Lessons from the Pros


Black OPS to Profit

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?

game choice

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 then 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 Professional Trader Course, we focus on identifying the impulsive and corrective environments in our securities.  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:

ops market

Here we see that the Dow, the S&P 500 and the Nasdaq are all showing positive OPS.  When the markets are bullish, it is wise to trade stocks with a positive OPS as they will generally be easier to locate opportunities.  Trading stocks that have the same OPS as their related market index will also increase probabilities and gains.

ops brcm

ops arun

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 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!

Brandon Wendell

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

Join over 170,000 Lessons from the Pros readers. Get new articles delivered to your inbox weekly.