Since 2022, SlashTraders has been running a math-based wheel and options income system on a fully transparent $2.5M live portfolio<\/a> \u2014 every trade publicly logged, every loss clearly visible, and every return verified by API in real time. This guide will walk you through the complete method we use, including our stock screening tools and real-world examples.<\/p>\n\n\n\n A trading system is a set of defined and repeatable rules that help you find entry and exit points to trade the financial markets.<\/p>\n\n\n\n A successful trading system usually has the following components:<\/p>\n\n\n\n The stock market is a pricing mechanism that tends to be 70-80% bullish but is in its nature purely random.<\/p>\n\n\n\n Our experience tells us, nobody, no system, no algorithm, no artificial intelligence, no analysts, no sentiments, and no ratings can be 100% accurate in predicting future price moves.<\/p>\n\n\n\n The ups and downs of the market prices<\/a> can be likened to a pendulum:<\/p>\n\n\n\n The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The Intelligent Investor is a realist who sells to optimists and buys from pessimists.<\/p>\nBenjamin Graham<\/em><\/cite><\/blockquote>\n\n\n\n Like many phenomena in and outside of economics, stock prices follow the movements of a pendulum, albeit with much more unpredictability, and the larger the timeframes you are looking at the more it is recognisable.<\/p>\n\n\n\n SlashTraders\u2019 philosophy is no matter we are \"trading options<\/a> to generate consistent income\" or \"building our dividend portfolio that compounds growth\", we want to use data to make high probability trades that have a positive expectancy.<\/p>\n\n\n\n In short, we combine the valuation of an underlying and look for discernable exhaustion of stock price movements over a long time.<\/p>\n\n\n\n So we combine fundamental analysis and technical analysis<\/a> to look for converging trend signals to find entry points that generate the maximum possible positive expectancy in the stock market.<\/p>\n\n\n\n There are about 150,000 securities across 70+ exchanges listed across the global stock markets. At SlashTraders, we only consider about 0.5% of companies as investable out of these 150,000 globally stock-listed securities as good long-term investments.<\/p>\n\n\n\n Great companies are characterised by:<\/p>\n\n\n\n We compiled a database of about 1,000 growth and dividend stocks<\/a> around the globe across all continents that we make available to our subscribers.<\/p>\n\n\n\n We constantly monitor these companies and perform valuations based on the Discounted Cash Flow (DCF) model calculating each underlying\u2019s respective Fair Value. Then we can calculate the potential Upside of each stock based on the differences between Fair Value and current price.<\/p>\n\n\n\n Our investment is based on the philosophy of the greatest investor of all times, Warren Buffett. In other words, we only buy with our limited and hard-earned money great companies at or below Fair Value.<\/p>\n\n\n\n But, we can go one step further to combine Fundamental Analysis with Technical Analysis. Besides buying at discount to the current price, we only invest when the stock is also \"technically undervalued\".<\/p>\n\n\n\n In technical analysis, we look for discernable exhaustion of stock price movements over a long time.<\/p>\n\n\n\n For us, there are no bullish or bearish trends as such. An underlying is not bullish because its price is above 50 and 200 SMA (Simple Moving Average).<\/p>\n\n\n\n Bearish or bullish ratings mean nothing more than 50% of market participants hoping that it will go in the anticipated direction and the other half wondering why it should move in the anticipated direction.<\/p>\n\n\n\n From our point of view, an underlying is only bullish when the downtrend is exhausted while the stock is undervalued.<\/p>\n\n\n\n But in such instances, most analysts would rate the stock as bearish with low price targets and keep revising their ratings as they observe what just happened as contrary to their predictions.<\/p>\n\n\n\n At any given time, there are only very few stocks that meet both downtrend exhaustion while being heavily undervalued<\/a>.<\/p>\n\n\n\n Our Bull Put Spread Screener<\/a> uses historical chart analysis to find bottom out stocks that have a high probability of an upward correction that we can sell Bull Put Spreads to open.<\/p>\n\n\n\n There are three key metrics in the Bull Put Spread Screener that help us find heavily undervalued and bottomed out stocks:<\/p>\n\n\n\n When an undervalued stock has both Trends and Long Signal Days turn green, we can be confident of entering a bullish trade.<\/p>\n\n\n\n We can double-check the price charts to confirm the bottomed-outness of the trend.<\/p>\n\n\n<\/p>\n\n\n\n <\/p>\n\n\n\n Our Bullish Value Stocks<\/a> section lists all the underlying in our database that is both fundamentally and technically undervalued right now. The additional Dividend Yield information allows us to find entry points for short, middle and long-term trades.<\/p>\n\n\n\n In other words, it is time to go long and be bullish despite analysts\u2019 bearish outlook.<\/p>\n\n\n\n In the words of the legendary investor himself:<\/p>\n\n\n\n Be greedy when others are fearful.<\/p>\nWarren Buffet<\/cite><\/blockquote>\n\n\n\n So in SlashTraders\u2019 trading strategy, we combine the valuation of an underlying and look for discernible exhaustion of stock price movements over a long time to find the best entry points.<\/p>\n\n\n\n Our trading system is based on selling options that expire next month, so we can control the probability of success and Return on Capital, and profit from the gradual time value decay of options<\/a>.<\/p>\n\n\n\n Any professional options seller will tell you not to keep the contracts open through to expiration, but exit early when the trade meets the following conditions:<\/p>\n\n\n\n This way we can efficiently utilitise our capital in profitable trades, and cut our losses in losing trades. All for the sake of creating a profitable, positive expectancy trading system.<\/p>\n\n\n\nWhat Is a Trading System?<\/h2>\n\n\n\n
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The Secrets to Our Trading System<\/h2>\n\n\n\n
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How Does Fundamental Analysis Work?<\/h2>\n\n\n\n
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How Does Technical Analysis Work?<\/h2>\n\n\n\n
![\"slashtraders](\"https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/03\/slashtraders-trial-banner.png\")
<\/a><\/figure>\n\n\n\nAn Example of Downtrend Exhaustion and Heavily Undervalued<\/h2>\n\n\n\n
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![\"ATVI](\"https:\/\/slashtraders.com\/wp-content\/uploads\/2021\/10\/ATVI-bottom-out-1024x323.png\")
![\"ATVI](\"https:\/\/slashtraders.com\/wp-content\/uploads\/2021\/10\/ATVI-price-bottom-out-1024x566.png\")
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When to Exit a Trade?<\/h2>\n\n\n\n
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