In the Digital Options Trading Plan there is a tiny formula that shows the possible movement in both directions of the share price being followed.
This is not guaranteed in any way. It simply shows that if a share is travelling well and you know the direction (trend) it is travelling, how far it might travel in the next trading week.
As this changes every day it is an extra guide that is handy when:
Deciding if a share is 'sufficient distance' to have the potential to be a trade, or if it is moving sideways and there is likely to be insufficient movement to justify a trade.
Just a little something extra.
And handy for real share traders who want a glimpse of the 'possible future' on the next trading day or the next trading week.
The formula is a guide. It is not a system. It works on a daily basis. It also works on a weekly or monthly basis. By weekly I mean five day week which is a trading week.
To benefit from it you need to know the trend and isolate whether the upward portion of the formula prediction is most likely to be correct, or if the downward portion is most likely to be correct.
The formula is very simple. No one knows why it works, but it works more times than it does not.
No guarantee is given. Like all formulas it is not 100% guaranteed. Understand that the results are empirical. Never guaranteed to be exact. Subject, shall we say to 'trial and error' if you are a pessimist, or 'trial and success' if you are an optimist.
The formula can be favourably used by option players as a small extra indicator and used always when trading in the directional trend of the market, share or commodity you are looking at.
If the predictions are very small in both directions the formula is indicating a sideways market.
If the predictions are very large, and you know the anticipated direction of the trade, you can foresee a movement over the next 5 days that may fit in with the overall trend and other indicators you are looking at.
I first used it when trading commodities. Using it as a simple back up opinion.
It can be used to predict the FTSE or the DOW or S & P.
The five day (trading week) version of the formula takes only moments to calculate.
I'll send lesson eight tomorrow.
Great Trading.
Dean Roberts.
Next Page - Lesson 8 - Questions and Answers
