John Carter: Master Trader and Author of Mastering the Trade

John Carter, author of Mastering the Trade, has been a full-time trader since the 1990s. He is renowned for his structured approach to options trading and rigorous risk management, building a reputation for identifying high-probability trade setups and maintaining the right mindset during extreme market volatility.

His ability to adapt to changing markets and develop effective trading strategies has earned him deep respect within the trading community. Let's delve into his journey, trading philosophy, and core lessons.

"The market will open tomorrow. Be patient and wait for your setup." – John Carter

John Carter's Path to Trading

During my senior year of high school, I worked a minimum-wage job at a cookie shop in the mall. After saving up $1000, I came home one night to find my dad and his friends discussing Intel call options. I had no idea what "call options," "options," or even "Intel" were, but I was fascinated.

I invested my $1000 savings, and they helped me place a trade for 10 contracts. Weeks later, I got my $1000 back plus an $800 profit. I wasn't even sure how it worked, but I was hooked. I realized you could make money with ideas, not just manual labor.

This early success hooked John Carter on trading, leading him to spend years refining his strategies. However, his path wasn't smooth, marked by multiple boom-and-bust cycles. One significant setback saw him lose $150,000 just before buying a house.

This painful experience taught him the critical importance of risk management, a principle that later became the cornerstone of his entire trading strategy.

Key Early Lessons

• Risk Management is Paramount: Early mistakes taught him that structured risk control is essential.
• Market Presence is Key: Truly major opportunities only arise a few times a year; traders must be ready.
• Emotional Control is Crucial: Inspired by Mark Douglas's Trading in the Zone, he learned to remove emotion from trading decisions.

John Carter's Trading Strategy: The Squeeze

One of Carter's most well-known strategies is the "Squeeze" – a volatility-based pattern identifying price compression before a breakout. This allows traders to enter before significant moves, greatly improving success probability.

What is the Squeeze?
In options trading, a "Squeeze" refers to accelerated one-sided price movement caused by one side of the market being forced to cover positions.

The core concept is "low volatility breeds high volatility." When a stock consolidates sideways with price contracting into a narrow range, it's building energy. When released, price typically makes a strong directional move:

A "Squeeze" occurs when Bollinger Bands contract inside the Keltner Channels, signaling low volatility.

A red dot appears on Carter's "Squeeze Indicator," signaling a high-probability setup.

Momentum indicators help determine the breakout direction (up or down).

When Bollinger Bands expand and the Squeeze "triggers," price usually explodes rapidly in one direction.

Identifying Optimal Squeeze Setups

Not all Squeezes are tradable. John Carter filters for high-probability setups using multiple factors:

Price above (bullish) or below (bearish) the 21-day EMA.

Bullish EMA stack (8 > 21 > 34 > 55 > 89 EMAs for bullish).

Momentum histogram turning in the anticipated direction.

Squeeze showing 5-8 consecutive red dots (indicating sufficient energy buildup).

Stock showing clear relative strength versus the broader market.

How John Carter Trades the Squeeze

Carter avoids chasing breakouts, instead entering before the move starts. This aids risk management and captures asymmetric reward opportunities.

• Best Entry: Buy during the Squeeze when price pulls back to the 21-day EMA.
• Entry Confirmation: Momentum shifting towards the expected breakout direction signals entry.
• Secondary Entry: Enter after the Squeeze triggers on a pullback to the breakout level.

Placing limit orders near the 21-day EMA before the trigger requires strong conviction and tight stops. This "early entry" offers maximum profit potential with lower risk. Waiting for the first strong momentum bar to close is safer but may miss part of the larger move.

Profit-Taking Strategy:

Carter typically scales out of positions as the move progresses.

• First Target: +2 ATR (Average True Range).
• Second Target: +3 ATR, take partial profits.
• Final Target: Hold a portion for a larger move.

If the Squeeze fails to trigger or momentum weakens, he exits early to limit losses.

John Carter's Classic Trade Examples

Carter has executed many impressive large-scale trades. Three stand out for their significant profits, excellent risk management, and precise execution.

Tesla Motors, Inc.(TSLA.US)  – The $14 Million Trade (2020):

Background: TSLA consolidated after a strong rally. Carter identified a daily chart Squeeze signaling an imminent breakout, backed by strong momentum and a bullish EMA stack.

Execution: Used deep-in-the-money calls for leverage and long call spreads to reduce risk/optimize returns. Strict risk controls were maintained despite large size.

Result: TSLA surged as expected. Carter scaled out positions, securing over $14 million in profit.

Amazon.com, Inc.(AMZN.US)  – Post-Earnings Squeeze (2018):

Background: AMZN reported strong earnings but didn't rally immediately. A clear 30-minute chart Squeeze signaled an impending breakout. Implied volatility remained high.

Execution: Sold put credit spreads to capitalize on the potential upside while collecting premium and controlling downside risk. Defined risk; stop placed below breakout level.

Result: AMZN broke out strongly. Carter closed within days for a six-figure profit.

Netflix, Inc.(NFLX.US)  – Capturing a Major Reversal (2019):

Background: NFLX was in a strong downtrend near key support. Carter detected institutional buying via volume surges. A 4-hour chart Squeeze signaled a potential reversal.

Execution: Bought calls anticipating a bounce. Used small size due to the counter-trend nature. Stop placed below support.

Result: NFLX rebounded sharply. Carter scaled out as price rose, netting over $500,000 in days.

How Carter Manages Trading Risk

John Carter is known for calculated risk-taking while protecting capital. He understands risk is unavoidable, but controlling it separates successful traders from those who blow up.

His risk management includes position sizing, portfolio hedging, trailing stops, and scaling out.

Risk Management Principles:

• Position Sizing: Risk 5% per trade; up to 10% for exceptional (A+) setups.
• Portfolio Hedging: Buy SPX put options to hedge long positions.
• Trailing Stops: Exit if the trade thesis breaks down, even at a loss.
• Scaling Out: Reduce risk exposure by taking partial profits.

💡 Key Lesson: Never Bet the Farm

Carter nearly lost everything betting his entire capital on one options play before a major event. Since then, he never stakes everything on a single outcome.

By following these principles, Carter survives long-term to capitalize on the best opportunities.

Trading Volatility Like a Pro

John Carter excels in volatile markets where large price swings create significant opportunities. High reward accompanies high risk; Carter cautions traders to manage volatility, avoiding emotional decisions and large losses.

Managed well, volatility brings substantial returns; unmanaged, it can destroy accounts. Carter employs specific strategies to stay disciplined, protect profits, and profit from large price movements.

Surviving the 2020 Post-Pandemic Frenzy
In 2020, Carter's account soared with aggressive Tesla trades, but his equity curve was highly volatile – up 300% one month, down 33% the next.

To manage volatility, he:

• Maintained Neutral Mindset: Didn't let profits/losses affect emotions.
• Withdrew Profits Regularly: Prevented overtrading and secured long-term gains.
• Used Multiple Accounts: One for aggressive trading, another for passive investing.

For traders navigating unpredictable markets, these strategies help turn chaos into opportunity while protecting capital for long-term growth.

Conclusion

John Carter's experience offers valuable lessons for traders at all levels. He consistently emphasizes that mindset is key: the market constantly tests discipline; staying calm and avoiding emotion is vital. He advocates risking small to win big, controlling position size, using hedges, and avoiding wipeouts from single mistakes.

He also reminds traders to stick to their plan, not be swayed by momentary emotions. Markets cycle; extreme events like 2020 are rare, but high-probability opportunities arise yearly – patience is crucial. Finally, remember to regularly book profits; trading isn't a game; making money is the ultimate goal.