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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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Is interest rates about to start going up? - Yes, I know - it does not make any sense - FED is about to cut rates...but....real world interest rates are not always what FED wants it to be.
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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
6 comments:
Its been a long time since we discussed overall portfolio positions. I am currently 45% in cash, 25% double short the russel via TWM and 30 % long in various long trades.
Where are you recommending we should roughly be at this point.
W. It's hard for me to say without seeing position sizes, entries, etc and still it's just my opinion, it has to fit with your risk tolerance and general market outlook.
I like your cash position, I think it's very prudent in a time in which everything is up in the air, it shows good discipline in my opinion. You sound roughly hedged depending on how your longs are doing. I think more then anything right now is there are good short trades in specific equities. I personally might be more comfortable having the TWM money which is market exposure, working in shorts that are trending lower. I am not saying I'd get rid of the whole thing and certainly this week's POMO results would help determine that, but I may want my short exposure to be that concentrated in pure market exposure.
Otherwise, from what you have told me, it sounds like you are in a decent and prudent risk management area with your distribution of positions, so long as some of those longs are working out well.
I think this week will answer the QE2 question, at which you have ample reserves to commit to new positions as opportunities arise. I like that.
"but I may want my short exposure to be that concentrated in pure market exposure. "
meant to say :
but I may NOT want my short exposure to be that concentrated in pure market exposure.
Brandt, are you impling that NFLX would be a buy here. Isn't that a contradiction of our overall direction? Any 3C charts to back this up?
No not saying that, just saying it's a POMO favorite and if they are going to ramp the market that NFLX is one to watch. So far the breakout seems to be a false one, but it's worth keeping an eye on.
Sorry, just wasn't quite sure of what the post was implying.
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