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The J.E.D.I. Way

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THE J.E.D.I. WAY

Hello everyone. My name is Patrice V. Johnson. And I welcome you all to my newsletter.

Before I get down to the nuts and bolts of my trading system, I would like to begin by providing all of you with some background information about myself, my education, etc. I think this background information is important to establish a rapport with you, my readers, before you begin reading my newsletter which I will get to you each week, every Sunday, before the next trading day.

BACKGROUND

First, I have always been somewhat of an adventurer, possessing an inner need to look deeply into things and have always been fascinated with how people thought, and acted and how things worked. I have always been perceived to be a little “different” with an almost stubborn need to be independent, to take the road less traveled, and to create my own wealth through my own independent efforts. When I discovered the Stock Markets, though, through my High School, that was it! I had found my true calling. My High School offered business oriented courses to prepare me for future careers in marketing, banking, finance, human resources, information systems, economics, computer science, taxation, law and the secretarial fields as well as academic preparation required for college.

MY MENTORS

While in High School, I had the opportunity to work with Mentors in the field of Securities and Finance (which was my High School major), Money and Banking, Marketing, Accounting, Law, Taxation, Computer Information Systems and in the Secretarial Field to name just a few. I was also the Editor of my High School’s first Newspaper and selected to be an Ambassador for New York City while overseas in Tokyo. I also had Mentors when I did Internships outside of High School mostly in the field of Marketing, Research, Accounting, and Law.

STOCKS AND MUTUAL FUNDS

I began trading stocks since I was in High School (on paper only, at first). Soon after my High School graduating class (Class of ‘93) competed and won the Stock Market Challenge against all participating high schools in New York City (including Styvesant High School), I began trading stocks and investing in mutual funds with real money that I earned from my internships and other work programs that I participated through my High School and through the City and State of New York and the Government.

COLLEGE - “MY FRESHMAN YEAR”

My professor said, “Patrice, that paper you wrote about establishing a mutual fund was phenomenal. You should start an investment club and get all of the students of the college to participate in it.” Unfortunately, I was so busy working to pay my tuition, and studying to keep my grades up that I was unable to make this a reality. And grants were very difficult to come by. Having my own stock, options, futures, and mutual fund trading company with a newsletter service has always been of interest to me. .J.E.D.I. Funds....J.E.D.I. Capital Trading, LLC. These are just some of the names that I continue to ponder for the companies I hope to establish someday.

OPTIONS, FUTURES, AND OPTIONS ON FUTURES

When I returned from my overseas trip as an exchange student which included visiting all of the stock and options exchanges in Tokyo (including the Topix Options Exchange), I went to college and while in College, I started trading futures on paper, as was required by the professor in an Introductory Futures Trading Course that I was taking to meet my graduation requirement for my College major - Finance and Investments. Then I began to trade options, futures, and options on futures with real money after I completed an Introductory College Course to Derivatives in my Senior year in College. I had to pass this course too before graduating from college.

THE OPTIONS INDUSTRY COUNCIL

Not satisfied with my performance with my real money, though, I began networking outside of my educational institutions and began establishing relationships with various organizations, and attending seminars and classes through these organizations which led me to do additional research online and at libraries as I was determined that I was going to beat the odds and increase my success in trading stocks, options, futures, and options on futures. Trading the markets was going to be my second source of income to my present day job.

While networking, while I was in college, an opportunity was extended to me by The Options Industry Council to join specialists and market makers as a “Trader-for-a-Day” in a lively, true-to- life Mock Trading Session on the trading floor of the American Stock Exchange to get into the heart of the options market - buying and selling options with the pros!. I was told that I was selected from thousands of individuals in the United States to participate in this Mock Trading Session. About 100 other individuals from all over the United States participated in this Mock Trading Session as well, on the floor of the American Stock Exchange (AMEX). We were all given a tour of the American Stock Exchange (AMEX) and attended a how-to-trade seminar, learned first-hand what happens to an option order once it leaves the broker’s desk, met with professional options traders at a special reception, and traded options on stocks for a day on the floor of the AMEX. I traded options on IBM stock that day.

THE LEARNING CURVE

And it was through these experiences that I was able to overcome a number of learning curves.

PRICE FORECASTING, TRADING TACTICS, AND MONEY MANAGEMENT

First, I learned that to increase the odds of survival to reach the long run, I need to be able do the following three things successfully:

1. Forecast Price (Determining which ways the market is expected to trend),
2. Tactical Trading (Determining specific entry and exit points) and
3. Manage Money (Determine how much funds I should I commit to the trade, portfolio makeup, diversification, the use of stops, reward to risk ratios, whether to trade conservatively or aggressively, and what to do after periods of success or adversity).

Second, I learned that trading should be approached as if you are running a business. And business is the effective management of cash flow. Because you happen to be managing a trading company.

Third, I learned that the trend is your friend. And it is important to trade in the direction of the trend.

MY NEWSLETTER SERVICE

Now, I would like to take the next couple of minutes or so to get down to the business of telling you what you can expect from my newsletter service.

WHAT TO EXPECT FROM MY NEWSLETTER SERVICE

• THE GENERAL TREND OF THE MARKET

  Each week, every Sunday, before the next trading day, I will begin by posting what I have determined to be the general trend of the market. I will state that the general trend (or long term or intermediate term trend) of the market is either UP, DOWN, or SIDEWAYS. For example:

  General trend of the market: DOWN     UP     SIDEWAYS

• STOCK OR FUTURE (INDEX, ENERGY, INTEREST RATE, CURRENCY, METAL, LIVESTOCK, GRAIN, or FOOD & FIBER) UNDER ANALYSIS

  I will then let you know which stock or future I will be analyzing for trading for the newsletter service and provide you with the last closing price for that stock or future. For Example:

  Stock Under Analysis:	NDAQ	Last Closing Price: $
  Future Under Analysis:	Mini Dow Index	Last Closing Price: $

• TECHNICAL ANALYSIS

  I will utilize the method of Technical Analysis for the stock or future under analysis.

  The purpose of providing you with my technical analysis of the stock or future under analysis is to inform you of what is actually happening in the stock or future.

  Technical analysis is the study of market action (price, volume, open interest), primarily through the use of charts for the purpose of forecasting future prices trends.

  For the purpose of my newsletter, I will include daily, weekly, and monthly charts of the stock or futures under analysis as a way of presenting my Technical Analysis (the bullish or bearish psychology) of the stock or futures under my analysis as well as for the purpose trading the stock, options on stock, or options on futures under analysis.

• FUNDAMENTAL ANALYSIS

  To make you aware of what ought to happen with the stock or future under analysis, I will provide you with fundamental analysis for the stock or future under analysis.

  Fundamental analysis is the study of the cause of market movement.

  Fundamental analysis examines all of the relevant factors affecting the price of a stock or futures in order to determine the intrinsic value of that stock or future. The intrinsic value is what the fundamentals indicate that the stock or future is worth based on the law of supply and demand. If this intrinsic value is under the current market price, then the stock or future is overpriced and should be sold. If market prices is below the intrinsic value, then the market is undervalued and should be bought.

  If fundamental analysis data is not available for the stock or future under analysis. I will state “N/A” for this field.

WHICH IS MORE IMPORTANT - TECHNICAL ANALYSIS OR FUNDAMENTAL ANALYSIS?

Both Technical Analysis and Fundamental Analysis approaches to market forecasting attempt to solve the same problem, that is, to determine the direction that prices are likely to move. They just approach them from different directions. The fundamental factors suggest what ought to happen in the market, while the technical factors suggest what is actually happening in the market. It is therefore, the more important of the two angles for the trader.

• FREQUENCY OF MY ALERTS

  I will get you my newsletter each week, every Sunday, before the next trading day. An alert will be sent thereafter if I have an update for you (For example: If I think you should pyramid (add positions), take profits, or cut losses short)

• WHAT I PLAN ON TRADING FOR MY NEWSLETTER SERVICE

  For my newsletter service, I plan on trading stock and options on the Nasdaq Stock Market, Inc. (NDAQ). I will also be trading Options on Futures primarily on the 30 Day Fed Funds (FF), and the Mini Dow Index (YM), because of their low initial margin requirements for their futures, their options are American Style, and primarily because the options on futures for these markets are cash settled. I may also trade Options on Futures on the U.S. Dollar Index (DX) for this newsletter. Keep in mind though that that U.S. Dollar physically settles as opposed to cash settles. And I plan to exit the options on the U.S. Dollar Index Futures before it physically settles.

• WHY PURCHASE AN OPTION INSTEAD OF A FUTURES CONTRACT?

  The basic advantage of purchasing an option on a futures contract as opposed to the futures itself is limited risk. When a trader takes a position in the futures market, initial margin money is required. The margin is relatively small and is usually only about 5% of the value of the futures contract. If the market moves against the trader’s position, however, more margin money is required to hold onto the position. In a fast moving market, the trader can lose more than the initial margin deposit. In options trading, however, the trader is required to pay a premium to purchase the option. The size of the premium is determined on the floor of the exchange. That premium is the maximum amount the trader can lose if the market does not move as expected. If the market does trend as expected, the option holder still has unlimited profit potential (minus the premium cost.)

  For the reasons mentioned above, I plan on trading options on futures for my newsletter when I want to participate in the price movement of the futures markets.

• WHO WOULD THIS NEWSLETTER SERVICE BE GOOD FOR?

  This newsletter would be good for anyone who has an interest in trading stocks, option on stocks, and options on futures markets but whom do not have a technical, and/or fundamental method or any particular strategy for that matter for trading stocks, options, and options on futures.

• HOW MUCH MONEY DO I NEED TO HAVE TO FOLLOW MY TRADES

  Since trading involves the risk of loss, I highly recommend the use of “Discretionary Income” and “At Risk Income” to follow my trades.

  Discretionary Income is spendable income remaining after the purchase of physical necessities, such as food, clothing, and shelter, as well as the payment of taxes.

  At Risk Income is the amount that you are willing to lose out of your Discretionary Income.

  If you plan on following my trades on NDAQ, you would need at least $5000.00 of “Discretionary Income” and “At Risk Income”.

  If you plan on following my options on futures trades on the Mini Dow Index, U.S. Dollar Index or 30 Day Fed Funds, you would need at least $5,000.00 of “Discretionary Income” and “At Risk Income.”

  If you plan on following my trades for both NDAQ, and Options on Futures on the U.S. Dollar Index or 30 Day Fed Funds or the Mini Dow Index, you would need at least a total of $10,000.00 of “Discretionary Income” and “At Risk Income” - $5000.00 to trade the stock market and $5000.00 to trade the options on futures market.

• WHAT BROKERS CAN YOU USE?

  I love using E*Trade Financial for executing my online stock, option, and mutual fund orders as well as for my handling my banking needs. They offer great interest rates on your funds. You can check them out at http://www.etrade.com. But you may use another broker if you wish.

  I love using optionsXpress for executing my online options on futures orders, but you may use another broker if you wish.

• DO YOU NEED A SPECIAL TRADING ACCOUNT

  In a nutshell, you will need the following trading accounts:

  1. A brokerage account that will allow you to trade stocks as well as option on stocks. Ask for an “option approval level of 3”. This will allow you to do Covered Calls, Covered Puts, Credit Spreads, and Debit Spreads. I love E*Trade Financial for this.
  2. A futures account that will allow you to trade options on futures. I love OptionsXpress for this.

DISCLAIMER

The information contained in this report and future reports and newsletters contain independent analyses, statements, opinions, beliefs, and strategies that are mine and not those of the company and is made available to anyone interested in my analyses, statements, opinions, beliefs, and strategies made on a stock or future. I do not represent that the information, analyses, statements, opinions, beliefs, and strategies contained in this report or future reports and newsletters are accurate or complete. And since trading stocks and options on futures involve risk of loss, I highly recommended that you seek the expertise of a professional investment advisor, professional tax consultant and/or broker before acting on any analyses, statements, opinions, beliefs, and strategies contained in this report or in future reports and newsletters of mine for any stock or future. The analyses, statements, information, opinions, beliefs, and strategies contained in this report is not a recommendation to buy, sell, or hold any stock or future. Nor are the statements, analysis, information, opinions, beliefs, and strategies contained in this report or in future reports and newsletters an offer for any stock or futures or solicit the offer of any stock or futures of any company. I will trade securities of the companies on which I report during the term of engagement. I assume no responsibility for your trading and investment results. You assume all responsibility for your trading and investment results.

This is The J.E.D.I. Way. Until next time.......the force (volatility) be with you.

Good night!

Very truly yours,

Patrice V. Johnson

How Do We Do It?

We have an internal system that produces either a buy or sell mode. Once a mode is established, we then issue an e-mail for you to take action specifying the exact options we are going for together with the minimum net credit to attain. This will involve you either manually placing a buy order for the bought option first and then a sell order for the sold option, or you can simply place an order requesting a net credit and allow the market to come to you.

We’ve found that it is possible to get a higher premium by doing the orders separately. There is, however, the possibility of also getting a lower premium, and there is also a level of stress involved in doing it this way, which is why we don’t recommend this style. Our preferred method is to simply request a net credit and forget about it. Occasionally, we won't get our trade and, in these cases, another e-mail will be sent the day after with a new suggestion.

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The J.E.D.I. Way, by Patrice Johnson, is brought to you by Stock Barometer. For customer service or subscription questions, it’s best that you e-mail us directly at CustomerSupport@StockBarometer.com.

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For questions regarding the editorial content of The J.E.D.I. Way, please e-mail Patrice Johnson directly at Patrice@StockBarometer.com.

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Regards,

Patrice Johnson