The 3Dimensional Trading Breakthrough

Brian Schad
range below the opening price, then it’s time to “do something with my position”
– offset the position, or reduce my risk.
Third, if the market opens with a potential Ooops trading signal, this may be the
first signal I will plan for. If the Ooops signal occurs first, followed by a volatility
expansion % range move in the direction of the Ooops signal, then the second
signal to occur validates the first signal. I use this as sort of a confirmation of
momentum, whether it’s continued momentum or changing momentum.
Last, and this is a rare one that happens only occasionally, is intra-day retracements.
How many times have you experienced a market make a substantial move to the
upside only to turn around and retrace the entire move? The next time the market
moves up or down, with a range greater than the day before, and when you notice
the market has “backed off” about half the move, calculate the range of the move
by subtracting the intra-day low from the intra-day high. Next, multiply this intraday
range by 70% (.7). We are now looking for a 70% retracement of this intra-day
move to the downside. To find this price, simply subtract (or add) the 70% intraday
value from the intra-day high (or to the low). The resulting price is where I
will have to offset the position, or reduce my risk by…you guessed it, selling a call
option above the market for a price equal to, or greater than, the premium that I
am losing on my original put option insurance.
Just today, I was involved with an Apr Lean Hog position that I had been short for
the past three trading sessions. I thought today might be the day that the market
would change momentum to the upside, but instead the market was down 190
points from the intra-day high. When the market had backed off almost half of
the move, that’s when I was alerted to be on the lookout for a 70% retracement
upward. This did not happen and the momentum going into tomorrow’s trade
remains down (…even though my profit target was realized). In addition, I will
be looking for a potential Ooops buy signal tomorrow on the open, as the market
closed near the low of the day.
Remember, if any two of the possible three signals (mentioned above) occur in any
given trading day, the second signal always confirms and validates the initial signal.
Having the plan for tomorrow’s trade – or any plan that is designed to reduce your
risk at the first opportunity of a shift in momentum – is the essence of being your
own professional risk manager. Since it has been said that 10% of the traders
make 90% of the money, it must be certain traders who know how to use all of
the trading instruments to their full potential – and know when to execute these
trades. If you know how to reduce your risk at the optimal time, the profits will
follow as long as the market allows it. Once you complete this book, you will never
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