SaintsTradingPhase 1 · Lesson 1 of 8
Before you trade
Learn to separate a market idea from a trade and put the possibility of loss ahead of the desire to participate.
An option is a contract whose value depends partly on another market, called the underlying. SPX is an index measuring a broad group of large U.S. stocks, not a share you can buy. A setup is a set of conditions you require before considering a trade. Paper practice means recording decisions without placing real orders.
Start with what you can control
A level is a reference price; a zone is the small area around it where you watch for a reaction. You cannot make the market respect a level. You can choose whether to participate, how much money to put at risk, and what evidence would make you stop. That is where this course begins. Before you learn a setup, learn to leave one alone. A busy session does not create an obligation to trade. Watching without taking a position can be the right decision for the conditions in front of you.
A plan is more than a direction
Confirmation is the behavior you require before entry; invalidation is the behavior that cancels your idea. A target is a planned place to reassess or exit. You might think SPX will rise. That is a directional opinion, not a complete trade. You still need a location, a confirmation rule, an invalidation condition, a realistic first target, and a contract whose risk you understand. You also need to know when the idea expires. A morning scenario can become irrelevant after a major announcement or a sustained change in price behavior. Keeping the original opinion does not keep the original evidence intact.
In Saints' approach, you read price alongside a map of reference levels and estimated positioning, meaning the contracts market participants are thought to hold. The map helps you organize questions. It does not answer them for you. Put Wall marks a price with heavy put-option positioning; a put has an expiration payoff when the underlying finishes below its specified exercise level. Expiration is when the contract ends. A reclaim means price moves back across a zone and holds there. If price approaches Put Wall, you ask whether selling slows and whether price can reclaim a nearby zone. You do not conclude that a decline must end because the line has a supportive name. The difference is observable behavior, not confidence in the label.
Trading and gambling are not separated by vocabulary
You can use technical terms and still make an impulsive bet. If you enter because the last price move was exciting, cannot state the possible loss, or change the exit whenever price moves against you, the process is not controlled. Calling that process a strategy does not improve it. A written plan makes your decisions inspectable. A consistent process makes it possible to identify which decision needs correcting.
Ask yourself whether you would take the same action if your previous trade had never happened. If the answer is no, you may be trying to repair your mood or recover a loss rather than respond to the market. You do not get a better opportunity because you are frustrated. You also do not earn permission to increase risk because a previous decision worked. Each new idea needs its own evidence and its own affordable risk.
Separate what happened from what you expect
A retest is a return to a previously tested zone. Rejection means price tests an area and moves away; acceptance means price holds beyond it rather than quickly returning. Rotation means movement back through a range or toward an average. Start your notes with an observation. For example: price tested a zone, returned above it, and held the next retest. Then write an interpretation: that behavior is consistent with rejection of lower prices. Only after that should you write a hypothesis: price could rotate toward the nearest average or reference level. Each sentence does a different job. Keeping them separate helps you notice when an expectation has outrun the evidence.
An illustrative example, using invented round levels and no actual market session: Put Wall is at 5,000 and a possible rotation target is at 5,020. Price briefly trades below the wall, then returns above it. You have observed a reclaim, but not necessarily a held retest. If your written rule requires that retest, you wait. If price instead accepts below the wall, the upward rotation idea has failed its condition. Neither outcome requires you to predict the entire day.
Make loss limits real before you need them
Set a fixed, small per-trade risk limit and a pre-set daily loss limit, with defined risk preferred. Defined risk means the position has a known maximum contractual loss when held as intended. These are ceilings, not recommended amounts to spend. Your circumstances may require much less risk or no live trading at all. A trade that appears attractive does not create an exception. Consider costs and the remaining daily allowance before entry, not after the position starts losing.
You also need to distinguish a chart exit from maximum financial loss. The premium is the price paid for an option. An underlying price level tells you where an idea is wrong. It does not tell you the exact option premium available when you exit. The bid-ask spread is the gap between quoted buying and selling prices; it can widen during a fast move. Slippage means an order executes at a different price from the one you expected. A stop is an order intended to trigger an exit at a specified condition; a fill is the price at which an order actually trades. If the position's possible loss is unaffordable without a perfect stop fill, the risk plan is not adequate. Choose a smaller defined-risk exposure or leave it alone.
Practice the decision, not the fantasy
For an initial exercise, observe one session and record only the nearest useful level, the current price state, and two conditional paths. One path should describe what would support the idea. The other should describe what would cancel it. Do not fill in missing information with assumptions. If the chart is stale, the opening history is incomplete, or the contract is unfamiliar, record that limitation and stop the exercise at observation.
At the end, review the notes you wrote before the movement happened. Did your confirmation actually appear? Did you recognize invalidation without changing its definition? Did you skip an idea with too little room to the next level? These questions teach more than drawing an entry on a completed chart. A finished session makes uncertainty look smaller than it was in real time. Preserve the original uncertainty instead of editing it out.
Finish the exercise by writing one specific improvement for the next session. Perhaps you need to wait for a retest, check the time on a quote, or notice a shrinking distance to the target sooner. Keep the original note beside the correction so you can distinguish what you saw at the time from what you learned afterward. Repeat the observation process before adding another setup.
Key takeaways
- A directional opinion is not a complete trading plan.
- Levels identify places to observe, not prices that must hold.
- Keep observation, interpretation, and the conditional idea separate.
- Treat your fixed, small per-trade limit and pre-set daily loss limit as ceilings, not quotas.
- Paper practice and no trade are valid choices.
Self-check questions and explanations
1. Price touches Put Wall. Does that satisfy a plan requiring a reclaim and held retest?
Answer: No. The required price behavior must occur; the label and touch are insufficient.
2. What is missing from the statement "SPX should rise"?
Answer: Location, confirmation, invalidation, target, timing, instrument details, and an affordable cash-risk plan.
3. Does a protective stop guarantee that your loss cannot exceed the intended amount?
Answer: No. Price jumps, spread changes, slippage, and execution failures can make the loss larger.
4. What should you do when you cannot verify the current session's data?
Answer: Wait and record the limitation rather than inventing a usable signal.