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Trend Trading Rules

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www.MarkJessing.com
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Key:

TV        Time Value
IV          Intrinsic Value
ATM     At The Money
OTM     Out of The Money
ITM       In The Money
BB         Bollinger Bands
OI          Open Interest
MA        Moving Averages
ETF        Electronic Traded Funds / Indexes
S/R         Support/Resistance

  • Never trade without a real market order stop

  • Don't enter ITM trades the day before expected news like earnings

  • Buy In The Money, ITM, options (not Out of The Money, OTM)

  • Expected trade length 1 to 5 weeks

  • Avoid buying ATM, as they have the highest vega cost

  • Enter when stock hits BB and MAs confirm
  • Have no more that 25% of the account value in any single trade
  • Never add to a losing trade; Dollar cost averaging is a lie for suckers to lose more
  • Close all positions before a holiday week
  • Never re-enter a position that hits the stop in the last hour without looking at Extreme Charts
  • Buy 1 to 2 strikes ITM with a delta of 0.6 or higher (because ITM loose value slower if stock moves against position)
  • Stock options are best for this trade (ETFs move too slowly)
  • Use very liquid stocks; volume of several million daily
  • Use contingent market orders to enter, exit or roll position Up/Down
  • Place roll orders just beyond expected daily high/low
  • Technical stops outside the “noise”
  • Place page alerts to trigger before stop is hit
  • Avoid using trailing stops (because hard stops are more strategic)
  • IO must be several hundred (1000 or more preferred)
  • Favor strike prices with high OI (but not ATM)
  • Adjust stop losses to maintain risk/reward of 3:1 or better
  • More than one indicator must indicate entry
  • Roll up/down a strike just before stock goes 2 strikes ITM
  • Options are entered ITM, so stop out before it goes OTM
  • Buy 3-6 weeks before expiration
  • Sell or roll out at least 2 weeks before expiration
  • Buy during low Volatility, if possible
  • Favor trading 10 contracts of more (to limit commission costs)
  • Consider placing tight orders for half the expected trade size
  • Place phone text alerts to trigger at favorable entry points
  • Exit trade if option value looses 50% of the cost
  • Let winners run with the trend, keeping stops under the 10ema
  • Pass on trades without reward/risk ratio (3 or 4:1)
  • Maintain daily trade journal comments & equity curve entries
  • Go to cash if account equity curve turns down by 15% in one month
  • Go to cash if moving, changing jobs or other life changes

  • Bullish MAs, 10>20>50 exp MAs

  • All MAs over the 200 simp MA for bullish enttry...

  • Increasing Cashflow and RSI

  • Bollinger Bands opening in the direction of the trade

  • ...and the reverse for puts

  • volume increasing on up days, more than down days

  • Stops and entries above / below the previous day's high/low

    ...simple...(Kind 'a)