Good morning, tradersโฆ
Jeff here.
You need to hear thisโฆ
How you plan your trades can make (or break) your career in the stock market.
On the one hand: Inexperienced newbies often enter positions blindly, without truly considering how they will react to any possible scenario the market throws at themโฆ
On the other hand: Seasoned professional traders never enter a position until they know exactly how to enter, exit, and profit.
Take it from me. Iโve been trading for 25 years, over half of my life. Iโve seen it allโฆ
Had I entered a big position with no game plan while I was working on Wall Street, I wouldโve been fired on the spot.
However, you donโt have that oversight. Itโs all on you.
As an independent retail trader, no one can fire you for failing to form a game planโฆ
But if you donโt do this, you will probably blow your account up and lose money.
So, letโs make sure that doesnโt happenโฆ
Today, Iโll show you how to plan your trades (and trade your plan)…
How to Form an Airtight Game Plan
I create a game plan for every trade I execute ahead of time.
First, I note where I expect the stock to go and where Iโll sell if Iโm wrong.
You must determine your price target and risk level before entering any positions.
If you donโt, youโll be unsure about where you entered (and unsure when to exit).
REMEMBER: You can always get back into a trade if youโre wrong the first time. But if you let a bad play get out of control, it could be disastrous for your account.
Luckily, thereโs a simple way to prevent this โ form a solid entry and exit plan before you make any trades.
Entry Plans
You should never buy contracts without carefully considering your entry pointโฆ
I see many inexperienced traders make this mistake and pay for it dearly.
Theyโll get trigger-happy and buy contracts immediately, then realize they couldโve purchased at a lower price (had they just been a bit more patient).
This is why I always send detailed alerts before all of my Burn Notice trades. I want you to understand exactly what Iโm thinking as I enter my positions.
And speaking of Burn Noticesโฆ
Every week, I share the trades I find inside my flagship research trading service โ the Burn Notice Alliance.
Hereโs what youโll get by signing up:
- ๐ 4 new trade alerts every week (over 200 opportunities per year)
- ๐จโ๐ซ Stock tickers and complete instructions for your options trade
- โญ My proprietary ranking system for position sizing
- ๐ Full trade analysis and follow-up game plan
But you canโt see ANY OF THIS if you donโt join NOW!
What are you waiting for? โ CLICK HERE NOW TO JOIN THE โBURN NOTICE ALLIANCEโ!
Now that youโre signed up, here are some important factors to take into account when entering options trades:
- If youโre thinking about buying puts, consider whether thereโs a major support level near the current share price. If there is, you may want to wait to see the stock lose that level before buying puts.
- The inverse is true if youโre buying calls. Check to see if thereโs a level of strong overhead resistance to worry about, and if so, consider waiting for the chart to crack that level before buying calls.
- Watch the price of contracts throughout the day, noting their high and low points. This will give you an accurate gauge of the range the premiums are trading within. That way, you donโt have to guess what a good fill is โฆ youโll know youโre buying near the low of the day.
Exit Plans
How you exit trades is arguably even more important than how you enter themโฆ
After all, exits are where you make (or break) the bank.
With that in mind, hereโs how to design an appropriate exit plan:
- Always have a price target where you plan to exit. I like to have a target for the share price as well as for the options premium. For example, Iโll write in my trading journal โIโm aiming for Stock XYZ to hit $95, or to hold the contracts Iโm trading from $1.20 to $2.50ish.โ
- If youโre worried about your timing, or being able to pay attention to the market for the entire trading day, donโt hesitate to set a limit sell order and/or a trailing stop loss. You can do this as soon as you put the trade on. That way, you ensure your contracts get sold when you hit your price target โ or get stopped out at an appropriate risk level.
- If youโre up 100% on an options trade, you should probably just sell the entire position. But in those rare setups when you see more upside on the chart, you can sell half of your position. From there, youโre โplaying with house money,โ so to speak. This can make the second half of the trade โ and your ultimate exit โ much less stressful.
4 More Factors to Include in Your Game Plan
Risk Tolerance
This varies from trader to trader and determines how much of your total capital you should risk in a single trade. A common rule is not to risk more than 1-2% of your total trading capital on a single trade (although that % might need to be larger if youโre trading a small account).
Position Sizing
Once you know your risk tolerance, calculate the position size. For example, if your total trading capital is $50,000 and your risk tolerance is 2%, you shouldnโt risk more than $1,000 on a single trade.
Time Decay
Options lose value as they approach their expiration date, known as time decay. Use your brokerage software to calculate the expected value of your contracts at different prices and time periods. Be aware of how time decay will affect the value of your options.
Prepare by building a prospective timeline for your trade:
- How long do you plan on holding the position?
- How does the expiration date line up with your timeline?
- Will you exit at a certain point in time, if you havenโt yet reached your price target?
Look, I understand how hard it is to identify, plan for, and execute winning trades.
After all, thatโs exactly why I created the Burn Notice Alliance โ I want to help you take the guessing games out of entries and exits
But for any non-Burn Notice setups you might be looking into, follow the steps Iโve outlined today before smashing the โbuyโ button.
Happy trading,
Jeff Zananiri
