For those who still do not understand, a negative divergence occurs when price moves up or is measured at two relative points that are the same in price. 3C is either moving down or not confirming the relative second high. This is the process of distribution, meaning smart money is selling into that rally, s you are best off usually not to chase it.
At the point I posted the last negative divergence, an uptrend that had been in effect since about 11:45, went into a double top, the first time in the trend. After the close, we can see why. Smart money is a lot more informed (i.e. "The Whisper Number") then you could ever imagine. Bill Gross from Pimco let some Fed news slip live on CNBC long before the Fed announced it, probably because Bill Gross could move the economy with Pimco if he wanted to.
In any case, IBM has been take to the woodshed in after hours and had thus far erased the gains it made in the last 8 DAYS! The DIA is significantly lower then when I printed the last market divergence around 3 p.m. , the SPY has just about erased all of today's gains and the Q's have not only taken out today, but a chunk of Friday as well.
This is after hours, so there are no victory laps being taken here, it's just useful to understand what 3C is really god at showing, the underlying sentiment of a trend.
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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
4 comments:
What happened to the SPY at close?
http://stockcharts.com/h-sc/ui?s=SPY
Flashy crashy?
Mine was printing something similar into the close with a closing price of 106 and change. I just went back to check and it has been correct now, but shows a good sell off right after the close
Anybody else showing a flash on the Spy at 11:08 as well?
Well, that 'flash crash' is going to throw off the RSI, MACD indicators on a lot of charting sites. Needs correct really.
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