Momentum, Reversals, and Bar Patterns

Last week AJ Brown from gave us a great article to 'chew on' covering OTM near-term vertical debit spreads. The response was pretty good, but I think we'll get him an even greater number of comments with this article on momentum, reversals, and bar patterns. Please enjoy the article and if you haven't done so yet, I recommend you check out AJ's training videos as you'll learn a TON!


Every day’s bar tells us something about what to expect the next trading day. In other words, today’s bar affects tomorrow’s bar. So how do we know what that effect will be?

Not every bar will give you clear insight into where the market is headed. But there are certain bar patterns that are more informative than others. Allow me to share a few of these bar patterns with you.
You can often determine if the next trading day is going to be an up day or a down day by looking for a “key reversal up” or a “key reversal down.”
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OTM Near-Term Vertical Debit Spreads

If you can understand the title you're approved to continue reading this article by AJ Brown from AJ is really one of the only guys I know who can make something like OTM Near-Term Vertical Debit Spreads an easy topic to understand and execute! Read the below article and also be sure and get AJ's Options Trading Courses as I made him promise to give it to Trader's Blog readers for free! He told me he was impressed with Trader's Blog readers and really wants you to ask him some tough questions...don't let him down!


If you open and close too many positions in a single week, you will be tagged as a pattern day trader and forced to comply with a set of complex and onerous rules.

To reduce our exposure, increase our probability of making a profitable trade, and avoid being flagged as a pattern day trader, we’ve been using out-of-the-money near-term vertical debit spreads. What this means is that we’ve been leaving our positions open overnight instead of closing them intraday.

A vertical debit spread is like a cheap insurance policy to protect you in case a stock gaps up or down.
Here’s how it works…
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