This article on it is good..if nothing else it is interesting stuff and keeps the brain active!
I suppose no one here has done any work on it?
https://www.google.com/amp/s/seekingalpha.com/amp/article/3467846-skew-index-predictive-s-and-p-500
Why Is The Obvious Not So Obvious?
- Thread starter nysestocks
- Start date
This article on it is good..if nothing else it is interesting stuff and keeps the brain active!
I suppose no one here has done any work on it?
https://www.google.com/amp/s/seekingalpha.com/amp/article/3467846-skew-index-predictive-s-and-p-500
I trade stock options for a living so IV and IV skew are important to me. However I am not sure the skew index is a good predictor of SP500, it reminded me of RSI: Skew is usually high when the SP500 drops, just like RSI. They both are lagging indicators. I think your telling me to study the realtime price chart is more pertinent and have more predictive value.
I am no expert, so maybe you can shed some light on this.
Thanks.
Hi, about selecting 'key levels.' How does one go about defining key levels? Is it picking S/R in the traditional sense, I.e., looking for places where price has been rejected several times in the past?Forget reading it all..no need to..you now know that bars are better than candles..well..I hope so..key levels are your get ready points..what is important next is what happens..not what you or anyone else thinks might happen..if you are wrong..get out and wait or reverse trade if required..if right..and momentum takes off..use your 2 bars back to lock in profits!
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Or is it b/c of the logic I have in the attached Pic, labeled 'caseA?' Where 2414 was selected as a key level b/c of price having a sharp selloff back near that area... and at that point we are just waiting to see if it 'bounces' or not?
Is there a way to learn to observe the 'drop' and the 'bounce?' Does it look differently each time?You must have some idea now of what is required..if not..then..I really don't know..you have seen how a drop which is not followed by a quick bounce has a very good chance of more down.. this is all controlled..only thing that stops control is sudden news..which is why you must always pay attention and WATCH what you are doing.. welcome to the real world of trading
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I think its about trying to figure out where other traders will act. Lets say a breakout happens at 2440. If price retraces, the people that were in losing shorts will cover and possibly reverse, existing longs may buy more and people on the sides will enter long too. All this order flow should drive price up unless some one big is gaming the level.
If its a range... Buy low sell high.
If its a range... Buy low sell high.
The one thing I learned is that you never dismiss anything until you have tried it and seen the results.. just because someone else says something does not work..does not mean it can't work for you..same for something working of course!
I like investigating things to see if they are worthwhile using..if not..no harm done and some additional knowledge attained.
As for this skew..I have not done enough work on it..so I don't know yet if it worth using or not..but I will do some more work to find out a bit more. Option activity I believe is worth following for certain markets like SP500..as to the value for very short term trading..that I am not sure of..and find it a very interesting subject.
Price chart..yes..I believe that most option "experts" are very bad at chart reading..and could greatly improve their results if the could combine good chart reading skills with good option analysis skills.
To me..the chart is your main trading tool..but one has to understand volatility and effect on premiums if trading options..we all know about the 80% figure for deep OTM puts expiring worthless..and which some traders only trade by selling puts..for obvious reasons
There is no easy or one answer..it all depends on the individual..the commitment.. experience and available cash..one can make and lose money loads of ways..best way will always be the way that carries the least amount of risk PER TRADE..with a high probability of making a decent return PER X No.TRADES..common sense really!
How do you know when someone big is getting in? I have been staring at the AAPL charts for 2 years and for the life of me cannot figure out when BRK spent $10B on AAPL?
I dono for sure but you can look for held and refreshing bids or offers, lack of buyers / sellers on the time and sales. I haven't figured it out yet but this is what I try to see on the dom. Will take lots of practice but im working on it. Remember futures have accurate volume info unlike stocks.
Thank you for your reply.
Totally agree. Whatever I read at ET I tried them out. Most did not work for me but I did find some very very good advices, like yours here, that made me a much better trader.
To those interested, here are some of my lessons learned: As an amateur retail option trader, I could not trade complicated instruments (e.g., complex combinations), compete trading indices, compete trading volume and be profitable... As a small trader, I needed to keep things simple, to make directional bets vs hedging, delta neutral, volatility.... As a small retail trader, I was unable to day trade options profitably, the MM and professionals killed me with bid/ask and.... As a small retail trader, I needed to get my entry right to be profitable.....
But in spite of all that, I think a small amateur option trader can make a good living.
I appreciate the coaching and enjoyed reading your comments.
Regards,
I have no idea what I am doing yet just absorbing everything I can and what makes the most sense to me. From observations I think orderflow and s/r are the route for me in the markets. Just have not been able to put it all together into a winning method. I think the missing link is experience / psychological factors like taking losses when wrong and letting winners run and being able to act on what I see. Or maybe I just need to stumble on to the "obvious"
.Personally I dont get the value in backtesting stats. The market is people making decisions. Why should there be any significance to a candle stick pattern or chart pattern, doest make sense in my head. Even if there was a small statistical significance in your backtest it can still be totally random. If you flip a coin 100 times doesnt mean you will get 50 heads and 50 tails. If you got 40 heads and 60 tails you be mislead to believe you have an edge when you dont.
For me personally id rather trade live paper or real money and collect stats based on my own real time market reads.
I'm just a rambling loser at this point tho.
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