Black Ops
No, this isn't an article about some great conspiracy theory or a Tom Clancy novel. I bet the title got your attention though! I wanted to discuss an issue I see often with new traders in our classes. Many new traders feel they need to make as many trades as they can in order to be successful. This couldn't be further from the truth. In fact, trading is all about finding the trades with the highest probability of success. If I asked you to place a wager on one of two games of chance, which would you choose?
If you chose Game A, after 10 tries, chances are you would be even, ($10 wager lost on all games and only one $100 win). After 10 tries with Game B, you would profit $100, ($10 wager lost on all games but $200 won). The market offers us the same choices daily. We can try for a big payout with low probabilities or play only the high probability trades that will allow us to make consistent money in the markets.
This brings me to the OPS. OPS stands for the Opening Price Signal. The opening price signal is simple. Look at the current price for your stock and see if it is higher or lower than the first trade (opening price) of the day. If the current price is higher than $0.25 above the opening price, then the OPS is positive and you should be focused on taking long positions only as they will have a higher probability of success. If the current price is lower than the opening price by at least $0.25, then you have a negative OPS and should focus on good short entries for high probability.
In the Broad Market Analysis class, we focus on identifying the impulsive and corrective environments in our securities. I am not going to go into detail in identifying them here - I can't give away all the goodies here so come to one of our classes! We want to trade in the direction of the impulse and therefore will have the markets move in our favor further and faster. Trading in the direction of the correction could be profitable for an experienced trader, but beginners will take losses as the market shifts rapidly back to the impulse.
Let's look at an example:
Here we see that the Dow and S & P are both showing positive OPS. The NASDAQ however is negative. Apple is following the NASDAQ in the negative OPS while Schlumberger has a positive OPS. Trading stocks that have the same OPS as their related market index will also increase probabilities and gains.
You should wait until after the two morning reversals to see the smoothed trends and to determine the OPS. If you are not sure of the reversal times, visit one of our centers and take the Professional Trader class as this and many other trading necessities are discussed in detail. Remember, there is no prize for the person who makes the most trades. You only make a profit by taking winning trades and minimizing your losses on the losers. Trade with high probabilities and you will increase your chances for success. Once you have more trading experience and platform experience, you may want to take counter trend trades, but is there really any reason to take the risk? Stick with the OPS for success!
For those of you playing the home version of "Where's Brandon?", I'll be at Online Trading Academy New York this week until the 23rd. Then after a much needed vacation I'll be at Online Trading Academy Houston teaching the Professional Trader class on the 31st. I then return to California and will be at Online Trading Academy Irvine for the Professional Trader class on the 7th, a special Forex presentation for Saxo Bank Online Trading Academy Irvine and Online Trading Academy Los Angeles, June 16th and 17th respectively, and Online Trading Academy San Jose for the Professional Trader class on the 21st. But don’t worry if you aren’t anywhere near those locations. We have an amazing staff of instructors who all teach very well, and who are definitely looking forward to your being in their class too!
Don't forget to join us at the Los Angeles Traders Expo from June 18th - 20th. We look forward to seeing you there!
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As a former stockbroker, brokerage trader, and hedge fund trader, Brandon brings various market views and insight to his classes. A wealth of knowledge, he has held NASD securities series 7 and 63 licenses. An OTA graduate himself in 1998, Brandon has been trading his own account since. Brandon taught for OTA in 1999 to 2001 before becoming a Realtor and Mortgage broker holding licenses in 15 states. Returning to the OTA family late 2005, he now balances trading, teaching and a real estate career.