Technical Analysis.

Our short-term trader has made some trades based on our advice and analysis, he was able to make two promising trades that could lead to a tidy profit.

NOTE: This chart of the week is mainly intended for educational purposes. We don't recommend that our customers follow these exact trades. We suggest that you develop your own trading style and try doing some paper trading before using our volume analytics.

On July 28^th, 2003, the market was stuck in a trading range of only 10 points for the NASDAQ 100. This was a direct result of the previous day's resistive VMA spikes to the upside, which didn't immediately cause the market to move lower. MarketVolume's short-term prediction for the market was for it to move lower in reaction to the previous day's volume. Based on this prediction, our short-term trader decided to trade puts for NASDAQ 100 index options. Even though the market did not move lower in reaction to the previous days volume (it did so on July 29^th), our short-term trader was still able to make several excellent intraday trades.

This chart will be an excellent example of how intraday scalpers can use MarketVolume's volume charts to make several trades during a single day.

Motivations behind Trades: Because MarketVolume's Market Commentary predicted that the market would move lower in the short term, our short-term trader decided it would be best to trade NASDAQ 100 index put options. His first two trades were based on small (but noticeable) resistive VMA spikes to the upside. As a result of the first two resistive VMA spikes, our trader purchased NASDAQ 100 put options at 10:39 and at 11:24. A moderately large supportive VMA spike to the downside began to appear as the market declined in reaction to the previous resistive VMA spikes. Because of the supportive VMA spike, our short-term trader closed all open positions in order to wait for a new signal to buy puts again. At 13:49 our short-term trader bought more puts because of a new resistive VMA spike to the upside. The reason he did not sell those puts before his next purchase at 15:07 was because there was no appreciable supportive volume to the downside. Our short-term trader ended up closing his remaining two positions at 15:47, not because there was a noticeable supportive VMA spike to the downside, but because as an intraday scalper it is good practice not to leave any positions open overnight. He would have made a lot more money had of he left the positions open, but since he was dealing with current month options, it was much safer to close all remaining positions.

Why did you trade current month options when you usually recommend trading options that don't expire for at least three months?
Because we were scalping these options (only trading them within the scope of one day), we had to choose the most liquid options available, which generally turn out to be current month options. We reduce our risk by following the rule that whenever we do intraday scalping, we never keep a position open for the next day. As a result of this policy, we reduce the risk introduced by trading current month options.

Why did you trade NASDAQ 100 index options?
Generally we trade options, and in this case NASDAQ 100 index options, because they offer a high return, but are less risky than futures for the NASDAQ 100 index. One can trade NASDAQ 100 index futures, QQQQ stocks, QQQQ options, or even NASDAQ 100 options on futures. There is a wide array of trading vehicles that are tied to the NASDAQ 100 index, and it's mostly up to the individual trader as to which is preferred to trade. Keep in mind that trading options and futures requires a great deal of skill and experience; therefore, we do not recommend it to everyone.

How can this chart be used by me?
Our main reason for publishing these charts is to allow our members to learn by another trader's example  how they can make trades based on our volume signals and Market Commentary. Members can gain a better understanding of how to enter and exit the market, based on when a signal is generated. To learn from these charts, you don't need to trade the specific security mentioned in this publication, but whatever security you feel comfortable with. The principles for trading NASDAQ 100 index options will not change when trading something like S&P 500 futures.

Should I try to paper trade before trading options?
Yes! We suggest that anyone who is new to our signals and analysis try doing some paper trading to start, at least until they are comfortable with interpreting our signals.

I trade the S&P 500 / SPDRs. How does this apply to me?
The S&P 500 and NASDAQ 100 indexes have generally the same behavior. If you overlaid a chart of each of them during a short period such as this one, their general dynamic would be the same. Because of this, you can trade S&P 500 index shares, and options.

Conclusion: Our mid-term trader, based on our Market Commentaries and Volume Signals, decided to trade current month options because they are the most liquid and allow for quick entry and exit from the market. Since he was not looking to keep these options past the end of the day, he had to close all remaining positions before the market closed. Overall, when one is scalping options, it is best to choose the most liquid strike price so that any open positions can be easily closed.

The same principles mentioned above work for trading S&P 500, S&P 100, Dow Jones, and other indexes.

Here is a detailed list of our investor's trades, which netted the above returns:

To see any of our past best trades, simply select from the list below.

To see any of our past best trades, simply select from the list below.