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With the new year right around the corner, we want to review our goals heading into 2022. There are two aspects to working the numbers as a trader. Our goal is to maximize our win rate as much as possible while maintaining a good risk:reward (R:R) ratio.

We can maintain a “good” win rate around 70% to 75% as long as we focus on clean setups, squeezes, and trends. We then use a proper R:R of 1:1 or 1:2 to maximize these setups.

Here are a few focal points to drive home:

• Let’s say we take 100 trades per year over a 10-year span. We have a 5% position size on each trade with a 70% win rate. Over the course of 10 years and one thousand trades, the compounding annual growth rate is 150%+ per year with a maximum drawdown of -15%. Working a 1:1 ratio, we could see serious yearly growth without much drawdown.
• Instead, let’s take this with the same 70% win rate and 5% position size, but using a 1:2 risk reward ratio. Over 1,000 trades the 10-year compounding annual growth rate is 250%+ with a maximum drawdown of -6%.
• As you can see, if you can work a 1:2 R:R, we can work the numbers for serious annual growth.
• Of course at times we will have trades at breakeven, with a small profit or small loss. The major thing to drive home is regardless of position size, at a bare minimum working a 70% win rate, a 1:2 R:R ratio can compound to strong yearly gains.

We are on the right path if we maintain a good win rate, focus on the best setups possible, and aim for a 1:1 or 1:2 ratio. The key after that is to work the numbers to enter the most setups possible.

Don’t build bad habits. Focus on taking one good trade after another. For serious growth, we want to work the scans, dial in our criteria for a good setup, and work those setups to maintain a strong win rate and risk reward ratio.

When taking trades, have an exit plan in place. In the Compounding Growth Mastery, I’ll be alerting exit plans with every new trade we take to ensure we keep our optimal R:R.

Remember, work a 1:1 or 1:2 risk reward ratio and sustain a good win rate near 70% to rock and roll into 2022 with serious account growth potential.

Stay Focused!

 

 

We’re dealing with a sideways market as we head into Friday and 2022. We’ll lay out key areas to watch that will likely translate into the new year and determine when we break out of this chop fest. 

The market ripped hard to start the week as the S&P 500 (ES) broke its previous high to create a new all-time high (ATH) at $4,784. We’ll be watching two levels to determine where the market could head next. 

Until the ES reaches $4,800 or drops to $4,766, we will likely continue to chop.

If the ES breaks below $4,766, we could see a healthy pullback and retest the ATH. If it doesn’t break below $4,766, the market will likely continue to move sideways. 

In today’s video, we’ll define inflection points and setups on our focused list as we head into the new year with a tight 2-hour squeeze and a developing 4-hour squeeze. 

Stay Focused!

 

 

Let’s discuss squeeze setups we’re watching and prep for the last week of the year before 2022. The market chopped into the holidays due to the market events over the last few weeks. 

We’ve been focusing on the 2-day squeeze, and on Monday the market put in a reversal for a strong green day. 

Regardless of how you trade, we want to focus on the big picture and focus on the best setups to trade in the market.

Here is our focused list:

GOOGL — Printing stacked squeezes on the daily, 2-day, and weekly charts. GOOGL could revert back to the $2,904 or $2,925 levels. Once it squeezes, it could push to $2,982, $3,000, and potentially to the all-time high at $3,019. 

NVDA — Ripped through the trendline near $296 on Monday. If NVDA can squeeze and break through $313, look for the $320 to $325 range. NVDA could drop to $305 or to the trendline near $296 for a great potential pullback..

SHOP — Look for a pullback to its 200-day simple moving average at $1,380. SHOP will break above the Ichimoku Cloud if it can push through $1,400. If it can hold the $1,380 to $1,370 range, we’ll look for a dip buy toward its previous highs and potentially to $1,520. 

Stay Focused!

 

Merry Christmas Eve, traders! 

This holiday season we’re grateful for your endless support, dedication to trading, and loyalty to Focused Trades. We hope to keep teaching, collaborating, and trading alongside you for many years to come. 

As a special Christmas treat, we wanted to share Taylor’s simple checklist for his credit spreads strategy.

• Focus on mid/large cap stocks
• Stock is in clean uptrend
• Must be in a weekly, 3-day, or daily squeeze
• Must be trading just above its 21 period exponential moving average (EMA)
• EMA’s must be stacked positively
• Positive momentum on Squeeze Histogram

We want you and the team here to spend the holidays with friends and family away from the charts, so we will not be sending a newsletter on Sunday, Dec. 26. 

We will post a Sunday Prep video and be back on Monday with live premarket prep as always on the Focused Trades YouTube channel to prep for the year’s end. 

Stay Focused!

 

 

The market is closed on Dec. 24 for Christmas, so it’s a shortened trading week. The market has been more difficult to trade the last few weeks as recent events have caused more volatility and chop. Because of this, we’ll want to take shorter, quicker trades this week as premiums will be taking a beating. 

Trade small, trade smart, and enjoy the week with family and friends. 

We’ll finish off the rest of the year strong and approach the market in an appropriate manner heading into the new year.

Here is our focused list:

GOOGL — On Monday, GOOGL fell below the daily Ichimoku Cloud but finished the day inside of it. As long as it holds above the Ichimoku Cloud, it’ll be inside of a weekly squeeze. Let’s see if GOOGL can hold the $2,820 to $2,823 zone and reach Point of Control (POC) at $2,863. From there, we could potentially see a boost to $2,900. If GOOGL heads lower, we could see a lot of chop. If we break $2,788, things could start to get ugly.

NVDA — NVDA traded at the Ichimoku Cloud and the $271 key level, filled the gap, and started to pop on Monday. Let’s see if NVDA will hit POC at $283.60. If NVDA can keep holding the Ichimoku Cloud, look for a push through POC and a reversion to the mean at the $296 to $300 range. We could see a nice dip buy opportunity with NVDA.

Stay Focused!

 

 

We wrapped up a week full of events that created a recipe for choppiness.

Three major events – the Federal Reserve meeting, quad-witching, and quarterly rebalancing – led to volatile back-and-forth action that ended the week with little to no difference in price from where we started.

Keep in mind this can be a harder market to swing trade if we aren’t giving our trades enough time until expiration.

In terms of structure on the S&P 500 (ES), we are seeing a daily squeeze at the 21 exponential moving average (EMA), positive histogram, weekly stacked EMA signals, and a weekly squeeze. Together this gives the ES a bullish structure with a lot of built up energy.

With these catalysts out of the way, we’ll gain a better sense of direction next week for where we can expect the market to head toward the end of the year and into January.

In today’s video, we’ll review the structure of the major indices, the market conditions after this week’s choppiness, and some clean setups that came up in our scan results.

Stay Focused!

 

This week we saw the markets go up, down, and ultimately nowhere.

We had the final Federal Reserve meeting of the year along with quad-witching expiration on Friday. Throw into the mix the quarter-end rebalancing and tax-loss selling, and this week made the perfect trio of events for a chopfest.

 Looking outside of the chop, the SPY continues to set up in a bullish daily squeeze with a positive histogram and stacked exponential moving averages. This is nested inside of the bullish weekly squeeze. With this trio of catalysts out of our way, it’s time to see if the indexes can finally start firing squeezes to the upside next week.

Should the markets rally into January from here, “everything” will likely rally with it. As always, we want to focus on the cleanest setups possible. From our scan results, following are charts of some of the setups we believe are poised for solid moves higher – if the markets get to ripping higher.

 

1. SMH

 

 

2. F

 

 

3. QCOM

 

 

4. ON

 

 

5. GOOGL

 

 

6. AMZN

 

 

Stay Focused!

 

 

This week has been the champion’s owl of economic events. Our focal point has revolved around understanding these events, how they impact the market, and how to thrive in this market.

The essence of “quad-witching” – expiration of equity and index options along with futures – is to keep the market in place. When the market pops (or drops) quad-witching brings the market back to the mean.

A big level we’re focusing on during quad-witching is point of control (POC) because of its connection to liquidity. POC is the biggest level of liquidity, and we can expect price to move back and forth to these major liquidity zones during quad-witching. This is why we’ve seen the S&P 500 (ES) continue to retest its POC at $4,685.

After quad-witching ends tomorrow, we can turn our focus to the 2-day squeeze starting to form on the ES. We plan to use this squeeze as a compass for whether the Santa Rally will occur and send the market higher or squeeze to the downside.

Stay Focused!

 

 

We have a stacked week of significant events that could prove more difficult to trade than usual. It’s important to understand what these events are and when they are occurring so we understand price action better and stay out of trouble.

Here are the upcoming economic events we’re anticipating this week:

Wednesday, Dec. 15:

• Retail sales
• 1 p.m. Central Federal Open Market Committee (FOMC) meeting with Chairman Powell press conference

Friday, Dec.17:

• Quad-witching: Expiration of equity and index options along with futures
• Option Expiration (OPEX)
• S&P 500 Indexes rebalancing
• Nasdaq 100 rebalancing

Traders who aren’t aware of these events will have more skewed expectations of the market, especially with anticipation of the Santa Rally. By being aware of market events we are more ahead of the game and can prepare for opportunities.

Protect your account, stay patient, and size down until normal price action comes back (when we’ll be ready to attack hard). 

Here is our focused list:

GOOGL — Started the week with a reversion to the mean at the daily 21 simple moving average (SMA). GOOGL has a weekly squeeze with a gap to fill from $2,904 to $2,877, the bottom being the 30-day SMA. See if GOOGL can hold the daily mean and head toward last week’s numbers in the $2,980 range for a dip buy opportunity. If it moves to the downside, look for it to fill the gap and hit point of control (POC) at $2,863.

NVDA — Closed down 6.7% on Monday. If NVDA breaks the key level at $280, look for it to move to $271 toward the Ichimoku Cloud. We could see a bounce from $280 to $288 up to $300. Keep an eye on the semiconductor index (SMH) to understand if its overall sector could boost NVDA higher or add pressure to the downside.

SHOP — Dropped to the 200-day SMA on Monday. If we revisit the $1,380 area, we could see a decent dip buy opportunity. Look for it to work its way back toward $1,500.

TSLA — Has a gap to fill on the downside from $944 to $910. If TSLA can’t bounce at these levels, look for it to get to POC at $1,017 and revert to the mean from there. 

Stay Focused!

 

 

The bulls regained some control last week, as the S&P 500 (ES) and QQQ (NQ) traded above the 21 exponential moving average (EMA), in a bullish daily and weekly squeeze, and with stacked EMA’s and green 10x bars. This push in the indexes could lead the market to brand new all-time highs. 

Heading into the week, watch the 4-hour squeezes in the ES and NQ which could set the tempo for a big move. Keep in mind we have monthly expiration and the final Fed meeting of the year, which could lead to back-and-forth action in the short-term.

In today’s video, we’ll review clean setups that we’re looking to add exposure to, as well as scenarios that need to happen before we can take action on certain names.

Stay Focused!