In this exciting webinar with professional trader Chris from Spartan Trading, learn how he uses Benzinga Pro News Alerts to make sound trading decisions that match his trading strategy.
Chris began trading his first year at university as a student studying finance. From there, through trial and error, became the professional trader he is today. Find out Chris’s strategies for trading using help from Benzinga Pro News Alerts.
Chris’s Number One Rule for Profitable Trading
Chris is a huge advocate for creating a risk/reward plan. In order to be a successful trader, he says the two most important things to keep consistent in your strategy is your setup and risk/reward plan. He lives by a “3:1” risk/reward ratio. This important ratio mathematically suggests that as a trader you can be wrong more than 50% of the time and still be profitable.
During the webinar he goes over his excel template for risk/reward, which he emphasizes every trader should have. As a trader, you should have some sort of calculator and implement that into your rules of trading. The template basically portrays that at five trades per day the only variable being changed is risk, while everything else is random probability. Further, at Chris’s rule of thumb, 3:1 ratio you’ll have high profitability whereas at 1:1 you’ll have low profitability.
Although risk/reward is important to strategize as a trader overall, it’s very important when trading options. When analyzing risk/reward from this perspective, remember to look at the underlying stock and whether or not the contract has enough room to meet your goal in terms of your risk/reward ratio.
It’s also important to know how important risk control is. Know when something isn’t working and get out, and know what you’re trying to make per position and where your stop is going to be. The only time Chris says he’ll let a contract go to zero is on days he calls “Lotto Fridays.” Then, he’ll risk the entire amount going into the contract. On these expiration days, it is the only time he’ll do so because of how much volatility there is. Generally, he’ll use the hard stop approach where he manually sets a stop in the broker.
Using the Risk/Reward Tactic with Benzinga Pro News
The two main functions Chris uses while using Benzinga Pro News are Option Sweeps and Benzinga Wire.
A highlight of Benzinga Wire that Chris likes is that he is notified of market news when there is an explanation of why it’s moving. This is important to know so you can figure out whether or not that trade will fit into your strategy. Additionally, traders can chat with the Newsdesk to get even more in-depth explanations on why things are moving. It’s a quick and easy way to see what is currently moving as well as what has moved in the past.
Overall, Chris says the benefit of using Benzinga Pro News Alerts for positioning yourself in a profitable direction is to weed out what’s actionable and what is not.
What To Look When Reviewing Benzinga Wire News Alerts
- Revenue Changes: The biggest question to ask yourself is “Does this change the amount of revenue the company will be making in the future?” The stock price is a reflection of the future value of the company and should be considered when reviewing your risk/reward plan. These revenue changes can bring about mergers, buyouts, and contracts. Chris says that contracts that are large in regard to the market cap will move stock while those that are small will do the opposite. It’s also important to review earnings guidance. Chris notes to look towards the future when earnings come out on a stock.
- Notable Catalysts: This is mostly in terms of Biotech stocks and specifically references Pfizer. When looking at similar stocks, consider how many products they have in their pipeline. The fewer products in their pipeline the more the news will affect their stock price. The news will indicate how close that product is going to trial and where it’s at in the development process.
- Short Seller Notes: These reports have been something Chris has been keeping an eye on to know when stocks are going to move.
- Big Analyst Upgrades: When news comes out on top-tier companies with huge price targets that are far away from the stock it might be notable to look at. In regards to smaller companies, they may be gimmicks to get you to read their news versus noteworthy market news. A tip Chris suggests for finding top tier analysts with moving stocks is to determine the size of the firm and how much power they have behind them. To measure the size of a firm it can be referenced by market cap.
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