Omnitrader by Nirvana Systems

Testimonals

Interviews

Rick Glyman - Stocks & Options Trader

Rick primarily trades equity options and index options. He's been trading about 10 years. Rick's approach works just as well with stocks as options in that he identifies the stock and then finds the associated option, saying that his stock hit rate is 90% which is more that impressive. Here is what he had to say.

What attracted you to OmniTrader?

The way it systematizes the analysis, its trading systems and its effectiveness. I had used a manual process and it was very time consuming and frustrating. I had found some systems to use on some stocks but not on others. OmniTrader solved my problem by creating the Focus List. I also like OmniTrader's ability to optimize and update itself.

What has your success rate been and how has OmniTrader influenced that success rate?

OmniTrader improved my confidence - it gives me a system I can stick to. I get more trades than if I were doing this manually. If I trade it right, it works. If I trade it emotionally, I invariably lose money. If I used it right, it has improved my success ratio. The tricky part is finding the right option. I guess I have a 90% success rate on a stock basis... and that is not an exaggeration. The option part needs more work. The stock success rate improved from about 70% before I used OmniTrader, and I get more trades with OmniTrader.

Did you change OmniTrader's settings much or do you primarily use the defaults?

I changed the optimization (in Test/Advanced) to 50% hit rate and upgraded the APR to 30%. The seamless integration with TC2000 was a big plus. TC2000 has clean data that comes down easy. I weed out marginal trades. I only go for 3-4 a week. Since I have been doing well, I have not wanted to change it any more.

What is your personal screening process?

I set the chart to 12 months and I look at the bottom left hand corner of the screen. If price there is lower than the upper right hand corner of the screen, then I have a long term up trend (I used the same approach for a long term down trend). I trade only in the direction of the long term trend. That's another thing I like about OmniTrader is the automatic generation of the trend lines. I use the long term trend lines. Then I have two rules:

If the back test hit rate is less than 75%, I will not even look at the signal. 85% is usually my minimum.
APR in the back test for the stock must be relatively high.

I will go against the long term trend from time to time, but I usually pay for it. Most importantly I trade AT the long term trend line. I have found that the farther the stock is from the trend line, the more likely the trade is not to work out.

How many candidates do you have per week?

I have 12 open positions now, which is more than usual. Because I use long term trend lines, I can use relatively tight stops. Once I find a stock I like, I want to buy a cheap option. I want the strike price of the option I purchase to be very close to the stock price.

I screen the stocks using TC2000. The stock must be greater than $10 and enough volume to be liquid. That leaves me with about 4400 stocks that I look at. I make 1-2 trades from Tuesday - Friday, but have 10 -15 candidates on Monday after the new weekly confirmation.

Back to options, I want to be near expiration so that the time premium is low. I only buy underpriced options. Low priced options are important because I look for a minimum 3-to-1 risk reward ratio.

Underpriced based on Black-Scholes?

Based on OptionVue and primarily on AIQ's option model, using a 30 day volatility.

The floor will take advantage of you when you trade options. How do you protect yourself?

I traded with a lot of brokers who did not know options. Then I found a broker that will take the kinds of orders you need for options - most of the order types you used in futures. They will take contingent orders. Say I want to trade an IBM option based on some movement in S&P. I use limit orders only and will not get into options having spreads greater that 1/8 - 1/4 between the bid and the asked. If the limit order does not come through, then I just set. I place my stop based on the stock price.

How long do you hold a trade?

Until an exit is triggered by a stop or a target. Targets are based on trend lines, which are usually the long term upper trend line. I only hold for a short period because I do not want to incur much time premium decay. Ideally I will buy an option 1 1/2 months out to hold for 2 weeks to minimize time decay.

What advice would you have for new users of OmniTrader?

I have never used the Trading Game, but it seems it would be a great way to gain confidence. Don't try to out-think OmniTrader; it does well on its own. Watch it awhile and build your confidence. There is no guarantee of making money because managing the trade is the hard part. You have to stick to your system. OmniTrader is a very smart system.