Our trading on Tuesday, October 11, 2016 was a great day. We forecast a down day and it was a wonderful day to have entered a put early on. All of our forecast levels were hit and it was a very profitable day for us. We made 292% profit on a single trade. The reason we want to mention this day in particular this week, is the way we decided when to exit our trade. Exiting a trade, knowing when to let it run and when to lock in the profits is a very difficult part of trading. There were several possible exit points for a trader on this day.
The power of multiple time frames
Notice this 30-minute chart of the SPX, and notice please the yellow line that we’ve drawn at what had clearly been a level of support for the past few weeks. 3 times the SPX has bounced off this level. Making this observation, is what enabled us to ride the trade on Tuesday as we did. Because when it broke through that level so quickly, we expected a bounce back. We were watching it closely and we gave it some room to move, as it was approaching the level of 2145. Certainly a trader could have locked in the profit at any point here, but we waited and as expected the level that was once a strong support level had now become a strong resistance level. That is exactly what happened.
Support level becomes a level of resistance
This is an important concept to notice in your trading, levels of support once broken often become levels of resistance. Also keep an eye on the time of day. Often times between noon and 1 pm EST there is a slight lull or retracement during the lunch hour. Many times the morning trend continues after 1 pm. Not always, but that time is something to keep an eye on as a trader determines their own exit strategy.
After hitting this level of previous support, the SPX turned and started to fall quickly. So we rode it down to exit later in the day for 292% profit, while it hit a high of 354% profit. The key to being on the right side of the trade on this day was having used the SPX daily forecast that our members received within minutes of the open of trading. By watching the support level from a 30-minute chart we were able to ride it down to very nice profit. We look forward to another great week day trading SPX weekly options.
