Tuesday, October 5, 2010
Afternoon update
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Risk Management
Get the Most Out of Your Experience
- * Understanding the Head-Fake Move Part 1
- * Understanding the Head-Fake Move Part 2
- * The Holy Grail of Investing and Trading-MUST READ-MUST UNDERSTAND IF YOU WANT TO EVER MAKE CONSISTENT MONEY IN THE MARKETS
- * Member's Video-SWING TRADE ONE ENTRY SYSTEM
- * Placing Stops-What you should consider...
- * A Currency Crisis
- * A Currency Crisis Continued...
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My Charting Software
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
28 comments:
Thanks for the update. It is interesting that C3 is showing a down move right before DJ-30 and QQQQ can reach new highs for this move. SP-500 did make fractional new highs. A divergence here that sticks can add another clue to the puzzle.
... another POMO day tomorrow.
Insider Selling To Buying: 2,341 To 1
http://www.zerohedge.com/article/insider-selling-buying-2341-1
... unfortunately, facts like these don't matter when the FED is the market.
Brandt, I know you said it would be a scary bounce, but even this has to be way beyond what you thought. I bet you didn't think it was going to be a 3D movie that actually killed people!!! That is what it feels like, so I'm sure this means we have to be near the top of the top.
Jack,
Problem is... what if the SPY goes up another 10 points? Will that be the top then? or 20 points?
Brandt said he thought the SPY 'broke' on the Thursday, 23rd September... trouble is, we are 20 points higher than that price now and it was two weeks ago! And that market already rallied 8-9% to that point already!
There just has to be a point where you say, look, 3C is wrong, let's be reasonable?
3C is just missing too much for my liking (like todays near 200 point bounce, why didn't 3C pick up that? or the strength of this 'huge bounce' since the start of september overall?), and calling too much wrong, like strength in the $dollar, weakness in precious metals. Gold is up nearly $100 an ounce, and silver is up over $2 an ounce since!
What was the point of the 'smart money' selling yesterday and the DOW dropping 70 points, only for the DOW to bounce back 200 points today? Please don't tell me "they need to distribute over time", that doesn't wash anymore.
Thoughts?
C3 did call the sept bounce and todays bounce.
er, no. 3C did not call a 200 point DOW 'bounce' today or a 1000 point DOW bounce at the start of September. Brandt even said he didn't see much evidence of a 'bull bounce upwards'. You need to be reasonable, i think you're trying to see what you want to see rather than trying some critical thinking yourself.
The DOW has 'bounced' twice as high as it fell yesterday, so is not a 'bounce'.
Let's give 3C credit for what it does. It works exactly as it was designed. The problem lies in the fact the control of the market has changed. It is now in the FED's hands and 3C is not picking up these moves. While the big boys and insiders are liquidating positions and maybe even going short, it is against the grain of the FED. They want to take the market higher to establish confidence in the market. All they may achieve is belief the market has been manipulated. Nobody believes the crap that is be shoveled, although many are glad to take the ride.
3C never calls the extent of the bounce-QS pointed out the truth, called both and if you read last night, I said, we'll have to see how it goes Mr. Pink. If you have questions, I'm glad to answer them, but I'm not going to spend my time arguing over misstatements of fact. Quote awhile ago I said the dollar was not acting bullish and was not showing 3C positive divergences. Perhaps you should re-read last night's post. Or try playing some of the picks put up.
Volume is rising and with it the market.
I sure hope this is the last big gasp of a dying man.
If insiders are liquidating at an accelerating pace, what does that tell you. With no volume in the market, we'd already be below SPY 100-the FED is providing volume, I don't know if their intention is to take the market's higher. I think right now it is to prevent the crash that the insiders alone would have caused.
Brandt,
You said this last night:
"I do not think that natural progression from bull rally to a reversal is going to see a "out of no where" big bull move. We'll monitor the progress of it should it come to pass, which I think it will early tomorrow."
Is a 200+ point move on the DOW while at near highs an "out of no where" big bull move?
The April high took nearly 15 days of distribution before it crashed, we're at about 9 days and a different situation with the FED. I do believe 3C is reading FED money, but it's going into a select group of stocks-very few that move the market higher, retail simply chases it, smarties don't seem to be chasing it.
Mr Pink, think of what 3C does, and answer me, how could it possibly call a target? The days of accumulation or distribution can give some idea of whether we are dealing with a lot of accumulation and we can infer how big a move might be considering volume, but it has no way to judge, take that and add market makers running orders and there's really no possibility. If you read last night's post clearly I said we'd have to see how it went as far as a target goes. I also said day traders , if nimble could probably make some $$ here.
So what is the consensus, are we going to see more of this tomorrow? Should I exit my short positions and cut my losses?
no Mr. Pink, a rally from here is. This is a big day up, not a new bull move like we saw in September. The natural progression if you looked at the charts two posts below were over a period of weeks.
"The April high took nearly 15 days of distribution before it crashed, we're at about 9 days and a different situation with the FED."
- Different situation? Is that an admission that the game has changed? What's the new 'most probable' outcome then? SPY 1200? DOW 11,000?
Using critical thinking, It all seems like clutching at straws to me to find reasons. I thought 'the smart money' was now short, so why make the market go even higher?
Do you not think 3C has called gold, silver very wrong?
The euro is tanking and the market hasn't caught up yet, so let's hope this what we needed.
Also, how can you say we are 9 days into distribution? 3C was showing distribution from the very start of September? So i make that over a month of distribution. I guess you mean 9 days from the day you thought the SPY 'broke' (23rd September)?
We already established that they didn't accumulate much going into the 'sept/oct' bounce.
It seems we keep having 'most probable' outcomes. These get blasted to bits. So, we then come up with another 'most probable' outcome... and so on. Trouble is, if our 'most probable' outcomes constantly keep getting ran all over, then how good is 'the system' at producing those most probable outcomes?
Jack,
Tanking? It's down 0.1% after closing on a very strong day?
After following for some time here I am hard pressed to understand the usefullness of "3c" fwiw.
I watch it on a 5 min time frame and in 10 min it has given back alot of gain from earlier in the day. Also, it broke down out of the bear flag that was forming and dropped hard from that point. Currency moves are slight compared to stocks, so you have to pay attention to little moves. It is forming another bear flag, so watch to see if it breaks from that one as well.
Big green candles going into the close on TZA
john9o9,
Frustratingly, you're not alone friend. I was going to go long on silver as soon as it broke $20 an ounce, but Brandt said 3C was showing the silver chart as looking 'bad'. Silver is now well over $22 an ounce. I was also going to increase my exposure to gold at $1244 an ounce, but 3C showed gold was under heavy distribution, so i didn't. Gold is now nearly $100 dollars an ounce higher.
And not to mention the equity markets. We've had most probable outcome after most probable outcome get smashed. We've had 'hangman' reversals and other chart indicators fail, volume dropping off, all the charts under the sun showing that the rally is not being supported by the 'smart money' and yet we are now at pre-flash crash levels. It's not been good following the smart money i tell you.
My faith is hanging by a thread. I want to see some serious downside market action for 3C to justify it many many days/weeks of bearish calls.
TRIN closed at 0.31. Lowest reading ever!? Not that TRIN has been reliable recently in the face of POMO. More POMO tomorrow. If the FED worked hard pumping the markets 200+ DOW points today why let it slip tomorrow or the next day? Surely they are only shooting themselves then?
New post is up, take a look. Mr. Pink, I think you are getting lost in the lines. Take a look at past tops, Go all the way back to the early 1900's there's much to be learned, a day does not a trend make.
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