TC + Stocks/Options

Stocks and Options Trading Using TradeCharting

Background:

I have used my TradeCharting system for the directional trading of Stocks and Options and with good success. I use the same template for trading Stocks and Options as I do for trading Forex. I assess stocks and indices on my ‘Profit Source’ trading platform. This is available from Hubb Financial. I will provide some snap shots and insight into what I do and how I apply TC to trading these instruments.

Trading Methods:

  • Directional Trading: LONG: I like to to see TC ‘LONG’ signals or an absence of TS ‘SHORT’ signals when selecting stocks for the following strategies.
  1. I will sometimes do this by purchasing the stock outright. More so for stocks under $50.
  2. For more expensive stocks, my preference is to trade the stocks using Options. I will buy a CALL option as this give a similar gain on any increase in stock price but for a much lower initial outlay.
  3. Sometimes, I will SELL a PUT option on the stock. This is like selling insurance on the stock. I receive a premium for stating the price I will happily buy the stock. This will be at a lower level than the current stock price. Nucor has been a stock I have been doing this for recently:
  4. I also do OTM Covered Calls at times, or Buy-Writes as they are sometime referred to. My preference is to use this type of trading instrument when my preferred stocks are either ranging or trending up.

 

  • Yamana Gold was a favourite stock of mine that I have been trading for a number of years. It has been a great Covered Call candidate:

 

  • Directional Trading: SHORT: I like to to see TC ‘SHORT’ signals, or an absence of TC ‘LONG’ signals, when selecting stocks for the following strategies.
  1. I will trade down-trends in the market at times as well. I will do this by purchasing Put options. Best Buy was a candidate for Put purchase that I noted a few sessions ago. The TC signal to ‘SHORT’ came with the added confluence of a trend line break as well:

It is not my intention to try teach people about Stocks and Options trading within this forum. This is a huge discipline and one that would be best covered by interested traders elsewhere. My purpose here is to simply show you how I use my TC system to capture price movement in the trading of Stocks or their Options.

Daily Routine:

Essentially, I update my stocks ‘Profit Source’ software at the end of each trading day. I trade mostly US stocks so, for me, that is at about 9 or 10 am Sydney time. I then scroll through the charts and assess each stock and determine whether a TC signal has been generated. This process takes only a few minutes each day. I will then place a forward order on my Interactive Brokers (IB) trading platform to either buy the stock, buy a CALL or sell/buy a PUT option (with at least 3 months to expiry and a suitable ‘delta’ value: another book here too!). I use the paid ‘Premium’ service from ‘Morningstar’ to assess stocks. This is not very labour, or time, intensive at all which is another reason why this type of trading has huge appeal for me.