Remember yesterday I said all the 3C timeframes lined up, it was a rare occurrence, but is the best signal of a reversal-that was yesterday.
So it seems like we are on our way back to the neckline. This time we'll have some different strategies in place.
I hope you all made a nice little chunk of change today.
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Risk Management
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- * Understanding the Head-Fake Move Part 1
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- * The Holy Grail of Investing and Trading-MUST READ-MUST UNDERSTAND IF YOU WANT TO EVER MAKE CONSISTENT MONEY IN THE MARKETS
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- * Placing Stops-What you should consider...
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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...7 years ago
11 comments:
Hi Brandt,
Can you be specific to want level you mean when you say 'neckline'. Which neckline on the SPY are you referring to?
Looking forward to the different strategies. Would love to trade specialized stocks here at WOWs and leverage ETFs for trend plays. As with any speculations picking your entry is key. Keep up the good work my friend.
Thanks Brandt, picked up another couple hundred shares of TZA today near the high on the SPY and about the time the EURO broke it's third Bear flag of the day. In the past we have had a traget of the $104 area on the SPY for a neckline, but I am also seeing some possible resistence from a rising trendline in the $106 area. Does this sound feasible or are you planning on covering that tonight?
Not sure what I'll cover tonight, it depends on what I uncover. I will be back testing strategies and watch lists though.
Mr. Pink, I still consider the most important neckline to be $104, but there is support around $101. I don't think you can make a good case for a descending neckline based on a false break down. It simply does not touch enough points of support. The neckline is part of a large H&S top, consistent with the March 2009 rally Right now it's nearly 10 months long so it's significant, but ever since I saw distribution in the March 09 rally, I felt this was a "Historic" bear market rally, although there's a very good bear market rally after the crash of 1929, actually there's 5 in that bear market decline, but the first is always the most believable.
QS-thank you and thank you for your participation and keen insights.
I know I have said this before and I realize it is early, but thinking ahead to October 15th option expiration and the Jobs report being delayed till that time has me suspicous of what they are up to. It would seem they if they can artificially inflate the job numbers, they can pull off one heck of a bounce into the elections and try to spin it as positive for the Democrat's. Again just speculation and we'll see how this plays out.
possible Jack, but the Republicans killed the rally in oil that made their supporters so rich, 8 months ahead of the election. Other factors were in play, but people have long memories regarding that. And there's already mounting suspicion about the administration and how they conduct business/transparency. I just saw a video of an Obama supporter chewing him out-"tired of defending him" etc. I don't think even a super rally at this point is going to change much. a rally doesn't put millions of people back to work or back in their lost homes.
This is my opinion only, but he made a huge mistake in legacy building with the Health Insurance bill -even if it cost America nothing-it gave most Americans the opinion that he didn't have his eye on the ball.
Manipulating markets with monetary policy or whatever can work for awhile, but it always falls into the law of unintended consequences.
Honestly the 2003 Bull market was almost entirely fueled by consumer spending which came from equity lines and inflated housing prices. The Republicans purposefully maintained a weak dollar policy and the main beneficiary was oil, but look how it turned out. Free markets work, we just don't have them.
I agree, that there are always unintended consequences. At this point they (the administration looking to save face) are looking for any positives they can headed into this election. A healthy job report and an inflated stock market would be something they can spin pretty good just in time for the election. Will it help them, probably very little. Will it have a bad consequence. More than likely. I would bet that the big boys will be more than glad to run the market up on a little good news, just to have another run at making more money going up and then coming down in a grand fashion.
Jack,
But 3C isn't showing that they plan on running the market up anymore? I thought 3C showed that the 'powers that be' have now finished distributing their shares and are short? i.e. This is the reversal we have been waiting for all September.
The market is dynamic for sure, the original plan put out before the rally began, was correct, maybe not timing, but the intent and broad strokes. That's pretty amazing considering it was a week before a rally even started.
I don't know what the OCT surprise will be, but the market could also tank and the campaign slogan could be, "do you want the same people who created this, back in office?" truth is a casualty in politics. Like the market, it's all about perception.
Remember, that currently the Bush tax cuts expire at the end of this year. Capital gains are set to go up. People will be looking to take whatever profits they can at a lower tax bracket. In addition to other problems for businesses that will be of unintended consequences by letting these cuts expire.
Pink, think of it as a swing trade. They will set up the markets in both directions if it makes sense to do so. At some point (week, 2 weeks, a month) they will want to sell their short trades for a profit and go long. We don't know when that will be. Going down is always a lot faster than up once it picks up speed.
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