Friday, November 12, 2010
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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
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- * Placing Stops-What you should consider...
- * A Currency Crisis
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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
6 comments:
Abandon Apple Ship? Ken Heebner Dumps Almost Entire Apple Stake
Submitted by Tyler Durden on 11/12/2010 12:16 -0500
13F Ken Heebner Lehman
Is the game theory defection dump of the world's biggest hedge fund hotel starting? In a just released 13F filing, Ken Heebner's Capital Growth Management has disclosed that he has reduced his holdings in Apple almost to zero. After holding 1.15 million AAPL shares as of June 30 (which made him holder #100 in the name sorted by size), Ken Heebner who is a regular guest on CNBC courtesy of his bullish tendencies, sold virtually his entire stake, leaving him with just 111,000 shares. One can only speculate about the causes, although it is notable that the last time Heebner did a comparable dump was in late 2008, when after the Lehman bankruptcy he liquidated half his million share stake. Is Heebner sensing something comparable to what happened in late 2008 on the horizon? Or was he satisfying margin calls? Or, most innocently, did he just sell what is probably his most profitable position, "just because" - inquiring minds want to know. We will keep an eye out on who else dumped Apple as the barrage of Q3 13F issuance begins today and ends on Monday.
Brandt,
Can you tell us the parameters that you are looking for for the 'price confirmation' that the trend has changed to the much talked about 'big sell-off'...
Flash Crash Time? It is a day like this the market is not doing what it is "suppose to" that people get nervous going into a weekend. Especially with Ireland, missles, and the world snubbing us at the G20.
Pink, first I'd like to see a leading divergence on the daily chart-of all 3 majors if possible, second I use my Trend Chanel which is an objective stop system, when we get price confirmation on a reversal there, I would say it IS a reversal or lower highs, lower lows. The trend channel is at about $115 right now but should continue higher for the next day or two.
Also I'd like to see how today closes and if negative, a couple more POMO operations to be sure there is a change that I suspect we might see in QE2, but there are plenty of shorts right now that look good, just the index related shorts I'd want to see that price confirmation.
Thanks.
I'd be impressed if web-bot (which was originally conceived as a financial tool) actually calls this turning point (financial and social turning point), it had predicted a turning point between the 5th and 14th of November, which is the period we are in now. It works on the wisdom of crowds notion.
http://en.wikipedia.org/wiki/Web_Bot
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