Monthly Long Options Strategy
- Quick Overview: Focus on trend continuation patterns with retests of breakout levels.
- Risk Management: Trades risk between 1.8% and 2.2% of bankroll, with a maximum of $250 per trade.
- Accessibility: Suitable for traders who prefer to set and forget rather than frequent monitoring.
Strategy Description
The strategy will look to follow the daily/weekly trend and mainly focus on looking for trend continuation patterns on the 4 hour chart.
This strategy is based on the core concept “Resistance becomes new support” in an uptrend and “Old support becomes new resistance” in a downtrend.
When there has been a breakout and it is retested, the strategy will consider trend continuation trades. Further filters of required confluences
and reactions to levels attempt to increase net win rate. Expires will typically be between one to three months.
Bankroll Requirements
This strategy will use a maximum risk per trade of $250, more typically in the $200 range. Making $10,000 suitable to maintain a risk of around 2% per trade.
Percentage Risk Trade
There will be a slight bit of variance to the risk per trade but typically the risk is going to fall inside of 1.8% to 2.2%. The strategy is fine on a lower risk level
but it’d not be wise to trade it on a higher risk level.
Strategy Strengths
By only looking for entries on retests of broken levels in a trend the strategy has the ability to take only signals that have a high, theoretical, edge and also there’s
a chance some of the trades can be high paying ones. In times there is a deep pullback and retest and then a new high/low this strategy can do very well.
Strategy Weaknesses
Heavily reliant on the trend. In times of ranging the best thing this strategy will be able to do is sit out (And perhaps enter in the direction of the trend at extremes
of the range) and in instances of trend reversals this strategy is always going to have trade at least three mains levels to determine the trend has failed.
Benefits of Trading the Strategy
This type of strategy is suitable for people who do not want to put excessive time into chart reading and analysis. Most of the time the strategy will determine a set
of levels it might be interested in trading at. Set alerts at those levels and then wait. When these levels fill is the only time anything needs done, and that will
often just be setting a limit order.
Disadvantages of Trading the Strategy
Trades may be infrequent and there can be periods when it’s not sensible to do anything with this strategy. Can be boring. Might wait a long time for a trade and then
lose it quickly. Waiting for pullbacks might see the trend run without filling orders. Could be considered dull and frustrating at times.