Presents

Ultimate Options Day Trader Course

With

Bill Corcoran

I am not a registered broker-dealer or investment adviser. I will mention that I consider certain securitiesor positions to be good candidates for the types of strategies we are discussing or illustrating. Because Iconsider the securities or positions appropriate to the discussion or for illustration purposes does notmean that I am telling you to trade the strategies or securities. Keep in mind that we are not providingyou with recommendations or personalized advice about your trading activities. The information we areproviding is not tailored to any particular individual. Any mention of a particular security is not arecommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for anyspecific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation,regardless of whether we are discussing strategies that are intended to limit risk.

I am not subject to trading restrictions. Myself and other instructors could have a position in a security orinitiate a position in a security at any time.

WELCOME

• I am SUPER excited to do this class.

• This is a day trading class.

• Over the next several weeks our lessons will be based on real trading opportunities that have traded in my trading group, “The Morning Lab” and/or that I review in “The Day Traders Almanac”.

• This is an open forum, your questions will direct the topics we learn.

LAST WEEK• History of the strategy

• Goals and objectives

• Basic Considerations

• Brokers

• Costs

• PDT

• Why the Spy

• Spreads

• Expirations

• Charts

• Strategy Overview

THIS WEEK

• Charts

• Technical Indicators

• Multi Time Frame

• Asset Allocation

• Risk management

• Win:Loss Ratios

• Reward:Risk Ratios

• Performance Measuring

WHAT IS IT??• This course is the result of over 13 years of experience

trading and teaching people to trade the options market.

• It evolved from a need to find an options strategy that could be traded in any market condition.

• It avoids overnight “headline risk” and can be scaled to fit virtually any trading account size.

• This strategy has the potential to generate significant income with minimal time expenditure once it is mastered.

TECHNICAL ANALYSIS

Technical Analysis

• If you suck at chart reading you will suck at trading.

• The chart tells us all we need to know.

• Patterns tend to repeat.

• Charting is scalable and transferable.

• Most trades should be in the direction of the daily chart. (there are exceptions)

The Chart

• A picture is worth a thousand…Dollars!

• A picture of the market psychology.

• Tells us what the market is “thinking”.

• Pure supply and demand in picture form.

The Chart

• Chart patterns occur in multiple time frames.

• Chart patterns occur in all asset classes.

• Anytime there is a buyer and a seller there is likely a chart pattern being created.

Candlestick Charts

• Break down individual trading periods.

• Can identify market sentiment in each trading period.

• Patterns can emerge within individual candlesticks or even groups of candlesticks.

Bullish Candlestick

OPEN

CLOSE

LOW

HIGH

Bearish Candlestick

OPEN

CLOSE

LOW

HIGH

CHART PATTERNS FOR DAY TRADING

• Day Trading the SPY will use Candlestick Charts.

• Many of the “Setups” are based on observing reversal or continuation patterns.

• These patterns may emerge at or near key technical indicators like moving averages or Bollinger Bands.

• This is what creates our “Setup”.

Candlestick Reversal Patterns• Evening Star or doji reversal

• Morning Star or doji reversal

• Bullish Engulfing

• Bearish Engulfing

• Bullish Harami

• Bearish Harami

• Bullish piercing

• Bearish Dark Cloud

Evening Star Reversal Pattern

Doji Reversal (Engulfing)

Morning Star Reversal Pattern

Bullish Doji Reversal

Bearish Engulfing Reversal Pattern

Bearish Engulfing

Bullish Engulfing Reversal Pattern

Bullish Engulfing?

Bearish Harami Reversal Pattern

Bearish Harami

Bullish Harami Reversal Pattern

Bullish Harami

Continuation Patterns

Rising Three Method Pattern

Falling Three Method Pattern

TREND VOLUME

• Bullish

– Price is rising

– Volume is rising

• Bearish

– Price is falling

– Volume is rising

RETRACEMENT VOLUME

• Bullish

– Price is rising

– Volume is rising

• Bearish

– Price is falling

– Volume is rising

REVERSAL VOLUME

• Potential Bullish Reversal– Price is falling and approaching support

– Volume is falling

– Watch for reversal patterns

• Potential Bullish Reversal– Price is rising and approaching resistance

– Volume is falling

– Watch for reversal patterns

TECHNICAL INDICATORS

DAILY CHART MOVING AVERAGES• BEST USED FOR TRENDING STOCKS

– Trailing indicator

• Bullish– Stock price above moving average

• Bearish– Stock price below moving average

• Use “exponential” moving averages on Daily Chart– 5 EMA– 10 EMA– 20 EMA– 50 EMA

• Simple Moving Averages for long term – 100 SMA– 200 SMA

MOVING AVERAGES• Identify Trends

– Higher highs – Higher lows

• Strong trend-– Moving averages spread apart

• Weakening Trend– Moving Averages come together

• Act as support– Up-trending stocks

• Act as resistance– Down trending stocks

INTRADAY MOVING AVERAGES• Applied to Multiple time frames

– 1 Min– 5 Min– 15 Min

• Bullish– Stock price above 20 moving average

• Bearish– Stock price below 20 moving average

• Use “exponential” moving averages on:– 5 EMA– 10 EMA

• Simple Moving Averages on 1, 5, and 15 min chart– 20 SMA

Bollinger Bands

• Bands measure Volatility

• Can act as “Support” or “Resistance”

• BB mean (20 SMA) can act as support or resistance.

• Can signal changes in momentum

• Use BB on 1, 5 and 15 min chart

• Standard setting is 20, 2, 2

STOCHASTIC

• BEST USED IN CHANNELING STOCKS

– Works well in 5 Min Intraday view

• Bullish

– Shows “oversold” below 20%

• Bearish

– Shows “overbought” above 80%

TECHNICAL SIGNALS

BULLISH TREND

• Stock price moves up for 3 to 5 candles.

• Price retraces for 1 to 3 candles to a moving average.

• Stock price bounces and heads higher from the MA.

• Pattern repeats, creating higher highs and higher lows.

5 MIN CHART TREND

BEARISH TREND

• Stock price moves down for 3 to 5 candles.

• Price retraces for 1 to 3 candles to a moving average.

• Stock price bounces and heads lower from the MA.

• Pattern repeats, creating lower lows and lower highs.

5 MIN BEARISH TREND

BOLLINGER BAND TOP

• Stock price moves aggressively above the upper band.

• Price retraces below the upper band.

• Stock price rallies but fails to reach the upper band before retracing lower.

• Can signal a loss in momentum.

BOLLINGER BAND TOP

Bollinger Band Bottom

• Stock price moves aggressively below the lower band.

• Price retraces above the lower band.

• Stock price sells off but fails to reach the lower band before retracing higher.

• Can signal a loss in momentum.

Bollinger Band Bottom

Bollinger Band Channel

• Bollinger Bands and the 20 SMA are moving essentially sideways.

• Stock price moves below the lower band or above the upper band but fails to stay beyond the band.

• The stock price is likely to revert to the opposite band.

BOLLINGER BAND CHANNEL

MULTI TIME FRAME

MULTI TIME FRAME CONFIRMATION

• We are day trading in very compressed time frames.

• The daily chart is a reference.

• The five minute chart is our primary tool for observing price activity.

• The one minute chart is used to confirm price activity observation on the five minute chart to confirm good entry and aggressive exits.

• The daily chart helps establish the presence or absence of longer-term trends and patterns.

Multi Time Frame Template

12:57

12:55

15 MINUTE CONFIRMATION

• We use the 15 minute chart to see the bigger picture.

• It is a look forward reference for the 5 minute chart.

• The five minute chart is still our primary tool for observing price activity.

• The 15 minute chart is also used to indicate trend changes in the daily chart.

15 MINUTE CHART

ASSET ALLOCATION

POSITION SIZE

• Position size should be considered in relation to total account value.

• Exploiting relatively small moves using high probability technical setups can potentially create higher win/loss ratios.

• His means we can afford to set up near 1:1 reward to risk ratio trades.

• The profit target on these SPY day trades is .10/share, therefore the net realized loss can approach .10/share, including the spread.

• Even with the potential for higher win/loss ratios, potential net realized loss on a single trade should not exceed 7.5%-10% of total account value.

RISK MANAGEMENT

DAY TRADE RISK EVALUATION

• Day Trading eliminates overnight “headline risk”.

• Day Trading requires and can potentially yield higher win:loss ratios.

• We can bump our normal 2.5% risk tolerance to 7% to as high as 10% of total account value as long as we maintain a 70% or greater win:lossratio.

REWARD TO RISK

• Swing Trading carries significant overnight “headline risk”.

• We compensate by taking smaller positions with larger profit potential.

• We maintain a small 2.5% risk tolerance and seek 3:1 or greater Reward:Risk ratios.

• We can be profitable with low Win:Loss Ratios.

SWING TRADE RISK : REWARD

“REWARD”

3.00

“RISK”

1.00

SWING TRADE WIN : LOSS

“WIN”

4

“LOSS”

6

SWING TRADE RESULTS

“WIN”

$300$300$300$300

$1200

“LOSS”

-$100-$100-$100-$100-$100-$100-$600

WIN:LOSS and REWARD:RISK

• Day trading eliminates significant overnight “headline risk”, but the moves are smaller.

• We compensate by taking larger positions with smaller profit potential.

• We maintain a larger 7.5% risk tolerance and seek 1:1 Reward:Risk ratios.

• We can only be profitable with high Win:Loss Ratios.

DAY TRADE RISK:REWARD

“REWARD”

1.00

“RISK”

1.00

DAY TRADE WIN:LOSS

“WIN”

7

“LOSS”

3

DAY TRADE RESULTS

“WIN”

$100$100$100$100 $100$100$100$700

“LOSS”

-$100-$100-$100-$300

MEASURE IT!

• To be successful we MUST know our numbers.

• Calculate win:loss daily

• Calculate reward:risk daily

• Calculate compliance with the7.5%-10% risk tolerance daily

NEXT WEEK

• More Charts

• Setups

• Multi Time Frame Setup

• Pre Setup indicators

• Order Execution

• Stop Management

• 80/20

• Profit Management

I am not a registered broker-dealer or investment adviser. I will mention that I consider certain securitiesor positions to be good candidates for the types of strategies we are discussing or illustrating. Because Iconsider the securities or positions appropriate to the discussion or for illustration purposes does notmean that I am telling you to trade the strategies or securities. Keep in mind that we are not providingyou with recommendations or personalized advice about your trading activities. The information we areproviding is not tailored to any particular individual. Any mention of a particular security is not arecommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for anyspecific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation,regardless of whether we are discussing strategies that are intended to limit risk.

I am not subject to trading restrictions. Myself and other instructors could have a position in a security orinitiate a position in a security at any time.