 Hey everybody, this is Hari Swaminathan from optiontiger.com and I'm continuing the video series on the SPX intraday tick trading, tick trading algorithm as well as the custom RSI indicator. In this video I want to make a trading plan for making about a thousand dollars a day from one to two trades $1,000 a day and so what are the parameters of the account size? What are the parameters of the trade the delta of the options the expiry and all those kinds of details I want to cover in this video. In yesterday's video we looked at the rules and guidelines for trading the ticks and the custom RSI indicators. So I just want to do a very brief recap. First of all you want to let the ticks develop for one hour unless there is strong momentum at the open in which case it's a momentum trade rather than a ticks trade. Then after the one hour you want to see the sentiment of the SPX. If this SPX is between minus 5 and plus 5 then it's considered a neutral market environment because the average true range of the SPX for any given day is 15 or slightly even higher. Then you want to align your calls or puts with the market sentiment which means if it's bullish you go for the calls, if it's bearish you go for the puts and then if the ES is bullish and the ticks are more than zero and increasing and the custom RSI is in the bullish zone then you want to go in for calls. If the ES is bearish the ticks are less than zero and it's decreasing and the custom RSI is in the bearish zone then you want to go in for puts. Anytime you go in for a trade you want to look for some persistence of at least two dots on a five minute chart. If the ticks and the custom RSI are not in sync there is no trade. You take profits if the custom RSI starts turning around or the ticks start to go the other way and finally you do want to step down to the one minute chart every now and then to get a finer view of what is going on whenever needed but then you want to revert back to a five minute chart for trading decisions. So now let's look at a trading plan for the ticks and the custom RSI indicators. Once again the objective is that we want to make about a thousand dollars a day over one to two trades. So now we are looking at the SPX options but you can trade the spider also or you can trade the ES futures or the options on the ES as well. So the first thing is what expiry do we choose? You can choose the same day expiry also if it's in the morning session or you can choose the next two day expiry. Now as we know the SPX has multiple expiries during the week so you don't want to spend too much on the options so you want to get to a nearby expiry then you want to choose anything between a 35 to a 45 delta whether it's call or puts. The trade plan assumes an account size of 30k and the 30k number avoids the pattern day trader rules which apply at the $25,000 level. If you assume a five contract position and you can start until you're comfortable you can start with two contracts or three contracts and once you're comfortable you can assume a five contract position and we're also going to assume a five to seven point move on the SPX which is generally what I found once you get the right signal I think you can write it for about a five to seven point. Now it might not happen every time but you can assume a five to seven point move on the S&P and we'll put a stop loss at 25%. So now we're going to go into the platform and look at the option prices the expires and all of that and I'll explain all of this again but you're going to have a stop loss at 25% and if it goes down 25% you just need to close the position and in the long run this strategy will work out well the numbers will work out. Finally there are no adjustments and there's no carrying the trade overnight we're going to close the position either it's a winner or we take a stop loss and we get out so we're going to close the position there's no adjustments involved. So let's now go into the trading platform and apply all these parameters and see what a trading plan will look like and what kind of results we can expect. So in terms of a trading plan this is what we are looking at we are looking at the SPX options and as it turns out there's an expiry of two days you can go for the one day or the two days but don't go for more than that we do have expires through the week and so you shouldn't ever have to go more than two days. So if we open up the two days and let's assume we're going for a call position if you look at the deltas we have a 32 delta and a 44 delta so I would say you know strictly we don't have the 35 to ideally it would be a 35 to 40 delta all right so let's just choose the 44 delta because if the SMP moves five points then this would become a 50 delta and that would be the ideal time to take this trade off but you don't have to go for a 44 delta you can go for a 40 delta as well. So here we are we're taking a five contract position it's going for about 580 actually 560 if you look at the mid price but let's just say 580 so for five contracts that's going to be about 2900 dollar investment so now remember we have a 30k account one trade is going to take up about 2900 dollars now as I said when you first start trading you keep these contracts to one two or not even three just one or two contracts because you want to get the dynamics of catching the trade right and exiting properly and so once you've got that experience then you can move up to a five contract position and so this five contract position will cost us let's say 3000 dollars and so now if this SPX which is at 2976 and I said we can expect a move of anywhere from five to seven points so I'm going to simulate here you can see this gearbox here if you click it you this is the simulation window for the SMP and so from 2976 let's say it goes up to 2983 and you can see the profits developing 1039 so that's about seven points let's do 2982 and you can see that's about 748 to take off the simulation all you have to do is click this lock here and it goes back to 2976 you can see that we start with a delta of 212 so for every dollar we are going up 212 but then the gamma factor adds in so if we move up to 2982 our delta then becomes 284 so as you can see the delta is also increasing as long as the position is working out in your favor so this would result in about 750 profit so that's it I mean once you get that move and if you see the indicators changing direction then you want to get out of the train now if the if it doesn't work out in your favor because that can happen too even though you get the signal you got two or three green dots and suddenly a red dot or two red dot start appearing and the customer side turns around and if that happens then what you want to do is if you look at 20 25 percent of your trade that would be about 600 dollars I would say in this case if you look at it as a 6000 a $3000 trade 20% loss would be 600 so you take off the you take it off at 20% to 25% that's it you just let go and then you know once you have a trade a bad trade like that just take a break don't don't try to get back in the market right away and try to do a revenge trade you know that never works it's better to just go out and get a coffee or you know read a newspaper or something like that the strength of the signals are very powerful and so you're going to get seven or eight winning signals out of ten the two that might not work out you know it may take some time for it to play out or worst case scenario you take a 20% loss and you get out the goal is that we don't have out of ten trades that we don't have more than two losers like that so you can see the numbers will automatically work out if you can get seven or eight winners and just a couple of losers there and so that's the name of the game we want to make it a numbers game and we don't want to take the trade into the next day we don't want to do any adjustments but in this strategy there's no point in doing all of that if if the trade goes south just get out with a 20% stop loss because we are going to be making a lot more successful trades because the signals are going to work out 75 to 80% of the time so that's the trading plan for making about a thousand dollars a day and and like I said you want to keep your trades to no more than one or two now of course the market might present more opportunities on any given day the market might also present less opportunities maybe just one trade a day and sometimes they may not be a trade at all and so that's okay but if the market will do what it does from our side we don't want to over trade because the moment you start over trading that's when all the problems begin and but in general I I feel that there will be a trade opportunity in the morning session and there will be a trading opportunity in the afternoon session so you want to take advantage of these two opportunities and make the numbers game work for you thank you