{"id":12033,"date":"2011-06-02T15:56:21","date_gmt":"2011-06-02T19:56:21","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=12033"},"modified":"2023-04-17T15:26:24","modified_gmt":"2023-04-17T19:26:24","slug":"directional-indicators-that-are-not-too-wrong","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/directional-indicators-that-are-not-too-wrong","title":{"rendered":"Directional Indicators That are Not TOO Wrong"},"content":{"rendered":"<p><a href=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/06\/TI_GannTrendOscillator_01.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-12043\" title=\"TI_GannTrendOscillator_01\" src=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/06\/TI_GannTrendOscillator_01-300x208.png\" alt=\"\" width=\"300\" height=\"208\" srcset=\"\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/06\/TI_GannTrendOscillator_01-300x208.png 300w, \/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/06\/TI_GannTrendOscillator_01.png 576w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>One of the great things about options trading is that you can make a directional bet, be wrong, and still make excellent money on a trade. As many of my closest relatives are fond to point out how wrong I am on so many life issues, it is a comfort to know that there is a way to trade options where being wrong is not necessarily a liability.<\/p>\n<p>Yesterday I received an interesting email from one of my mentoring students reacting to one of our training videos. The video is on the subject of directional options spreads. The premise of the\u00a0 training session was that the trader <em>had<\/em> a directional bias on a particular stock and was going to use that directional bias to construct a directional credit spread.<\/p>\n<p>So for example, if you sell a put credit spread, you are betting that the stock will go either up, sideways, <strong>or even down slightly<\/strong>, to make the maximum profit on the position.<\/p>\n<p>Most people who are\u00a0 not familiar with options trading will probably think that the\u00a0 last sentence has a typo in it, but fortunately they would be incorrect about that. Credit spreads are flexible enough that the only outcome that really gives the competent options trader a challenges is where the directional prediction was<strong> way wrong<\/strong>. While we teach techniques for rectifying even these situations, an extreme enough adverse move will most likely create a loss for the directional options trader, for that particular trade.<\/p>\n<p>So my mentoring student&#8217;s question was simple: What\u00a0 are some good methods for determining a 30-60 day directional bias in the first place? There are probably thousands of answers to that simple question, and in fact our training program does not advocate any particular technique. Rather, we discuss how to structure trades\u00a0<strong>around<\/strong> the technical bias that the trader brings to the table.<\/p>\n<p>For example, I know of directional credit spread traders who will enter a\u00a0 put credit spread whose short is one standard deviation from the current market price if\u00a0 a stock makes a new 20-day high (in the case of a put credit spread). The interesting thing is that these traders don&#8217;t necessarily believe that the stock will rally particularly strongly from that point. Rather, they think that the stock is <strong>not likely<\/strong> to have a particularly strong sell-off from that price. In other words, they think that this criterion is a directional indicator that is not likely to be <em>too<\/em> wrong over a 30-day period into the future. It&#8217;s a subtle distinction, but an important one.<\/p>\n<p>What are\u00a0<em>your<\/em> favorite directional indicators? More precisely, what do you think are the technical indicators that are likely not to be <em>too<\/em> wrong over a 30-day time frame?<\/p>\n<p>Seth Freudberg<\/p>\n<p>Director,\u00a0 SMB Options Training Program<\/p>\n<p><em>The <a href=\"https:\/\/broadcast.smbtraining.com\/smboptions\">SMB Options Training Program<\/a> is a program designed for novice and intermediate level options traders who are seeking an intensive training process to learn how to trade options spreads for monthly income. For more information on this program contact Seth Freudberg: <a href=\"mailto:sfreudberg@smbcap.com\">sfreudberg@smbcap.com<\/a>.<\/em><\/p>\n<div><a href=\"http:\/\/www.cboe.com\/resources\/intro.aspx\" target=\"_blank\" rel=\"noopener\">Risk Disclaimer<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>One of the great things about options trading is that you can make a directional bet, be wrong, and still make excellent money on a trade. As many of my closest relatives are fond to point out how wrong I am on so many life issues, it is a comfort to know that there is a way to trade options &#8230; <a href=\"https:\/\/www.smbtraining.com\/blog\/directional-indicators-that-are-not-too-wrong\" class=\"more-link\">Read More<\/a><\/p>\n","protected":false},"author":741,"featured_media":12043,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,1402,1584,3],"tags":[4694,1598],"class_list":["post-12033","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general-comments-2","category-options-education","category-seth-freudbergs-blogs","category-technical_plays","tag-options-income-strategies","tag-options-strategies"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Directional Indicators That are Not TOO Wrong | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/directional-indicators-that-are-not-too-wrong\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Directional Indicators That are Not TOO Wrong | SMB Training\" \/>\n<meta property=\"og:description\" content=\"One of the great things about options trading is that you can make a directional bet, be wrong, and still make excellent money on a trade. As many of my closest relatives are fond to point out how wrong I am on so many life issues, it is a comfort to know that there is a way to trade options ... Read More\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.smbtraining.com\/blog\/directional-indicators-that-are-not-too-wrong\" \/>\n<meta property=\"og:site_name\" content=\"SMB Training Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/smbcap\/\" \/>\n<meta property=\"article:published_time\" content=\"2011-06-02T19:56:21+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-04-17T19:26:24+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/06\/TI_GannTrendOscillator_01.png\" \/>\n\t<meta property=\"og:image:width\" content=\"576\" \/>\n\t<meta property=\"og:image:height\" content=\"400\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Seth Freudberg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:site\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Seth Freudberg\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/directional-indicators-that-are-not-too-wrong#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/directional-indicators-that-are-not-too-wrong\"},\"author\":{\"name\":\"Seth Freudberg\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/b10cb321c8434e2e6899b2953e0ed471\"},\"headline\":\"Directional Indicators That are Not TOO 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