published on August 2, 2020

hey folks how we doing out there doc steverson with you here ready set trade doing a ready set live session we haven't done this now for

What is it two or three months and uh for those of you paying attention you may notice a little bit of a different background in the back here move to a different place so

New brick in the background all right how's everybody doing out there today is wednesday the 22nd of july and we thought we'd do something a little bit different today so let's get right into it

And we'll be in and out of here maybe half an hour or so so hello everybody welcome to ready set trade this is our ready set live session so what i'm gonna do is give you guys

Five points and then the trade of the day hey rajith good to see you guys okay so welcome to our live trade at the day session we plan to do this on a weekly basis so this is going to be

A little bit different for those of you that are wondering just where the heck mav is he's in the chat room so if you want to say hi reach out to mavs say hello tell him you miss him

Okay if you want to be notified on these things when we do them next week make sure you hit the notify bell so that you are aware of things all right today's session what are we going to do

Today i've got a number of topics that i want to cover for you first before we get to the trade of the day first of all the market does not care about your logic it does not and then we're going to talk about the

Psychology of runaway markets which we have how the institutions are driving asset prices today how the price is moving in today's market and how to capture

This edge what is the crypto market doing and then we'll get to the trade of the day again i'm going to move through this pretty quickly if you guys have any questions

I will cover those at the end of today's session so for those of you that want to split you can take off or watch a replay later on and by the way for those of you watching

This on a replay hello want to pretend like you're here with me welcome aboard all right number one the market does not care about your logic doesn't care about you doesn't

Care what you think many traders come to the markets from a technical background so for those of you out there that are coders or engineers or attorneys or some type of

Accountant somewhere where you're using a heck of a lot of your left brain go ahead and raise your hand and admit it so many many of us come from a technical background i had an

Engineering background and in these types of careers you're going to be rewarded for your application of linear logic your ability to put little things in the right correct boxes and to make everything

You know create order out of chaos one plus one equals two right so technical analysis will come easily to you oh this makes sense it's nice patterns here and

You understand the difference between divergences and rsis and moving averages and crossovers and it's just like mastering a new gaming interface right it's it all comes very easily to you

Here's the problem though you're assuming that markets behave in the same linear manner and you're shocked to find that markets don't behave rationally so i just here's a little facebook

Exchange yeah i'm probably showing my age that i admit that i'm actually on facebook but i can't figure out why in the world these markets would be around at or above all-time highs in the global

Pandemic the country was closed for months businesses are closing do people just not see it one plus one equals two right and i'm sure many of you are

Having the same question like wait a minute this doesn't add up this must be market manipulation or some other nefarious evil thing like jay powell is pushing the market higher

It doesn't make sense right this is not linear logic it's supposed to be selling off right now and it's not we're up near all-time highs and people can't understand

What the hell's going on and you're not alone if you have this question there we go the market however does not care about your impeccably constructed linear logical argument you can put this together

You can put a qed at the end of it and say i have provided all the due diligence and i know exactly what's going to happen later on and the market will just laugh at you and just keep moving

In fact it will probably do exactly the opposite of what you expect why for dozens of different reasons that quite honestly have taken me way too long to figure out through a lot of hard lessons a lot

Of losses a lot of embarrassment right you learn from these you move past it you get on i don't want you guys to have to repeat the same i'd love it if you could like instantly

Grock what i'm talking about here but here's here's a couple that i'll give you to start with first of all the mass the market is a massive discounting mechanism the news that you're trading on today

That you think you know hey look at the news the news is good the must be going up and it's available to literally everyone has already been priced into the asset long long ago

It's already old news you're trading on the news that the market already has priced into the asset long ago and here's another one price moves towards the fear now you may not understand exactly what

I'm talking about here perhaps somewhere down the road you'll see something you'll hear something and you'll put two and two together and you go oh that's what doc was talking about okay so when you're ready you'll

Understand what this movement or the statement means but price moves towards the fear price moves because of emotions either fear missing out fear of loss forget about greed

Everybody says no it's ruled by two emotions fear and greed forget about greed greed is nowhere near as powerful as fear fear of missing out drives markets much higher

Fear of loss drives the bears to cover which pushes mark attire if we flip around in the opposite direction the beer the bears don't get greedy with that it's fear right fear of missing out this is where

The bears always enter too late after getting it wrong for years and years they enter down at the bottom of the move and of course fear of loss is where

Everybody pukes out at the bottom so forget about greed understand how fear rolls the markets so my point here is to forget about your linear assumptions markets behavior rationally i've been trying to coach

People through this for the last 15 years everybody comes to me like hey you know let me give you my background i was involved in this lbo and i've ran this company and i've done this stuff i'm like congratulations

That doesn't mean anything about trading the market it means absolutely nothing so none of your background has any use when it comes to understanding the emotions and the weirdness that

Comes with understanding the market so maybe you'll for maybe you'll remember this somewhere down the road but forget about trying to apply linear logic when it comes to understanding the market the market behaves

Irrationally because it's traded by millions of human beings or bots that were programmed by human beings and humans are irrational when it comes to managing

Risk whoever heard of somebody that was cool in the face of fire right oh he's cool he's ice cold in the face of like nobody right everybody freaks out when it's your money at risk

And you will invariably do the wrong thing don't worry about it it's human everybody seems to be stamped out of the same mold all right got it number two let's talk about the psychology of

Runaway markets and when i talk about runaway markets i'm talking about you know markets that are just doing this and once again we try to apply our linear logic towards runaway markets and we fail market tops

I will say this market tops are way way harder to analyze the market bottoms i can handle market bottoms and i can get involved in market bottoms because bottoms are an event

Tops are a process bottoms are an event tops are a process right so when it comes to market tops understanding where this thing is going to stop i mean this this one here in the end of 2019

Early 2020 it went on and on and on and it didn't seem to want to ever stop the next thing you know it's puking its guts out that was your last chance to get off the roller coaster before everything

Fell to pieces that was coincidentally the week the very week that we started ready to trade what a great timing it was on our behalf actually it was good though because

We've we've actually done really well during this period we've done really really well and that's because of the things that i'm talking to you guys about that have taken me years to figure out

Market tops who knows where this thing is going to end up i'm not sitting here trying to determine when this is going to die i'm not shorting it into the highs or anything like that

A lot of you are psychologists have determined that the pain of missing out on a big rally is far more intense so you see this market just going higher and higher higher i don't care what it

Is what stock it is or crypto or or futures contract or you know forex pair anything doesn't matter you'll sit on the sideline you've missed it and the pain of watching something

Run away without you is so intense that nothing compares to it it's much more intense than actually just taking a loss you take a loss you're like oh well

Stopped out shoot i hate that you know so you beat yourself up for a little while you get over it but sitting on the sideline watching something every day it's going higher

It's going higher every single day you will drive yourself crazy with this and you have to be very careful not to chase after these things and this is why traders they cannot help

Themselves by jumping out at the top so if you jumped on at the top whether or not it was the top of the market back in you know early 2020 or if you want to go back to 2017 with the crypto market doesn't

Matter it's in your dna you can't help it this is something you have to work on an equally dangerous reaction and to me this is even more dangerous is those that

They sit on the sideline and they got not only do they get anxious about missing the move then they get vindictive about it right so for those of you shorting into the highs raise your hands

Go ahead and admit it this these are people that want to punish the market well i'll show them you know i i missed out on this whole move so i'm gonna i hate elon musk and i'm gonna i'm gonna show him i'm gonna pound this

Thing down into into the dirt and they short the markets and then they wonder why they get their asses kicked because again this is just a different reaction these people are a little bit more

Vindictive than the people that are chasing after the fomo you know and perhaps they think that they're being more of a well i'm i'm a bear i'm a more sophisticated traitor well

You're more sophisticated in terms of how you're getting your ass kicked and that's about it so don't trade a market don't short a market that's going higher wait until it starts to drop or wait

Until it sets up with a lower high and a lower low and starts to give signals that you know maybe even divergent signals things like that so be smart about how you do this

Again the linear logic is pulled out of the holster by these bears this is unsustainable it must go down i mean you could probably find any number of subreddits and

Discord channels and everything out there from people that are getting their butts kicked because they're getting run over and they're using all the linear logic in the world and then they

Start to get betrayed and then they start to get angry about it and it's not making you any money guys it's not making any money you know like bruce lee really said it best be like water

You know just go with the flow which way is the market going don't give any judgment to whether or not it belongs up there that's not your job your job is just simply to go in line with where the

Price is going not to give judgment on whether the price belongs up there in the first place who cares nobody cares what you think about your linear logic

Versus the price value of that okay you can yell into the wilderness and nobody will hear you the market does not care it will move towards the pain and that might be you if you're trying

To teach the price a lesson i can't read that comment number three how is the overall market moving what's it doing right now what's the signature of this

I want to make two points here that will help you if you can apply them number one point here is that assets have been booking the majority of their gains in the aftermarket or pre-market which is for those of you

In crypto it's probably a foreign concept that the market would ever shut but yes it does in the in the equities markets it it will follow the sun

It will open and close the various parts of the world and it will follow the sun in doing so so extended hours is basically any time that the cash market is shut in the united states the cash market is

Open from 9 30 in the morning until approximately four o'clock in the afternoon eastern time six and a half hours and the rest of the time is considered extended hours

And so what you're seeing is the blue line here or let's compare this versus the gray line the gray line is regular hours market hasn't gone anywhere and the regular trading hours

So gains and losses have been offset but all the gains have been coming in the after hours extended hours not during the cash market so what does that tell you

This means if you're trying to time a breakout trade you're going to lose most your edge chasing the move and this will give us another edge and as we'll see in a minute

The second point i want to make here is that big institutional players are chasing momentum plays this is the the thing that i noticed in 2017 and beyond is it seemed to be that everybody was

You know a buffett player before that the buffett player means waiting in the pullback waiting for people to be puking their guts out and then they would stand in line and buy with both hands

And that's when markets were generally a bit more volatile i guess you'd say a bit more sideways and since really the fed has put the hammer down been printing money like crazy there's

No shortage of money out there there has never been a shortage of money since we started turning the spigots on in 2008 so that's 12 straight years of turning the spigots on

There's money everywhere and now it's literally free to borrow for those institutions that can get their hands on it this means accumulating assets in the exact

Opposite way that was taught by buffett buying as the price goes higher this is more of a jesse livermore type of thing so retail is sitting there that was trained by buffett and holds everybody holds buffett on you know a picture of

The wall uh warren what would warren do retail's waiting on this pullback and getting pissed off because it's overbought and it keeps on moving and that goes back to the first couple of points that

I was making about this market is that now people are getting angry now people are getting you know so trying to punish the market so this is all kind of wrapped up into the same thing

So overnight moves locking out retail everyone waiting on the pullback while it continues higher this is how assets are moving today so you can't trade the type of market that you want only that

The one that you have so for a lot of you that you're like well this used to work all right well it doesn't work now and this is your job is you have to figure out what

The market is giving you so what are some of the ways that we can take advantage of this movement the current character of the market if that round peg is going to fit into that round hole

What can we do with that using options allows us to design trades that you simply can't do with stocks so stocks buy low sell high or sell high by low that's pretty much it not much you can do with that

Dividends are crap these days so with stocks it's become a very difficult game especially as expensive as things are now one of the cool things that they're

Doing with companies like robin hood is offering fractional shares i just signed up for that the other day i don't know when they're going to give that to me but i've got a little robin

Hood account to play around with and i think that's cool that's a good idea but options are so much more flexible for instance if eighty percent of the movement in the markets

As we just showed happens overnight and then during the day it just goes nowhere that 20 percent happens during the day and then the next day off it goes again what can we do to take

Advantage of this range bound behavior that's happening like around here well this is what options are great with because we can trade something to make

Money when it's range bound may not have known that so the price running in a smaller intraday range means that we can sell options against these ranges like like an insurance company

Right we can be just like an insurance company that doesn't yeah so kubsicle's saying the after hours volume is low though you're not trading the after hours volume

It can run and do whatever it wants to in the after hours but you're going to do it you're going to do so without you so look at this the s p 500 has got a couple of different tickers to it the

Spx is the big the big enchilada the spiders are one-tenth the notional value here are today's options here's friday's options here's monday here's wednesday here's next friday

So every three days you've got another option that's going to expire and turn into dust at that point so you have at least three opportunities a week because some weeks will get four and

Sometimes even five where options expire that day this is what we call zero days to expiration trades zero days to expiration trades this is what this is one example of what they

Will look like this is what's called an iron butterfly and the advantage here with the iron butterfly is that you have options that are right at the money and these ones decay

The fastest otherwise you could set up something where you can get a lot more range you can do something like this this is what's called a high probability iron condor i don't tend to like these

Though because the even though you seem to have a lot of range the reward to risk is fairly poor and it's difficult to manage okay so there's many different ways to do this we talk about this

Within there within our room we also have what's called the expected move iron condor looks kind of like this gives a little bit more range there's you know you can come up with any no any number of trades

That fits your time knowledge capital your availability to do the trade the ones where we're playing a little closer like hand-to-hand combat with a price right

There do require a little bit more time but as you'll see time can be exchanged for quicker profits right so here is a couple of trades that we took today in the room we're doing an

Experiment we're experimenting setting these things up like right at the open and this one took a little over an hour to get 100 bucks so we sell it for 1535 buy it back for 1435 capture 100

This one was 150 and this one actually took a little bit less time because it was technically entered and the entry was more accurate versus the what we call the random walk entry of this

So two different brokers e-trade versus thinkorswim they're all kind of the same really they all do the same job so we seek to create trades with limited risk and this is very important

Is that you can find very very dangerous ways to trade out there if you listen to the wrong people so we're looking for making a hundred bucks a day that's really what we're doing something consistent modest we're not out here

Going hey look at everybody we just made 15 000 today look for most people that's unsustainable right most people are not going to have the capital to do something like that

But most people have the capital and the skills and the knowledge to be able to make 100 bucks a day so that's what we look for so don't continue to pound that square peg into a round hole just because it used to work

The market is always providing opportunity for those that know what to look for it's always changing it's always changing it's stripes it's a it's a little bit of a chameleon depends you

Know look at the market that we've had over the last year we've had very different markets from month to month to month and this is the challenge is that something that you read in a book that

Was written 10 years ago is not going to necessarily work for what's out there today you have to be adaptive and flexible to trade the market whether or not you're trading crypto or the equity

Markets or whatever you have they're always changing so let's uh let's wrap up here let's talk about the crypto market for a second what is the crypto market doing um basically nothing right now it's been

Range bound for months refuses to move for the the top 10 top 20 however what it's turned into is a traders market and not an investor's market an investors market is

One where you just buy the dips and it all goes higher over time and everybody goes home happy but it's not doing that it's been in this hellacious two and a half years of sideways

Correction two and a half years of bear market so you can continue to dollar cost average if you want to if you're a committed investor and if you have a super long time frame

For holding there's nothing wrong with that but you can take what's you can pick up the change that's on the floor today if you want to that's what's happening swing trades

Are out there if you know what to look for the swing trades are consistent consistently out there and i would say just a couple of things will help you first of all buy things that are heading

Higher don't buy things that are heading lower that means you're an investor if you're a trader you're going to buy things that are heading higher you can look for certain patterns

Certain assets that are being accumulated you're looking to get in get your fair share and get out and this is an interesting one this is one of the trades of the day that we

Pointed to a little over a week ago was digitex and i just got my hands on their exchange i just got my hands on a login to their their platform and i'm gonna pretend

That i'm canadian for a few days and trial it out let you guys know perhaps next week i'll uh talk to you guys about my experience with the digitex exchange again that's meant to be free

Trading no commissions zero commission futures trading on what is uh bitcoin futures at the moment but they intend to add a lot of different assets to the program

Okay so that is our top five let's get into the trade of the day and for those of you that are already members on our discord you got this trade of the day today at 7 55 am

It was posted out there this is what i talked about was advanced micro devices being in this big base and coming up on earnings reports and so at the time i wrote this

It was 57 a share and now it is broken out and is almost at my target which i said was 63 and got there one day time rests for no man or woman

Or whatever you are right it's just it's not going to stay there right another way to trade this is if you want to use options you can use vertical spreads let me bring this over here i'm going to

Bring over just an interface of thinkorswim just to show you guys what this looks like so if you're in this case you're only risking about 43 dollars to take a long trade per

Contract 43 dollars and what this represents this odd looking graph here this obviously here's the zero line this represents a loss since you guys are good all of you

Engineers are good at the the visuals here that represents a loss and this represents a win and so you can cut your loss to 43 bucks a contract with something like this

Which is significant if you have a smaller account versus trying to buy the stock which is right now 60 some dollars a share right so this is uh if we just go over to amd on this broker interface we can see the

Amd is now up to about 62 is up it's up 8 today for those that caught the the trade of the day so this is this is how you can do this and you can trade earnings against this if

You want to if you want to go for to me earnings are more of the more of a roulette wheel than anything else i don't trade earnings typically because there's it's all

It's all a game of chance and to me trading requires skill to get the edge and in this case with earnings there's not so much edge there okay so that's our traded today but i still love

Amd this is more of a longer term base this shouldn't this should run well above 63 by the time it gets going so if you want tomorrow's trade of the day

I've got a deal for you you can have it for free all you gotta do is go to ready set dot trade slash free and just poke your email address into there and we'll set you up with a

Discord login for free into our there's no catch there's no nobody's gonna pound on you nobody's gonna knock on your door or do anything like that you're just gonna be part of our free

Discord area where we have a lot of stuff out there a lot of assets and oh by the way mav is there too you can say hi to mav he's in our discord he's the architect

He's the architect remember the matrix right the architect so just enter your email into there and uh we'll take care of that i promise not to pound you guys we will not spam you or anything like that

You're just part of our free you know and maybe someday you'll you'll join the the elite service and join the rest of us making money so so if you have any questions that's all the

Material i had we came in right at half an hour wanted to respect your time if you enjoyed this please show up next week let me know what else i can do for you guys

Or any other questions oh tracy yeah that's uh we wanted to okay that question all right i'll stick around here for see if there's any other comments or questions

Just for a minute here nice all right good to see you guys well i'll tell you what uh if you have any have any questions once you hit me up in the discord area how about that it's free doesn't cost anything all

Right okay guys um see you later adios we'll see you next week see you in the room take care everybody bye now

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