Important Breakthrough For Options Traders Only Finally: Fill & Download for Free

Great question. I’ll share with you my exact process that has allowed me to leave my corporate job, become a full time trader, travel at will and take care of my parents in retirement. It’s fairly straight forward after a bit of practice.Stock SelectionDevelop Market ThesisIdentify Optimal Trade StructureWhile every trader performs these three steps, it’s the extent that they perform these three steps well that determines their level of success.The method I use for performing these steps is called “Edge Stacking”. An “edge” is something you do to help your trading performance that a number of other traders do not do, giving you an edge over those traders.Once your compile enough edges into your process of implementing the steps above so that your overall edge is greater than that of the average market participant, profits begin regularly blessing your trading account.The bad news is that it takes time to learn these various edges, and most traders give up or blow up before they can collect and incorporate enough edges.The good news is, that as you add edges to your strategy, they produce a compounding effect, and if you keep at it long enough you will be surprised at how good you can get.So let me share with you some of my best edges I’ve learned after several years and over $60,000,000 worth of trades that have allowed me to breakthrough to profit land.There’s an old saying: “Diversification is the closest thing to a free lunch on Wall Street.” It’s true. Yet, so few active traders practice diversification. Why? Mainly because many traders use leverage, and often tie up the majority, or even all of their account into one or very few trades. They do this because they believe they cannot generate high returns without “going all in” on one or a few trades. I’ll address this myth later in this post.There are two primary benefits of diversification if you know how to use it:Reducing risk without sacrificing rewardAmplifying reward without increasing riskReducing risk without sacrificing rewardThe first benefit comes when you divide your account up between uncorrelated assets. Just think of it this way. Let’s say I offer you a 50/50 bet that pays your 2-to-1. But you have to put all of your money into it.Would you take this bet? It’s theoretically a good trade. But you would be crazy to expose your entire net worth to a 50% probability of being wiped out.But if I offered you 10 different bets, each with a 50/50 probability of paying your 2-to-1, now things are looking better. If you put your entire net worth into these bets, your probability of being completely wiped out is less than 1% (.5*.5*.5….5^10=.00097).The “expected value” of your trades are the same when you diversify (50% ROI in this case on each trade), except by diversifying, you’ve reduce your risk significantly.Enough with the theory, here’s exactly how you should diversify in the real world:The above chart shows you two things: the diminishing returns on diversification, and asset correlation’s impact on your diversification’s benefits.All you need to know is that diversification doesn’t give you the same benefit the more you do it. So a portfolio of 100 stocks does not receive twice the diversification benefit of a 50-stock portfolio.The benefits of diversification start to level of after about 8 holdings. Therefore, my diversification “sweet spot” is usually between 8 and 16 assets, which is what I aim for in my portfolio.The correlation of two stocks measures how much they tend to move together. As you can see from the same above chart, you only get the full benefits of diversification from assets that are “uncorrelated.”And this makes sense if you think about it. If you divide your portfolio between 8 assets that all move together, you might as well just be holding one asset. And if you divide your portfolio across assets that always move against each other, your trades will cancel each other out and water down your profit potential. Don’t do that to yourself. Stay uncorrelated.This answer is getting long and we’ve just finished the first half of the first step, so I’ll keep the other edges brief from here.Amplifying your rewards without increasing risk using diversificationYou divide your portfolio into two strategies: strategy A and strategy B.In month one, Strategy A returns 100% and strategy B loses 50%.In month two, Strategy A loses 50% and strategy B gains 100%.That means each strategy independently returns 0% overall at the end of month 2, right?Now get ready for some magic.If each month, you re-balance your portfolio evenly between Strategy A and Strategy B, your portfolio would have returns 25% at the end of month one, and another 25% in month two, for a cumulative return of 56.25%, as shown below.Congratulations, you’ve just generate returns out of thin air using diversification. If you don’t see how that’s possible, just run through the example I just showed you with hypothetical numbers.But enough math magic, let’s move on to step number 2 in our overall process.If diversification is the closes thing to a free lunch on Wall Street, this next technique is the closest thing to a crystal ball.If you know how to develop a proper market thesis, you’re heads and shoulders above literally hundreds of thousands of traders.A market thesis contains three elements.DirectionDistanceTime frameIf you’re into physics, you might interpret this as measuring an asset’s velocity.To create a market thesis the professional way, on a high level you would export 5 or more years worth of weekly open and close data from your broker, and import the data into excel.You would then measure all of the rolling percentage moves over weekly, 14-day, 28-day and 35-day periods (takes only a few minutes).Next, you would extrapolate these percentage moves into forecasts based on your asset’s current price.Finally, you would plot the distribution of these forecasts over an expected price range. This entire analysis can be performed in under 5 minutes.You end result should look something like this.This information is trading gold. You can use it to begin making predictions that give you a major edge over other options traders.For example, from the chart above you can tell that ERY has a 47.08% chance of ending at or below $9 after 28 days. Another example: ERY has a 48.96% chance of ending between $8 and $10 after 28 days. This is trade-able information.I can often find calendar spreads that line up almost perfectly with these types of price forecasts.Seem hard? With practice, this type of analysis becomes second nature. I speculate that 80% of traders are too lazy to do this, thus giving the ones that do a valuable edge to add to their belt.I’ve shown you the first of the edges that allow you develop your market thesis.There are other market theses edges, and of course there are trade structure edges as well that let you win even if you have no idea where the market is going (those are some of my favorite).To go over every edge in detail would be to write a book. And I’m not going to do that here in a Quora post unless the upvotes really signal some demand for this type of content. But I did write a book on this exact topic on Amazon. If you’re interested in learning all of the edges I incorporate on a regular basis in detail, I suggest you check it out. It’s called “Edge Stacking.” You can find it here.

The answer to your question is called “Specialist’s trap”. This was first theorized by Wyckoff.Richard Demille Wyckoff (1873–1934) was an early 20th-century pioneer in the technical approach to studying the stock market.Wyckoff concept is that, markets are manipulated, perhaps not by a manipulator, but more by a collective consciousnesses, the great anamorphic “they” or “them”. This group of “them” moves the market to draw the public into the game at wrong times. This group is termed as specialist’s and their method of moving the market is “Specialist’s trap”.However, I wouldn’t 100% say what happened was exactly, what was theorized by Wyckoff. But can be closely matched, as the action happened in just few min.However with time, this subject was further studied and with time names have been changed. Most important of them are “Bull trap” and “Bear trap”. Some other types you can try are Value trap and Superiority trap (provided links to them) for further understanding.Now coming to what happened today is called a “Bear trap” or “Purchase trap”.It appears on the market going down trend, which then stabilizes in the lateral movement within 5-10 days, and then breaks down, bare close below the lows of all daily trading range. Theoretically, you should think that it will drag the prices much lower. Indeed, it often happens this way. However, if there is a sudden improvement, which raises the price above the true maximum of the breakthrough day, it means that there was almost certainly a pivot of the market. All sale-stops below the market went off, and the buying public is now afraid to open the long position at a pivot point.Based on above definition, you can understand why I said it is not a 100% match to book definition, it was not derived for intraday activity. However, what happened today matches to the actual theory in many aspects.Based on this, I will try to explain what was the technical reasons behind the great swing. Please note these are based on my readings and understanding of today.Above is the 5min chart of today (21/9/18). Market opened with a slight gap up from previous day close. Then had very little action till noon (lateral moment or stabilization). Then all of a sudden, market crashed from 11,300 to 10,800 within few min (less than 30min). Then within 5min, market did a sharp rebound (big green candle post the red candle).Why did it fall? or How did it fall?Now let us try to understand what might have actually happened, after the lateral movement, some selling has happened taking it to 11,180. This is actually one of the pivot points and strong support zone (11,150–11,180). So many traders who might have kept this as ‘stop loss’, might have sent square-off to exchange (system generated).Boom, value of market adjusted to buyer to seller ratio, since this is a stop loss…. system sends signal to sell at CMP or confirmed exit of asset. Too much difference between buyers and sellers created a void of buyers.As we know, when supply is more than demand, price tends to fall.So next question, why did it rebound?With sudden drop in price buyers started pour in. Even this might have not happened probably not by their conscience, but due to system generated (people keeping buy at limit price lower than CMP). When equation of buyers to sellers has achieved equilibrium, final low has been hit. But some people who exited without their knowledge might have thought it is a great time to buy. Sellers fast became buyers in no time. This might have kicked in price rise, so traders who already knew that market reversed (back to major support level), started buying again. However, the volume of buyers are not as high as who sold, so price did not go back to open or high. Some people might have lost dearly that it was impossible for them to come back in to the game again.Why this happened today? Why not yesterday or Monday?Any action to happen, there requires exact timing and situations. Today many factors kicked in to create such an event. What happened today happens very rarely and even if it did, it takes a long time intervals for such huge movement.Let us try to list out few of important factors, there might be many more.Market trend since last 5 sessions, nifty was making lower lows everyday. If one has observed market was going down only in the last hour of the day (most of the time in last few sessions). This is because buyers are not holding their positions overnight, an indication of strong pessimism.There are two major news, happened in last two days. Both related to banking sector. NBFC’s and YES bank. I don’t really want go in depth in to these. It is important to note, Banking sector has good contribution to overall market. Higher opening was due to buying in IT, metals etc, which has dominated over selling in banks (at least till noon). But market high could not hold for long, meaning lot of people booked profit. Profit booking, started taking market slowly towards 11,250–11,280 level. Which was previous day close. Some new players have shorted off thinking it will go down.It’s Friday, people who has any idea of Trade Day of Week (TDW), knows Friday’s are bearish (mostly due to people avoiding keeping positions over weekend). There might be many people already be thinking market will go down. When market crossed previous day close, general sense of these people might have kicked in to short at this level, which took price to 11,180 level.Final Question, what’s next?What’s going to happen on Monday or coming week, the following chart has answer to it. The chart shows Max Pain based on Open positions in options. This is a very good tool in estimating, the closing price of market at the end of month.So, from chart below, maximum pain to investors can happen if Nifty closes at 10,300 while minimum if closes this month around 11300–11400.Bear trap generally follows a rally. But based on current open positions, option writers start loosing money, if Nifty goes past 11,400 or goes below 11,200. So worst case scenario, would be either 11,500 (if bulls take charge) or 11,200 (if bears hold their position). So till Thursday, close of month for derivatives, market might not move beyond 11,400. It might be range bound 11,200–11,400 and finally it might start going up from next Friday. Assuming no big news comes around and all parameters remain same next week.PS: The above mentioned is purely based on existing technical theories and there is chance of them being wrong too.

Why Buying Membrana Token Is A Smart MoveEverett Rogers’ Diffusion of Innovations Theory describes a detailed life cycle of every technological breakthrough: proposed by innovators, it is picked up by early adopters, after that early majority joins and then, gradually, it is followed by late majority and finally laggards.Rogers’ Diffusion of Innovation BellSimon Sinek who is one of the brightest motivational orators and business consultants of today explains that the big idea and revolutionary product never aims to focus on “What?” question — its main task is to explain clearly “Why?”. Why this new technology matters? Why it has potential to change people’s life? Why it is capable of disrupting the industry it applies to?In Membrana, we intend to have this answers.For decades, asset management industry remained among the most conservative segments of the financial world. There is no question about a long line of technical improvements in reporting, custody methods, valuation procedures, index construction and transition of money. There were many changes in asset classes available, namely Milken’s junk bonds in 1980s, mortgage bonds in 1990s followed by CDS and CDO products later in early 2000s, Vanguardlong run to popularize index investments and many more.But the core idea remained unchanged: there is investor, investment manager and their agreement which, in the best case, is secured by some trusted third party. Everything else was, till this day, resolved within a framework of plain commercial legislation: creation and dissolution of funds, settlement of profits, charge of commission, accounting and so on.Madoff Investment Securities was, by far, the biggest failure of this system. There were multiple reason why this could happen: greed, conspiracy of powerful investment houses, price manipulations and more. When the dust settled, everyone involved, from regulators to retail financial brokers, made multiple promises that the crash of this magnitude will not happen again. It is easy to believe that the industry operators became way more cautious and alert, yet the main weakness is still there. And it is the fundamental principle of the asset management system. And it needs to be changed.We in Membrana blockchain project understand clearly that by transferring their assets to experienced traders, investors retain the possibility of obtaining exceedingly-high income in the cryptocurrency (or any other) market, while at the same time minimize the risks of significant loss common to inexperienced players. However, at the moment, there is no convenient and safe tool on the market for the conclusion of contracts between investors and traders for the trust management of cryptocurrencies and other assets. Regardless, such contracts are active in words, forums, and chats, which leave the marketplace ripe for fraudulent acts, such as, when traders disappear with investors’ money.Our answer to that risk is decentralization and transparency. The Membrana Blockchain Platform is intended to bring investors and traders together for concluding mutually beneficial blockchain-protected contracts for the trust management of cryptocurrency assets. Membrana provides investors and traders with a transparent, decentralized and secure system, which controls the process of concluding and executing a contract up to the point of revenue gained by both parties.Membrana intend decentralization and transparency for financial marketsOur solution rests on four pillars:1. Safe transfer of funds in trust managementFor the purpose of transfer of an investor’s exchange account to a trader in trust management, an API key provided by the exchange is used. The API key is not transferred to the trader, but stored on Membrana’s platform in a secure database. The trader trades on an exchange via the Membrana single trading terminal. Consequently, the trader does not have access to the investor’s assets. All investors’ funds remain on their exchange account, and are not transferred to the trader. Membranaalso maintains the restrictions set at the contracting stage: stop loss, time period for trading by the API key, etc.2. Contract between Investors and tradersTo conclude the transaction between investors and traders an Ethereum Smart Contract is used. Traders’ consideration is reserved in a Smart Contract, in advance, and it is automatically paid upon reaching the target profit set in a percent of the amount transferred in trust management, or upon expiration of the Smart Contract term.3. Confirmation of past trader’s profitability using blockchainAll contracts concluded by traders via the Membrana blockchain platform will be saved to the database. This information is further used to calculate traders’ success using indicators, such as ROI, rating, etc. These indicators will be provided to investors, giving them a greater ability to select suitable traders.The Membrana blockchain platform uses blockchain to validate traders’ details. To do this, the hash sum of traders’ transactions for the day is saved in the blockchain Ethereum Smart Contract. The block, where the hash sum is saved, is dated and cannot be counterfeited; therefore, the validity of all data on traders’ transactions of exchange is confirmed by their hash sum in the blockchain — in the block dated with the respective date of transaction. Thus, it is impossible to save only profitable transactions in the database and their hash sum externally as far as at the moment of saving, because it is not known which transactions are profitable.4. Distribution of investor’s assets among several independent tradersThe Membrana blockchain platform allows the investor to transfer, to trader, only part of his funds in the exchange account, as is stated in the contract terms. The remaining funds remain under the investor’s full control and can be used for independent trading, transfer of these funds to another trader, or withdrawal from an exchange account.Trade in cryptocurrencies is actually carried out from one exchange account by different traders or by the investor himself. In spite of this, the Membrana blockchain platform provides isolated and independent trading within the amounts transferred to trust management for each trader and the investor himself.At the time of the conclusion of the contract, the investor determines the amount transferred from trust management in the accounting currency to be used.Currently, cryptocurrency market has a total market value of slightly below $200 billion. This market has emerged over the last three years and it has increased in value by roughly 100x since inception in 2014–2015. Yet, even after this impressive growth it is dwarfed by the global stock market which has a size of approximately $50 trillion.Observes from all over the world agree that there are good chances that, once proper legal regulations are in place, the digital market will start taking bigger market share quickly expanding from its current 0.4% of the global wealth to tens of percent. This will be happening primarily because of the tokenization tools and techniques that are expected to enable real estate, industrial and commodity assets to be wrapped in digital cover, effectively enabling access to all assets for all investors on the globe.This new reality will call for new infrastructure. Old school depositary and custody services won’t be able to promptly adjust to new scale of operations which will be fully global and will require faster and more transparent operation. Transitioning your stocks from the exchange to ADR programme agent for three days? Procedures like that will become history.Neither will they posses the most needed attribute of this decentralized world: independence and risk elimination. Despite the multi layer insurance coverages, reinsurance agreements and banking norms, there always will be general risk that is associated with them and third party.We, Membrana blockchain project, are certain that the blooming decentralized financial world will be using blockchain based mechanisms allowing to avoid third party risks and see clearly in every given moment what is happening with the funds, where are they located and what are those funds. No question about conversion rates, actual buying and selling prices, transaction fees, special commissions and other foggy elements.Membrana blockchain project is here to present this option.PreICO stage is the Best time to invest in MembranaBy investing in Membrana tokens you can join the revolutionary project on its early steps. And, in Rogers’ definition, become early supported rather laggards. Early buyers will enjoy significant bonuses and will be able to capture more token price growth than late investors.We believe in community wisdom and see our investors as important contributors to the platform’s development and improvement. You will be first to try new options and features, speak with the project’s team to find more about further evolution of Membrana. But most importantly, you will be there to disrupt the sector that remained barely changed for almost a century — and benefit from it!Don’t miss the opportunity to take part in the next generation market leader today. Find out more about the project at Membrana’s web site. Get detailed information about the platform from its white paper; get in touch with us to know more via email or join Membrana community.We don’t want to tear any buildings apart, we are building a new better home for asset managers and clients. Join us in this work and Membrana journey!Preico live now.Stay with us!Website Twitter Telegram BitcoinTalk Reddit Steemit Golos LinkedInFacebookYoutube