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Math Based Strategy

Updated: Aug 27, 2021

When I first learned about stock options and how much money could be made trading them, I read everything I could about the stock market and how it works. I got up early and watched the market every morning at 6:30am (I live in California.) and I tracked several stock options to see how their prices fluctuated with the share price. I took careful notes on which expiration weeks (how far out) the prices moved when the stock price moved and how to avoid decay. I have notebooks filled with daily data and note pages on my phone with pictures of different options and their movements through the day.



Once I felt comfortable with where I should buy in, in relation to the stock price and all my rules on how to handle the stock option, I read about several strategies, candle stick charts, patterns, momentum, crosses, and bounces. I didn't watch any HoW tO Be aN aWeSoME tRaDEr videos, they aren't for me, but everyone should do what they do. I stuck with reading articles that gave basic information and then I tried to implement it on a chart I liked. When I first started, I tried to be on the charts every hour I could. I'd watch all day until the closing bell and then continue to test my strategies on old charts at night watching the candlesticks of charts months before I started trading. After a while, I felt like the chop of a replayed chart affected how I traded live. At first, I would work on my strategy all night and then fall on my face in the morning because they just don't move the same. After a few weeks, I stopped watching old charts and my trading got a lot better. That's not saying they can't be used effectively by other traders just that I can't use them, they mess up my rhythm or something like that.



Once I had a winning strategy that gave me a good win rate consistently, I set my stop loss and came up with a plan to turn day trading into an income.

To find my stop loss, I take my average gain and multiply it by my average win rate percentage (turned into a decimal) minus my average loss multiplied by my average loss rate. This gives the average made per trade. If you're keeping good trading notes, with this math it's easy to see when a system isn't working and when a stop loss starts to overtake the win rate.

If you can't figure out how to use the formula or set a stop loss, contact me on IG @chasingtrades or any of the social media links available. (I respond fastest to IG dms) I'll show you how I set mine and you can decide how you want to set yours.

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