We've had some very large red spikes this morning in volume, it's strange to see it occur mid-morning, heavy volume on the open is to be expected with limit orders and such being filled, but these are standing out as if some mid-level firm not connected to the boys club, is dumping in a dramatic way.
GLD will be an interesting trade to watch this a.m., don't just discount it as bullish on this gap up, the most wicked reversal starts with a big gap up.
UUP also saw interesting volume this a.m. and thus far refuses to make a lower low on what is already increasing volume.
Some interesting things that are out of character are afoot.
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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
12 comments:
Whose buying is the big question and if it is the FED, and not the big boys playing the market; I am very concerned that we may be see this manipulation play out till the election. Does 3C take that long to play out? I wouldn't think so, but if the FED is playing us; who knows. This feels alot like last fall. I trust what the indicator is suppose to do, but I don't rust our Gov't not to get in the way.
on a stock, no. An index, yes it can take awhile, but the levels it's at are what I see near the end or at the end.
I may sound negative, but read that more as frustration. I've been trying to keep my finger off the unload button as I am at my risk level. Knowing we are probably close, is the only thing that keeps me going in the direction. Let's hope this doesn't keep derailing our position.
NEW YORK (MarketWatch) -- The Federal Reserve Bank of New York purchased $1.379 billion in Treasury debt maturing from 2012 to 2013 on Thursday, part of officials' pledge to reinvest cash from maturing mortgage-backed securities and housing agency debt back into the bond market to support the economic recovery. Dealers offered to sell the Fed $30.162 billion in debt. After the results, the broader bond market remained lower, pushing yields up. Yields on benchmark 10-year notes , which move inversely to prices, rose 4 basis points to 2.76%.
Just came across the wire, hope that money has already reached the market this morning. I find it interesting that the PD's wanted to sell $30 billion and only $1.3 billion was purchased. They could of purchased up to $3 billion if you were to figure the total to be purchased over the next month divided by the 9 reverse auctions. Some say their is a lot of dissent in the FED and myabe the inflation #'s this morning are making them rethink their positions.
I hear you Jack, that's why I've posted some short term poppers. However, it takes tie for a top to unfold. Looking back you can see it on past charts, but past charts can't account for the emotional feelings of sitting there 12 hours a day for each bar. However if you look back to former declines, especially the 2007-2008 period, you'll see there's nothing too unusual about what we are seeing.
Agree, Top will take time but as we have seen with C3 longer time frame divergence will eventualy have the market follow their lead.
That's one thing I can say Q.S. this indicator has the least failures of any I've seen, short term divergences aren't big investments, they are easy to run over, but the longer ones like I've posted recently are pretty darn solid. I need to write more about it so people better understand. What we are doing here is very unique and it probably requires a different approach in everything. Maybe this weekend.
I agree. One thing to consider though is the use of our tripple inverse core ETFs. These get killed from slippage and have been hurt bad even though the market down. It is something to keep in mind when buying. If you held these as your core shorts from your recommendation back in June you are hurting badly right now.
Agreed, and if I can help to create a system to get a better timing let me know. It might be a combination of a couple different indicators.
Q.S. Yes, however I've also mentioned their problems many times (leverage+compounding+volatile choppy markets=losses) and the benefits and problems of real shorts. I recommend a mix and 25% cash to play bounces and hedge.
There's two guys I advise, one has significantly more in the market and the other has about 60k, the one with over 350k has been holding a lot (more then I'd like) inverse like FAZ, EDZ, etc. We do see about 20+k drawdown on a rally like this, but on the declines we're always back in the green. We need the break to really make $. However you do raise a good point. We have an awesome edge, but it's a totally different method of trading and I think I've not spent enough time thinking through the optimization of entries, exits, position sizes-I have thought about the stops and risk management, but I suspect (as it's kind of the boring part of trading) that a lot of people in general don't have a comprehensive risk management plan and no matter what edge 3C gives, there's nothing in the market that is more important then R.M.
Remember during the oil rally that young 33 year old trader who was the wizard of oil, making huge trades and huge profits, then he took his entire company down with some bad trades. It turned out he used no risk management and the company had no risk management oversight department. From wizard to poster child for the "fall from grace"
All great points and something to def think about!
Yes, we are not retail investors, we are acting more like institutional, EXCEPT we don't have the knowledge of the big picture, it requires a total shift in thinking. We're something in between.
I think if we take what we have, compare to other indicators from past trades (history) we might find something that gives a sharper edge for entry and exit. It seems that their is some delay from the longer time frames and maybe that time frames is consistent over many trades. We are still talking about human emotion regardless if it is greed or fear. The only thing we can't predict is the unknown news, that is where or risk really needs to be watched.
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