Cthulhu & Dragon Signals

Cthulhu

Cthulhu is the name of a swing trade algorithm. Developed with the intention of signaling to overall market weakness, Cthulhu has proven to be a highly effective algo that is able to catch great entries for call options. This is what the signals look like.

As you can see, the format of the signals are simple to follow. You have the ticker so you know the symbol of the asset you will trade. You have the price which signals the price of the asset at the time the alert came out. You have the order type which is always going to be calls for Cthulhu. Then you have a note that simply explains the algo detects the asset giving signs it could turn bullish.

How to trade Cthulhu signals

Trading Cthulhu is simple. I recommend buying At-The-Money option call contracts with a 4-week expiration call option contract. You can also buy $1 Out-The-Money 4-week expiration call option contracts as well. In the example above, a $1 OTM contract would be $171. Although not recommended to everyone, 2 week expiration contracts have proven to perfect incredibly well with these signals as well, so do consider trading those instead after a handful of successful trades.

Cthulhu signals also provide a quick economic calendar so traders are aware of important short-term economic events taking place that might affect their trades. For example, if on a Monday, Cthulhu signals to open calls on SPY and the economic calendar shows that the next day there is an important market catalyst like CPI or a Jerome Powell speech, it would be idea for members to exercise higher levels of risk-aversion and trade with lower amounts of money. It’s impossible to predict what can happen in important economic events and it’s better to trade with full conscience of the catalysts that could affect the trades.

Simulate & Trade always provides a screenshot of his trade order for Cthulhu signals. You can feel free to copy his own trade. Remember that just because the signal for entry came out, it does not mean you need to rush into the trade. Sometimes being a little patient pays off a lot better. The algorithm is looking at a wealth of information and looking at the market from a more distant standpoint, meaning that the price of the asset might go down even more from the moment the signal comes out. It is suggested that if you are buying multiple contracts, you spread out your entries with the intention of catching a nice average. If the price weakens, that could significantly help you get a better average on your contracts. If it starts showing signs of moving up, you might as well just buy all intended calls you want to have to get a full normal sized position according to your own risk parameters.

Cthulhu provides signals for you to assess when to exit out of the trade. They don’t necessarily mean fully exit out of your trade, but it generally implies that it’s a good spot to consider closing out a portion of your trade or the entire thing. The amount you decide to exit out is up to you. If you are trading only 1 contract, it’s recommended that you fully exit out. If you have multiple ones, it’s recommended you close some and then set a stop-loss order on the remaining contracts if you intend to continue holding. The assess signals look like the following format.

The strategy for trading Cthulhu signals is a bit complex. Traders are expected to allocate a specific amount of money they are willing to put in the trade. However, they will only use half of it to open the trade. The reason for that is that buying even more contracts when the price of the contracts goes down is ideal. Although this rarely happens, buying more contracts and averaging down as a result, can significantly boost profits. Let’s imagine that you allocate $2,000.00 for a Cthulhu trade. At open, you only buy contracts worth $1,000.00 in total cost(or close to it). Then, let’s assume the price goes down to 55%. It’s at that point where you want to spend the remaining $1,000.00. After that second purchase, you are to place a stop loss at 50% on the contracts, capping you maximum loss to $1,000.00. In all it’s time, Cthulhu has only ever had one bad trade, and about 2 or 3 times where traders were recommended to buy again to average down. 99% of the time, you only buy on the first signal and close at profits without having to buy more contracts. Simulate & Trade will always alert if and when he is buying more contracts. He will also tag everyone and inform when he fully exits out of Cthulhu trades. Again, you can just follow his trades, as he will always provide full guidance throughout the trade from open to closing.

Dragon

Dragon is another algorithm that also provides entries on swing trades for calls. The format of the alerts is pretty much the same. They look like this:

Dragon trades tend to last about 3-5 days on average. The format is pretty much the same as Cthulhu signals. Dragon only signals to call trades as well. There are some differences in how you pick contracts and how you assess trades.

How to trade Dragon signals

There are two ways in which you can trade Dragon signals. The safest way is to buy At-The-Money call option call contracts with 14 days until expiration. Dragon generally signals to expected movements in the short-term, so even though these are swings, don’t be surprised to find out that you might end up closing and taking profits on the same day, you opened the trade. The other way is to trade these is to buy call contracts with 7 days until expiration. These tend to be more profitable but carry more risk. I would suggest that if you elect to trade these, rather than fully opening a position upon a signal being issued, you rather buy half at first and then wait for a $1 to $2 dip on SPY’s price before buying the other half. This way, your full entry is averaged down and more like to be safer. The exit strategy is very simple. If you are trading the 14-day expiration contract, you are to assess and consider taking profits at $1.50 to $2.00. If you are trading the 7-day expiration contract, you are to consider assessing gains $1.25 up. On the example above, we see that Dragon signaled entries on calls for SPY when it was trading at $623.60. That means that traders with a 14-day expiration contract are to realize profits when the price of SPY reaches $625.60. If they have the 7-day expiration contract, they are to take profits at $624.60. If you are only trading one contract, you are to fully close your position. However, if you have multiple contracts, it is recommended you close a portion of them and assess if it makes sense to continue holding some of the position. Sometimes SPY moves a lot more than expected and if momentum and the direction is strong, then it might make sense to continue holding a portion of the contracts. If you elect to do this, set a stop-loss order above your average price so that if SPY reverses quickly, your position and profits are secured.

Dragon will not provide a signal telling you to assess your profits, so remember that you will have to be on top of things. Simulate & Trade provides a screenshot of his entries and exits. He is continually monitoring the trade and providing guidance to everyone. He will tag everyone when he opens his trade and when he closes his trade.

Similar to Cthulhu, the trading strategy relies on setting a specified amount of capital for the trade, but only using half of it when the first signal is placed. If the price of the trade hovers near or over 50% in a loss, you can spend the remaining initial half on it. However, unlike Cthulhu, this is option for Dragon trades. Simulate & Trade will provide guidance and signal if this is the right move to make or if its better to hold for a bounce or cut the trade and take a loss. Remember that the markets can turn volatile quickly and news might drop at any moment during a swing that might entirely affect the outlook of an open trade. This is why trading always has inherent risk. Dragon and Cthulhu have a success rate of over 98%, and traders generate between 10% and 30% in profits per trade on average according to polling. Don’t freak out if news drop and the price of your calls is affected more than you thought. Remember to trade the plan and strategy as intended. Simulate & Trade will always provide guidance on these trades and will alert to you if it’s better to hold, buy the other half or exit at a loss if the worse comes to be. This hasn’t happened yet, as Dragon has continued to prove itself incredibly reliant.