High Accuracy Trading With Chuck Hughes

TradingPub Admin | May 22, 2015

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At the TradingPub we are dedicated to connecting you, our members, with some of the top professional traders in the industry. Chuck Hughes clearly fits this group of successful trading experts as he is one of the best options traders in the world. He has proven that by winning the World Trading Championship an astonishing 7 times and coming in second and third place on a number of occasions.  Chuck has recently amassed $3.2M in profits over 342 trades, and is sporting a 93.8% winning percentage. More impressively, Chuck shared his broker statements, and  agreed to show us the techniques he uses in his High Accuracy Option Trading program.

We received a number of requests for the recording of his trading education session with us and have included it and a brief summary of his presentation below.

High Accuracy Option Trading

Chuck Hughes began his career as a commercial airline pilot with the primary responsibility of protecting the safety of his passengers. After retiring as a pilot, Chuck  turned to trading, and over the past 28 years he has been focused on looking after the financial safety of his clients. During his presentation, Chuck went into significant detail on the key elements of his High Accuracy Option Trading program.  This trading approach is based on a trend-following system that Chuck developed early on in his trading career, and continues to be consistently effective in today's trading environment.

Options are leveraged financial instruments, and provide more potential for profit when compared to normal stock investing.  However, this same leverage also means there is greater risk. Any time you buy an option you are risking 100% of your capital.  For this reason, the goal of the High Accuracy Option Trading is to avoid getting into trades where the risk is higher that can be justified by your trading plan. This requires careful timing of your entry determining when a market is overbought or oversold. Armed with this knowledge then you can enter at a more optimal point and still gain from a defined up or down move of the market.

The High Accuracy Option Trading program consists of 2 parts.

 PART ONE- Prime Trade Select:

 Step 1: Determine the price trend of stock using the 50/100 Day Exponential Moving Averages (EMA) System

  • Here the goal is to quantitatively measure buying and selling pressure of a stock
  • This allows to follow the trend instead of trying to predict the trend instead of trying to predict the trend
  • Use a system instead of emotional decision making
  • The "Buy Signal" is when the 50-Day EMA is above 100-Day EMA
  • The "Sell Signal" is when the 50-Day EMA is below the 100-Day EMA

Step 2: Confirm the price trend using the On Balance Volume Indicator and the new 52-Week High List to isolate the best profit opportunities.

  • The On Balance Volume Line is calculated by adding or subtracting volume to the line when a stock goes up or down in volume respectively. A cumulative total of these additions and subtractions is then calculated.
  • On a given day there may be hundreds of "Buy Signals" that is why the On Balance Volume Indicator is used to measure the volume flow with an easy-to-read line, since volume flow precedes price movement and helps sustain price trend and better choices are made.
  • Using a list of shares achieving  52-Week Highs will help to spot stocks in a powerful uptrend.

Step 3: Select low risk entry points using the Keltner Channels

  • One of the simplest, but most effective timing indicators are the Keltner Channels originally developed by Chester Keltner and updated by Linda Raschke in 1980's.
  • Those can be used to help time trade entry and exit points and provide high probability buy and sell signals
  • Can also be used to help select option strike prices with repetitive and predictive pricing. 

PART TWO- Trade Management: 

Step 1: Us the 1% rule to select an option strike price with a high probability of success

  • Once you select an option trade there are a number of strike prices to choose from and this step is as important as the trade selection itself.
  • Due to the time decay characteristics of options you have to consider that when you buy an option you want to minimize the time value and maximize the intrinsic value
  • Here we limit the time value to less than 1% of the stock price per month to minimize time value and maximize intrinsic value.
  • In this case the stock price only needs to increase 1% in order for the trade to break-even

Step 2: Use 30% rule for walking away

  • If an option's price drops below 20% of its entry price, start looking to exit before it hits the 30% mark. This will help prevent the 100% loss.

Step 3: Rollover as expiration if stock is still on a prime trade and if the trade is still profitable

  • This feature of the program allows to reduce risk and helps compound returns.

Chuck extended a special offer to all of those in attendance. Learn more and join him and his team  to the Wealth Creation Alliance program. 


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