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This is the latest entry in THE CROSSHAIRS TRADER DICTIONARY.
COORDINATED ATTACK: A carefully planned and executed options trade in which the various weapons in THE CROSSHAIRS TRADER arsenal are employed in such a manner as to utilize their powers to the greatest advantage as a whole. In other words, the utilization of the trader’s weapons in such a manner that the probability of success is stacked in the trader’s favor.
THE CROSSHAIRS TRADER bases trading decisions on a checklist of weapons. This checklist determines the probability of an options trade working based on historical evidence and the current market conditions.
The checklist contains the following and is in the form of questions:
1. What is the current BATTLEFIELD TERRAIN? According to the CROSSHAIRS TRADER DICTIONARY the choices are: ACCESSIBLE, PRECIPITIOUS HEIGHTS, TEMPORIZING GROUND, ENTANGLING GROUND, NARROW PASSES, or GREAT DISTANCES. Determining the general market condition is the top priority because most stocks move in tandem with the general market. There are some occasions where the stock may go against the general market but the move will not be as strong and will not be as highly probable. Why trade against the strongest probability?
2. Is the DIVISION prepared for battle? In other words, stocks belong to sectors and just as stocks usually move in tandem with the general market so do stocks move in tandem with its sector. For instance, if trading an oil stock look at the XLE; if trading a financial stock then the XLF, etc.
3. Is my SOLDIER ready for DEPLOYMENT? Is the stock that I trade set up to enter the battlefield based on my edge (my highly probable set up)? If my reason for entering the battlefield is present but does not correspond with number 1 and 2 above, then there is no trade or I trade as a SNIPER.
4. Is there any news pending that could affect my trade? THE CROSSHAIRS TRADER is careful not to be on the battlefield when news is expected. For example, if trading CAT (Caterpillar), a trade should not be entered if the Construction Spending Report is the next morning. Or, if trading an oil related stock, a trade should not be entered directly ahead of the 10:30 oil inventory report. Most importantly, a trade should not be held through an earnings report. A huge move in the opposite direction of your position could cause irreversible damage. It is best that your soldier sit and wait for the reaction to the news thus avoiding a vulnerable position.
5. Is my soldier near a strong line of defense? According to the CROSSHAIRS TRADER DICTIONARY, the 200, 50, and 21 simple moving averages are considered strong areas of support or resistance and are compared to 200, 50, and 21 tanks. It is important that a decision to enter the battlefield takes into consideration these areas of defense. Tackling these tanks can be difficult at best and ruinous at worst.
Before sending a soldier into battle, the wise trader collects a general view of the battlefield, reviews the strength of the division, checks the preparedness of the soldier, considers any news from the frontlines, and looks at the enemy’s defenses, knowing that leaving out one of these crucial elements could be fatal. Options trading is hard enough as it is so why make it more difficult?
“Strategic planning is worthless-unless there is first a strategic vision.”
John Naisbitt
TRADING IS WAR. PREPARE YOUR WEAPONS.
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