Friday, March 26, 2010

Day 2 of short trade

In a bigger picture we are still in a up trend and need to break though these support channels to confirm a change in trend, see chart below.

On the smaller chart time-frames (see chart on left) this is a perfect structure for the Divergence Trade of 3's strategy. That shows all 3 types of trades. 1.) Bull Trend break short to the fibs. 2.) break from the fibs to existing high/lows and 3.) Bear trend break long to the fibs. Enter the postion at the top of a trend, in this case bull trend where bearish divergence is shown in at least 3 indicators between (CCI, STO, MACD, RSI, ADX). Once the trend breaks and your trade is making money, exit on the 3rd wave down when you see bullish divergence in 3 indicators in this case, the trend is broken and your in the range of 68%-31% of the fib retrace. . If trading off the 1, 5, 10 minute charts (day-trading) This exit signal happened @ 1173 yesterday at 3:00.

The second trade is that now that you reached the fibs, the bear/bull fight continues to make a run towards the old high or low. I had a longer-term bearish view of the market looking at the longer-term charts so I felt bearish argument would win this fib battle. (if I was day-trading). This type of trade is more complex and has greater risk than the other two. I will explain more in the documentation area later. We had a break yesterday at the 68% retrace where I would enter short in a bet to test the last low.

In the early trading hours this morning we had an exit signal at 1168. At this point the same criteria exists to as a long position, where you trade long back to the fibs. in a new Fib drawn on the last high/low. Where the exit of that long possition would be 1172. A new short postition would be made @1171. where we are currently and the trend down has not been broken and would be still considered live.

I hope this finds you well

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