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  #1  
Old 06-29-2017,
Billysef Billysef is offline
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Join Date: May 2017
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Default The concept of trading.

First of all let me thank all of you for your insight and advice. I really am trying to grasp this.

From my previous post I think I gained some perspective.
I thought stocks were about finding a collected group of indicators to help you make an educated decision as to where the market will go tomorrow.

What it's starting to sound like now is.. you want to find the average within a stock through a specific time-frame dependent on how long you plan to hold. Once you see that stock knocked out of it's average, it'll help you decide as to buy assuming it will return to it's average, correct?

So here are two photos of the stock Netflix (NFLX). I know these are gonna pretty bad and I'll get criticism but I'm just trying to get the concept.

I set the a simple moving average to 120-period just to even it out and get more of a price average. The first photo shows a 1 day chart. The 2nd photo shows a 90 day chart also with a 120-period simple moving average.
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  #2  
Old 07-02-2017,
Billykit Billykit is offline
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Join Date: Jun 2017
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Yeah of course. Is that a correct method for price direction though? Also, if I was correct and netflix was on it's way back down to it's "average". Options let you buy the stock at a fraction of the cost and capitalize more correctly? SO I'd want to do a "put option" here. This is all based on assumptions but I'm just trying to get the concept again.
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  #3  
Old 07-02-2017,
BillyDaste BillyDaste is offline
 
Join Date: Feb 2017
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haha I don't know....is it? The market will validate your assumptions.

There are many reasons why people don't use options....expiration being one. Stocks don't expire...options do. Permissioning and perceived complexity or lack of understanding may be other reasons.

Taking a bearish position by buying a put will give you a disadvantage as the stock will have to move into your strike price plus the cost of the put ......and the put losses time value (theta) everyday....this is the price you pay for potential unlimited upside with defined risk on the downside.

If you do the opposite (sell a call) you take the other side of that bet for the same direction....you give up unlimited potential gains (which aren't really unlimited are they?) for defined gains with undefined potential loss. For this you gain the edge in price ..... such that the price could go backwards the amount you were credited before you start taking losses and still come out ahead at or before expiration.....also you gain from the time decay everyday.

For your account size you will not want an undefined risk so you can sell a call at the strike price you think it will stay below then buy a cheaper call. Your potential loss then will be the difference between the two strikes minus the credit received. Your max profit will be the credit received. I usually look to collect at least 1/3 the width of the strikes, and the further out of the money you go the less credit you will receive but the higher the probability of success by expiration. Also the higher the Implied Volatility the richer the premium, generally.
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  #4  
Old 07-03-2017,
BillieLem BillieLem is offline
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Join Date: May 2017
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Why did you move onto indicators again? MA is still a secondary indicator BUT could be used as a confidence boost AFTER you understand basic primary indicators. I've suggested the direction you should be starting, but yet you keeping moving on to other topics. When learning math in school did you learn algebra before addition?
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  #5  
Old 07-03-2017,
BigBonusfLeek BigBonusfLeek is offline
 
Join Date: Feb 2017
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When you're ready to actually learn how to read a chart, I'd be more than happy to set up a phone call with you AFTER you do the exercise I gave you here. Until then, I find it hard to keep wasting my time replying to your threads. I've given you the short-cut directions to start your process, but you keep taking the long-road trying to find your own short cut. I've taken the long-road already and now trade for a living; I'm trying to give you a short cut. Heck you really haven't listened to much of what Acstudio has said either. We've both given you tons of advice/direction but it only helps if you actually read and digest what is being taught.

Do you want to learn from someone who has been there and done that or keep guessing how all these indicators or options work without the proper framework in place? Sadly, most end up losing money when they take the long-road. I hope you choose wisely going forward.
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  #6  
Old 07-04-2017,
admin admin is offline
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Join Date: Dec 2010
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By the way, I believe it was Blaine above and his referenced exercise that suggested that you use daily charts (1 candle = 1 day). Let me second that. You have to start at the beginning. Don't even look at a 5 minute chart until you've been trading for a year.

Regarding options. Sure, options add leverage, which may or may not be a good thing. Options also expire, which again, may or may not be a good thing. I use options more for enhancing the probability of success. I prefer to make 5%/month 80% of the time than trying to get 200% 1% of the time.

My book mentioned below discusses my favorite high-probability trade that I use for monthly income.
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