Trading Style

My life is starting to return to normalcy... but don't get your hopes up. For those of you that registered for my advanced options open house, you have probably received an e-mail apologizing for the technical difficulties. I have received more e-mails, business/personal/marketcast than I think I have ever received in my entire life. If you haven't gotten a response, don't take it personal. Normally I delete all my e-mails, but lately I am trying my best to reply. If you get a rather short quick response from me, and you think "what a jerk" remember that it was one of hundreds I had received on the day.

As I have warned, earnings season has taken us all over the map. Technical Analysis takes a back seat during times like this. However, it impacts you and I when you see the VIX in the mid 20's. Make sure you put that on your radar, I will be talking about it a lot more at these levels.

Today I felt like I should talk about trading style. The other day I talked about creating an investing style and creating a foundation that consists of at least 7 basic principles. But once you've done this, you need to focus on what vehicles you are going to use to take you to where you want to go.

I have often mentioned that I think every individual looking to get started in the market should take an online exam. Similar to what you would go through over at If you not familiar with eHarmony, they have constructing a very intense, intrusive, complicated but yet effective personality profile to offer help to those getting into the relationship market. They help you to find someone just as crazy, emotionally inept, and unreliable as you are. In my opinion, it was a great way to corner the market. I tip my hat to them.

I know none of this from experience, but have concluded my results from 3 minutes of research. Anyway, my point was... wouldn't it be just as effective to have a questionnaire ready when you send in your check to fund your new account with an online broker dealer? This would make sure that you have access to the only tools that are compatible with your goals, level of risk tolerance and emotional instability? Over the years, broker dealers have become very laid back in the options approval process. When you notice that the nice older lady that has been retired for 30+ years has the ability to trade naked options with no former trading experience, you know the registered options principles at these firms are going to wind up in hell.

Consider what strategies are suitable for you. I normally ask someone who is in the process of deciding on their trading style these few questions...
  • Are you generally a risk taker, or are you conservative in your decision making processes?

  • Are you comfortable being wrong? If so, how often?

  • Are you patient?

  • What is your time frame with trading/investing?

  • What are your financial goals?

  • How emotional are you when it comes to money? Are you trading with money you can lose?
There are plenty more, but you get the point. I think most traders have to take one of two roads in trading options. High probability or high performance. I chose high performance. This style of trading seemed to fit well since I am a risk taker, I am comfortable being wrong a lot, I am very impatient, my time frame is forever, my financial goals are to be able to print my own money and make the Forbes 400, I am naturally emotional, but can afford to lose everything.

Many of you have already determined your trading style, but many others have looked at the fact that there are so many strategies and don't know where to begin. If you are going to be a high probability trader (non-directional), consider covered calls, spreads, naked puts and owning stock. This method is more conservative, fairly consistent, and offers lower returns. If you are the high performance trader (directional), consider buying calls and puts, stock, and maybe occasionally legging onto spreads. This method is more aggressive, less consistent, but offers much better returns when you are right.

Sometimes we get too carried away with so many details, we forget the answers to the easy questions

Recommendation: Get started on this process immediately, if you haven't already

Long: Defined trading styles

Short: Jacks of all "trades"

Disclaimer: I don't really delete e-mails, but don't test me.

PS- On a serious note, for those of you in the So Cal area, you are in my thoughts. I hope everyone is safe and doing well. Take care.

I know for a fact you do not delete e mails (unless this is a new trait you are working on).
Anyway, thank you for all of the energy you put in to the blog, trying your best to educate, cajol, prod, push, and drag us all into being better traders. The response to the open house should reinforce that. I was one of those not able to hear you.
I apologize for not voting for you as the best damn blog period. I tried many times but someting is in right since it will not let me vote. Regadless, this is a fantastic resource for us all. Thank you.

The more I see on CNBC, the more I love AMZN here.

"Amazon Shares Plunge as Earnings Fail to Blow Away Street Estimates."

Is that REALLY the headline they're going with? Amazon delivers a great quarter, but it didn't shock and awe enough? Fine, sell it off today. I'm all in. I don't think you got the spades, Teddy.

Intraday double bottom on the indexes? (crosses fingers).

James H.

"Street raises bets on AMZN despite sell-off" is the headlines now. Guess they can't decide if they like AMZN or not. It is holding well at 85 today though.


Well said Jeff! Its better to keep things simple and trade according to individual's personality.


Here we go! Double bottom! Bull flag/pennant! Itraday patterns for the win.

DB target 136.20, Flag target 135.60. Intraday $djx

VA Beach Girl,
On the Monitor page go to setup in the upper right corner then "Position main layoout", change to Delta.... selection.

Is this your question?

Please take this as virgin eyes on broadening patterns...

Investopedia says, "Traders will watch for a move off the upper resistance and for a corrective move toward the lower support. A change in the uptrend is confirmed when the price breaks below the lower trendline."

So, what I see is that the price action hit the 52-ish area and headed down to the 45-ish support. It broke the support, with some decent volume, on 10/18 and continued downward.

I am new at this one and have never seen it before but I really found the whole study of it to be very interesting.


Another name for the pattern is the "Megaphone Top."

James H.

Bull flag again. Flag target 136.20 same as Double bottom.

I love today. What a great opportunity to get in some great trades.

When everyone was panicking this morning, I added GOOG at $660....

I love opportunity...

I think, then, that my summation was incorrect. Today would be the break-out, right? Or you could have shorted it at the top because that was the third touch?

I did not panic. Thanks, in part, to Raimo and my new found love of clearly defined lines.

What a revoluutionary idea!:-)

Be careful Laney, I don't know that 3 is a magic number. Look at your volume on the way down, it decreases. While not a sure thing, that is an indication it may bounce back up again. It seems to have rallied back up pretty good already today.

James H.

SMSI sym tria with possible 6pt move. Earnigs Nov 1 however.

Blast off time again - $djx.

James H.

Thanks, but I haven't taken this one yet. I don't trade patterns that I don't understand so today was more of a learning experience for me.

Personally, I would probably wait and take the trade if it rallied back up a bit, but turned back down before making it to the top. Its a long way to the top. I'll watch it.

James H.

Brian K,
Thanks for the reply but I was looking at the net shares on the monitor tab. At the bottom of the rows there is displayed the overall totals. This goes in line with Jeff's post from the other day about how many shares you control.

Thanks for taking the time to respond, though. I think I'll give TOS a call. Guess I should have done that in the first place.

Are you a day trader or just capitalizing on some opportunity?


AMZN. Got in this morning when I saw a divergence between the oscillators and the price movement. Bought Jan. 85's to capture the Santa rally. At least that's the plan.

Excellent post as usual! Can you give an example of when/why to leg into a spread rather than just dong the whole thing at once? I had a situation with an AZO put trade gone bullish and was considering turning it into a bull put spread but chickened out and just took the loss and closed the trade. I couldn't quite figure out the numbers (risk,breakeven,etc.) and didn't want to make things worse.

James & Laney,

I'm not taking this as a real trade for the same reason you stated, Laney: I don't know a thing about this pattern. Never even heard of it until Jeff threw it out there.

I DID, however, take a paper trade on it: Dec $40 Put. This forces me to monitor it since it's an active trade, albeit in my paper trade account. Then, as I study the pattern more, I can have a real-life example to compare it to.

I agree with your second assessment, Laney. I think that today is the breakout. Although when you originally mentioned a breakout on Oct 18, I moved my lines around in ProphetCharts, and I could see how you got that, too. The Oct 18th trade would have been anticipatory, in my opinion, but the anticipatory trades are the most profitable when they work out. So I'll have to see how this trade plays out for me in my PaperMoney Account. It's down $17.50 right now on one contract...

Bingo - 13620, ok from here I have no idea lol. New target from last flag 155?

James H.


I'm with you on opportunity. I added to DRYS at todays low. After I day traded put's on the SPY made money ,then saw a double bottom forming on the 2 day 15 minute chart. So I went bargain shopping.

What do you watch, the one day 15 minute?

Laney & Krystal,

The way I draw it, today is the breakout also, IF it closes below 42.20-ish. As of right now its back up above that. Further it might just form a hammer. Wait for the close to see for sure - hammer/bounce or breakout.

Heed the volume. It is one of the few good leading indicators.

James H.


1d 1m.

I back up to 5day or 10day to look for larger patterns too. But the posts I've been making are the result of 1d 1m.

James H.

By the way - another flag breakout!

James H.

This comment has been removed by the author.

TAP, bull flag and moving nicely on news from competitor.


Might be some resistance at 13670ish.

James H.

What did you do??:-)

Wow, what a rally!

Well ... looks like the 'see-saw' volatility infested market is back .... What a turn-around ..

Glad I got some things on sale this AM ... i.e. ISRG and GOOG ....

I'm with you Raimo - these are great days to shop!

TRMB. Take a look at today's candle!

Diamonds took out the highs for today. Did you exit your position from this morn or whenever.

Reason I ask , in an effort to go delta neutral this morn I went short dia, then when it started to rebound today and eat into my daily P&L I exited.

Is this how you use them, or am I over trading or is today an exception (making it ok to day trade the indexes to preserve daily profits) because of the wild ride.

Sorry if too many questions.

Thanks in advance.


Thanks for another great post! Judging by the comments, people really got a lot out of this one!



Vero Beach Girl,
Hope you read this. I agree that MDC made lots of money today but do you realize it's earnings tonight? I'm sure you do.

I must go and deliver my youngest daughter's newpapers and then take her riding... so I won't be able to catch up until tonight. There's a buzz on the blog that I love. Can't wait to read it all.

Krystal, we're going to have to call you the Clean Cups Queen. I guess this means you can't join the Valley of the Unclean.


I will RULE OVER the Valley of the Unclean!!!

Lovin' this late day rally!


No, I exited my IWM puts, but i'm keeping my DIA puts. I use them as a hedge.

Also took the gift when GOOG was at 2 levels of support and, ahem, down $11.

$13735 IF it gets past 13675.

It is also hitting diagonal resistance from earlier today (support from this morning.)

James H.

$DJX also hitting its head on diagonal trendline beginning back in August.

James H.

We just confirmed a "batman" on the DOW 2 day.....

If I haven't told you lately that I love you, I do. Awesome post from soup to nuts! I have your shit posted all over my office and keep it coming.

I would like you more if you took Hunter safety.


Thanks for the reco on google, I did not believe it was going to 680 today. Maybe Cramer will have a GOOGLE 680 t shirt on today who knows.

Thanks for all you do for guy who doesn't even have the common decency to own a HOYT.


Mr. Phoenix,
I would like to send my sincerest thanks for bringing my attention to AMZN right before if got to my entry point. May it blaze Blue in the night like the Phoenix.

What a great day!



You dont need a hunter safety in PA...just a plane ticket to get here. I have everything else. Yuengling, Guns, Whitetail, land, even a computer you can blog from via astellite....

When you speak of volume as an indicator, what volume do you use? There seem to be many choices on TOS. I'm not sure which one is the best indicator.

What a rally.


What a WILD ride!!!...

Did you see my post about us living in Wilmington? If you ever visit please let me know because I would love to meet up with you! :-)


LOL on the Batman's the same on the S&P 500. Since it's upside down I guess I traded the bounce off the left ear and bought S&P calls with a stop below 1490.

Added to RIMM as well.....sold 1/2 position of ICE into earnings.

Well the S&P has bounced off 1490 4 times on the 5 day chart. That is support for now, until it is broken.


hell, now I think it's rightside up and I traded the right ear. Megaphone tops and batman bottoms, always something to learn.



I trades em as I sees em....I added RIMM as well...


I agree Jeff, people need to trade according to their personality - and I agree with your idea of printing your own money and being in the Forbes 400. Sounds great! See ya there!

I know I'm a risk taker - I love big returns, and I'm not scarred to lose my money. I don't have much anyway, I'm still a college student, so if I lose what I do have then I'm just as broke as the rest of my college buddies - that doesn't scare me.

This is not exactly a comment but...

I am usually a shot-term/day-trader but I decided to get PTR at 247.5 and I'm not exactly sure what to expect. Apparently this is supposed to go up, but it doesn't seem to. Should I hold'em or lose'em?


Very Useful information , this is both good reading for, have quite a few good key points, and I learn some new stuff from it too, thanks for sharing your information

There are four main styles of trading, namely scalping, day trading, swing trading, and position trading. Technically, scalping is a type of trading within day trading, but scalping is so different from all other forms of day trading, that I consider it to be a separate style. The difference between the styles is based upon the length of time that trades are held for. Scalping trades are only held for a few seconds, or at most a few minutes. Day trading trades are held for anywhere from a few seconds to a couple of hours. Swing trading trades are usually held for a few days. Position trading trades are held for anywhere from a few days to several years.

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About me

  • I'm Option Addict
  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
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