What is RadioActive Trading?

RadioActive Trading is not really a trading system at all. A trading system is defined as a set of rules… a criteria for selecting markets to trade, as well as entry and exit signals. This is NOT covered in The Blueprint (except to say what I personally like to trade) or in any other RadioActive publication. What actually defines RadioActive Trading (RT) is what RT does.

My favorite saying regarding trading the RadioActive Way is, “Don’t pick stocks… pick STOPS.” Now, of course we do have to pick something to trade. But RT is not about WHAT picks we decide to trade, but rather about HOW we trade those picks.

In my study of some of the world’s greatest traders, I found that there was an amazing disparity between them all: what kinds of markets they would trade, what constituted a trading opportunity, the length of time in a trade. In other words, they all were great… but all did completely different things. They all had different systems but all did well. What does this mean to you?

The one thing that I DID find that the high performers had in common was an intimate understanding of RISK. All the world’s best traders take the one thing that they CAN control, and use it to bring order to the marketplace. That one point of control is the decision to control HOW MUCH money they would risk in any one trade. With RT, risk is established at the beginning, monitored and adjusted during the trade and used to help exit the trade.

The RT money management system is a practical method for taking whatever picks you prefer to trade, then adding put options as an insurance policy. RT makes the maximum loss in any trade into only a single digit percent possibility. That means that you CAN’T get into too much trouble in any one trade, which preserves capital so that you have something to use to buy the next big winner. This is one of three great principles that RT uses: Force Ideal Sized Trades.

My second favorite saying that we use around here is, “Don’t time trades… Trade TIME.” This saying acknowledges that ONE thing in the options market we know for certain: that the time value of an option (whether put or call) goes to zero at expiration. I like betting on a sure thing, how about you?

Because of the certainty that time value goes to zero at expiration, and because of the fact that time value swells when a call or put is At The Money, we can gain an edge for capturing premium. That edge is based in skewing probability and payout by buying options cheaply and selling them at a dear price.

When BUYING options far away and In The Money, we can get the most protection for our dollar spent. By SELLING options near to expiry and At The Money, we can get the best dollar for the obligations we take on. These truths form the basis of two other important RT key principles, which in The Blueprint are called the ATM Bell Curve and the REDLine.

About the Author