VLAD KARPEL CEO AND FOUNDER, TRADESPOON

5 STEPS FOR SUCCESSFUL TRADING

This is your step-by-step guide to the process that our professional traders go through before making a trade. This proven five-step process is the culmination of decades of trading experience. It can help you quickly evaluate potential trade opportunities and take decisive action when you identify a winning trade.

WWW.TRADESPOON.COM 3

INTRODUCTION

What’s Your Stock Market Outlook? The first thing you need to ask yourself before even looking for a new trade is, “Do I need this trade? Does this trade fit within my current portfolio?” If you already have 10 bullish trades do you really need another bullish trade - probably not, right? The key here is to look for trades that add balance to your portfolio or reduce your overall risk. If you already have 10 bullish trades you need to look for some bearish trades to help re-balance. Just knowing what to look for from the start helps you focus only on the trades and strategies you need for your portfolio. It is important to determine your market outlook for the next 40 to 75 days. Are we in a bull market? When does earnings season start? You want to align your portfolio with market direction and not trade against a prevailing trend. If the market is choppy, consider hedging your positions with condors, butterflies, $SPY puts or $VIX calls.

WWW.TRADESPOON.COM 4

CHECKLIST - STEP 1

Bullish, Bearish or Neutral Bias Once you determine your market outlook and decide to get into a new position, you need to identify a stock to trade and decide your outlook on that stock. You can perform a fundamental and technical analysis to determine if the stock is trading in a bullish, bearish or neutral channel. Your trade outlook should coincide with your average position duration. And as we mentioned in the last step, you do not want to trade against a market trend. Remember - the trend is your friend. You also do not have to be 100% accurate in determining where stock will be by the end of your expected position duration. However, it is important to determine the general stock trend and an expected price range in order to construct the correct trade strategy. There are a lot of strategies for each direction, but you should pick one or two strategies that you feel most comfortable executing in terms of risk, return on capital and probability of success. We recommend using multiple statistical systems to help you rank different stocks in terms of price trend and predictability of direction. And keep in mind for options trading you want to focus on stocks that have average stock volume over 1MM shares and high options open interest .

WWW.TRADESPOON.COM 5

CHECKLIST - STEP 2

Support And Resistance Levels Once you decide on the direction of a stock that aligns with your expected position duration, you need to determine key support and resistance levels for stock. As with your general outlook from Step 2, your support and resistance outlook should match the time frame that you expect to hold your position. Again, you do not have to be 100% accurate in determining support levels but you have to be correct with the general direction. You can utilize traditional technical analysis and use several key upper and lower studies like Volume, RSI, MACD, and Bollinger Bands to determine support levels. Keep in mind that a lot of S&P 500 stocks are highly correlated to the market so you should also determine key support and resistance levels on the market as a whole using Fibonacci retracements and moving averages on the market indexes. The key is to get familiar with 2 - 5 technical indicators and learn them well throughout market cycles.

WWW.TRADESPOON.COM 6

CHECKLIST - STEP 3

Choosing Your Trading Strategy The process of selecting the best strategy is a process of cost basis reduction. With a solid understanding of where the implied volatility is for the stock relative to its historical performance (IV Rank), you’re able to eliminate all the strategies that “don’t make sense” for this setup. For example, if the implied volatility is high and option pricing is rich we can eliminate all option buying strategies like debit spreads, calendars, long single options, etc. Once you remove those strategy possibilities, you’re left with a short list that includes credit spreads, iron condors, and butterflies. That makes it easy to choose a strategy that best fits your risk tolerance and account size.

WWW.TRADESPOON.COM 7

CHECKLIST - STEP 4

Making Your Trading Plan Developing a clear trading plan is one of the most pivotal areas that many traders (both new and experienced) fail to get right. Countless studies have proven that trading big positions will exponentially increase the risk of blowing up your account and losing all of your money. For this reason we suggest that you place trades on a sliding risk scale from 1% - 5% of your account balance per trade. Risk, by our definition, is measured in cash or margin put up to cover the trade. For example, say you have an account with a balance of $10,000. If you are allocating 5% of your account to each trade, you would trade in increments of $500. You can look for a 20% - 40% return per trade and hold positions for 20 - 30 days This way you can make $100 return per trade every 30 days. Keep track of commissions and structure your trades you have more winners than losers. Also, try to limit your number of losers to the same number of winning trades. Play it safe, trade small and trade often! WWW.TRADESPOON.COM 8

CHECKLIST - STEP 5

WWW.TRADESPOON.COM 9

VIEW UPCOMING WEBINARS

tradespoon.com/webinars

GET IN TOUCH WWW.TRADESPOON.COM

SOCIAL MEDIA facebook.com/tradespoon twitter.com/tradespoon

©  COPYRIGHT 2015 TRADESPOON, ALL RIGHTS RESERVED