Investor’s Guide BigTrends Advisory Services · precaution is taken in order to minimize your...

Investor’s Guide

BigTrends Advisory Services

Welcome to BigTrends.com’s Investment Advisory Services. We look forward to helping you maximize your trading

profits in the weeks and months and years ahead.

This guide is meant to explain how our service works and how you can integrate our recommendations into your own

trading. We send out our analysis usually around 7-8 p.m. ET before the next trading day. Trading recommendations

contained in your nightly service are intended for the following trading day. For instance, Monday’s nightly

recommendations take effect upon Tuesday’s open, Tuesday’s recommendations include instructions for

Wednesday’s open, and so on.

First: An Important Note on Placing Stock and Option Orders

Our new entry recommendations are intended only for one day unless otherwise specified. If your orders were not

executed because they did not met the Buy or Sell Limit, then the order should not be re-entered, unless we suggest

that you replace and perhaps adjust, said order for the next trading session. Due to the short-term nature of our

trades (from a few days to a few weeks), we recommend Day orders (which expire automatically at the end of the

trading day if not filled) as opposed to “Good ‘Til Cancelled” orders (which must be manually cancelled).

Price Headley, CFA, CMT

Founder and CEO of BigTrends.com

Questions? Call 1-800-244-8736 or email us at [email protected]

Options Recommendations

BigTrends’ option recommendations typically involve the straight purchase of option puts or calls in index and/or

equity options, depending upon the service(s) for which you are registered. When market opportunities exist for

spreads we may suggest a 2 leg strategy to capitalize. Moreover, we recommend option strategies which involve

minimal capital and maximum return: We recommend simply a straight purchase and sell of option contracts, and at

no point will recommend that options be exercised. Simply put, we believe that the greatest profits are generated from

the high-percentage gains involved in contract trading as opposed to the relatively smaller increases you might have

by exercising the right to purchase the underlying stock shares.

Puts and Calls

When our trend indicators detect a pending upside move (bullish) in a particular stock or index that meets our strict

reward-to-risk criteria, we may recommend the purchase of a specific option call contract, including the option

symbol, which will reflect specific strike price and expiration data. Similarly, to capitalize on downside trends (bearish),

we will recommend buy and sell levels for option put contracts. Recommendations will typically provide buy levels,

price targets and stop loss instructions. Given the fluid and quick-moving nature of option trading, intraday alerts may

be used to issue both buying and selling alerts to Maximize trading gains. Additionally, your daily service will include

updates on any and all open option positions.

Entry Levels

BigTrends.com analysts provide you with specific buy levels for all option positions. These entry price

recommendations are designed to maximize profits and minimize risk. The entry price indicates the maximum prices

at which we recommend you purchase the specified option contracts.

For instance, if the buy limit on November 20 XYZ calls is 2.50, you should place a day limit order to enter the

position at 2.50 or lower. At 2.50, we expect the reward of a gain in value prior to expiration will prove profitable, so

purchasing the option below that entry price is certainly acceptable as well. Defined entry prices allow you to enter a

given position at a price point our analysis has identified as offering the greatest risk-to-reward potential.



Locking in Gains: Target Prices

The Target Price is the price at which we

recommend taking profits by exiting your option

position. The Target Price is the price at which

we would like to see the option contract hit in

order to reach the optimal profit level our

analysis has identified. You should enter your

target price with your broker immediately once

you have entered the option position. If at any

time during the trading day the stock hits the

target price, the stock is then immediately sold

or bought. We do this to lock in the gains

based on intraday volatility. For instance, if we

set a $15 target price on Apple calls, and the

stock reached that price during the day, your

day limit order to sell should be in place at that

price to capture that profit.

Risk Management: Stop Loss Strategies

The tremendous return potential – and high volatility – inherent to option trading underscores the importance of

effective risk management.

The Closing Stop level indicated in your daily recommendation service is the price at which would exit a position at

the end of the trading day in the event that an option contract fails to confirm the directional trend our analysis

anticipated. In this case, a position’s value has begun to erode to a degree that your Closing Stop will help minimize

any loss.

Unlike the Target Price however, the Closing Stop Price is meant to take effect at the close of the session, not

during the day.

This is because volatility will move the stocks during the day, and we do not want to exit the position unless the trend

has clearly broken at the end of the session. If the stock has reached the Closing Stop Price in the last 5 or 10

minutes of the trading day (3:50-4:00 p.m., E.T.), then we recommend placing a market order to exit the position. This

precaution is taken in order to minimize your losses while still giving you the opportunity to stay with the BigTrend

throughout the day – for as we often find, intraday action is less indicative of a prevailing trend than closing prices.

Note: You should place an order with your broker at the time and date a closing stop is violated. Unlike a simple stop

loss order, which will automatically take effect when a stock drops below a certain price level, Closing Stop market

orders must be placed by the investor once he or she has determined that our recommended stop level has been

violated within the last minutes of trading on any given day. If you happen to miss exiting a position on the day a

closing stop level is violated, an acceptable alternative would be to place a market order to exit the position at the

next trading day’s open.

Sneak Peek: Future Trades and Watchlist

Your daily options advisory may also include potential setups that currently at the top of our list as prospective trades.

This is our watchlist, not actual trading recommendations, but rather buy/sell levels on key options which our analysis

has highlighted as offering potential for high reward¬ to-risk potential.

Stock Recommendations

We provide stock recommendations in two simple categories: Bullish and Bearish. When a stock selection is Bullish,

we expect that the stock price will rise in the near future, and we recommend that you BUY into a “long” position.

When a recommendation is Bearish, we expect that the stock price will drop, and we recommend that you SELL,

therefore creating a “short” position to profit from the anticipated decline in price. When executing a Bearish pick, you

will be “shorting” the stock.

When we make a recommendation, we also specify a Buy Limit or Sell Limit, or Market Order.


Buy Limit

The Buy Limit reflects the maximum price at which we recommend you purchase to enter a bullish (long) stock

position. For instance, if the Buy Limit on XYZ were $90.05, you would place your order to pay no more than $90.05

for the stock. If the stock trades under $90.05, then your order would be processed. If it did not trade below that

price, then the order would not be executed. The concept of the Buy Limit is to define the entry point that is

acceptable on the basis of our reward-to-risk analysis.

Sell Limit

The Sell Limit indicates our recommended sell level for bearish (short) stock positions. The Sell Limit defines the

minimum price at which the stock will be sold. The idea behind the Sell Limit is to sell the stock for a high enough

price to create an attractive reward-to-risk ratio. With a Sell Limit on XYZ of $60.94, for example, you will instruct your

broker to sell shares of XYZ for no less than $60.94. If the price does not reach $60.94 or higher, then the order is

not to be executed. As with Buy Limits on the long side, our short Sell Limits reflect the most attractive entry point,

offering the maximum profit potential, should a particular stock decline to the level we predict.

A few words on shorting.

Many people are familiar with the concept of buying stock.

The principles of shorting a stock are less well known.

When you “short” a stock, you are selling the stock first,

even though you do not own it. You essentially borrow the

stock from your broker and sell it first. But you will have to

buy the stock back eventually and return it to your broker.

The expectation when shorting is that the “borrowed” stock

can be sold high first and bought back lower later after the

stock price drops. Ideally, you buy back the stock,

otherwise known as covering, for less than you sold it.

Essentially, you pocket the difference when the stock

declines: The profit or loss is the difference between what

you sold the stock for and what you paid for it. The concept

of “Buy Low, Sell High,” is still in effect, except it’s just the

reverse when shorting. You hope to sell high, then buy

back lower.

Please note: You must have a margin account with your

broker in order to short a stock. Your “margin” covers the

potential loss/cost you may incur should you choose to

cover your position if a shorted stock actually rises in price.

Locking in Gains: Target Prices

The Target Price is the price at which we recommend taking profits by selling the stock if in a long position, or buying

the stock back if in a short position. The Target Price is the price at which we expect to see the stock hit in order to

reach the profit potential our analysis has identified.

You should enter your target price with your broker immediately once you have entered the stock position. If at any

time during the trading day the stock hits the target price, the position is then automatically exited. We do this to lock

in the gains based on intraday volatility. For instance, if we set a $100 target price on IBM, and the stock reaches that

price during the day, your day limit order to sell should be in place at that price to capture the profit.


Risk Management: Stop Loss Strategies

One of the oldest rules of trading is, “Let

you winners ride and cut your losses short.”

While our innovative strategies capitalize

on highly sophisticated analysis, our

investment strategy follows this time-tested

adage.

The Closing Stop level indicated in your

daily recommendation service is the price

at which would exit the position at the end

of the trading day in the event that a stock

fails to confirm the directional trend our

analysis anticipated. In this case, a

position’s value has begun to erode to a

degree that your Closing Stop will help

minimize any loss.

Unlike the Target Price however, the Closing Stop Price is meant to take effect near the close of the session,

not during the day. This is because volatility will move the stock during the day, and we do not want to exit the

position unless the trend has clearly broken at the end of the session. If the stock has breached the Closing Stop

Price in the last 5 or 10 minutes of the trading day (3:50-4:00 p.m., E.T.), then we recommend placing a market order,

thereby exiting the position. This precaution is taken in order to minimize your losses while still giving you the

opportunity to stay with the BigTrend if the intraday move is just “noise.”

Note: You should place an order with your broker at the time and date a closing stop is violated. Unlike a simple stop

loss order, which will automatically take effect when a stock drops below a certain price level,

Closing Stop market orders must be placed by the investor once he or she has determined that our recommended

stop level has been violated within the last minutes of trading on any given day. If you happen to miss exiting a

position on the day a closing stop level is violated, an acceptable alternative would be to place a market order to exit

the position at the next trading day’s open.

Looking Ahead: Watchlist

In your newsletter, we also provide you with a watchlist. These are stocks that we see as possible emerging

opportunities. These stocks are not recommendations; our watchlist includes stock buy/sell levels that could soon

develop money-making potential. If we believe that these stocks become “active” opportunities, we will send you a

specific email alert directing action.

Open Position Update

BigTrends.com also provides a daily or weekly updates of current open recommended positions. Among the

information provided is the amount the stock gained or lost during the day, the trading range of the stock, the amount

of profit or loss the stock position has incurred, and a brief update on the stocks outlook. This information is provided

so you can keep track of your open positions and any new developments.



Key Indicators

BigTrends.com’s stock and option recommendations are each based on a unique technical based system. In your

newsletter(s) you will typically see pictures of charts or videos provided in updates that include the technical

indicators that we use on a regular basis. Here are a few of our favorites:

• Williams’ % R (range) • Acceleration Bands

• Efficiency Ratio • DMI/ADX (DMI Difference)

• Force Index • Bollinger Bands

• Parabolic Stop and Reversals (SARS) • Stochastics

• Commodity Channel Index (CCI) • Average True Range (ATR)

• 200 Day Indicator for Monster Stocks • And more…

If you ever have questions about the system that we use in your newsletter (e.g. time frame, indicators, settings etc.)

feel free to send us an email. We are happy to work with you to provide the best educational resource for learning

our systems.

A Final Word

Finally, we want to again to thank you for selecting BigTrends investment advisory services. Our analysts are here to

provide you with winning strategies for bull and bear market trading conditions.

The service guidelines outlined above are provided to give every possible advantage when trading stocks and

options. We hope that this guide be valuable to you, and help address any questions you may have during the

course of your service.

Should you have specific questions regarding your service, feel free to contact our Trading Consultants at 1-800-

BigTrends (1-800-244-8736), or simply e-mail us at [email protected].

Over the course of your service, our efforts will be directed to providing you market-beating stock and option gains

over time.

Price Headley President and CEO

BigTrends.com 1-800-BigTrends

(1-800-244-8736)

Investor’s Guide BigTrends Advisory Services · precaution is taken in order to minimize your...

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