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Josh, when you’re looking at futures, options or cryptos charts, do you look at them differently or do you look at them the same?
So Josh behind the camera is asking the question, when we look at a chart, and we like looking at Japanese [Keioso 00:00:30] charts, do we change our approach if it’s stocks, options, futures, Forex, cryptos? The answer is no because, in my opinion… Everyone has different opinions. This is just my opinion. My opinion, that chart is a chart. Our approach of looking at a monthly timeframe for direction, daily timeframe for high price, low price, one hour timeframe for zones, and then using a strategy to basically enter and exit the markets based upon the first three criteria and based upon kind of experience we want, that’s exactly the same regardless of what the chart is. If we have the data and we have the history and we have the candlesticks, we can run our methodology.
Now what’s different is how you enter into the markets and how you manage risk realistically between. So an example would be if someone were to trade a stock or an ETF, and they were to buy the share outright, they have limited risk, right? So they buy outright. Worst-case scenario, a stock or ETF goes to zero, and if it goes to zero, then they lose their investment. But you can also use stops along the way to exit early to minimize the drawdown. But, realistically, you probably are more going after like smaller percentage points. If you’re just going to trade the stock or ETF outright, you’re not looking for big gains or big losses, if you’re looking for the short-term moves, unless you trade penny stocks. And if you trade penny stocks, it’s a different animal.
If you trade options, there’s only so many stocks or ETFs that are truly optionable to where it’s really make it worth your while, because you still got, you still have to monitor the bid and the ask, the time decay. You still have to monitor the volatility of the market, because if you enter into an option and there’s no volatility, it’s challenging to get out of the option. That just means there’s not enough buyers and sellers for you to like exit or even get in sometimes. Doesn’t make sense if the spread is so large and you’re just trying to trade options for the purpose of making money on the increase of the premium. Options, you can buy options, and you can sell options. Those are different ways of managing risk.
What else? Futures. Futures, you have to manage the margin requirements. There’s enter day margin, which is like smaller investments during normal activities. And then you have a maintenance margin or initial margin, which are outside of normal activities, normally like nighttime trading, basically larger investment requirements. But instead of futures is very much like Forex where wherever you invest is not your risk, you get assigned a tick value or a pip value, depending on your market. And you’re managing the actual movement of the market first, and that’s your risk, which is a little bit different. We have other videos that kind of go into a little bit more detail with that.
Cryptos is very much like stocks and options where whatever you invest is your risk, and that’s what you basically will lose unless you exit out of it yourself. But at the end of the day, a chart’s a chart. That’s our big belief. We believe that you’re going to approach a stock chart the same way as a crypto chart, the same way as a ETF chart, same way as a futures chart, same way as a Forex chart, doesn’t really matter. Chart’s a chart and your strategy, which is designed to really do five things. So a strategy will help you find your direction, your entries, your stops, your limits, and ideally your risk management. But your risk management really comes into play on how you manage the risk and how you manage risk is kind of different than how you manage stocks, options, futures, cryptos, Forex.
So long story short, no, we don’t look at it different. But depending on the assets you’re investing in, depending on the realm you’re investing in, you’re going to have to really understand how to manage the risk. Otherwise you can kind of get into trouble.
So, hope that answers your question. Josh Martinez.
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