I’ve been called America’s No. 1 pre-market trader thanks to my ability to pick winning trades in SPY, the highly liquid ETF that tracks the S&P 500– 30 minutes befor the opening bell on Wall Street.
To achieve this level of success isn’t easy. Heck, I’m up at 3 a.m. ET, sifting through charts and reading up on news, which you’ll hear more about later.
In fact, today, I’m going to walk you through the three-step process that has allowed me to get these epic results.
You see, each day, I alert my members on a single option trade in the SPY. It’s either a put or a call, and to make things even easier and simpler, I spell out the exact strike price and expiration period.
The goal is simple.
Place the trade early, and try to be out for a profit within 30 minutes.
But to get to that level of accuracy, it requires hours of analysis and sifting through pre-market data.
And you know what?
My pre-market strategy is so consistent and profitable, we’ve begun referring to the trades as “Daily Deposits.” (If you want to hear from some traders just like you who have been racking up profits day after day, check out my Twitter feed.)
Now here’s what it is all about:
I wake up every trading day at 3 a.m. While some people are just hitting their REM cycle, I’m hitting the gym and digesting the overseas trading action.
I have always paid close attention to the Asian markets and currencies. That said, with the trade wars being one of the most talked about topics on Wall Street, it’s even more critical now.
For instance, last week, the Chinese yuan dropped below a key level, prompting President Trump to accuse China of engaging in currency manipulation.
Of course, this only further escalated trade tensions and caused a massive volatility shock across global markets.
The sell-off that followed was fast and hard, with the major indices dropping 3% in a single day.
The three major Asian exchanges I watch are:
- Japan’s Nikkei
- China’s Shanghai Composite
- Hong Kong’s Hang Seng Index, which close between 2 a.m. ET and 4 a.m. ET.
You better believe what happens in the Asian markets carries over to the European markets too. And when you examine both these markets, you too will realize that they are often leading indicators to how the U.S. markets will trade.
Now, the European indexes I watch most closely are:
- Germany’s DAX
- France’s CAC 40
- the FTSE 100, which is made up of the 100 largest companies listed on the London Stock Exchange. The London Stock Exchange closes at 11:30 a.m. ET.
Step 2: Analyze Market-Moving Data
Right now, stocks are heavily reacting to news headlines pertaining to the Fed, trade talks, economics and policy. Some of it can occur at any moment.
However, you can’t prepare for that. So instead, I focus on scheduled events that have historically proven to be market-moving catalysts.
- Federal Reserve announcements
- GDP releases
- Jobs reports
- Earnings announcements
All the dates and times for major economic releases can be found online.
I use the economic calendar provided by my broker, but a quick Google search will pull up plenty of free online calendars you can use.
However, in this market, uncertainty is causing all this market volatility.
I often tell my Daily Deposits traders that this is a day trader’s market. What I mean is that there is a real danger in holding positions overnight or through the weekend, especially in a market as volatile as this one.
The potential for major news — scheduled or otherwise — to move markets is why I tend to stay all cash overnight and through the weekend.
Because stocks are gapping up or down each morning, and if you are on the wrong side, you could be waking up to some heavy losses.
No thank you.
It’s a lot easier to manage risk intraday.
And that’s why I like to remain in cash through major events such as Fed announcements.
But a day traders’ market is fine by me, and perfect for my “Daily Deposits” options strategy.
The idea is to get in and out of these trades quickly, deposit your cash and go on with your day — richer than you were when you woke up.
Step 3: Analyze the SPY’s Chart
My final step before selecting the Daily Deposits trade of the day consists of a thorough analysis on the SPY price chart.
Why the SPY you might be wondering?
Well, it’s not only the oldest ETF, it’s also the largest ($277B AUM), and the most liquidly traded on the planet.
That said, Pre-market trading in the U.S. begins at 4 a.m. ET. Pro Tip: Turn on extended hours on your chart settings to see what happens in the pre-and-post market.
Now, before I select the Daily Deposits trade, I answer these critical questions:
1. Where do support and resistance lie?
2. How does the previous day’s volume compare to the 90-day average volume?
3. What pattern will I look for on that day’s chart?
Now, if any of this language appears foreign to you, that’s OK. It was foreign to me once. That’s why I make it a point to educate through my ongoing video library in the member’s section.
Again, this following section, might be too advanced for beginners. However, the trade of the day is laid out to members on a silver platter, they don’t have to know much to follow along and profit off the strategy.
Nonetheless, I include key support levels and resistance levels that I want traders to be aware of. These levels are often good profit-taking points.
For example, right now, I’m looking at the 50-day moving average as resistance (SPY $293.40) and support at the 100-day moving average ($290).
As for volume, I have found comparing its 90-day average volume to the previous day’s is a good predictor of which direction the market will open.
You see, over the past three months, the SPY has traded about 67.9 million shares per day.
If the SPY trades above its 90-day average volume in the previous session to the upside– and has no bearish news, I’ve found it to be a reliable way to predict a green move to come.
If the SPY’s volume is below its 90-day average volume in the previous session — I approach the next day with caution. On days like this, there’s no need to pull the trigger right out of the gate. And maybe you’ve found out recently– patience pays.
Finally, I use a handful of simple-yet-reliable patterns to guide my trading. My top three are:
1. The head-and-shoulders pattern for timing put option trades
2. The inverse head-and-shoulders for time call option trades
3. The exponential moving average (EMA) line crossover, which is great from timing call and put option trades in a choppy market
You can find examples of each pattern by clicking on the links above.
Now, as you can see, there’s a lot to take in each morning, which is why I wake up at 3 a.m. Doing so gives me a six-hour jump on the trading day. That’s plenty of time to assess what is happening in markets here and abroad and deliver my Daily Deposits trade.
I know waking up at 3 a.m. and spending the morning analyzing charts and data isn’t feasible (or even desirable) for most people.
With my Daily Deposits trades, I do the heavy lifting for you, delivering gift-wrapped pre-market analysis, plus my top trade — 30 minutes prior to the market.
To get my next Daily Deposit trade as soon as this morning, you can join me here.