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Whether you are a seasoned trader and investor, or new to options trading, and investing, we have created this podcast for you. We have packed each episode with actionable strategies, tips for success and analysis to help you gain confidence in your trading.


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Watch and Learn from Sarah and TJ every week as they share their trade set ups, market analysis and most importantly, tips to help you trade better than ever. Each episode will share the realities of trading options and the markets. You will hear tips and tricks by retail traders, for retail traders. Yes, finally a show that delves in to trading for people just like you!

We are well known around the world for a consistent approach to the market with a down to earth approach to trading. We believe that anyone can trade, but you need to have access to real trading information without the gimmicks, which is why we do what we do, to help retail traders. If you want to get right to meat of trading, this show is for you.

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When buying calls is it better to buy at the money or out of the money. There is not a one size fits all answer to this question. There are many considerations on both sides, and each strategy has it's benefits and drawbacks. In this podcast we discuss the pros and cons of trading calls out of the money vs in the money.

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How long should you hold a losing trade? This is a question with as many answers as there are traders. In this podcast we discuss some of the common answers and what we think are the best ways to handle a losing trade.

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Sarah: Hi everybody, this is Sarah Potter from and this is the SCT podcast, we are at episode 40. Today’s discussion is going to be around adding a new trade set up or new trade strategy to your toolbox of trades and how do you actually evaluate that to make sure it’s really worthwhile to place those trades in the first place. So, I mean to kind of start off, I think it’s important to think about the context of all of these. We all want to be able to find the most amount of trade set ups that we can when we are trading options, we want to be able to take as much profit over the market as we can, we want to be able to reduce our risk, so I think everybody who is trading is always looking for something more, they are looking to able to make just a little bit more in the existing trades they are in or they are looking to have additional trade strategies to set up to trade, or set up based on how that market is moving. So, I have TJ here.

TJ: Good Afternoon

Sarah: and He and I will just have a little discussion back and forth about what we each do when we are testing new strategies or and/or give you some tips about how to do that yourselves and I think the first part of this discussion should really begin with when should you actually add a new set up to your existing trades, is there a time frame for you TJ when you are trading, when you think, yeah, now is the time, now I need to add in a new trade setup

TJ: Absolutely, right. I think what it is, it’s evaluating how the trades are working and a lot of times too, I think that you know, as you trade more and more, you can spot changes in the market more quickly and I think that’s what I really rely on, I look, you know, you guys had known me in the trading room and that know me, know that I spend a lot of time looking at the broad market and the S&P and I think you know, yes we are trading individual stocks but they are part of the broad market and also we have to remember too, that’s really, what’s really unique in that, the broad market trades on it’s own and trade the S&P the features that influence price as well as the price of the underlying, so you know, there is a push and pull, the chicken and egg, but what I like to do is I like to look at the market, are we consolidating, are we moving up, are we moving down, are we in a situation like we are right now, where you know, we are getting some big moves within during the day but when we look at the S &P at the end of a week or two weeks, you really haven’t moved that much because one day we are down 20 and the next two days, we are up 15 each day, so you know over the week, may be up 10 or 15, 20 points if that, so for example for trading, if you like to sell put credit spreads and the market is you know, you are in a nice up market, then it starts to reverse and it starts to trend down. Well that may be a time to reevaluate it and choose a different trade setup. For markets moving down, these big surprise days like we have had over the last two weeks, all of a sudden you are 5 points a day then you get a 40 points a day just thrown out, you know, just out of the blue, you know those put credits that you sell, those puts credit spreads or puts that you are selling, you know that is definitely going to affect that, so that would be something that I would look at, say when may be I should be looking at a different strategy. So I really like to look at the market first and you can really tell, you don’t even need to wait for 3,4,5,6 losing trades, you can just really look at the market and say, look you know what, we are going from a period of, we are moving up all the time to consolidation to moving down to a lot of volatility and I am going to be looking forward, I am going to change my trade set ups accordingly and I have, obviously, you know, I am sure this is the same that you do Sarah, is you know, what you have a set of trades you do for various market conditions and it’s about having that toolbox and matching the strategies or using to what the market looks like.

Sarah: Yeah, so when I am trading, my approach to finding trade set ups isn’t the fact that I say, I know how to trade let’s say 20 set ups, so I am going to look to trade each one of those today instead I go to the market and say what’s actually moving, what’s actually happening. Now, what strategy links up to what’s actually happening because I want to place the best strategy that I can and I just want to talk a little bit about people who let’s say, have a lot of success selling put credit spreads and then all of a sudden decide, no, I want to make some more money, so I am going to do the exact same thing and only this time I am going to sell the put, so they had taken the assumption that the naked put is going to behave the same way as the put credit spread, I mean if you read a book, technically it should, right, it’s the same idea you are choosing to sell a strike rate, I don’t think the price is going to be and you are collecting premium, both of those trades really are the same except for one you are buying back, so you are basically just reducing your margin and you are creating your spread versus the naked put is just selling the put. So, when you are thinking about that, because you want to make some more money on the same kind of trading assumption, let’s say the market is not moving around as much, so you think, well, I will just sell the same thing and sell the naked put and make it a bit more. It’s important to recognize that those are two difference trades set ups and if you are going to come in and test a new trade strategy and for this example you want to bring in the selling the naked put, I wouldn’t suggest that you start off in your real account trading the same amount of contracts as you already do when you have successfully traded put credit spreads, because the important piece there in the thinking about your trading plan and your response to trades is that, it’s going to be a different emotional reaction to trading the naked put, whether it’s just that you are uncomfortable with the undefined risk or the increased margin requirement, you are going to think about it and trade it in a different way than if you sell all the put credit spread. So it’s important when you are testing new strategies to start in a paper account and I think it’s important to just start testing things out on one contract, as opposed to using the existing contracts size that you might already use in a different one. So I basically say a new trade set up has to prove itself to me the works and it has to start out one, it’s not going to be where I am going to start trading with 10 contracts, let’s say and just expect that it’s going to do the same thing as my put credit spread. I don’t know, do you have any different rules for yourself when you are testing out a new strategy.

TJ: I think it’s writing down the strategy, I think a checklist steps, following the steps each time to make sure that I am doing something that’s repeatable, I find that any trades with futures is really easy to test because you are trading one market the S&P, say and you can just test, test, test . With options, we also have to keep in mind too that, you know, I may be testing the strategy this week in Apple and then next week, it might be in Tesla, then in CNG then in Google, then in Amazon and you have to remember too that we have to isolate the strategy from the stock we are trading, it becomes a little bit more different. Little bit more difficult and a little bit different than if you are just testing on one single market because there is no strategy that I want to sit and test, you know, 30 trades in a row on Apple because for Apple to be setting up for those trades, I mean that could, it’s just not something that’s really going to, you know, take place realistically, so I need to make sure that, I am keeping track of stock versus strategy and then writing down, what I am doing, I am keeping kind of a detailed journal and then I am giving it, you have to give enough trades to see whether it’s working but you also have to say that you know what, do it a few time and if it’s not working, you are not getting the results you want, may be it’s just not going to work and I think that’s a lot about, there was a lot of an attitude that comes with experience on how to test. One thing as a lot of people say you know, what I had backed that as a strategy and that’s it, they run it through some back testing software and then they take it out, they go live with it, we have to remember too that, you know, to back, that’s what’s happened in the past, the market going forward, may be similar but it may not be exactly the same and we might not get you know results that are close to the back testing. And that’s the same thing too as if we spend a lot of time developing a strategy based on historical data, when we go forward with it, it may not work as planned, so I think something are that I like to do obviously checklist, try that out on a paper account, see if that’s even close, once you kind of get it close, then you need to start trading real money, see how it works live trading, but yeah absolutely keep you contract size as small as possible one contract. Just keep detailed notes to see what’s really happening with that strategy and then it’s about fine tuning it but not spending too much time fine tuning, you need to really get that big picture first and once you are profitable with the big picture, then you can increase your profitability by fine tuning it.

Sarah: Ok, so let’s talk a little bit about back testing, because there is lots of platforms out there that do lot of sophisticated backtesting and your thoughts on it is that it’s not the same representation as if you are actually in the market live and testing the stuff in the moment as opposed to looking back, so why is it that you think that the real live testing is better, which I agree with by the way, but what are your thoughts.

TJ: I mean, the simplest thing is that, about fills, so we know options trading and it’s especially anyone who is in the room or does the room is that we know that, just because a appraise is traded doesn’t mean that, we are all going to get filled in the room and how many times do we see that where we sit there, we see the price, we get in the chat room oh, yeah, I got filled up filled, other people don’t, some people get filled, some people don’t get filled, but that price was really, that price was traded, we all saw it, some people got filled, some didn’t, so that’s the one thing with back testing, is there is no depth to the market. Yes, you may have accurate trade information that’s stored if it’s a sophisticated backtesting software but there is no depth for that market, it doesn’t tell you at that price whether a 100 people would have got filled or 5 people would have got filled. So that’s one thing, you know there can be slip edge that way, the other thing too is that, it’s kind of chicken and egg argument, it’s that most people, they don’t create a strategy and then back test it, what they do is, they create their strategy based on the back testing, so what they will do is they will start out and back test it, doesn’t look good and what they will do is, they will tweak the strategy so it looks awesome in back testing, well that’s great, that’s nice in high end side if your strategy would have worked 100%, well in the high end side, I can look at charts, I don’t need the back testing, I can get something to work really well too. It’s all about going forward and it’s about going forward and being able to, you know, the money isn’t made when the strategy is working, money is made when the market conditions change, how flexible, how fast can you adapt your strategy, so you don’t get a whole bunch of losing trades in a row that wipe out your previous profits. So I think that’s one thing about the backtesting, well the basic thing is that, you have to understand that it’s a simulation and you know, anything that simulated you know, may not be the same going forward and you won’t, definitely won’t be in the same market conditions with the same supply and demand on either side of the trade. But as I said, you know what, trading the S & Ps you know what, I can you know, most of the time, if you get that filled price, you know what, you are going to get filled out, it’s a deep, it’s a really deep contract and there’s a ton of people trading it, but if you are trading something like, Travelocity or Expedia and you know there is an option [inaudible] day one strike of 10 contracts, in a realistically easier 30 contract, what are you going to filled if there has only been 10. We have got to think about that really, that realism as well. So, what do you think Sarah, how else do you kind of go about both tweaking once you got your strategy established, how do you fine tune it?

Sarah: well, I agree that the first, I am always going to do is, checklists are very helpful, at least they are very helpful by tracking the information that I have used to not only place the trades, so I think about it in two concepts, one is I need to have steps that I am creating for the actual trade set up, but I also need a list of the evidence I have collected and what I want to look for, so if I think about Monday to Friday, do a five column chart and I have to rate down the evidence that I collected to use that trade set up and I am going to do that everyday for couple of weeks and when I need to go back then, when I review let’s say month’s worth of information here, about five column chart is what pieces of evidence have I continually gathered everyday and which one of those were actually very useful in helping me to make the decision about that trade set up, because you kind of have to test both, you have to figure out details of the trade set ups, so what are you going to use, what are you going to look for and then also in that evidence piece, so what made you decide place that trade, so it is important to gather information about both of those things and the more that you can find connections between the two, the better that’s going to be for you and generally that means the more successful the trade setup will be, because you are really identifying what are the pieces of information that you are finding and in the market, in the option chain to make the decisions that you are making and that’s also very important when it comes to thinking about trading in a psychological aspect of it. What you are doing is really your decisions and evidence and gathering information based on the evidence that creates the success in your trades as opposed to one feeling lucky or feeling I have a win or you know, just kind of hoping that those trades are going to work, so concrete evidence is very helpful and you can use that, especially over the long term, down the road, go back to these pieces of information to make sure that you actually are trading the trade set up the way that you tested it, being very good about going back to see to make sure that you actually have some good rules and you are following through on those rules down the road will also be very effective. So great talk, I think there was a lot of tips for everybody, I hope that’s helpful for all of you, please make sure to post a review whether you do that itunes or upon in testimonials, anywhere up on the internet is very helpful for us to give us a good review or any kind of review, a truthful review is very helpful. So for more information at and happy trading everybody.

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What do you do when you have a few back to back winning trades? Most traders will increase their contract size and the riskyness of the trades they take? What is the best strategy, Sarah Potter of Shecantrade will review how she adjusts her options trading to make sure she doesn't give all of her profits back to the market.

The best strategy is sometimes the hardest, and that is to not get greedy as you have a few trades that end in your favor. Staying consistent with your probabilities and position sizing is a good way to be trading options for years to come.

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In this episode of the SCT Podcast Sarah Potter and TJ discuss the differences between fundamental analysis and technical analysis. Fundamental analysis is typically discussed in the media about trading options and stocks. Fundamental analysis attempts to assess the financial health of a company and determine if the current market price of the stock is under or over valued.

Technical analysis on the other hand looks at charts and chart patterns and looks at the supply and demand for the stocks and whether current price trends will continue or reverse.

Both technical and fundamental analysis have their place in investing, for the short term weekly options trades that we place in the shecantrade trading room, a combination of technical analysis and probability trading from the options chain are what we use to select our trades.

Fundamental analysis is best used for longer term trading when the financial growth prospects of the company can be fully realized over a few years.

Podcast Transcript

Sarah: Hi everybody, it's Sarah Potter from and this is the SCT podcast. We are on episode 38. I have TJ here.

TJ: Good afternoon.

Sarah: And today's discussion we're going to talk a little bit about technical analysis versus fundamental analysis and basically why we choose to look at what we do to gather evidence to place the best trades. What we're really proud of in the live trading room she can trade is that we are very consistent in our approach to trading and as a result that really comes from finding good evidence from the beginning, we really focus on getting it right from the beginning as opposed to just placing trades and then adjusting or rolling trades as we proceed in them. So kind of front-running the evidence I suppose and trying to gather pieces from all sorts of different areas to make sure we have a good perspective when we're placing trades. Now the basis of what we both trade both TJ and I is technical analysis, but you know I think even within the umbrella of technical analysis there's a lot of different areas, a lot of different systems that people use to place trades and I'm not really sure we do everything in technical analysis. So I don't know, what do you think you would you call yourself a technical trader or a Chartist like, how would you define yourself?

TJ: Well definitely for the weekly trades, the day trades, the swing it's definitely not fundamentals, so yeah, I consider myself a technical analyst.

Sarah: But I think when someone thinks about technical analyst I think sometimes you're thinking about somebody who spends a lot of time, very detailed amount of patterns in charts and when I've seen you trade, you do use how price moves but you're not getting that detail in terms of the patterns you're look for.

TJ: Yeah, that's true. I don't think what we do is we would I do anyways I think kind of the broad concept from technical analysis, you know in terms of support resistance, trend, reversals and really applied at a pretty high level kind of the 10,000 foot level instead of getting into it right you know right down to the nitty-gritty and counting the number of bars in a triangle and you know the exact shape of the triangle and you know going back and looking at every time it happened for the last ten years and will it happen again, I think definitely, I don't delve into it that deeply and there are a lot of people that that really do it and use it to quite a bit of success. I think anything that you use, you need to, whether it's technical or fundamental you can't use it in isolation on its own, you need to combine it with what you're seeing and the options chain, what you're seeing on the charts, what you're seeing on short-term, what you're seeing on some long-term charts, what you've seen that stock do in the past and put that all together and take a little bit from every piece of that and then and then evaluate your trade. So yeah, definitely I use definitely use all the principles and it's a mosaic you know you grab a little bit of a little nugget from here, a little something from there you know something that you've learned here over there that works and you kind of put it all together and wrap it all up and apply it and I think that's why every trader has a slightly different style and I think that's the same thing with the trading room as well is that you know none of our members, are going to trade exactly like us or are going to look at the market exactly like us, but as long as we can give them some nuggets and some good trades and you know discuss the pros and cons good and bad of each trade before we place it then everyone is educated and everyone can make that decision to trade on their own and I think that's the important thing is building the story yourself and just being confident in the trades.

Sarah: Yeah, I mean so I think when you're talking about it, it really does ring true to what I'm saying is that yes we're technical traders. I am as well, I do want to pay attention to how price is moving but I want to look at things like how it’s moved in the past as opposed to, oh today we've seen this many Bars in a consolidation so it must mean it's going to break out. I actually think that a lot of times we spend a lot of time there too much time in charts it's very good at looking back in history and identifying areas to enter our exit rates but because we're trading live and we're actually looking to get filled on our trades to make money on our trades then we need to be able to see things in the moment, recognize patterns certainly that have happened in the past, we can rely on those pieces of evidence but if you're only doing the charts I think you're missing another part of the picture and in options trading because we do have an options chain there's a lot of information there and that tells a story too. So what we both do in the trading room very successfully is take pieces of technical analysis and layer it in with the options chain but what I find interesting is that I've tried just looking for trades only through the auctions chain and I can't really find trades that way. So I definitely rely on technical analysis to find my trades, to choose the stocks that I'm going to spend more time and to decide whether or not a trade is actually setting up. So for me when I'm starting to look for trades I'm going to focus on the daily chart that's really where I'm filtering through all the different stocks, it comes from the daily and if something from the daily piques my interest then I'm going to go out to different timeframes and look to see how it's moving. So I want to look historically, looking on a weekly chart to see what is it done in the past are there any key areas of support and resistance, what does the trend look like, is it consolidating, those kinds of things and then from the weekly chart if things still look good and I'm still excited in the trade then that's where I'm going to move to the shorter term pieces like the 60 minute and the 5 minute to then get more precise about my entries. And then from there we're going to take all the evidence we've already gathered and then layer that into the options chain. Actually today in the trading room, I was looking at one stock at Walmart and the Walmart chart, so from a technical analysis point of view looked fantastic, it pretty well had everything, steep trend, no resistance, multiple timeframes everything looked like it was going to pop up it looked like an idea a great trade to place led to buy a call but when we moved into the options chain and started looking out to next week in terms of expiry which is where I was going to purchase the option, it didn't look as good anymore. The probability of success to me didn't look as as great as I would like it to and so I didn't place the trade so there's times where I'm going to gather all sorts of different evidence from the charts but if I can't get it to line up with what it looks like in the options chain, it's not worth placing the trade, it's probably worth putting it on a short list perhaps trading it next week once that expiry is moved on but it actually stopped me from getting into a trade. So layering what you see in charts with what you see in the options chain and what we know what's happening in the media too can also be helpful when we're actually putting together that trade. Now you use probability as well when you're placing trades especially sometimes with some day trading, how do you layer in different pieces of evidence? You're really well known TJ for your day trades, what kind of evidence to use there is it any different than when your swing trading?

TJ: I think so. I think if it's if we're day trading I'm looking for something is going to happen either the next day or later that day. So I think the evidence that we that shows up on the options chain is more timely because it's you know there's less time before that option expires so what I'm seeing is you know is probably going to be the most accurate information that I'm seeing. For example, you know let's talk about Delta. Delta changes very rapidly it can and it can go from you know you can go from a delta 20 to a Delta 80 on an option on a strike pretty quickly if the stock really gets you know really gets moving, you know if we you know let's take an example again with a delta and we go to expiry and we look at expiry that delta number is going to be the most accurate right before 4 o'clock on that Friday and that's just the nature of the market so if I'm taking a day trade you know I'm relying more on what I'm seeing on the options chain I'm trusting it a little bit more because there's less time between now and expiry for the market to move, for traders to change their mind, for new big positions to be initiated. So definitely for the day trading I'm looking at the options chain, I'm looking at the details from the options chain and I'm taking that at a more of face value, I'm looking for things like you know where's the volume today, you know where is volume coming in, is it close to the strikes I'm trading, is it far away, is there a skew to the put side or the call side, is there a lot more credit on the put side than on the call side? You know there's the market and we look at the credit is the market pricing and a bigger move to the put side or the call side and these are all things that I look at in that that I use from the options chain to form my day trading decision and then I'll go to the chart and I'll look at those support and resistance levels from the options chain, you know based on like I said on credit, on volume, on open interest and I'll compare those to the moving averages, you know more traditional support and resistance on the chart and I'll see if any of those levels line up. And again you know the more the more things that line up at a certain point you know typically this areas as more traders will be looking at that point as well. So it will you know if you know if there's a lot of traders looking at say 2400 to hold on the S&P, there's a good chance that it probably will. So yes I use a lot of evidence and I think a lot of it is just looking at subtleties and seeing if there's you know a little bit something different than last week or you know something's changed between the morning in the afternoon, you know nothing will really kind of showed out at you but by the time you put it put together 3, 4, 6, 8 pieces of information and you build your case you know at least you've got at least the evidence that you know is supporting the trade.

Sarah: Okay, so what we haven't talked about is fundamental analysis. And that is also very traditional, there's a lot of people in that group in camp that would say that that is an important piece to trading, but it's something that you and I both don't use and that might just be because of our outlook and how we setup our trades, because we are generally trading and looking to get out of the trade within a week or two. So do you think there's a role to play with fundamental analysis in the approach or the system of which we trade the market?

TJ: I honestly don't think so for short-term trades. I don't think the fundamental analysis, I don't think any of that has enough time to play out during the week. I think fundamental analysis takes a longer time to work its way into the system, to work its way you know we see that you know companies release they've got good, good fundamentals you look ok it's a growing company you know price should go up over the next six months to a year that's great but we're typically in well I'm typically in a trade two or three days. So the market knows that yes, fundamentals might be good or fundamentals might be changing but you know there's no real time for that to take hold in the market. No obviously, earnings which is a fundamental event obviously if you want to consider that do have a big impact and we obviously you know we've talked about that in previous podcast with earnings, but generally yeah you know it doesn't I don't really pay attention to it at all.

Sarah: Do you think what we have both been paying attention to though and what is relevant from very much for our style of trading though is what's happening in terms of in media and whatever you want to call that in terms of its analysis being very aware of what's happening on a global stage will impact the broad market especially which then will roll into the trades that we're in? So it is important to be paying attention to what's going on in the world because that will influence how price will move and so whether you're a technical or fundamental trader I do think that that's very important. We have geopolitical news that is influencing the market these days and I think as we move forward that will definitely be something we'll need to be very considerate of. The beautiful thing which is we're talking about the trading room today actually, the wonderful thing about the style of which we do trade is that it doesn't really matter what happens in the market two or three weeks down the road because we're probably out of those trades and we can easily-easily readjust to how the markets moving at the time. So whereas somebody who's maybe more long term is thinking, oh is this a dip this is my opportunity to buy and then we're going to see things move up and they're thinking about longer-term stances in the market, we don't have to be as concerned about that, we can be fluid and flexible with the market depending on how things are portraying themselves and we can take advantage of the trades that we're seeing and I think marrying the combination between some technical analysis linked with what we're seeing in the options chain and keeping in mind what's going on in the world is kind of the three core pieces to have really great trades. All right let's leave it there, that was a great discussion, certainly there's a lot of camps and a lot of points of view on technical and fundamental trading. As always we really do appreciate your review so anytime you can review she can trade or our podcast I would really appreciate it, those are very important and honest review is very helpful and come and check us out the live trading room at Happy trading everybody.

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