Here is a copy of his trading rules. Please offer any feedback that you can or any suggestions that come into your mind. Participation in this activity will help more people here than just Stephen.
Hello Everyone,I just want to say thanks in advance to anyone who takes the time to read through this. I know your time is valuable so I honestly appreciate it.
For those interested, I will go ahead and spell out my situation exactly. I turned 27 in March and I have been studying the program for nearly one and a half years. Since I started, I have lost a total of $19,000. At the close of 4/11/07 the remaining balance that I have to trade with is $4215. For a lot of people studying this program, $19,000 might be how much they spend in commissions every year, but to me, it is everything I have ever saved. As much as I want to blame someone else, I know there is nobody else but myself to blame for losing this money. A lot of the loss came early and I was far too inexperienced to have been playing around with it in the first place - and thus made some pretty awful mistakes.
Originally, I had dreams of making a nice living with the program and being able to help my father retire a couple of years early with my trading skills, but that seems to be the furthest thing from my mind at this point. My family is not aware of how much money I have lost as I have just chosen to not talk about it at all with them. In fact, they still think I am doing really well with itand are even trying to get me to help them open an account for them so I can invest some of their savings.
Anyways, that is the background of this case study - I hope you do not have visions of me crying into my keyboard as I type this:) Usually when I get angry I close my computer and go running. I had to make a new notch in my belt last night and my neighbor thinks I am training for the Boston Marathon:)
On to my rules...
These following 2 sets of rules are for Support Bounces and Flag Breakouts. The flag breakout rules can easily be applied to any sort of breakout, but I specifically mention flags to be more detailed.
If you have any questions, please do not hesitate to post them or email them to me. I will answer all questions honestly and as quickly as possible. I have to drive my girlfriend to work in the morning, so I might be away for the open.
step_investments@yahoo.comThank you again,
Stephen
Trading System for directional options (calls andputs) Support or Resistance Bounces:
-Timeframe: Short term Bullish / Bearish Continuation
-Document Earnings date (min. 10 days away & plan to exit trade prior)
1. Identify stock is approaching a clearly identified support or resistance
2. Use 30, 50, 200 MA to identify trend and S or R areas
3. Use candle patterns to confirm support/resistance areas and exit points
4. Use Fibonacci lines to confirm S & R areas
5. Use Bollinger bands, MACD(8,17,9) & STO(14,5) for market sentiment but do not use them for entries. (i.e. bullish if 2-line MACD above zero)
6. Buy on confirmed S or R bounce -OR- place a limit order to purchase option when stock is at least .10 above yesterdays candle on bullish or .10 below yesterdays candle on bearish trade
7. Place stop at .25 below the identified S or R (low of yesterday on bullish trade and the high of yesterday on bearish trade)
-On a daily basis (last 15 minutes of day)
1. I will move my stop to break even once the stock has shown a profit of $1
2. I will lock in profits of 50% as my stock moves beyond $2 in profit
3. I will lock in profits of 90% once my stock has reached 75% of my target price. At this point, a trailing stop of 10% below the current option price will be used.
4. I will set a stop at .25 below the low of the day on any bearish candle formation.
5. I will exit the trade early if I see a confirmation on any bearish candle.
6. I will exit the trade early if I see price weakness and a turn down in the MACD or Stochastics (I will not use MACD/STO alone for exits)
7. I will exit any trade that is moving sideways for 7 consecutive trading days.
Trading System for directional options (calls andputs) Bull/Bear Flags
-Timeframe: Short term Bullish / Bearish Continuation
-Document Earnings date (min. 10 days away & plan to exit trade prior)
1. Identify Bull/Bear Flag and support or resistance
2. Draw flag pole & and flag channel to identify S & R
3. Use 30, 50, 200 MA to identify trend and S or R areas
4. Use candle patterns to confirm support resistance areas and exit points
5. Use Fibonacci lines to confirm S & R areas
6. Use Bollinger bands, MACD(8,17,9) & STO(14,5) for market sentiment but do not use them for entries. (i.e. bullish if 2-line MACD above zero)
7. Buy on confirmed flag trend line break -OR- in anticipation of breakout, place a buy stop order to purchase option when stock is at least .25 above the upper (bull) or lower (bear) trend line of the flag
8. Place 1st stop at 1% below the upper trend line of the flag. (If not in front of PC, set a 1st triggers to set this stop)
-On a daily basis (last 15 minutes of day)
1. I will move my stop to break even once the stock has shown a profit of $1
2. I will lock in profits of 50% as my stock moves beyond $2 in profit
3. I will lock in profits of 90% once my stock has reached 75% of my target price. At this point, a trailing stop of 10% below the current option price will be used.
4. I will set a stop at .25 below the low of the day on any bearish candle formation.
5. I will exit the trade early if I see a confirmation on any bearish candle.
6. I will exit the trade early if I see price weakness and a turn down in the MACD or Stochastics (I will not use MACD/STO alone for exits)
7. I will exit any trade that is moving sideways for 7 consecutive trading days.
Post feed
I decided to trade at home this afternoon, and will probably head into work around noon. I'd like to get a good post in before the weekend, so if you have a request, lay it down.
Yeah, so what this is off the topic of trading. It's good to mix things up now and again. Plus I would like to see a little playoff dialogue along the way.
How about IIG? SWEET!
I'll continue to work these issues out. Option Addict to the rescue! 
Anyone still tracking this? What else is everyone up to? Any "Nice" set-ups?
