Tuesday, October 12, 2010
Update
3C 1 min is negative on the DIA, SPY and QQQQ. This seems like an obvious trap. I'll elaborate more once I put all the information together, but the key is Yellin front running the release of the minutes.
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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...7 years ago
9 comments:
Front running?
I thought you said 3C was negative going into the FED minutes news?
"All 3 averages are in the negative on the 1 minute going into the release of the Fed minutes."
Another weak close.
Weak, but higher... and all these going higher moves add up over the days and weeks...
especially when all the 3C signs pointed to this being a good down day. It's getting way way way too many things wrong...
... and we'll have POMO back soon.
I think what Brandt is trying say is that retail is buying the hype on TV and going into the Shark Infested Market with out the life guards on duty!!! All of this, while in the background you have little bits of information being leaked here and there indicating the FED is rethinking the whole QE2. If the FED indicates it really doesn't think it is needed now or to a much smaller degree (regardless if it is or not, it won't work and is a waste of tax payer money and is going to further intensify inflationary pressures) the market is going to drop like a brick sucking with it all the retail and mutual fund advisors who wanted to play in the water. At least this is my theory of the days to come. I sure hope it happens soon, as I won't be able to follow the market soon for about a week. If I do get service it is going to be sporadic at the top of a mountian and I may not be able to trade.
Brandt,
It would be great if you could run the major stocks reporting earnings through 3C prior to earnings being released. For example, Intel is now reporting.
Jack,
There's no way retail are in this market. I said it at DOW 10500, and i'm saying it at 11,000.
Only the FED is in the market along with HFT. The 'stick-saves' we see should show you that. You think that it's retail buying that is turning the market around 180 degrees when the market is falling fast?
So, what went wrong with the 3C 5minute SPY chart Brandt? It's had a bad leading negative divergence since last Thursday.
Well, we finished at SPY $117.0
I told you when we were at the supposed reversal point of SPY $113, why wouldn't they take it to $114, or $115, or $116... well we are now at SPY $117, and theres no reason to think they won't take it higher.
They have perfect control of the market, they can take it wherever they want with or without POMO money.
There is no downside volume, because there is no one in the market to sell, so they have little opposition to pumping the market.
Still think the SPY 'broke' on the 23rd of September Brandt? Nearly 3 weeks ago now and we are roughly 45 points higher on the SPY now?
One thing is for sure, i don't feel like a wolf when i am being sheered daily.
I bet your 'high roller' is glad to be out, right Brandt?
After hours getting a bit of a goosing on earnings releases.
Seriously this is bad:
3C said accumulation in the dollar, yet it's gone through the floor.
3C said distribution in equities, yet they have gone through the roof.
3C said accumulation in VIX, and yet VIX is now at 5 month lows.
3C said silver looked ugly, and yet it has gone up over 12% since.
3C said 'is this the top' in gold? and yet has gone up over $100 an ounce since!
Seriously, this is bad. No two ways about it.
What is going on here Brandt?
Can you post that 3C 5 minute chart you've been posting since last Thursday please Brandt, i'd like to see if/how it's changed with regard to todays market 15 point swing.
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