Technical Analysis.

Frequently Asked Questions

System FAQs ||| Strategy FAQs ||| Technical FAQs

We receive a great number of questions dealing with our trading system. In order to help you better understand our trading system and approach, we have selected and addressed the most commonly asked questions below. We hope this will help you in your trading.

Trading Strategy

• Should I attempt to emulate a particular “Best Trade” if you have not closed out the position by the time you report and discuss it?
   
• I noticed that the amount of capital you allocate to your trades can vary quite considerably. Is this a trading tactic or perhaps a marketing strategy?
   
• When do you normally close a “Best Trade”?

Should I attempt to emulate a particular “Best Trade” if you have not closed out the position by the time you report and discuss it?

Our "Best Trade" feature is designed primarily to teach you how to use our volume indicators. We do not wish to suggest that you should mimic these actual trades, even if they are still open. Only follow an open trade if you are aware of the risks involved and if you have access to real-time intraday volume charts (you can get these from www.MarketVolume.com). Whether or not we leave a particular “Best Trade” open is always contingent on our volume indicators. For logistical reasons, we cannot always send our newsletters out the same day we close a specific trade. Even if we could, it would often be too late for you to establish a position, since the market can reverse with very little or no notice following a significant volume signal. For these reasons, we strongly advise you against following an open position on our “Best Trade” feature. Should you wish to do so regardless, please assure that you have access to real-time intraday volume charts.

I noticed that the amount of capital you allocate to your trades can vary quite considerably. Is this a trading tactic or perhaps a marketing strategy?

There is nothing random about the varying amount of capital we allocate to each "Trade of the Week", nor is it a marketing gimmick or strategy. The amount we invest in a particular trade correlates directly to our interpretation of a specific volume signal. The stronger a signal, the more contracts we buy. Conversely, when our volume indicators are not as strong, or when other factors come into play (e.g., the geopolitical situation, options expirations, Fed announcements, and others), we enter a trade with a smaller number of options contracts. We may hold back some cash (i.e., “keep some powder dry”) in anticipation of being able to purchase further contracts at “better” price in the near future. Better prices may for instance result from a “delayed volume reaction”, a situation where index movements do not show an immediate reaction to the appearance of a (significant) volume spike. Another reason we may hold back some capital is when we are faced with a weaker than usual volume signal and think the market could turn against us – in situations, a lower capital investment has the advantage of reducing potential losses.

When do you normally close a “Best Trade”?

Under normal circumstances, we exit from a trade when we see a clear, unambiguous volume signal. The actual signal we look for must not necessarily be as pronounced as the one that prompted us to enter the trade. In order to play it safe, we sometimes even terminate a trade in the absence of a volume signal - for instance when we are up by 20 - 30%, or in the presence of certain market affecting factors, such as news on geopolitical events, Fed announcements, options expiration, and others. In other words, there are certain situations where we may ignore our volume indicators altogether. It is our belief that in options trading, it is often better to take a quick profit rather than overstaying in a trade and thereby putting the entire investment at risk.