Don’t Make This Common Options Trading Mistake
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ETF Watchlist
When it comes to my students and I trading ETFs, we look for longer-term trades primarily. This means we have to be very patient and wait for an A+ setup. This is due to the fact that we don’t want our drawdown to exceed that of our pre-determined stop-loss.
The better entries we have, the less likely we are to have drawdown, and ultimately, the less likely we are to get stopped out of our trade. It also gives a worthwhile risk vs. reward profile. IF we are risking one to only make one, probably not worth risking our capital. However, if we get a pullback that makes our entry and trade more attractive, that could take our 1:1 trade and turn it into a 2:1, or as we like to look for, a 3:1 or 4:1.
One of the ETFs on our watchlist today had a setup that right now doesn’t look like the most appetizing, but if we were to get a pullback it could warrant a trade to the upside. Conversely, if we get a run up to resistance, we could look to go short in expectation of a possible overshoot and pullback to previous support.
Communication Services Select Sector SPDR (XLC)
The XLC is one of the ETFs that come to mind when looking for a possible setup to develop into one that we would take a trade on. If you look at the chart, we have support around $52, this would likely be our support, should the stock pullback. On the flip side, a run up back to resistance in the area between 58-60 could like send the stock back down after a reject.
Make sure to have these levels marked on your chart, that way you have a roadmap of the market, and more importantly, so you can come up with your own trading plan. One of the biggest mistakes I see traders make is trading without a plan. With no plan you are just guessing at what might work.
The market doesn’t work for us… having a plan and sticking to it will create longevity in your trading because as we know, the key to trading long term is capital preservation.
If you want to see all the latest trades my students and I put on for my Smart Trades options trading service, you’ll have to join today! Smart Trades is where I teach my students how I trade options on some of the largest ETFs on the exchange. As you learn, you’ll get exclusive access to all my trades with notifications any time one is put on. Now, you can learn how many use this high-income skill to achieve financial freedom. Join today!
I look forward to trading with you, but until then, as always…
