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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...8 years ago
10 comments:
Brandt, can you put up the 1 min time frame of the different indexes for today? Was this buying going into the close supported by 3C on the 1 minute.
Jack,
Told ya they'd stick-save it towards the end. Good old FED... they ARE the market.
Like I said, anyone ready to throw their computer out the window? I know this has been a lesson in frustration, but it is really getting old quickly. Even watershed selloffs are stopped in their tracks. Protecting themselves at this point.
... and with a little goosing after hours, the DOW is roughly at the highs of the day... yay!
... and that 3C 5 minute SPY charts shows 3C in an even worse leading decline now? Correct Brandt?
I think we seriously NEED 3C to come through tomorrow with that 5min chart. I want to see us close well below 11k on the DOW.
Jack, there is NO volume, because there is no one in this market anymore to sell (including retail)... when there is no volume the FED can take the market wherever it pleases. Its easy. They just use the markets as a propoganda tool now.
Same old story, different day. Why should things change tomorrow?
Brandt,
Didn't you say Fridays SPY volume was the worst in X days?
Well, from a quick look, it looks like todays SPY volume was around half of Fridays:
http://stockcharts.com/h-sc/ui?s=spy
it was actually the Dow-30, but it is lower then Friday's, I'm not counting again, but you know it's the lowest in more then 190 market days. You have to go back to December of 2009 to see lower volume. This certainly was no follow through day.
Why are we talking about 'double tops'? I thought this was a 'right shoulder'? Is this another 'change the story because the original highest probability didn't work out as planned' day?
It depends which market and sectors you look at for regards to double tops...blow off tops....right shoulders or lower highs. Major tops always have diffrent reactions in different sectors, markets, and countries. It is a classic example that we have had repeast time and time again over the history of the market.
Quality Stocks,
I'm concerned with the SPY and DOW personally. The SPY is a good 60 points off of a 'double top', and the DOW is around 200 points off of a 'double top'.
So, yes, considering the 'strength' of this 'bounce' so far and all the 'distribution' shown by 3C from day one of this 'bounce'... and all of the comments, such as 'the SPY broke on 23rd September (When the SPY was around 113.0), and all the 'volume getting lower as the market rises', and all the 'VIX now at May levels', and all the 'the smart money won't want this going much higher as their shorts will be at risk', etc...
... well, yes, i will be majorly, majorly, majorly, majorly, majorly annoyed if the SPY has another 60 points upward move to form a 'double top' before reversing...
... i already think 3C has pretty much failed with calling the reversal in this 'bounce', so if we go up another 60 points on the SPY, well, that would take the biscuit to say the least...
.. i'm sure others would agree?
Can i enquire how your 'high roller' is holding up Brandt? Any change in his/her position?
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