Traders sometimes feel like the deck is stacked against them. Wall Street banks and hedge funds can throw around money, manipulating stock prices and writing off loses like they barely happened.
But individual traders can still get a leg up on their competition by using the right research. And that's especially true when it comes to trading options.
It's actually quite simple. The market gives off all kinds of signals every day, every month, and every hour. The idea is to zero in on the right signal, and use it to crush the market at every opportunity.
You don't need a Wall Street sized war chest to get an advantage in today's options market. You just need to know where to look. (And if you want a part supercomputer, part artificial intelligence, and part quant-trading algorithm to give you a shot at over $15,000 in weekly windfalls, click here.)
We're not talking about sitting back and magically getting a gut feeling for what to do. You have to rely on the kind of data that's been proven over and over again. And when you find what works for you, then you have a real plan.
And that is more true today than ever before.
The market's been a roller coaster lately, making it hard to implement a longer-term investment strategy. Stocks are up one minute, then news from the trade war front sends them plunging 5% lower. But volatility is actually a trader's friend because it creates plenty of short-term opportunities, especially when it comes to options trading.
And we want to help options traders find the best - and biggest - opportunities. Money Morning Quantitative Specialist Chris Johnson has a simple options trading strategy to find these moneymaking plays.
The best part is it's one of the simplest tools to use, too...
The Secret Tool to Get an Advantage by Trading Options
We're all likely familiar with moving averages, such as the 200-day moving average (MA200) and the 50-day moving average (MA50). These show up as default selections on most stock charts and show us the long- and short-term trends, respectively.
But with all the tweeting, rocket testing, and China-dealing, those averages don't react quickly enough. For that, Chris says the 20-day moving average holds the key.
The MA20 is the average of the last 20 closing prices for a stock or index. That value is recalculated fresh each day and because the window of data changes, the average "moves" over time.
By using the MA20 to find trends, you're getting a more nuanced and more immediate view of what's happening. That gives you an advantage, too.
Here's how to use it...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]Many investors know that analysts look at the relationship between the MA50 and MA200. They might have even heard the terms "golden cross" and "black cross" or "death cross," used when these two cross over each other.
However, that doesn't help us trading in short-term volatile markets. We need to tighten these signals up a bit. For this, we will use the MA20 and the MA50.
The strategy is to only take buy signals from the MA20 when both the stock price and average are above the MA50.
And we only take sell signals when both price and the MA20 are below the MA50.
In its simplest terms, we buy when prices rise above the MA20 and sell when they drop below.
Of course, stock price movements are often relatively small in this time frame. That's where options come in. With options, the same stock price movement can produce many times the return offered by the stock itself.
That's the power of leverage!
And when the current choppy market finally sustains a move in one direction or the other, you will see your winning trades multiply several-fold because you will naturally be in sync with the market.
But don't stop there...
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