then scaling in shorts in 30% increments somewhen in middle of US market time, or later near close. That would be realistic strategy with potentially decent returns. On long side i dont know of any pattern which one could trade without actually be at the market exactly when its needed (there are few exceptions of high TF supply takeouts and pullback legs, but you cant load more than 2% risk on those, which means also being capped on gains at aprox 2-3%).
In long term options such as you suggested, there is no money to make on small accounts simply because there are no heavily reliable plays on high cap equities (at least of that i know of), there is money in digital options trading the patterns on this thread on low TFs, but its hard, its much harder than regular FX or equites.
So high TF plus long term options are a no go for small account. You have to go into low caps if you want to stick to HTF thats basically a must, or a second option would be to find some pattern on high caps on high TFs that actually is very reliable but you would have to be ready to input a year or more of study to have chance finding it.

not quite symmetric, but 1.838 is a HTF supply, so seems attractive

awesome, these are incredibly valuable info. I must thank you!

Not much in markets today, 0 trades. Only 1 solid setup on EURUSD but wasnt tracking it .

USDTRY primary focus today, likely to see big moves, focus is to follow momentum with pullback accumulation plays.

Took one loss, one win

Yep solid one, i missed this one.

am I doing it right?

V tracking for potential play. QCOMM also on watch its a heavy runner well into all time highs, so momentum plays have higher chance of working.

QCOMM covered for gains, V still likely to come into play but closing the day here, 1 A quality play for day is enough. Following macro strong trends along low TF pullback legs on accumulation always a way to add bits to edge. Might come for V is it bakes strong HH in next 15 min.

Keep digging and learning more, still a long way to go. Trendlined plays are rare, they have to be perfectly symmetrical the one above has disconnected highs.

Hey Janpec...Got stopped out on a few in a row...maybe not perfect setups was the reason...been thinking about only trading the ones that form the shelf....instead of entering on the first break...which seems to get me into trouble. Might be less setups...but better results. Missed this EURGBP...but it was a good example of a shelf forming

Cad JPY setting up.....no broke down

Hey , shelf is defenetly better way, that confirms with higher probability that flipped supply will hold, but as you said you will get less entries. EURGBP is good example yeh. This rule applies to both pullback legs and supply takeouts, shelf confirms higher probability of setup to work, but it will exclude you from some entries.

Thanks, yes, might try to discipline myself....which is hard....to only take these for a while and see how that goes

Having said that, I traded this USD CAD...looked like strong break...so opened after break of supply...target reached....3 pips....wooohoo...ha

It isnt easy for sure. Most traders will fail because of trading too many low quality plays or plays that arent fitting the pattern at all. It all comes due to dedicating time to market and then not seeing anything, which pushes traders to start over-painting the charts and forcing it. Its most common cause of any strategy. The best cure for that is to have huge cover of assets and markets so that there is sufficient number of good plays being somewhere, from my experiance that was the only cure for it.

Additionally what you can do is to have a robust checklist. So that each play that you check has to pass all variables before you enter a trade, so that it fits the rules of A quality play as much as posisble.,

Example check for supply takeout that one can use is (all variables have to be present):

-down trend ahead of structure
-strong bull volatility in structure (strong prints of buy legs, at least 1 leg in structure that fits that)
-strong momentum HH bake of last leg that breaks supply
-clearout in structure before the HH was baked on supply takeout
-structure has clean symmetrical supply where all highs are at closely even price

If it fits all above its A quality play, so you can use checklist above to always make sure that what you are looking at is good play. A clearout variable is optional you can remove it if you wish, but it helps if its in.
Bellow is play that fits all variables and is a pass.