In this article:

• Pro trader is aggressive, ready to go
• ‘Squeeze’ opens up small, big plays
• Stocks vs. options: who wins?

This year has been a volatile trading environment not seen by most traders.

Strategies to combat this new “wild west” in the stock market have included moving to cash, going back to school to improve trading, and simply leaving the trading world altogether. All ways to protect capital and avoid market exposure.

While these are all viable risk management strategies, each misses out on the “trader’s market” that is in play.

Volatility, despite the risk, nurtures opportunity.

John Carter, Founder of Simpler Trading and author of Mastering The Trade, has adapted to this wild market and pivoted to target opportunities the market presents.

Following is a recent podcast interview with John on Chat With Traders.

Past plays open up aggressive moves

To get to where John is today and how he is trading this market, it’s necessary to get some background in place.

John sat down with Aaron Fifield, host of the Chat With Traders podcast. Here’s a recap of how it went (listen to the full podcast here):

Chat: These days it kind of seems like nothing is out of the ordinary. When the market started to unfold, did you feel as though your experience over the 30 years has kind of been preparing you for this, or were there still doubts or unknowns or uncertainties in your mind?

John: “2020 and 2021 were incredibly remarkable trading years. (John made multiple, million-dollar trades during this span, including his largest trade ever – $5 million in Google.) March 2020 (pandemic underway, market falling) for me was not scary at all. I’ve been through the 2000 crash, 2008 crash. I just remember spending a lot of time in those kinds of markets knowing that this is a day trading market.”

(John expressed how everyone has in some way been affected by the pandemic that hit early in 2020. The market was significantly affected, and traders as well.)

“You have no idea what’s going to happen next, but you don’t need to know what’s going to happen next in order to make money. I really focused on applying that to my trading.”

(Holding his positions through a rough market and hitting million-dollar trades brought clarity for his trading style and strategy.)

“It was kind of like a Forest Gump moment where the mindset that I brought to the market, which is a combination of aggressiveness and just anything can happen and be willing to really get out of (a trade) if it’s not working. It played out really well because I was willing to let winners run versus thinking, ‘I don’t know what’s going to happen, I got profit, let me get out.’

I was able to sit through uncomfortable-ness night after night in some of these trades where you’re in these trades for a couple of days or a couple of weeks. That’s not something I always want to do.

John Carter

“In this market right now (July, 2022), I hate overnight trades in this market. Let me try to make some money during the day, and then I’m going to go take it easy.

“It’s very common that traders make money in the morning and then give it away in the afternoon, and that’s proven. Impatience builds up as well as decision fatigue throughout the day, and it’s kind of a pattern of why traders tend to give money back in the afternoon.”

(John encourages traders to get away from the computer for regular intervals and do some other activity they enjoy.)

“In order to trade effectively, you cannot stare at the charts all day.”

Chat: How do you know when these sorts of bigger trade opportunities are actually present and available to you?

John:  “I think what happens is over time and being in the market for a while, you just start to recognize this.

(John offered details of his $5 million trade in Google during March, 2021.)

“During this time the market itself was selling off, so the Nasdaq was selling off and taking out support. But Google wasn’t. Google on the daily chart was holding support, staying above its 21-day period moving average and was building up a squeeze. It’s the backdrop of a weak market. That stood out here as a unique thing because Google is very, very strong.

“If Google was trading sideways while the market was going down, imagine what Google will do if the market actually firms up and it’s got the squeeze.

That whole scenario there was like a perfect storm. You have a market setting up, but also you have a stock that’s going to benefit really, really well from that. So that was the initial thing that I saw that attracted my attention.

John Carter

Power of the ‘squeeze’ in trading

Chat: What do you mean by the “squeeze?” (The original TTM Squeeze, or Simpler Trading Squeeze, is a stock chart indicator available on computer trading platforms.)

John: “The squeeze measures volatility. It measures when the Bollinger Bands contract to the point where they’re trading inside of the Keltner Channel. So Bollinger Bands measure two standard deviations, Keltner Channel measures one-and-a-half ATR (average true range). What I want to see is what are the times when the Bollinger Bands contract to the point where they’re trading inside of the Keltner Channel. What that means is that the market has gotten so quiet and it’s been building so much energy that it literally has to release that energy.

(As John has shifted from primarily swing trading in past markets to more day trading in the current market, he continues to focus on the trading plan, skills, and strategies that have been profitable.)

John: “I like to look at the indexes first (Dow, Nasdaq, S&P 500). A lot of trades I like to do are on the indexes because there is plenty to do on the indexes. I also like to look for, if the indexes are doing one thing then is there a stock that is ignoring that (like the Google trade). If I’m going to trade a stock it needs to be outperforming the indexes.

“On days when the market’s down, I will go and look and see what stocks are up to that day. Or, similarly, if the stock market’s going up, are there some stocks that are getting hammered?

“Are there some stocks out there that have kind of a unique story?”

(A current growth stock that John has been following is Unitedhealth Group, Inc.)

“Unitedhealth is not a stock I ever traded before this year. But in this current market where it’s been volatile and there’s these huge down moves, this stock just kind of keeps grinding higher.”

Difference between trading stocks and options

Chat: How do you compare trading stocks to trading options?

John: “I think trading stocks is absolutely easier than trading options, but there’s a point at which you learn enough about options where it’s hard to go back to stocks because there is so much flexibility in options. My background was directional (trading). I was trained directionally, so I trade directionally. So I utilize options as a way to enhance directional movement in the stock.

If there’s a secret to options, is that any book you read on options is gonna over-complicate them way too much. I get it because there’s a lot of people out there that are very smart that trade options in ways that I never would.

John Carter

(John suggested traders look for a “high-probability moment in time” in the charts that meet a checklist of signals for price direction, what is and isn’t working, and target profit criteria. He cautioned about getting caught up in the emotions of trading, and controlling the psychology.)

“Where we get in trouble is that one time when we see some stock racing and we get FOMO –  Fear Of Missing Out – and we just chase it. And at that point, then psychology does take over.

“That’s where the psychology comes in because to the extent that we are not following our plan is the extent to which our psychology is an issue. When we’ve reached indecision, it’s a psychological thing, and it’s always going to be there. But to the extent that we can be aware of it is the extent we can also overcome it.”

(He also cautioned about letting euphoria take over in trading decisions.)

John: “If you go on a winning streak, that’s your biggest danger because all of a sudden it’s like, ‘Oh, I’ve made it and I don’t need to be careful anymore.’”

(He referenced his million-dollar trades for caution to traders.)

John: “There are times when everything comes together in the market where a big trade like that is available to you. And, it’s more important to recognize when a big trade is not available.

“The worst thing you can do is trying to make a million dollar trade… trying to force that when the market’s not ready to do that at all.”

(John talked about trading in the market today where he is focused on the S&P 500, particularly the SPX which has options contracts that now expire every day.)

John: “This market is about quicker trades. It’s a trading market, not a buy-and-hold market.”

Looking for a trading mentor in this volatile market?

Looking for a trading mentor in this volatile market?

If you are looking for a trading mentor who has “been there, done that” then consider getting to know John Carter, Founder of Simpler Trading.

John, best-selling author of Mastering The Trade, delivers his unique style of trading and strategy with a focus on consistent income results.
John developed our community of like-minded traders because he wanted to share his growing pains and successes over the past two decades. Gain access to live-trading sessions, real-time stock alerts, and learning how a professional trader works this volatile bear market. Get started today.