Tuesday, October 26, 2010
Into the Close
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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
11 comments:
Meanwhile, back in reality, even with the $dollar taking a hammering against the EUR, the DOW finished blue after a 70+ point turn around from the days lows and the SPY finished near the days highs.
Time for some posts showing how bad the underlying conditions are during this rally, even as it goes higher and higher.
The dollar was hammered against the Euro? Do you understand currency pairs?
So why don't you post the indicators that have shown broad breadth into this rally? You were give warning that a rally was coming that it would be scary, but you seem to want a crystal ball. Really though, post the indicators that have shown this to be a broad based rally with underlying accumulation and strength. Or perhaps I should just lie about what objective data says?
Read a little about the concept of a "Bear Market Rally"
Yes, the EUR was down against the USD today
http://www.xe.com/currencycharts/?from=USD&to=EUR
and i understand how you stated in your post earlier today:
"The EUR/USD pair is seeing continued deterioration in the Euro trend toward that H&S neckline, thus our breakout today in UUP."
"Here's the hourly chart, there was a strong EUR trend in place, the fact that it's even gone lateral is cause for concern for market bulls as a rising dollar means falling equities and commodities. If you look at the red arrow, we have something that very much resembles a H&S top and we'd be on the downside of the right shoulder. a break below that red arrow would be a bottom for the USD as many charts are indicating, the GLD trade would be shot to pieces as would many market averages."
and yet the market (SPY and DOW) finished blue.
and i understand how we have negative divergence after negative divergence from 3C and yet we are at near 5 month highs on the indices.
Not good, really not good. After hours getting the usual goosing upwards.
Brandt,
You can post all the 'fundamental analysis' you like, as i and others have said from day one, and which you were reluctant to agree with, we are fighting the FED and their free money here... meanwhile you thought this was all a 'trap retail investors play by the smart money'... even though there clearly are NO retail in this market.
... and no, this in no way shape or form is a 'bounce' (a bounce by physics definition cannot go higher than it's previous high otherwise it is gaining energy), we are near the April highs in the DOW. You also said you would feel comfortable laying in shorts at DOW 10,400, that was only a mere 800 points ago! You also said the SPY broke on the 23rd September, 60+ SPY points ago!
As, i've said before, this is all about the tracking performance of 'the calls made'... and it's bad, real bad, watching on a daily basis, it seems worse than even chance. Good calls lead to credibility.
It's self-evident really, you said you started shorting the SPY at $118, well we are just above that level now after going as low as $101. Not much of an achievement for holding a short for 5+ months is it?
I look at hard cold facts. I don't ask you to make these calls, but when you do, i'll judge them, as i said before good calls lead to credibility and that is severely lacking in my opinion.
Mr. Pink, while it is true that the reversal you are looking for has not been forthcoming (my guess is that you are severely underwater with short positions), it may be a better route to trade the individual stocks that Brandt has put up...his record there is excellent. Perhaps 3C is better suited for individual stocks as opposed to the indices or ETFs.
Anonymous,
After seeing 3C/Brandt's terrible calls on Silver, Gold, market indices, VIX, etc i don't trust it. 3C seems no better than tossing a coin. That's why i've been long on the indices to offset my overall short positions.
I signed up to 3C to give me 'an edge', but it's ended up costing me money. Especially when i wanted to go long on Gold at $1244 and Silver when it was just under $20 an ounce... but 3C put me off these trades with the "Is this the top in gold" and 'the silver chart looks bad' posts. Lack of credibility leads to lack of trust... i'm waiting for that to be restored, but days/weeks go by. It's November next week!
May explain 3C for gold...
article: http://www.cnbc.com/id/39853052
"El-Erian also explained PIMCO’s significant reduction in a key fund's gold position from 10 percent to 3 percent. He said investing the precious metal “doesn’t make as much sense as it used to.” Because the price has moved so much and the trade is so crowded, he sees potential for a large technical retracement."
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