The 3Dimensional Trading Breakthrough

Brian Schad
A longer-term trader that is anticipating a forthcoming turn in the market will want
to sell a “covered option” to reduce any overall maximum risk with the insurance
that was originally purchased. The objective: If the market decides to trade
sideways, to down, the time decay from selling the covered option will help to
offset the time decay from the insurance that was purchased when the position
was initiated. When the market decides to return in the intended direction (by a
cycle momentum change), buy back the short option and resume with the trend.
Why wait to see how far down the market wants to drop to know where to set
your next longer-term stop? You may be stopped out on this drop!
Reevaluating on the Next Opportunity
As each momentum cycle passes, another opportunity awaits me and is my cue to
adjust my position accordingly. It only makes sense! There will be a time, however,
when the market may not provide a clear picture for me of its intentions and I may
decide to “stand aside” to let the market find the next level of support/resistance.
When this occurs, I am now able to reevaluate the current chart pattern for higher
highs, or lower lows, and then get back on track with adjusting my position. If you
find you passed on a trade from the last cycle shift, don’t feel as if you missed the
last opportunity because the market will ALWAYS set up another trade for you!
“You miss 100% of the shots you don’t take.”
– Wayne Gretsky
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