O&F Trade Recommendations
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• Minimum of 6 Trade Recommendations per Month
• Complete market info for the trade including tick values and option expiration.
• Proper trade description i.e. Bear Put spread, Strangle, Synthetic Future etc.
• Full explanation of the contracts necessary to enter the trade.
• Detailed entry and exit strategies.
• Professional and thorough Technical/Fundamental reasons for the trade.
• Charts with all referenced indicators clearly marked and annotated.
• Precise Risk/Reward scenarios and available probability analysis.
• 60 Day Money Back Guarantee!
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Trade recommendations are not created equal
Most of what is available to the public typically ends up being nothing more than an exercise in hypothetical trading that never becomes a viable order. Most trade signals offer entry points and if you’re lucky you may even get an exit point to shoot for. The problem is that telling someone to buy Gold at 450.00 and sell Crude at 60.00 has become the standard format for a trade signal in the industry. These types of signals are vague, not backed by any research (technical or fundamental analysis) and let’s face it these are typically not profitable. This is where O&F Trade Recommendations distinguishes itself from other services out there.
Become a Better Trader
O&F Trade Recommendations is a service dedicated to helping people become better traders. Many people venture into the world of trading with very little understanding of the risks involved. Risk spelled another way is opportunity. But managing risk is something many traders do not have a strong grasp on. O&F Trade Recommendations is a service dedicated to defined risk, high probability option spread strategies that are applied to the futures markets.
Any market whether it is Corn, Stocks, Bonds, the Euro, etc. can only ever do one of three things…Go up, go down, or go nowhere. Traditional futures traders can only ever make money in one of the three directions. Bulls make money if the market goes up, Bears make money if the market goes down, and both don’t make anything if the market stays flat. Options, on the other hand, can give a trader more flexibility by allowing the trader to create a strategy that can often profit in two out of three scenarios; up and/or nowhere for instance. But before we get into that let’s talk about a topic that many people might call boring, but in fact is the most important part of trading…Risk Management.
Risk Management
First of all, if you are a traditional futures trader your risk is usually theoretically undefined. Even if you are using stops, markets can always gap through your stops causing a larger loss than expected, and it could go lock limit. In a lock limit market traders cannot get out at any price, and losses can often become overwhelming. Defined risk options spread strategies are a great way to solve this unlimited risk problem. So what are defined risk option spread strategies?
Defined risk means exactly that…risk is clearly defined up front.. This means that before you ever enter a trade you know exactly how much money is at risk, no matter what the market does. Any experienced trader will tell you that managing risk is far more important than being right on calling a markets direction. How many times have you entered a trade with little more in your plan than how you are going to spend your winnings? This is a common mistake that traders make.
When O&F Trade Recommendations looks at a trade the first question we ask is not where we think the market is going or how much we think we can make on a trade, but rather how much are we willing to risk. All trade decisions should start with this one question. No exceptions. So if we decide that we are willing to risk $500 per trade, now we look at how much we think we can make. If we cannot make at least 3 times the risk ($1500) then we do not recommend the trade. This is where risk to reward ratios come into play.
O&F Trade Recommendations will always strive to put out trades that have at least a 3: 1 risk to reward ratio. There is a very sound reason as to why. If you are risking $500 per trade to make $1500 per trade, and you lose the first two trades you have lost $1000. Now if the third trade is the winner you make a net profit of $500 ($1500 profit - $1000 loss = $500). So here you were wrong on market direction 2 out of three trades and still made money because of sound risk management. Most traders will tell you (if they are honest) that they lose more trades than they win. So how can they still be trading if they lose more trades than they win? Risk Management is the simple answer. Now many of you may ask why don’t we do trades that have a risk reward ratio of 10:1 or greater…the thinking behind that being if 3:1 is good than 10:1 is great. This is not correct because now we must balance both risk and reward with probability. We can construct trades that have a risk/reward ratio of 100:1 but the probability of success on a trade like that is almost always less than 1%. Balancing risk/reward with probability is the “art” of being a good trader.
So how does O&F Trade Recommendations come up with trades?
We use a combination of standard technical analysis coupled with fundamental analysis to arrive at a trade. If we have a strong technical pattern backed up by confirming fundamental data we will then look at the options markets and determine how we can best maximize leverage and probability of success within a defined risk trade. We try to target $500 as the average risk per trade but that is not always possible depending on the market and the trades design.
Many people have traded options and been frustrated by it, lets look at some reasons why.
If you have ever bought an option and had the market move your way and still lost money you know the frustrations that can come with option trading. Most people simply buy a call, or buy a put, then only risk the premium that they paid for the option. On paper this looks good but again we must look at probability. Most people buy out of the money options because they are cheap. As with most things you get what you pay for here. Options are a wasting asset. This means that as time passes the value of the option declines even if the market is moving in the right direction. Because out of the money options have only time value, as time passes their value decays. By expiration, if the market has not moved through your strike price you lose the premium paid for that option. Again this is because most options traders buy out of the money options which tend to have the least probability of becoming winners. Option spreading is a way to turn this problem into an advantage.
Option spreading is the combining of both buying and selling certain options to create a defined risk strategy. Buy selling the out of the money options instead of buying them we raise money that we can use to buy an at or in the money option. At or in the money options are often expensive and therefore many traders ignore them. This is the main reason options traders get frustrated. By selling options that have a high probability of expiring worthless and using that money to buy and options that have a higher probability of being a winner instantly improves our odds.
Every trade recommendation from O&F Trade Recommendations is spelled out from start to finish with a Trade Description, Technical/Fundamental Explanation for the trade, clearly annotated Charts and full on Risk & Reward scenarios.
Let’s start with the Trade Description, this portion of the trade rec is where you will find the name of the strategy i.e. Bull Call spread, Strangle etc…and a description of the options you will need to buy and sell to place the trade. This section will also explain how much you will enter the order for and whether it is a Credit or Debit to your account. Please remember that these trades are being implemented by brokers for their clients so they are not hypothetical.
Next in the trade rec is the Technical/Fundamental Explanation. This section of the recommendation is a must because it allows the client to follow the thinking behind the trade and to understand why the trade was created in the first place. The primary purpose of this section is to allow the client to decide if they agree or disagree with the premise of the trade and possibly educate them on the important factors in spotting a trade for that particular market.
Clearly annotated Charts point out different technical formations and other important indicators such as commitment of traders and volatility indicators. This allows the client to visualize the projected move in the market and learn how to spot these formations on their own in the future.
Last but definitely not least is the Risk & Reward Scenarios. This section spells out dollar for dollar what a client can make or lose on a particular trade. With defined risk trading strategies this includes risk to reward scenarios and predetermined profit points for exit.
While O&F Trade Recommendations strives to cover all possible market scenarios in a trade recommendation we also understand that adjustments to strategies are necessary at times. So for our subscribers we issue Updates periodically to inform clients on exits or any other changes that we have made to an existing trade.
All the info you need to know about the trade is spelled out. From what the market is and how to place the trade what to risk and when to exit.
- What do you have to lose?
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Trade Example:
So lets look at some examples of trades that MyTradSignals.com has put out.
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| Japanese Yen Trade
From the desk of Derek Frey |
Technical/Fundamental reason for the trade:
The Japanese Yen has been on a decline for the past few months, but we have now seen this market begin to turn back up. We expect this market to move higher over the summer. The most immediate reason for this is the Bank of Japan meeting next week. We are expecting the BoJ to raise rates by .25 and that should continue to turn this market around. If the BoJ does in fact signal that they intend to raise rates, then that should begin to unwind the so called "carry trade" which should also push this market back up. On a technical level we have had almost every major technical indicator issue a buy signal in the last 72 hours, at the same time we are seeing bullish divergence between price and momentum which is a strong buy signal by itself. It is also rare for so many indicators to be wrong at such a visible turning point.
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Odom & Frey Futures & Forex
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| In this Edition |
Increasing Japanese Interest Rates will drive the Yen higher this summer. |
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