Hey all, would love to get some input/feedback on the strategy and psychological approach I’ve been relatively successful with lately. 0DTEs are always a risk, but I’ve enjoyed trying to simplify my strategy as much as possible in the quest for consistency (so far so good 5 months in).
Overall Approach:
- Identify and follow the overall market sentiment/appetite for the day. Wait for a pattern to be established — Is it a trend day or a range day? Are there market-wide catalysts like Fed meetings, major earnings AH (e.g., NVDA and Fed minutes yesterday)? Are there significant support/resistance zones established on higher time frames to respect? Are sector ETFs aligned with the current SPY/QQQ trend?
- Black and white theory confirmation. Understand if my theory (price will rise or fall) is correct or incorrect as quickly as possible and don’t let ego convince me that it will be correct eventually if it isn’t moving that way.
Entries:
- Trend days/periods: wait for established trend and buy 0DTE at the breakout or breakdown confirmation candle. If theory is confirmed, add half position post-retracement once trend continues.
- Range days/periods: wait for established trend and buy 1-3DTE at bounce back confirmation candle. Inverse that position with 5-7DTE hedge at half the main position value and lower delta
Exits:
- Set stop losses based on price action rather than monetary value. I.e., if it hits this price, my theory was wrong. If a range day/period and theory was correct, close the hedge and close primary position at confirmation candle when bouncing back off support/resistance threshold. If incorrect, close the 1-3DTE and let the hedge ride.
- The idea is to have a pretty black and white outcome. Either you were right or you were wrong and you should know quickly and have your downside exit automated. I never automate take profits because we don’t know how far it’s going to move. I take my profit when the theory is no longer looking correct (e.g., price hits lower high on a call position).
Rules:
- Don’t trade before 11:30 EST or after 3:30 EST. Never leave the position open overnight. I know there is more money to be made in early and late hours, but my goal is consistency and this is achieved by letting a pattern establish (for me at least).
- Never add to losers, never average down, never try to “catch a falling knife” (i.e., time the bottom or top). Don’t trade without a strong theory, don’t fight the trend, don’t fight the institutional volume.
- Add to winners and continuously move stop loss up once in profit
General Strategy/Guidelines:
- If trending initially, are sector ETFs aligned? If not, be wary of reversal and set your stop loss tighter. For example, if SPY is trending up early but is driven by high relative volume and rising prices for utilities and consumer stables rather than tech, semiconductors, and growth funds, be ready to exit early.
- Price action and volume only, no indicators aside from the occasional Fibonacci or anchored VWAP to identify bounce points on retracements
- Identify and respect institutional support/resistance levels identified via notable volume spikes at key price levels. The vast majority of trades are automated/algorithm-driven. Use this to your advantage.
- Take what the market gives you. If you don’t like the setup, stay away.
- Be happier about recognizing you were wrong quickly and admitting it than you are sad about being wrong. Don’t be afraid to accept you missed and flip your position. Being wrong is part of it, you can be incredibly profitable being right the minority of the time if your wins are bigger than your losses.
Would love to get your thoughts!
Posted by RichardHammersvee