Tuesday, November 9, 2010
TMV up Big Again
Our short position on the long end of the bonds, TMV is doing well today with a confirmed breakout n heavy volume. This trade is now up over 13% since it was featured about 6 days ago.
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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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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:
Here we go with the trumpet blowing. It's that 1-10 time that 3C was 'right' (less than natural chance of being right).
How's the FAZ trade going, or VIX trade? or gold 'top' at $1244, or silver 'locking bad' at $20, or equities heading for a huge sell-off trade?
Well, let's discuss those.
Today's must watch clip comes from Mark Fisher. Key highlights: "QE2 can't end right. Worthless paper after endless paper.... What's good for the equity markets is not necessarily good for the economy. The equity markets are not going to create jobs. If you have a paper bag full of money are you going to go out and hire workers and take risk with healthcare and all these other regulatory restrictions? No, you are going to go ahead and buy high yield, you will buy equities, you will buy risk assets. The fallacy in the whole thing is that you are not going to go ahead and create jobs just by pushing up the market by 20%, 15%. In fact, to some degree by pushing up commodity price to levels that are going to be obscene, which is what is going to happen, you are hurting everybody in mainstream America... If you have all this money coming into the system, and this money stays in the equity and commodity markets, when at some point you take this money out of the system, where is this money going to come out of? Parabolic moves have Parabolic corrections. This is going to end bad. It is not a matter of if, just a matter of when. This is going to be the ultimate bubble, this is going to make 2000 look like a cakewalk. This is going to be the bubble of all bubbles."
Jack,
That's just common sense. Problem is, the DOW will probably double from here before it pops.
China's Shot Across the Bow 11/9/2010 1:37 PM ESTI Report out of China regarding the Dangong Credit rating agency's downgrade of US debt. I get the impression they are not very happy with us. As a result of the announced QE2 the agency downgrade US debt from AA to A- saying that the new rating reflected the US's declining capability to repay the debt. The report also said that the decline of the US dollar could block the debt channels vital to " the existence of the United States." The report also expressed doubts we will get our house in order and put US debt on negative watch. The agency believes the US may face unpredictable solvency risks in the next year or two.The report reads a lot like a shot across the bow before a currency war escalates.
Short Bonds, go long silver and commodities to earn your money back until it pops. Then enter the short side of the market. Is that a common sense trade based on where we are right now? Right now is probably the most difficult to choose. You have the lesser of two evils to choose from. Is the Euro worse than the USD at current levels? If you say yes, than short the equity market. If you say no, then go long commodities and short bonds. Which way are you going? I haven't seen you post where your trades are? Care to share your constructive thoughts?
Jack,
If 3C is suppose to follow 'the smart money' (these are apparently entities that have fore-knowledge of news and intentions not available to the wider market) and smart money by definition doesn't lose, then you should follow what 3C says.
Otherwise, cancel your subscription to this worthless site and do the opposite to what it says.
And the floor is dropping out of Silver today as the dollar strengthens. I almost rolled out of my positions to chase the trade but knew it would have to pull back. I still like silver, but if the dollar stregthens, I will wait for it to pull back some more. This market is obviously being manipulated as the EUR/USD trade should be showing the SPY at about $119 range based on the strength of the US dollar of late. What a crime, I hope someday Big Ben and Little Timmy get what is coming.
Jack,
One reason the floor has fallen out of Silver because of margin requirements for silver being raised at some firms.
It has been raised by the CME today, I tok the margin table off their site, you can see it in the last post.
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