Dan Passarelli, CEO - Market Taker Mentoring

This week has been all about methodology and specifically following what I call the MTM Trading Plan Checklist. We're going to start talking about once you've got the trade on, how do you manage it?

So we're going to talk about exiting the trade and adjusting basically solid trade management techniques. Let's take that trade that we've been talking about for the last couple of days, this NVDA spread, and we're getting ready to exit it. We look at it and we think, well, how should I exit this trade? Just hammer it out? It's a natural bid, try and middle it? Go somewhere in between?

Do I leave it on good til cancel? Now, one technique that I like to use all the time is as soon as I put on a trade, I immediately - right after that, enter good til cancel order to profit take, as well as sometimes use a stop. Now, I don't use stops with spreads because the bid ask spreads are too wide and it can be a little bit tricky.

So what I would do typically is I would enter this as GTC order confirm and send. I'm not going to actually do that because I don't actually have it straight on. And then what I would do after that is I would go and I would set an alert. So I would just simply go over here to NVDA. If I don't have it on a watch list, I would just add it to one real quick and go create alerts.

Because if the stock falls too low, right, because this is a debit call spread, if the stock falls too low, like below support level, I'm going to want to know so that I can exit the trade and take a small loss before it comes for a big one. So this is more like the risk management part of it. Whereas this order would be a profit taking order, of course, if I were just simply buying a call and it was more of a Delta Centric type trade, well, excuse me; I guess this would be selling a call that I already have on in the hypothetical example right. There what I can do is I can put in a GTC profit taking order at, say, $9.

And at the same time, I could make this OCO right here go simply create duplicate order. And instead of a limit, I would change this to a stop. I guess I'd have to pull this up, change this to a stop, and then put this down maybe like $7 or something. Again, totally hypothetical example, and then confirm and send in. Both of these orders will be in, and if one gets filled, the other one gets canceled.

So look, there's a lot of things that you can do, but the point that I want to make here is that monitoring your position stems from the reason you put the position on in the first place. Your management plan should already be in motion as soon as you make that trade. And that's why I love to use GTC orders. We'll talk more about that in some future videos down the road. But it's important to continuously monitor your position.

Stick with the plan you have and if you have to make adjustments like maybe closing one leg and leaving the other on or taking off half the position at one profit target and the other half at a more aggressive profit target there's lots you can do as long as you have a plan. Remember I said before, even a bad plan, is better than no plan. As long as you have a plan and you stick with and follow with discipline, that is the most important thing.