Trading Options: Using Technical Analysis to Design Winning Trades, + Website

PART IV

DESIGN AND EXECUTION

You now have a firm grounding in finding the market trend and understanding how it may change. This is important because the vast majority of stocks move with the trend. You also know how to explore the sectors within the major indexes using relative strength and other measures to focus the process of finding potential stocks to trade. We explored many different styles of technical analysis to look for favorable trade setups in stocks—ones where there is potential for a 5 percent or more move in a very short time. And you learned that the more technical views that align toward the same targets, the better the idea can be. You also learned that there can be many outside factors like earnings, news, and short interest that can lead to your deciding to remove a good trade setup from your list if these factors might work against you.

Finally, in Part III you were introduced to the options tools that can be used to enhance the stock trade setups by adding leverage, reducing capital employed, and managing risk. In this concluding part, everything we have discussed will be brought together to create and execute trades. It is organized into three chapters. In Chapter 10 we will discuss the elements of design, including details on position sizing and setting stop losses. Chapter 11, on the trading plan, includes a detailed example of real plans for a week. Chapter 12, “Execution and Beyond,” wraps it up with a discussion on proper entry and adjustments for ...