How to be a good bear (or at least not get fucked on red days)

[wasabiEatingMoonMan]

I feel like I have a reasonably good strategy for entering bullish trades, but I absolutely suck balls at playing bearishly (or even playing bullishly on days that look promising in the first few hours and end up drilling the rest of the day like today).

I would really like some input from seasoned bears (@anon59732070 et al) or just smart people in general (@Conqueror et al) on what the fuck I could improve on, as I’m sure my strategy is clearly flawed in some way that I don’t see yet. Here’s what I do almost every day when trading indices or blue-chip stocks:

• Wait for the 10:30 dip (or even if it doesn’t dip, wait till 10:30 for shit to calm down); then look for a good support level on the 1 min chart for the day
• Then look at the daily chart and see if the stock has been in an uptrend (or is looking like it’s about to reverse)
• If it’s looking like it’s in an uptrend (or has begun reversing) and has found a good support for the day, buy calls
• Get out when I hit 5-10% profit (usually around the post-lunch uptick)
• Possibly look for a second entry close to power hour (but no worries if no second entry)

If you rewind time to 10:30/11 am today, it made perfect sense to buy SPY calls: (1) found a nice support around 11 am, (2) RSI was around 30 at this time, (3) daily chart looked like its reversing into bullish territory. Like it was a very not-stupid thing to do to expect this to be a good time to buy calls, and clearly, I got absolutely ass fucked today.

My strategy has worked really well for me on green days as well as days where my hypothesis that the 10:30-11 dip was a good support for the day held true (even if the stock closed red but above that support), but there’ve been days where I’ve been obliterated like today with there seemingly being no way of expecting this to happen given my current strategy. On top of that, I held my calls way longer than I should, simply because every time it hit a support or double-bottomed with a low RSI, it would’ve made logical sense to expect a rebound (given that there was no particularly bearish news for the market as a whole today) but none of that mattered today.

What am I doing wrong and how do I fix my red-day-trading skills?

I understand that the answer to this (to some extent) is that beyond some level no one can really know what the fuck the market is going to do, but unless I can play days like this well, I won’t feel like I’m being a skilful trader and I might as well gamble.

Any help from seasoned bears is much appreciated! Even if I never end up actually getting good at playing bearishly, I’d at least love to identify (at around 10:30-11 like today) that the day’s not going to bode well for calls, which my current strategy seems to be doing a bad job at identifying.

I some day want to get good at calling out things like some of y’all heroes/legends/gods etc. do, but if I can’t manage to trade well on days like this, I feel like a complete fraud being here. All I’m trying to do is make back my IRNT losses from before I joined this server and I’ll be happy if I can just get consistent at trading (let alone make a shit load of money), and unless I can learn to trade well on days like today I’ll continue to feel like I’m completely winging this and will get dunced out of this place in no time lmao.

[anon59732070]

Do you usually do scalp type plays or are you interested in longer term bear plays

[wasabiEatingMoonMan]

I’ve lately learned to settle for scalp type plays after getting fucked around September with SPY puts (was up bigly but held too long bc PDT back when I hadn’t heard of cash accounts, and lost most of it), so I’m scared to go back to longer term plays.

I’d love to be able to do longer term plays again, but I feel like I have to get better at scalping before I can have the courage to hold positions overnight on leveraged plays?

The biggest (psychological) thing that freaks me out about longer term plays is the possibility of a double-digit percentage unrealised loss being held overnight. If I were just trading non-leveraged instruments (like when I do pre-market stock scalps sometimes), I’d have no problem setting a stop loss at around 5% and not freaking out, but I don’t think I have a good plan for how to handle stop losses with options given that small swings in the underlying can wildly affect your options.

[anon59732070]

Ok, we’ll focus on scalps then because they are by far the easiet imo. How comfortable are you with estimating support/resistance on a chart?

[wasabiEatingMoonMan]

I think I’m decent at estimating support/resistance on a chart but suck at applying this knowledge in conjunction with other stuff I’ve learnt. (One exercise I’ve been doing is to wait for JB’s PM callouts, and try to identify 1-2 levels of resistances beyond what JB has called out and see if I turn out to be right, and I’ve been doing reasonably well at this drill.)

Please correct me if any of these are wrong, but this is what I was thinking today: would I be right in saying that there was a pretty good support around 469 for SPY today around 11 am? And then around 1 pm there was a double bottom at around 467 (which was another support right?) combined with an RSI ~30, after which there was a tiny reversal, but a double top at a resistance of 469 at around 2 pm? This instance of “past supports becoming new resistances” would indicate a bearish reversal right?

(Thank you so much for doing this, btw!)

[anon59732070]

@juangomez053 @PaperhandsJB @whiplash @Joshuke these guys are all good at the scalps that I’ve seen and can weigh in when they have time as well.

What you’re talking about doing in the morning with JB is good practice.

My suggestion would be to pick one ticker and really familiarize yourself with the movements of that ticker over the course of a few weeks. For most people, including myself, the ticker of choice is spy. You want to choose something that has consistent good volume because that makes it easier to follow movement and most people feel that lends itself to more accurate TA. You seem pretty well versed in that. Historical Points of rejections is something I used a lot and I used that in the DWAC put call out today.

Always keep in mind too overall market or sector sentiment. I have watch lists by sector. If I notice a sector trending a certain way I will look for Jews or reasons why and then moa replays based off that. For instance, EV sector is prone to runs and just as violent dips. They’re all over priced, si when I called puts on EV sector this morning it was due to them all recently running for no reason and needing to come back down to earth. Couple that with spy and everything else tanking and it was a bearish day for them.

I also like to look for stocks at or near all time highs. You’ve seen me mention Ford a lot recently, Ford is very easy to track and play. Anything in ATH range is good to watch for puts because it’s not just gonna go straight up. I played calls with Ford as it was blasting up and once it found a spot to hang out most of the day, I felt comfortable grabbing a few FD puts. Ford has a ton of volume (over 100million today) and moves well, but not unpredictability wild like Tesla. I felt support would be around 25 if it got that low, and that’s when I sold my puts when it went down in power hour. Ford FDs are very cheap to play and can be good practice for spy as well as they are usually pretty correlated.

I keep spy and vix on a watchlist to monitor market movement as well, just a personal preference.

Another thing is to remember to not fight obvious or really aggressive trends. Be mindful of what a stock has been doing the past week, month, and months. I’m always far more comfortable taking puts on something that’s been in a clear down trend recently vs. something that’s been blasting on an uptrend for months. It’s all about your risk reward.

I’m big on tight stop losses. Usually 10% or tighter depending on the play. If I go green and I’m comfortable something’s headed down I will set a stop loss in the green once I reach about 10% on profit. That way if it bounces up unexpectedly I still made profit, if it keeps going down I’ll sell for higher profit. I like ITM puts or near ATM puts. If I’m comfortable with the stocks direction I’ll go a little farther OTM.

Cliff notes of this are:

1. Pick a ticker and watch it every day to learn it…pick one with good volume and options chain. Learn it’s behavior.

2. Keep track of overall market sentiment and news (think fed meetings, pandemic concers, infrastructure bill, etc)

3. Monitor trends of not only individual stocks but sectors. (space, steel, EV, covid, etc)

4. Start playing with very small positions. Like one contract at a time until you’ve established something you’re good at.

5. Learn things like double/triple tops/ bull bear flags etc.

With Bear plays you gotta be mindful of IV crush on things that violently run up. This is especially true with popular meme stocks.

I’ll try to weigh in more in this when I have time to think it over but I hope those quick points can help. Hopefully some other guys weigh in as well.

Also, check out how Kevin and the rest of the PFE gang played Pfizer through all time highs as well. Good example there.

[khalidad]

Little Bear covered a lot in that response. I would only add two or three thoughts without rereading what was posted, or I may edit my response later.

1-min timeframe is too low, imo. When in doubt, zoom out. If you’re trading indices it definitely helps to have a higher timeframe up so you have multiple points of view. I also agree with having a VIX chart up along side whatever you’re trading - I had one up today and seeing it flip back above the moving averages made it obvious to me that SPY (and QQQ) would have to dump.

For indices, looking at the futures on a four hour or daily timeframe beforehand will give you better insight into what may happen that day. They diverge slightly at certain points but the SPY and QQQs effectively follow /ES and /NQ.

Checking known market events premarket is also helpful, and having a good feel for the major weekly catalysts gives a bit of color. Some people would say the news isn’t helpful, the price action will tell you what the market thinks of the news. But today, the congressional testimony from the fed seemed to have a pretty direct effect on market movement for the day.

Finally - depending on your broker, invert the chart! It’s amazing what insights you’ll see if you flip it upside down and view it from a bullish bias if that’s how you tend to view the market.

TradingView has a chart inversion feature, and TOS, which I use, allows you to put a - in front of any ticker to see it inverted. I’m sure most of the larger brokers have a similar option.

[whiplash]

Really only been playing spy lately. Todays 460 level worked for calls beautifully. Didn’t play puts today because I did yesterday. Sometimes I pick a side sometimes play both. But watching certain levels and playing off them consistently has been working for me. Like yesterday with puts at 467 and then 465 when it broke 466.5 support I figured it would track down to 463.3 and it briefly went into the 463s before closing in 464s but the idea of watching spy’s trend and playing those levels and waiting for them to come into range or hit has been working very well. I think spy will rebound next week so am holding 470 Jan 21 calls rn.

[wasabiEatingMoonMan]

So I’m definitely going to keep all this in mind in my future trades, but there’s one main thing that I’m sort of still confused about which I think is my core issue.

Even with all these tools and techniques in place, how would one know at around the 10:30 dip like on Thursday in the example in my post, that the market will drill the rest of the day. Like I had mentioned in my original post, I had every TA-based reason to believe that that was a good entry for a nice green day, but it ended up drilling the rest of the day.

And this has happened to me multiple times where stocks/indices have drilled in a day where the 10:30-11 am dip seemed to be a nice support for an uptrend movement.

So I guess what I’m saying is, I feel like the checklist in my original post is probably inadequate if it has failed me on red days multiple times, and I’m wondering what I can change about that list to get better at not entering trades on days like Thursday (if not being able to play puts well on such days).

[anon59732070]

Sometimes those dips are overall market sentiment, news, or good government meeting related. Sometimes it’s hard to determine. One thing to keep in mind is there’s money to be made both ways. With Ford, it’s at ATH. Calls as its blasting up pay. When it levels out and comes back play puts.

Try this, start doing bear plays only on something in a very clear downtrend for a while…my suggestion would be Robinhood (HOOD) that’s a very clear downtrend on that chart and several people play it. Once you get comfortable with playing downtrends advance to something like ATH scalps like some of us having been doing with Ford.