1

Copyright 2017 by John Carter.

Cover by Sarah Durkee.

Published in the United States of America by Simpler Trading.

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means,
electronic or mechanical, including photocopying, scanning, recording, or any information storage and
retrieval system, without permission in written form from Simpler Trading. Brief quotations for use in
reviews or other noncommercial use is permitted.

Ordering information:
Simpler Trading
4300 North Quinlan Park Road Austin, TX 78732 USA

2
Its not about being perfect or being right its about capturing the
opportunities being presented by the market, whatever they may be.
John Carter

A trader for over 20 years, John Carter, CEO of Simpler Trading, has a natural
knack for trading, and truly enjoys being a mentor and teacher. His strategy
combines technical analysis with an overall macro fundamental view, to identify
large directional plays as well as great moments to sell premium when market
conditions are on the slow side. He likes being in the trade before anyone else,
and uses his signature indicator the squeeze to
enter many of these plays. Johns trades
can generally be adjusted for those
looking for a more conservative take
on his aggressive plays. His setups,
market knowledge, and guidance to
continually improve yourself as a trader
is invaluable. He built this business and
this team because he truly loves inspiring
other traders, and its a passion he
wants to share.

John Carter
CEO Simpler Trading

3
Background, Rules, and Account Goals

To achieve aggressive growth, I target a 120% gain on my account per year. I break this
down to 2.3% growth per week, adjusting risk and position size each week for account
size. My primary goal is identifying high probability moments in time when I can
leverage options in a way to significantly grow my account while also paying myself on
a regular basis.

Overall Acceptable/Recommended Account Risk

My recommendations for position sizing are as follows:

New/conservative traders Dont risk more than 1-2% of your account per trade

Intermediate/conservative traders - Dont risk more than 2.5% of your

account per trade

Experienced/aggressive traders - Never allocate more than 5% of your

account on any one trade

For all traders - Dont have more than 20% of your account at risk at any given
time, which means sitting largely in cash

Dont have more positions than you can realistically handle.

My personal preference is to trade the positions I have rather than spread myself thin
on a large variety of setups. I prefer not to have more than 8 positions at a time.

Please note that I break my own risk parameters from time to time to achieve aggressive account growth,
but I dont recommend that others do that.

4
Psychology is Everything

To trade effectively, you must to have a calm

state of mind and a clear trading plan. You
are always going to be a slave to your emotions
and the underlying psychology. Its either
the weakest link, or the strongest link in your
plan to trade. The key--the absolute key-
- is to understand the relationship between
uncertainty and fear in your performance as a
trader. The real question for aspiring traders is
not Do I have a good setup? but Do I have all the
tools I need?

Another critical question for endeavoring

traders is Am I ready to commit to the emotional
lifting required to dive into my head and rebuild my
mind for trading?

As a trader you need to understand that stuff youve learned in other parts of your
life will simply not work with trading. Those non-trading life skills are guaranteed to
result in complete and utter disaster in trading. You really have to be committed to
moving through this barrier, to move from talking the talk to walking the walk. I always
recommend that traders print out the checklist below and place it on their desk or
wherever they do their trading for quick reference.

5
 01
10 SIGNS OF AN AVERAGE TRADER
You have no trading plan

02 You have no money

management rules

03 Youre prone to
emotional swings

04 Youre nervous when

in a trade

06 You revenge trade

07 You dont cut your

losses fast enough

08 You watch every tick

09 You never review

your trades

10 Youre LOSING MONEY!

6
We can gloss over all of our flaws in all other areas of our lives, except in trading. Its
scary when people who have been trading for six months or even a year email me to
declare Well, I dont really need the psychology stuff. I think, Oh my God! There
are few guarantees in life, but I guarantee that if you dont get the psychology stuff right,
its not maybe you wont be successful trading--its guaranteed you wont become a
consistent, successful trader. Ill take the opposite side of that trade all day long.

The key to the mental game of trading is to realize once and for all that uncertainty is
the rule. The market could care less if you are there or not. When youre getting ready
to make a trade, is your mind wrapped around the fear of uncertainty, rather than
the risk of uncertainty? This really is the big question. If youre focused on the fear
of uncertainty, youre going to start thinking fearfully, and youre going create fearful
solutions. Fear results in crappy entries. You want to wait until it feels good, right? And
what happens to a lot of traders is a very simple psychological cycle.

Highest Risk

Temporary setback. Im
Euphoria
a long-term investor.
Anxiety
Wow! I feel great Thrill
about this investment.
Denial
Excitement Fear

Depression Optimism
Optimism
Panic
Relief
Capitulation
Capitulation
Hope

Why would I make Despondence Depression

that mistake?

Highest Potential
for Earning

7
The markets coming down and you dont know and I dont know if thats going to
hold. If youre focused on the fear of uncertainty youre not going to take that trade
until you feel good about it. By the time you feel good about it, its too late. When
youre getting into a trade, the best thing that could be going through your brain is
that you feel bad. I know that sounds kind of crazy, but what I mean by that is going,
Gosh, this thing is not going to work. This thing could just keep on going. Thats the
time you want to get in, because thats what everybody else is thinking too. So man up
or woman up and face the uncertainty. You can always start off with small size. Thats
one of my strengths as a trader, being very comfortable with being uncomfortable.
Everybody wants to make money trading, but theyre naturally set up to lose.

The Most Important Short Squeeze of My Life in TSLA

Ive had a couple of big trades before, but not in one day like this. This trade was in mid
January of 2014. On that day, I woke up and I had two trades that werent doing well
and I got stopped out of both of them. And it was a million and a half dollar account.
Id lost $100,000. All right, thats not what I wanted, but Ive been doing this for a long
time so lets move onto the next trade idea. Everybody has their strengths and weaknesses
as a trader, right? One of my strengths is not hesitating when getting into a trade. Im
comfortable taking a little bit of heat when it looks like the trades going to work out, but
its important to remember that no matter how good the setup is, there is no certainty.

Im sitting there, now flat. I got stopped out of my positions. And I had noticed that
earlier in the day, Tesla (TSLA) was down $10. Then I suddenly noticed that it was up
$5. What the heck is going on? TSLA was down $10, now its up $5. So I checked
Twitter (TWTR) and Elon Musk made some announcement. Then I checked the short
interest. TSLA is like 40% at the time. If a lot of people are short--typically over 20%-
- then if you get a surprise announcement to the upside, theyre forced to cover. Plus,
there will be new fires so you can generally get these huge moves. I looked at the chart
and theres no real resistance; the prices were about $150 at this point and there was no
resistance until $170.

8
My Strategy

I bought 100 call options at $6 and TSLA continued to do well. In a $1,500,000

account, thats a small position. I kept adding as it goes to my favor and I reached the
point where I had 1,000 call options. Thats a pretty sizable position. I even bought
a bunch of stock, which at one point made the difference for me in that trade. So, Id
lost $100,000 that day but now, I was up about $300,000. So I was thinking, This is
an amazing trade! I was excited, this was great. Ive been trading for a long time and
would have been completely happy taking a profit there.

The Danger of Euphoria

The worst emotion of all is euphoria. And euphoria is way worse than greed. No
matter what we do, theres always going to be some days where we just kill it. Where we
just make so much money, we dont know what to do. We confuse having a great day
with our genius as traders, when in reality, it was just random currents. A random thing
happened, we made a lot of money, we are geniuses, and weve reached our next level
as traders.

Euphoria makes us overconfident and we start throwing out our trading rules and
doing more size. We start doubling up, we start tripling up, and we keep adding to
our positions. And my analogy for this is like, its like being in a fantastic relationship
with a significant other, and deciding to make our lives even better by starting to date
someone else as well. This will only end in one way. And thats very badly. So develop
a business plan, and stick to it just like I stuck to mine after a gut check moment. I
looked at my TSLA trade and thought this is not showing any signs of stopping.The
volume is pouring into this. But obviously, no stock goes up or down in a straight line.
So it started pulling back. And Im watching my profit that was up $300,000 dop to
$200,000 in 10 minutes..

9
Do I Stay Or Do I Go Now?

I was at that moment in time when every trader thinks, I dont want this to turn into
a losing trade, but oh my God, I think I see a lot of potential here. So I stepped
away from the computer and took a shower. I had to get away because I had stopped
thinking objectively. When I came back TSLA had gone a little bit lower and then
stabilized. I was back up to $300,000, so everything was looking good. I was at home,
and needed to get to the office which was about 20 minutes away at the time. So I
hopped in my car and started to drive. By the time I arrived, I was up $600,000 and
TSLA was running.

So now it had broke out again and rallied into the close. I sold half my position at the
close and held half overnight. The next morning, I was pleased to see that TSLA was
gapping up. I didnt know if this thing would gap and crap or not. The market was
set to open in a few minutes; the nightmare scenario would be that TSLA opens and
just sells off 20 points.

So essentially, at the open I dumped 90 percent of remaining position -- didnt want

to look a gift horse in the mouth. I could see the theo price on the options, and I knew
what the potential profit was on the
trade. I didnt want to be the greedy
little piggy and watch it all go away. So I
had to move very quickly. After the open
it was selling off, definitely some profit
taking going on. The market opened and
a lot of the option prices had a big jump.
Luckily, TLSA didnt fall off a cliff, I
started throwing some orders out there,
but I but I had to be careful because if
TSLA starts getting hammered, I didnt
want to be a dick for a tick here. I
wanted to get the hell out.

10
Looking back, you could say, Well gosh John, if you had been a little bit more patient,
you could have gotten a little bit better price for the options. But remember, we got
these for an average of around $6.70 and they were now trading for $23. Targets were
hit. I had 5000 shares and 500 options left. My Delta was 75000 per point and had
dropped to 30000 per point. This took the stress off. The stress of, Wow, I gapped up
10 bucks, this turned into a monster trade and thats when you can give it all back. So
Im out of about 90 percent of my position and left just a little bit in order just to trail
it... Ill have to say, it was pretty sweet.

The key is that the ducks were quacking

that morning, so we fed em. I did
trailing stops on the rest and looked
for the next set up. We had a little over
$1,000,000 in open profits the first day,
followed by another $590,000 and some FEED THE
change the following morning. Pretty
good work for a day and a half. DUCKS Carters
This is John
One thing that I know about myself is g, it is time
way of sayin
profits.
that I must be very careful after a big to take some
trade, to avoid getting euphoric and
thinking, Oh my God, Im the best
trader on the planet. Thats a serious
danger. So the last thing I did that day
was to place some more trades limiting myself to 10 contract trades. So 10 lots. And
thats to battle euphoria. I dont want to mistake the combination of skill and luck for
pure skill. With a trade like this, yes theres skill in identifying it. But theres also luck
that it actually went up $20 a share in the course of 24 hours. For the rest of that
week, I resisted getting too euphoric to avoid making an inflated ego type of mistake. I
concentrated on small trades, going back to the factory work.

11
Thinking Back on the Trade

The ability to sit on a winner is hard. Thats just training. Thats when you recognize,
Wow, this thing is moving, theres volume pouring in, every pullback is being bought,
where is this going to end? Sometimes there are moments in trading where all of your
training comes together. And TSLA was one of those times! You just hold on, and
youve got to have the guts to do it. It is hard. It is hard to hold onto those things.I love
the idea of having concentrated positions on something thats working. Especially when
something that everyone thinks should happen isnt happening.

Big Moves dont happen when a lot of people are right.The biggest moves happen
when a lot of people are wrong and they have to get out of that position. So with
TSLA, you had this reversal, a lot of people who were wrong and were forced to get out
of that position. You just recognize that and say to yourself, Well, these peoples pain is
for my benefit. Weve all been in positions where we keep to the pain, and its because
people are stubborn theyre going to keep holding on. If you can get on the opposite
side of that big things can happen. Instead of shotgunning and hoping for the best be
patient. Miss on things, but when it comes together, press it.

12
High Short Interest (Short Squeeze) Examples

With the market chopping around and trading at extensions, our traders here at
Simpler Trading have been focused on big moves in single securities one of their
favorites is high short interest stocks. What does that mean? It means there is an
unusually high number of traders shorting the stock and then when it becomes
evident they are wrong due to rising price, they start to panic. As price climbs further,
their stops get taken out, which only further accelerates the buying of the stock. As they
are forced to buy back their shorts (or cover), it causes a pop in price known as the
Short Squeeze. There are a lot of high short interest stocks, but which are the best to
buy? You must pick ones in which the shorts are forced to sell.

Having high quality setups in your arsenal is imperative, and knowing how to play them
properly is clearly critical to success, but you also must play them at the right time. You
want to buy stocks that have high short interest, are in an uptrend when the market is
also in an uptrend, where shorts are finally giving up. The most important part is that
the market must be in an overall uptrend.

Lets review a few recent examples that weve done in our trading room at Simpler
Options, and analyze the hows and whys behind the Short Squeeze so we can utilize it
properly next time the opportunity comes around.

SHORT SQUEEZE CANDIDATE RESTORATION HARDWARE (RH)

Lets look at the play we caught in RH as our case study. On May 2nd, Henry (our Vice
President at Simpler Options) and I identified RH as a good short interest play. We
utilized our scanner (www.simplertrading.com/scanner) to find these plays. Then you ask,
why did RH stand out? One look at this chart and it smelled like a short squeeze to me.

13
RESTORATION HARDWARE (RH) DAILY CHART MAY 2ND, 2017
It looked like a prime candidate for a short squeeze in the makin. It was trading near
highs not seen since the sharp decline in late 2015, had a daily and 195-minute squeeze,
had high short interest, and was making a run into earnings. Short squeezes get especially
amplified going into earnings when short sellers get nervous that the stock may have a
solid earnings report, further wrecking their short position, which causes them to exit
their position and buy. One look at the chart, and we bought 10 RH calls for $2.27; later
adding another 70 for $2.95. You have to love short interest because itll take a regular
trade and turn into an explosive trade.

RH DAILY CHART MAY 15TH, 2017 THE RESULT

Price popped from $48.50 at entry

to $60 before losing momentum.

Within a few days, the stock price saw the pop we were looking for, and RH traded
$10 higher, where we closed out half of our options at a double for $6.50, and the
remaining half at $9.70 triple on our money.

14
What else was required to make money on this trade? Patience. How many new traders
probably took profits once they were making money? Knowing how these plays act
allowed us to hold on until we tripled our options.

THE SQUEEZE + IBD 50 STOCK

Veeva Systems Inc (VEEV)

I love the squeeze and I like to combine it with a variety of other factors. I will combine
it with the triple squeeze, IBD 50 stocks, RAF signals, multiple squeezes on multiple
time frames, and high short interest stocks.

In this example, we had a daily squeeze combined with high short interest, on a stock
near all-time highs. This is also an IBD 50 stock, and it is near all-time highs on the
weekly chart. I like to play high probability, directional plays through long calls, so
my orders for this trade were as follows: BOT +40 VEEV 100 19 MAY 17 49 CALL
@4.60 PHLX. BOT +50 VEEV 100 19 May 17 50 CALL @2.60

I ended up taking profits on May 4th, where I expected VEEV to lose steam, after the
typical 8-10 bars the squeeze usually gives us. One thing I like to ask myself after a
trade is, What could I have done better? I certainly dont agonize over this, as Ive
come to realize you can make a nice living trading not being anywhere near perfect.
For losing trades, I also accept that 25% of the time stuff happens and there is
nothing you can do about it but position size correctly in the first place.

Im generally satisfied if I can catch 70% of a move. In the case of VEEV, although
I exited at my pre-determined target, I ended up leaving a lot of money on the table.
The $50 calls I sold at $4.35. Had I rolled them into the June option series, they traded
as high as $29.00 a mere 10 days later. That is a good problem, but it is a problem.

To put it in perspective had I sold all 50 calls at $29.00, my original $13,000

investment would have turned into $145,000. I would have made an additional profit
of $123,250.00 on the trade by doing nothing but holding onto a winning trade. This
begs the question, What can I do in the future to hold a potential winner like this longer?

15
Since I took this signal off the daily chart, I want to look at the daily for any signals I
missed that I should keep on hanging on. The squeeze technically never ended, as
it never hit two momentum loss bars in a row. But, in looking at the PSAR bars and
Early In and Out Bars - there are clearly losses of momentum. RAF? Sell signals all
over the place. But in looking through everything, here is what I narrowed down for
the future when I suspect we may have ourselves a healthy horse.

First, the TTM Trend bars on the daily chart never wavered. They stayed bullish
through the entire move.

Second, the Multiple Time Frame Analysis tool never wavered - which makes sense
since it is based on the TTM Trend. It is important to note that all the other higher
time frames (2 day, 3 day, 4 day and weekly) were also bullish. In other words, this was
a strong stock.

Third, the average daily volume stayed above its 50-day average during this entire
move. This is huge.

Last, this is something an IBD 50 stock is capable of. I would never expect this from
MSFT or HD.

The next time I get into a daily squeeze on an IBD 50 stock, or high short interest
stock for that matter, and the MTF is green across the board, I will hang onto at least
a portion of the position as long as the TTM Trend stays bullish and the volume stays
above its 50-period average.

16
The Conclusion

There will always be speculation about how long this rally will last but does it matter?
We can focus on the setups that we know work in the current market conditions, and
use those to make money. Of course, nothing works 100% of the time, but mastering
high probability trades within the right environment will give you your best shot. And
right now, that means utilizing the short squeeze.

By learning how our Simpler Trading experts identify and play these setups, you can
learn how to play them yourself. Come join us in our trading room (if you havent already),
and be on the lookout for the next short squeeze setup with us so you can learn the
nuances of the trade they arent all created equal! If you missed these plays, dont
worry the key is learning how to identify this pattern the next time it comes around,
so you can take part in the action.

Simpler Trading LLC

4300 North Quinlan Park Rd., Suite 120
Austin, TX 78642
512-266-8659

17