A continuation of the previous post, this one explores whether there are profitable 0DTE strategies, or if it's all just betting
2. Strategies for 0DTE
This video suggests ways to be always-in the market on options trading with the help of 200-day Bollinger Bands (BB).
If market price dips below the BB, make a Put option that predicts price will dip further. If market price rises above BB, make a Call option that predicts price will rise further.
I think the key is not to be greedy and use Trailing Stop Loss to manage risk. On the other hand, he recommends the Iron Condor approach to buy Call Options above current price, and Put Options below current price. Profits come when the price keeps within the upper and lower limit.
However, options do seem a little too gambling for me, so perhaps I will focus on more long-term growth investing like Technical Analysis or Fundamental Analysis that my friend recommended.
Scalper: 1-min / 5-min / 30-min
Swing Trader: Hourly / Daily
Bollinger Bands
Let's explore the long-term strategies in the next session, but for now, let's understand what BB is, article here
- Upper Band: prices here indicate possibility of being over-bought, and prices will drop to support levels.
- Lower Band: prices here indicate possibility of being over-sold, and prices will spike to support levels.
- Premise: Price should stay within the bands, usually.
- Slope: tells a story of the trend, whether upwards or downwards.
- Why 2 Standard Deviations? 95% of data trends fall within 2SD. Normal distribution?
Stochastic Relative Strength Index (RSI)
- Low value (<30): indicate possibility of over-sold, price will rise.
- High value (>70): indicate possibility of over-bought, price will fall.
Next Time:
- Support & Resistance
- Magnificent Seven Technical Analysis
- Fibonacci Retracement
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