Technical Analysis.

We discuss our “best trades of the week” here mainly for educational purposes. The trading examples we illustrate are based principally on our volume indicators and market commentaries. Our main intent is to show you how you can apply our volume indicators and to explain the specific correlations that exist between volume spikes and the movement of the indexes. We do not mean to imply that you should follow our exact trades, but rather wish to suggest that you may make use of our volume analytics to develop your own trading style. We also urge you to paper trade before committing your money to the markets.

For this week’s “trade of the week”, "Buy QQQQ Puts #1" are opened
in order to close it later with profit if the index moves in our favor.
 

Why did you initiate a trade only on the recent volume spike, when there was already a previous spike, which seemed just as important?

To answer this question, we invite you to access our historical charts and scroll back over the last 6 months of data. You will see that the price does not always react immediately to the appearance of a significant volume spike. Rather, you will find quite frequently that are time lags between price reactions and volume spikes. Price reversals often occur only on the second or even third volume spike, and the volume surges at this stage may not necessarily be as pronounced as they were on the first spike.

When you trade options, it can be safer to ignore the first volume signal and enter the market on a later signal. In the current situation, we ignored the first volume signal, because we anticipated that a later occurring signal would provide us with a better entry point. That is exactly what happened. It is for this reason that we promote our historical charts; they can provide valuable information (i.e., context) for the analysis of a particular market situation.

When do you normally close a particular “Best Trade of the Week”?

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 got us into 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. It is our belief that in options trading, it is often better to take a quick profit rather than overstaying and putting the entire investment at risk.