Introducing “3-9 Constructing The Jade Lizard,” a video by Heating & Cooling Solutions. This version two of the Unlimited income trading method eliminates upside risk, making it different from version one. By utilizing strategies like J lizard and Jade iron Condor, which are neutral to bullish, we can construct a trading method with no risk to the upside. This means we only need to manage the risk on one side, making it much simpler. We mainly use this method on spy and QQQ, while version one is used on iwm. In this video, the strategy is outlined step by step, showing how to enter trades based on market movements. If you’re interested in maximizing your trading potential and reducing risk, this video is definitely worth a watch.
Constructing The Jade Lizard
Introduction to Version Two of the Unlimited Income Trading Method
Welcome to version two of the Unlimited Income Trading Method! In this version, we have made some changes to eliminate upside risk. Unlike version one, where we had both downside and upside risk, version two is constructed in a way that ensures there is no risk to the upside.
No Upside Risk in Version Two
The main reason there is no upside risk in version two is because we will be using the strategies J Lizard and Jade Iron Condor. These strategies are neutral to bullish, allowing us to construct our trades in a way that avoids any risk to the upside. Even if the market shoots up to the moon, we can still profit from it.
Using J Lizard and Jade Iron Condor Strategies
The strategies we’ll be using in version two, J Lizard and Jade Iron Condor, are designed to be neutral to bullish. This means that we are not heavily impacted if the market goes higher or lower. By implementing these strategies, we can ensure that our trades are less exposed to the upside risk.
Application of Version Two on SPY and QQQ
In version two of the Unlimited Income Trading Method, we will mainly focus on trading SPY and QQQ. These are popular ETFs that represent the S&P 500 and the Nasdaq 100, respectively. By using version two on these stocks, we can take advantage of the benefits offered by the J Lizard and Jade Iron Condor strategies.
Simpler Strategy in Version Two
Version two of the Unlimited Income Trading Method is much simpler compared to version one. In version one, we had to manage the risk on both the call and put sides. However, in version two, we only need to manage the risk on the put side. This simplifies the trading process and allows us to focus on one side of the trade.
Difference in UL Side Compared to Version One
In version two, there is a difference in how we handle the UL side (Upside Legs). When the market goes up, we will only go up to UL1 and UL2. At UL1, we will put on a neutral Jade Lizard and Jade Iron Condor strategy. At UL2, we have the option of either putting on a neutral or a bearish J Lizard or Jade Iron Condor. This gives us flexibility in our trades and allows us to adjust our strategies based on market conditions.
UL1: Neutral Jade Lizard and Jade Iron Condor
At UL1, we will be utilizing a neutral Jade Lizard and Jade Iron Condor strategy. These strategies allow us to profit from neutral to slightly bullish market movements. By implementing these strategies at UL1, we can manage our risk and capitalize on potential market opportunities.
UL2: Option of Neutral or Bearish J Lizard or Jade Iron Condor
At UL2, we have the option of choosing between a neutral or a bearish J Lizard or Jade Iron Condor strategy. The bearish versions of these strategies have the call spread slightly closer to the current market price. We may choose to use the bearish strategy if the market has been going up for a significant period and is close to the previous high. This allows us to mitigate potential downside risk and protect our positions.
Considerations for Choosing Bearish Strategy
When considering whether to use a bearish J Lizard or Jade Iron Condor strategy, we should take into account the market’s recent upward movement. If the market has been trending higher for an extended period, there is a possibility that it may experience a significant correction. By implementing a bearish strategy, we can better align our positions with potential market movements and minimize risk.
No Difference in DL Side Compared to Version One
The DL side (Downside Legs) in version two is the same as in version one. We will be following the same levels on the way down. This means that we will go for neutral J Lizard or J Iron Condor strategies at DL1 and DL2, slightly more bullish strategies at DL3 and DL4, and even more bullish strategies such as the short put or bull put spread at DL5 and below.
DL1 and DL2: Neutral J Lizard or J Iron Condor
At DL1 and DL2, we will be implementing the neutral J Lizard or J Iron Condor strategy. These strategies allow us to profit from neutral market movements or small downward price movements. They provide a balanced approach to our trades and help us manage risk.
DL3 and DL4: Bullish J Lizard or Jon Condor
At DL3 and DL4, we will be going for a slightly more bullish approach. This means that we will implement the bullish J Lizard or Jon Condor strategy. These strategies allow us to profit from small upward price movements while still maintaining some downside protection.
DL5 and below: Short Put or Bull Put Spread
When the market is overextended and at DL5 and below, we want to become more bullish. This is where we can implement the short put or bull put spread strategy. These strategies allow us to profit from upward price movements and take advantage of potential market reversals.
Similarities with Version One on the Way Down
When it comes to trade setups on the way down, version two is very similar to version one. We will follow the same levels and implement similar strategies at each level. This consistency allows us to maintain our trading approach and capitalize on market opportunities.
Difference in Entries on the Upside in Version Two
The main difference in version two compared to version one is how we handle entries on the upside. In version two, if the market goes up to UR1, we will have an entry. The same applies to UR2, where we will also have an entry. At these levels, we have the option to choose between a neutral or a bearish J Lizard or J Iron Condor strategy.
Avoiding Entries on UL3 and Beyond
However, when the market goes up to UL3 and beyond, we do not enter any trades. This is because version two is a neutral to bullish strategy, unlike the neutral Iron Condor in version one. As we become more biased towards the upside, it is prudent to avoid entering trades when the market keeps going higher. There is a higher risk of a potential reversal, and entering at these levels may expose us to unnecessary risk.
Avoiding Entries to Mitigate Risk on Neutral to Bullish Strategy
By avoiding entries on UL3 and beyond, we can mitigate risk and protect our positions. The neutral to bullish nature of the J Lizard and J Iron Condor strategies means that we are more exposed to the upside. It is important to exercise caution and avoid entering trades when the market keeps going higher, as this can increase our risk.
Visual Representation of Entering Trades
To better understand how to enter trades in version two, let’s visualize the process. Suppose the market goes down, we enter trades at DL1, DL2, and DL3. If there is no significant retracement to the upside, we continue entering trades at DL4. When the market eventually goes up to UR1, we have an entry. The same applies to UR2. However, as the market goes up to UL3 and beyond, we do not enter any trades. This visual representation helps us understand the trade setups and manage our entries effectively.
Fewer Entries in Version Two in a Strong Boom Market
In a strong boom market, we may experience fewer entries in version two compared to version one. This is because version two focuses on avoiding entries on UL3 and beyond, where the risk of a potential reversal increases. By being more selective with our entries, we can adapt to market conditions and ensure that we are entering trades at optimal times.
No Trades in Version Two in a Strong Boom Market
In some cases, we may not have any trades in version two when the market is experiencing a strong boom. This is because we want to wait for our chance when the market comes back down. By exercising patience and waiting for opportunities, we can avoid unnecessary risk and focus on quality trades.
Waiting for Opportunities in Version Two
Version two of the Unlimited Income Trading Method emphasizes waiting for opportunities. By carefully selecting our entries and being mindful of market conditions, we can ensure that we are entering trades at the right time. This patient approach allows us to maximize our profitability and mitigate risk effectively.
In conclusion, version two of the Unlimited Income Trading Method eliminates upside risk and focuses on using the J Lizard and Jade Iron Condor strategies. We primarily trade SPY and QQQ in this version, while version one is used for trading IWM. The UL and DL sides are similar to version one, with slight differences in the approaches on the upside. By carefully managing our entries and making strategic choices in our strategies, we can navigate the market and achieve consistent profits. Remember to exercise caution, wait for opportunities, and remain adaptable to market conditions.