You see, after a little while of watching these guys they get predictable, but first you have to get over the learning and unlearning curve to understand the game.
I any case, 3C 1 min is headed back into leading negative divergences. If anyone is an avid blog reader, I'd like to know what the early sentiment was today-in other words, were the bulls out buying on the gap in blogland?
On another note. UUP -the dollar has quite a few leading positive divergences, as I said last night I think (I write a lot-here and emails) it appears the dollar's pullback is ending, this alone will drive oil prices lower.
USO is showing a multitude of negative divergences so whether the Inventories report on Wednesday is bullish or bearish, I think a downtrend is about to be re-established, today's head fake in USO as well is another sign of the probability of that outcome and while we are up here on this gap, it may be a decent place to add oil related ETFs-on your short list. Or to buy the inverse ETFS.
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Risk Management
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3C Quick Start
Many of the charts you see here at WOWS are my proprietary indicator 3C which reveals underlying institutional money movements and often contradicts price. To understand the annotations made on charts, you must first understand that 3C has no numerical value, it is a pure divergence indicator. Positive divergences represent accumulation by smart money, negative divergences represent distribution by smart money and when 3C trades with price, that is trend confirmation.
The chart annotation system is simple; white arrows represent relative positive divergences, red arrows represent relative negative divergences and green arrows represent trend confirmation. When 3C is in a white or red box, that represents a leading positive or negative divergence, leading divergences are the most powerful.
We analyse 3C in multiple timeframes, the longer the timeframe the stronger the accumulation. 1-2 min timeframes represent intraday moves, a 5 min timeframe can represent a day or two and 15 min timeframes average trends of a swing trade nature. 30 and 60 min charts can move the market for a month or more and daily charts can be over a year.
You'll get use to seeing the charts and understanding how the multiple timeframe analysis works and works well.
Welcome to Wolf on Wall Street.
The trades featured here are meant to maximize returns with the least risk and highest probabilities. Unless otherwise mentioned, all trades are meant to be executed at market. I prefer long-term trending trades which perform well in rising markets, but really stand out in declining markets. However, we get occasional one day gifts 30,40,60% 1-day gains. I'd urge you to consider taking some or all off the table in such cases, the markets don't give gifts like that often or for very long. Most of the returns that make the system outperform so well come in short-entry trades. If you are opposed to short trades, this is not the system for you, unless you are ok with buying an inverse ETF. If you would like more information about the truth about shorting stocks, just email me.
Risk management. I recommend a specific and consistent risk management approach to all positions. In most cases we try for 2% risk money (2% of portfolio) unless such a position size exceeds 15-20% of overall portfolio in actual position size. Each trader is different and each has a different allowance of open trades. I like to keep the overall money in the trade around 10-15% of portfolio per position in case of gaps against you. Stops are generally executed at the end of day and I personally never place a stop order, all my stops are mental; remember, the middle man gets to see everyone's cards. When you are not in tune with the market or opportunities just aren't that spectacular, I take my risk per position down to 1% or even half a percent of portfolio value.
Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.
Risk management. I recommend a specific and consistent risk management approach to all positions. In most cases we try for 2% risk money (2% of portfolio) unless such a position size exceeds 15-20% of overall portfolio in actual position size. Each trader is different and each has a different allowance of open trades. I like to keep the overall money in the trade around 10-15% of portfolio per position in case of gaps against you. Stops are generally executed at the end of day and I personally never place a stop order, all my stops are mental; remember, the middle man gets to see everyone's cards. When you are not in tune with the market or opportunities just aren't that spectacular, I take my risk per position down to 1% or even half a percent of portfolio value.
Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.
I do use other scans and systems when market conditions warrant their use and may change strategy with market conditions.
The MOST IMPORTANT tool you have to bring you long term success is RISK MANAGEMENT. There are plenty of articles linked at Trade-Guild.net on Risk Management. We can be wrong 75% of the time and still outperform the market with solid, consistent risk management.
Position Sizing
The position sizes noted in the positions @ 2% risk of portfolio are based on a $20,000 portfolio-adjust as needed. Due to tight stops, there is the possibility, even probability that one position could take up the entire portfolio. You need to decide how many positions you want to trade and reduce the position size according to that. For instance, if you want to trade 5 positions in a $20,000 portfolio, no one position should be valued at more than $4,000-not risk money or 2% rule, but share price entry x shares.
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Futures Update BR-EXIT Edition - So the conventional wisdom couldn't have been more wrong. Those chasing risk and closing hedges couldn't be in a worse place right now. I would still remin...8 years ago
8 comments:
Hi Brandt,
When you get chance can you run 3C over the FTSE to see if a collapse there is imminent also, seems very overheated to me?
http://stockcharts.com/h-sc/ui?s=%24FTSE
For some reason the FTSE has faired better than the US indices recently, it didn't dip so low on the last leg down, and is now at the same price it was at the start of May. It's even risen as the GBP has risen.
looks like we are starting to get our end of the day run up on the t-bill purchases by the FED. The money has to go somewhere and on a day like today, they were probably itching to get this money into the market.
Looks like the dollar is trying to gain on the euro, maybe the signal we are waiting for.
Jack,
What's the logic behind the FED pumping the money from the t-bill purchases into the market, if the market is about to fall off a cliff, why would they do that?
I'm not so sure that it is the FED. The Fed is going out into the open market and offering to buy T-Bills that have already been sold through prior auctions. They do this to keep rates down on longer term notes and provide more liquidity in the market place. They are hoping that this money from what they purchase goes into either stocks or additional future t-bill auctions would be my guess. This may be working directly into our hands, as it is providing the additonal capital to run this market up. I believe there has been reverse purchases by the FED for over a month now about every few days. Just enough timing to keep something going into the market.
Ironically the bond market is rallying today, which is not what one would expect on the verge of a bull run. The bond market is naturally much more risk adverse and tends to take profits quicker, the fact that they don't believe all the paositive news should tell us something.
Jack,
Looks like there is going to be even more propping up of the market in the coming days and weeks, no?
http://www.zerohedge.com/article/primary-dealers-prepare-invest-27-billion-fed-money-levered-30x-over-next-month-buy-high-bet
I don't have any access to intraday data on the FTSE, but the daily is showing some relative negative divergences, but the intrday data is more important to see what may be changing quickly
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