Strategy and Biography

Andy Chambers was a successful small business owner who discovered a passion for trading in the 1980’s. After selling his business, he became a futures analyst for Dearborn Financial Corporation. After a few years as an analyst, Andy was promoted to editor of Futures Options Weekly. Two years later, he became Editor In Chief, overseeing the Futures, Futures Options, and Stock Options publications and advisory services. During his tenure at Dearborn, Andy also wrote, recorded, and published the Daily Trend Watch, a daily futures advisory, the Daily Trend Watch Classroom, an educational futures service, and the MR2 Alert, a combination advisory and tutorial specifically related to futures options.

Since leaving Dearborn, Andy has been working as an independent trader and analyst for private individuals and corporations. Working on his own, outside the corporate structure, has allowed Andy’s trading and analysis to evolve to a much higher level. Andy has a keen eye for charts and trading patterns. He employs very specific methods to take advantage of patterns and trends, and his strong options background allows him to employ strategies that offer maximum reward with minimum risk.

Options Trading Strategies from Andy Chambers
I’m old fashioned. I love chart patterns, and I often act on wide-range reversals and gaps. My favorite chart patterns include the head and shoulders pattern, symmetrical triangles, and break outs from a flat top or bottom, also known as trading range breakouts. We also have a specific setup that helps us spot higher low bottoms in an up trend and lower high tops in a down trend. Wide range reversals and gaps are often part of those setups. We pay close attention to support and resistance. If a market breaks support, we tend to expect a further decline. On the other hand if a market cracks through resistance, we look for a further advance. We don’t use a lot of indicators. We try to focus on price action. However, there are a couple of special stochastic setups that we like to look for.

Option Trading Tips:
No matter what tools and methods you use, there will be plenty of lessons to learn along the way. Here are some things to keep in mind:

*Always wait for the best setups. When you see them, take advantage of them. If you don’t see them, don’t force them. Jimmy Rogers, a very wealthy, very successful trader and fund manager says “I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up.” Be patient. Wait for the best setups.

*Don’t mix up your time frames. If your trade is based on a daily setup, don’t pay too much attention to intraday charts. Intraday swings are more frequent and they can cause you to exit too early. Likewise, if the trade is based on a weekly chart, don’t pay too much attention to the daily chart. As a wise trader once said, “Too much attention to price fluctuation all but guarantees financial suicide.” We need to define our plan for the trade and have the discipline to stick with it.

*Diversify. No matter how strong the trend is, it isn’t a good idea to put all your money in one market or one sector.

*Manage your money. Many of the top pros limit their risk to one or two percent of the account balance per trade.

*If you’re buying options, buy time. The biggest problem with options is time decay. The more time you buy, the less you pay per day and the more you minimize the effect of time decay.

*Have reasonable expectations. I once talked to a novice trader who lost his job and hoped to replace his income by making $50,000 a year on a $10,000 account. That’s a lot to ask in any case, but if you add the pressure of trying to replace your regular income, the stress alone can beat you. Warren Buffet is one of the richest men in the world. I’ve read that his compounded annual rate of return for over thirty years is just under 25%.

*You can’t win if you’re afraid to lose. Being afraid to lose can cause us to sabotage our trading. As a rule, risk about half as much as you think you can handle. The less you risk, the less afraid you’re likely to be, and the more likely you are to follow your plan.

*If you catch a good move, be patient with your profit exit. Let your profits run, or hedge them with options. Jesse Livermore said, “After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight.”

*No matter how good they look, not all signals and setups work. If the market gives a good solid signal and it doesn’t work, it often results in a significant move in the opposite direction.

In my opinion:
•The most important part of the trade is knowing where you’re wrong. •The most important action is cutting losses. •The easiest step in the trading process is getting in. •The hardest part is letting profits run.

The keys to options trading success are consistency and money management. A successful trading plan essentially boils down to this:
1.Know what will trigger your entry 2.Know what will cause you to close the position with a loss 3.Know what will prompt you to take profits 4.Last but not least, we must have rules regarding money management