Buy Baskets, Short Breaks, Trust The Close: How I Trade Late-Summer Markets With TradeZero

*Bob Iaccino, Chief Market Strategist and Co-Founder of Path Trading Partners, joins us live every Thursday from 11am ET, as our risk management educator. With 30 years' experience working as an active investor in equities, commodities, futures and FX there are few better to talk on the subject of risk management.

Bob has developed a method for breaking down his key fundamentals of risk management, in a way that he thinks retail traders can understand and use to get actionable insights to bring into their own trading. Below are some excerpts of Bob’s thoughts from a recent live session.

If you feel like the last week has been chaotic, keep perspective. Major equity benchmarks are only a few percent off all time highs. That does not qualify as a correction. What does stand out is the string of lower closes. Streaks like that are uncommon in an uptrend, and they usually happen in the late summer window that often underperforms. In my research, the weakest stretch often starts in the back half of August and runs into October’s options expiration. That does not mean you sell everything. It means you lean harder on your rules.

On my TradeZero charts, I keep a simple seasonality reminder in my watchlist notes, so I remember to size conservatively and tighten my plan. I also set platform alerts for lower-close streaks on the broad ETFs. A five-day sequence will ping me so I do not miss context while I am heads down in single-name setups.

Everyone loves to pick winners inside the so-called large-cap tech leadership group. Leadership rotates. Some names sprint while others catch their breath. Rather than trying to guess which two or three will be magnificent next month, I used a diversified vehicle that tracks that cluster of leaders. My goal was exposure to the theme without single-name risk.

How I did it:

• Trend structure: I use a “rotation zone” built from short and intermediate moving averages. When price pulls into that zone during an uptrend and then reclaims a best-fit trendline, I look to buy.
• Best-fit trendline: On TradeZero, I draw a diagonal that fits the majority of closes rather than forcing it through an emotional gap-bar. If a gap up immediately fails, I ignore that spike for the purpose of the line. That prevents a distorted angle.
• Trigger: A daily close back above the best-fit line. Not a mid-day poke. I create a Close Above Trendline alert in TradeZero so I only act if the candle finishes where I need it.
• Stop: I place my initial stop a bit below the most recent swing low, enforced on a closing basis. More on that in a moment.
• Position size: I use TradeZero’s order ticket with a fixed dollar risk. If the stop is 1.00 away, and I am willing to risk 800 dollars, I buy 800 shares. If the stop is 2.00, I buy 400 shares. Same risk, calmer mind.

Why the basket instead of a single name? Because some former stars in that group have been choppy, while a few others have been in clean, relentless trends. The basket lets me express the idea without betting my month on one ticker’s headline risk.

Intraday, emotions swing. Headlines hit. Wicks pierce levels and snap back. I have tested both intraday hard stops and end-of-day, close-based exits. In my equity swing book, the close matters most. When I say “exit on a close below X,” I mean a red candle that finishes below X. If a candle finishes green while below the level intraday, I wait for confirmation.

Two places this helps:

1. Avoiding fake breaks: Price often flushes a popular level and recovers by the close. A close-based rule keeps me from selling the low tick.
2. Capturing gap dynamics: Stocks gap. If your plan is written around closes, then gaps up through your targets often give you better exits than you modeled. Yes, the reverse can happen too. Over time, the distribution balances if your reward to risk and win rate are sound.

I make this practical in TradeZero by adding two alerts per setup: one intraday alert when price first touches my level, and a second that triggers five minutes before the closing auction if we are still below. That second alert is my decision moment.

There is a recent IPO that grew rapidly, built a horizontal shelf near a round number, bounced there multiple times, then finally closed below the shelf. Traders often say “it always bounces at X.” Be careful with always. Repeated tests usually make a level weaker, not stronger. Triple tests often resolve in continuation with the prevailing trend.

My plan on that IPO:

• Support box: I drew a TradeZero rectangle around the repeated shelf. I did not short inside the box. I waited for a full daily close below it.
• Entry: Short on the next pop back into the underside of the broken shelf. TradeZero’s Level II and time and sales helped me spot the lower high and weakening bids into that retest.
• Stop: Above the most recent failed rally high. If the shelf reclaim is real, I am wrong. Out.
• Targeting: I used simple measured levels from swing high to swing low to swing high, then projected the next extension down. If I risked 7 dollars per share, I wanted at least 7 dollars of potential. One to one is my floor. Two to one is better.

Because IPO can jump around, I reduced share size to keep the same dollar risk. TradeZero’s bracket orders let me stage a cover level and a disaster stop so I do not have to babysit every tick.

We had a string of compressing inside days in a retail name that had gapped and surged. Inside days can build triangles. Triangles are often continuation patterns, but the statistics favor outside days more clearly. My playbook is simple:

• I do not buy an inside day breakout in isolation. I pair it with a trend filter, like the rotation zone re-angling higher, or the eight-period average pushing price.
• I will use an inside-day high as an entry only if the bigger context is already bullish. Otherwise, I wait.

In TradeZero, I set a conditional stop entry above the inside day high with a protective stop staged below the inside day low. If the day never breaks, the order never triggers.

There is a fast-growing intersection between prediction markets and traditional derivatives. A major US derivatives exchange recently teamed up with a leading sportsbook operator to push into event-style contracts. The pairing surprised many because the exchange historically moved slowly on retail-friendly innovation, while sportsbooks thrive on consumer product design. What matters for us is not the logo. It is the signal. Retail participation and event-driven speculation are converging. That affects liquidity around catalysts, the shape of implied volatility, and the way news gets priced.

Practically, I add two things to my TradeZero routine during heavy event windows:

• Wider alert bands around catalyst hours, so I do not get faked by a one-minute headline spike.
• Options chain checks for skew and elevated implied volatility if I am using stock plus options overlays.

Here is my checklist that mirrors everything above:

• Chart setup: Moving average overlays for the rotation zone, best-fit trendlines, and a couple of horizontal boxes for support and resistance.
• Alerts: Close-above and close-below triggers, plus five-minutes-to-close reminders on key levels.
• Sizing: Fixed dollar risk using the order ticket calculator. Number of shares floats to keep risk constant.
• Orders: OCO brackets for entries that include profit targets and protective exits, so I am not forced into emotional mid-day choices.
• Journal: I log every trade in my TradeZero notes: why I got in, the close-based exit rule, and whether the target was at least one to one. Patterns repeat. Discipline compounds.

Markets will keep giving us streaks, gaps, and narratives. Your edge is not predicting them. Your edge is preparing for them.

This content (the “Content”) is produced by Bob Iaccino. The Content represents the views and opinions of Mr. Iaccino. Bob Iaccino is compensated by TradeZero for participating in Live Sessions and for broadcasting, displaying, and/or presenting marketing and sponsorship materials that promote TradeZero. Mr. Iaccino’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero is not responsible for and neither affirms nor endorses any of Mr. Iaccino’s views or opinions expressed in the Content. TradeZero makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security.

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