optionsday-tradingbeginner

One word before the open: up, down or sideways.

To decide calls or puts, read direction on a chart several steps above your entry chart, before the open. Up means calls, down means puts, and sideways means smaller or nothing. Choosing on the entry chart is how you end up buying calls into an hourly downtrend.

How do you decide between calls or puts?

You decide calls or puts on the direction chart, before you open the chart you enter on. If that higher chart is trending up, you look for calls. If it's trending down, you look for puts.

The usual mistake runs the other way. You open a 5-minute chart, see three green candles and buy calls. Meanwhile the hourly chart has been making lower highs all week. The 5-minute bounce was a pullback inside a downtrend, and your calls bought the top of it.

Short-dated options make this expensive. Time decay punishes being late and being wrong alike. Fight the bigger trend and you need a fast move against it. You pay decay the whole time you wait.

So the call-or-put question gets answered first, on its own chart, before any entry is on the table.

Give each chart one job

Use three charts side by side in one layout. The top chart answers direction only: up, down or sideways. The middle chart checks structure, meaning whether the highs and lows agree with that direction. The bottom chart times the entry and nothing else.

Pick a direction chart several steps above your entry chart. An hourly direction chart pairs with 5-minute entries. A 4-hour direction chart pairs with 15-minute entries. Avoid reading direction off the hourly while entering on the 1-minute. The gap is too wide, and normal noise will shake you out.

Up means higher highs and higher lows on the top chart. Down means lower highs and lower lows. Neither has a fixed numeric test, so it's a judgment call. Make it the same way every day.

Once the top chart has spoken, it acts as a veto. You don't trade against it.

Write the answer down before the open

Decide direction the evening before or first thing in the morning, while no candles are moving. Write one word per symbol in your plan: up, down or sideways.

That word is your side for the day. Up means you only look for calls. Down means you only look for puts. When the market opens and a sharp 5-minute candle pulls at you, the written word settles the argument.

This also removes a common trap. Without a written direction, every bounce looks like a reversal and every dip looks like a breakdown. You end up flipping sides, buying calls at the top and puts at the bottom of the same range.

The word can change. If the top chart closes a candle that breaks its structure, rewrite it. Make that change on a top chart close. Noise on the entry chart never counts.

What if the higher chart is sideways?

A sideways top chart means no clear side, so you trade smaller or not at all. For option buyers, sitting out is often the better trade.

In a range, breakouts fail more easily and price wanders between edges. Every wasted hour costs you premium. Calls and puts both lose value while price goes nowhere.

If you do trade a sideways day, keep to the edges of the range. Buy calls only near the bottom edge if it holds, and puts only near the top edge if it rejects. Use a fraction of your normal size. Treat the middle of the range as a place to do nothing.

There's a stricter version some traders follow. They only trade when all three charts agree, and they stand aside otherwise. You'll take fewer trades that way. Either way, the minimum is the veto: don't trade against the top chart.

Once direction is set, the chart picks the strike

With the side chosen, the levels on your map decide the strike. Buy the strike where price is heading, at or near the nearest level ahead of you. Don't buy one because it's cheap.

A cheap far-out strike only makes sense when the map shows open air all the way out. If a resistance zone sits halfway there, price has to break it before your strike matters.

Expiry decides how much patience you can afford. Same-day contracts give you little room. A useful rule for them: no breakout within five candles of your entry timeframe means you get out. Decay keeps eating the premium. Next-day contracts let you hold calmly through a slow morning.

Every trade still needs a stop and a target from the chart. The target should pay at least twice what the stop risks.

Your pre-open direction check

Run this once per symbol before the bell, with the entry chart closed. It takes about two minutes and decides your side for the whole day. Keep the written word where you'll see it during the session.

  • Open the direction chart several steps above your entry chart.
  • Read the last swing highs and lows on it.
  • Write up, down or sideways next to the symbol.
  • Check the middle chart for highs and lows that agree.
  • Choose calls for up and puts for down.
  • Cut size or skip the symbol if sideways.
  • Mark the nearest level ahead of price as the strike area.
  • Pick the expiry that fits the patience you can afford.
  • Change the word only on a top chart candle close.

Frequently asked questions

Read direction on a chart several steps above your entry chart. Up means calls, down means puts, and sideways means smaller size or no trade.

Usually neither. If you trade, use small size near the range edges. Both lose value while price goes nowhere.

Pick one several steps above your entry chart. The hourly suits 5-minute entries, and the 4-hour suits 15-minute entries.

Check direction against the Morning Map

Before the open, the Morning Map draws the model's SPY, QQQ and IWM zones on a TradingView chart. It's free on the web and as an 8:40 ET email. Read it next to your own direction word and see whether the two agree.

Every trading morning at 8:40 ET our model draws the SPY, QQQ and IWM zones it expects to matter, on a TradingView chart, before the open. Where price reaches one, it has turned 74 percent of the time. Free, no account. See today's map