A pencil markup for invalidation, before ink

Hope has a handwriting. It is usually a trendline that was moved after the bar closed. We have all done it. The studio rule is unkind and useful: first pass in pencil, invalidation written as a sentence in the margin, ink only when the line has survived a full session of being looked at.

Invalidation is not a stop in the broker sense. We do not set prices for you. It is a statement of what would make the reading false. ‘If this low is taken on a closing basis, the pullback story is done.’ That sentence has to fit the bars, not the premium you already paid.

People who hold options hate this exercise because a void line can sit uncomfortably close to a strike they like. Good. The lesson is not to hide the line. The lesson is to notice that the option was expressing a location that the chart had already withdrawn.

Arthit’s private sessions spend the middle half hour on this and almost nothing else. Students sometimes ask for a second indicator to ‘confirm’ the void. We do not add one. Confirmation is often a way to negotiate with the sentence you already wrote.

Take last month’s charts and write the void you should have had, in pencil, without looking at what the option did. Then look. The embarrassment is the tuition. If you want that embarrassment in the room rather than at the kitchen table, bring the pages to a review hour.

Ask about a sitting if the note describes a habit you want in the room rather than on the page.