How You Can Trade Like a Pro by Sarah Potter

Author:Sarah Potter
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2014-02-14T16:00:00+00:00

Examples of Choosing a Spread Versus a Directional

Together we will walk through examples of trades, and I will share why I would make the decision to trade a spread versus directionally. First, take a look at Figures 5.12a and 5.12b (one day and 60-minute chart for XOM).

FIGURE 5.12a

(Source: MultiCharts.)

FIGURE 5.12b

(Source: MultiCharts.)

I would choose to trade ExxonMobile (XOM) as a spread because the 60-minute chart shows a strong downtrend, but the daily trend is not as strong. Since the daily trend is a bit of a mixed trend, I would like to limit my risk and trade a spread. Thus, if XOM pulls back a little, I can still profit from time decay and am not entirely reliant on the strong 60-minute downtrend continuing.

Figure 5.13a shows one daily chart, and Figure 5.13b for Netflix (NFLX).

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