Directional Traders Will Love This Lucrative Strategy

Last week, I gave you a quick quiz – three simple questions to help you determine what type of trader you are.

Many of us are directional traders, which means we assess the direction of the broader markets or individual securities, and then trade accordingly, taking long positions we believe will go up in price and short positions on securities we believe will go down in price.

Now that you’re armed with this very important piece of information, many of you have asked: What’s next? What strategies do I use now that I know I’m – say – a medium-term rules-based directional trader (like me)?

Today, I’m going to show you a simple strategy that allows you to target lucrative options trades… and it relies on a tool we’ve talked about a lot in recent weeks: The Simple Moving Average (SMA). So I hope you’ve been paying attention!

Let’s get started…

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The Two Lines I Draw on Every Stock Chart

Prior to moving into trading full time I spent a number of years with a leading global home improvement company. One thing I learned in that culture is that a tool that serves multiple purposes is worth its weight in gold. Multipurpose tools are economical, time efficient, and allow you to accomplish much more than you planned due to its versatility.

In trading terms, one of the best multipurpose tools is the moving average – the average price data of a stock or ETF over a specific time period.

As I showed you recently, you can use a stock’s Simple Moving Average (SMA) to determine its direction. If the moving average line is on an incline going up from left to right, it tells you the stock is in an uptrend.  If it slopes down from left to right, it tells you the stock is in a downtrend.

But this versatile technical trading indicator is like a Swiss Army knife for traders… and it is one of the go-to technical indicators in my trader’s tool chest.

Let me show you what else it can do…

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