Replace Your Income with Options Unpacking the Broadening Formation with Expert Guest, Rob Smith, Ep 107
Rob Smith is a trading mentor and the Director of Research and Trading Operations for Smith’s In The Black LLC at www.SepiaGroup.com. He’s been engaged in the markets since the young age of 15. In this episode of How To Trade It, Casey talks candidly with Rob about the Broadening Formation and his famous creation, The Strat. You don’t want to miss it!
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You’ll want to hear this episode if you are interested in…
- [01:10] Trading is a two-person job
- [05:50] Magnitude
- [12:50] Sideways 30 Pattern
- [16:52] The Strat!!!
- [20:35] When to get in
- [25:54] The learning curve
- [31:23] How long to stay in a trade
Magnitude
Magnitude is the idea of knowing how far an expected move will go and WHY. Once you understand the concept that there are only three possible options, you will begin to maximize your success. At The Sepia Group we look at Time-Frame Continuity, instead of the usual Moving Averages because we believe that price doesn’t actually “move”, it aggregates. So, for every buyer there must be a seller, and vice versa. Ultimately, understanding magnitude allows you to stay in trades a lot longer.
Sideways 30 Pattern
When Rob runs a scan, he wants to see how many things are taking out yesterday’s highs and yesterday’s lows. He looks at weekly and monthly time frames, in addition to the typical daily time frames. All of his software updates at the top and bottom of the hour (every 30 minutes). If you can learn to train your brain to see the same data at the :15 and :45 minute marks, you essentially double your signals. This approach is identifying participants by both price and time.
The Strat
Rob had been looking at charts for 20+ years and was trying to find a commonality to price action. On a discernibly good Fed news day back in 2009, he began to question why the markets responded the way that they did. If the news is good, the market should just explode, right? Well, it did initially, then tanked before it shot straight up again. And that’s when he discovered that the broadening formation isn’t nearly as rare as he had once thought. Voila, the Strat was born!
Resources & People Mentioned
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