Good morning, traders…
I need three boxes checked before entering any setup.
You might be thinking, “Charts, Smart Money flow, and trading volume.”
Yes, but that’s not all…
Before I click buy, I write down three numbers.
These three numbers guide me once I’m in the trade.
When the first target hits, I take profit.
When the stop gets triggered, I cut it.
When the chart reaches my final target, I take my final profits.
The numbers are determined before entering. Once I’m in the trade, I stick to them.
Trading this way has kept me from turning winners into losers, from letting small losses become big ones, and from making emotional decisions when the price is moving slightly against my position.
If you’ve ever held a winning trade too long and watched it turn into a loss, or cut a position in panic only to watch it work without you … you’re making decisions in the moment instead of following a plan.
The three levels I’m about to show you solve that problem.
They tell you exactly when to take profit, when to cut losses, and when to exit completely.
These Are The 3 Levels That Define Every Trade I Take…
Level 1: Stop-Loss
Your stop losses should all be based around a similar absolute value.
I typically set my stop around 20% below my entry for options trades. Never more than 30% below my entry.
This gives the trade enough room to pull back slightly without stopping me out immediately, while protecting me from being down 50% or more if the trade goes against me fast.
If I’m buying calls at $2.00, my stop is usually around $1.60. That’s a 20% risk, or $0.40 per contract.
Knowing this number before I enter tells me how many contracts I can buy based on how much total capital I’m willing to risk on the trade.
Level 2: First Profit Target
This is where I scale out and take partial profit.
My first target is typically around 1:1 risk-reward. If I’m risking 20%, I’m looking to take profit at around 20% gain.
Using the same example: If I buy calls at $2.00 with a stop at $1.60, my first target is around $2.40. That’s $0.40 of risk for $0.40 of gain.
When the trade hits this level, I take profit on part of my position. No hesitation. The plan says take profit at $2.40, so that’s what I do.
This locks in a win and takes pressure off the rest of the position.
Level 3: Final Profit Target
This is where I exit the rest of the position.
The final target isn’t a straight calculation. I look at the chart.
If there’s clear resistance at a 2:1 risk-reward level, that becomes my final target. If the chart suggests the move could go further to a 3:1 or 5:1 level without major obstacles, I’ll set my target there.
Using the same example: if I buy at $2.00 with a stop at $1.60, my final target might be $2.80 (2:1), $3.20 (3:1), or $4.00 (5:1), depending on the chart structure.
The key is setting this before I enter based on chart levels, not hoping the trade goes higher once I’m in it.
Real Example: UAL Trade
Let me show you how these three levels played out in my recent win on United Airlines Holdings Inc. (NYSE: UAL).
The UAL chart was sitting near VWAP around $97.55 with enormous Smart Money flow coming in.
Strong chart, stronger options flow.
I bought the October 10 $103 Calls at $1.05.
Before I entered, I set my three levels:
Stop-loss: $0.85 (about 19% risk, just under my typical 20%)
First profit target: $1.26 (about 20% gain, roughly 1:1 risk-reward)
Final profit target: $2.00 (about 90% gain, close to 5:1 based on chart structure)
When it hit $1.26, I scaled out, locking in 20% on that portion.
Before long, it hit $1.50, so I scaled out more for 42% gains (and moved my stop up to $1.20).
The next morning, UAL gapped up more than 4% and my calls were trading beyond my price target at $2.85.
Sticking to the plan, I exited for 171% gains.*
How To Calculate Your 3 Levels
Before your next trade, determine these three levels:
Level 1: Set your stop-loss around 20% below your entry. Never more than 30%.
Level 2: Calculate your first profit target at roughly 1:1 risk-reward from your stop to your entry.
Level 3: Look at the chart for your final profit target. Find the next major resistance level, previous high, or where the pattern suggests the move could go.
If resistance is close, your target might be 2:1 or 3:1. If there’s clear room to run before hitting major levels, your target could be 5:1 or higher.
And speaking of your next trade…
Earnings season starts this week.
I’ll be relying on Earnings Edge — the system Mr. Anderson and I built using six years of backtested data across 850+ names.
It looks for repeatable patterns in post-earnings behavior backed by volume, sentiment, and historical setups.
And the results speak for themselves…
Mr. Anderson recently grew a small account from $3,000 to $32,000 in 52 days using our Earnings Edge system … despite 8 brutal market selloffs.*
TOMORROW at 2 p.m. … we’re revealing his NEXT CALCULATED EARNINGS MOVE FOR FREE.
Save Your Seat For Tomorrow’s Briefing BEFORE It’s Too Late.
Happy trading,
Ben Sturgill
*Past performance does not indicate future results
