3 Q&A from August 14th Webinar (Part II)

Rick S.- 12:02 pm
Q: Hi, I was wondering if I were to follow The Market Guys rule of buying at the close, should I worry about the stock going down below my stop intraday or should I be more concerned about waiting for the close to decide what to do?
A: You should pay very close attention to the closing price because this is the time when mutual fund managers, hedge fund manager, and institutions make final adjustments to their positions to calculate Net Asset Value (NAV). This is the point when they decide whether they are going to take home the position overnight. The Market Guys follow the money so we want to make sure we are buying with the big boys. With that said it is also important to protect your position should the stock not go in the direction you plan for. Find a key support level on the charts and be sure to set your stop far enough below so an erratic intra-day low won’t get in your way where it sells you out then bounces higher, yet close enough so you are not losing more than 1% of your total portfolio. This will take some practice but with time you will be sure to get it.
JP (Dublin) - 12:19 pm
Q: How much below the 20EMA do I place my stop?
A: If you are using the strategy we were talking about where you buy above the 20 day ema and sell below the 20 day ema….it’s the first closing price below that you sell and the first closing price above the EMA that you buy. It’s as simple as that.
Kate C. - 12:33 pm
Q: It’s probably easier to make money buying if the market is in an uptrend, and shorting if it’s in a downtrend. How much attention do you pay to the market trend in deciding which trades to take?
A: It’s all about trend analysis Kate. If the broad based market is trending higher then we lean more towards a long strategy. This is where we would either buy stocks or buy calls on these stocks or…sell puts to collect option premiums. Selling puts are a good way to get paid for a long position. But the point I want to stress is that you have to learn how to put your money in the direction of the money flow. If the trend is up in every market you are looking at then it wouldn’t make sense to go against that trend. You would only increase the odds against you.
Kate C. - 12:34 pm
Q: Second question: do you ever stay out of the market waiting for it to establish a direction?
A: Personally, the only time I am out of the market is when I am on vacation with my family or away from a computer for any length of time. Option traders can make money on the way up…on the way down…and even when the market is laying flat. That’s the beauty of option trading and it’s why we have so many people signing up for our courses. It’s worth the time you spend learning how to make money from time erosion. It’s work for me for the past 26 years and I’m sure with a little bit more study time it will work for you too.