Thursday, March 25, 2010

Entry @1180 Short!

This is my very first official post on this blog and I hope you like it and brings some sort of learning to what, I’m sure, you have already puts lots of efforts into. If you don’t know me let me first start off by saying hello! If you don’t let me give you a little background on me and why this blog post is important to me. I have been studying technical analysis (TA) for around a year in the leadership and direction of GV (blog here, and sign up if you havn’t). I used a $2k trade account to learn over the year with some good and bad times, but learning was the key to put real money in a trade is way different that paper trading. GV gathered an amazing group of people that I call my closets friends and we all have excelled. Many name you might now like Columbia1 (blog here), Binve (blog here) and many more that I will add to my blog later, but in those beginning at CAPs the CIL was born, (See columbia1’s blog on the bottom of the blog).
About 2 months ago I sold my 4-month standing SDS (Ultra Short S&P500 2x fund) position and traded with paper trades on Wall Street Survivor (WSS) account. I since then developed a system of trade that I believe works and made this blog define, refine and share it.

Ok, I know bla bla bla Russ. Anywho, Today I opened my first real money trade position shorting the S&P 500 (SPX) index using SPXU (3x S&P500 short) as a vehicle, based on my “Divergence Trade of 3’s Strategy” I’m trying to evolve. I am going to attempt to explain my trade as time goes on for gain or loss in conjunction to documenting this strategy and hopefully it comes together.
First things first, overall, I have not seen all chart time-frames oversold or overbought since the 1150 top. All time-frames were overbought from 1 minute to daily (Time Frames are 1,5,10,15,30,60 minute, daily, weeklcy, monthly) This allows me to not only move from the rule of 3 chart time frame which are daily, 60 minute and 30 minute, but to even move shorter in time-frame to exact a trade (This vary rarely happens).
Enough text, if you like me I scan talk and look at charts… lol
Daily chart (longest time-frame in my trade of 3’s)

From the longest-term chart you can really only see oversold or overbought conditions. This is the extent of your profitability of a trade. I will explain the low-high risk trades in the documentation later, but the main focus of this chart is that we see bearish divergence on the highs and I want to short the position some time. From this time-frame I cannot tell exactly but we do have hints. CCI break of +100 is huge for me. My first attempt of a trade strategy was solely based on CCI. It is like my truth stone, but it does lie from time-to-time. I think the most important thing to add here on this chart is that when I consider this trade a loss is when we have a “BREAK IN DIVERGENCE” this is my latest evolution in my original system that has forced me to define a trade bunk and take my loss. I have work to do on this topic to define it completely but if you look at CCI only, you see that down trend, the break of that down trend line = EXIT TRADE.

I’m going to get into the other 2 charts of 3 (Daily you got, 60&30 min. later)… I new at that time they are all overbought with bearish divergence (THIS IS THE KEY to THIS TRADING SYSTEM)… Ah, as I said this is not normal you can do this, but when you can it’s has the most potential for a exact entry to a position (and it still might lose guys. I’m not sure if I’m writing, just playing the system) you will see these other two charts in a minute. I went to another 3-chart frame pattern as if I was doing a different trade of the 3-chart time frame, which is the (1,5,10 minute) charts.
Here is the longest-term chart of the 3 short-term trades. (10 minute)

There are dozens of things that I focus on and making a trade system I need to narrow my focus but forget the short-term charts even the one I posted the “3 trades” are simply a break from an up trend to the fibs, a break from the lows to the fibs and bread at the fibs to test new low or highs… I will have an entire section on this on the documentation of this trading system..

Nevertheless, we got the 10-minute chart up and in the purpose to exact a top a break in that up trend to 1180 break I used to enter a long-term short position. Note: this is a chart of 3’s in a very short time frame where my original trade is off (30,60min and daily). As you can see on this chart above you have very slight understanding of the divergence, yet at 12:00~ish on that chart it was completely overbought… Lets take a closer look lets get to the 3 minute chart.


As you can see that I entered that position and yet we got a new high and I didn’t sell.. This is because we had continual bearish divergence on the new high. Granted, we could have much higher highs with my original (3 chart, daily/30/560) but it didn’t turn out that way. This was the perfect setting even for a short-term trade….
If we were taking a trade off just the (1,5,10 minute chart) in the 3 charts I have a continual bearish divergence until it rolled over to something major bearish. Let get really crazy and get to the exact top to the top chart where I made my bearish trade.. notice I held even on a new high on bearish divergence….

The ultimate micro of micro of my (30minute to daily) 3’s trade chart. The 1 minute chart......

Ok, now that I entered this position of short. I am not convinced and give myself a 58% chance of being right on the longer-term trade… This trade system is to identify tops/bottoms or breaks in the fib lines so now that I entered a short with an exact top of tops… Maybe I missed a $0.8 on the top here I’m looking for break in divergence and even on the 1-10 minute charts divergence was not broken. 60,30 minute and daily charts… I will consider this trade a loss if daily bearish divergence is gone and I’m just using CCI for an example at this time. In the future I want to expand divergence and break in divergence, but for now, CCI is my #1 if you look at the 3 chart time frames.
It is hard as hell to explain to people what I’m doing in trades. As humans we act on impulses conscious or subconscious, but we act nonetheless…. When I’m day trading I act on the core of some of what I outlined but seeing the charts “tell me the future”… this is like asking a pro surfer how he knows what to do. ..
I thought I could explain this strategy to anyone and this is my stop… I have an gift to understand charts. Not to brag, but when I focused on charts and did day trading on WSS…. I got almost every turn in the market. I think it’s 2 fold… Can you ask Larry Bird how to make 3 pointer shots… and then you know?
Nonetheless, there is a core of understanding we all can grow from. Nonetheless, the stock market is one crazy bastard and if you think you understand it. That is the moment when you don’t.
Ok, I’m done for the night but I will leave this blog post that if divergence in CCI on the daily is broken when I call it a losing trade. Defining a losing trade is way more important than how to exit a winning one.
This was the perfect time to start a blog for me to have all chart time frame lined up. (And yes we might get a new high, but I will only leave the trade if my longest-term chart breaks divergence)

Good night brothers! I will have a post tomorrow night if not during the day!


  1. Congratulation Russ on your first blog. Just quick note until later. Your charts when enlarged, they are not fine enough and annotation are hard to read. I am not sure if this is a universal issue or mine alone. Thought to bring this up to you. Try to upload images to your blog in the largest size possible. Best wishes and may the charts be with you.

  2. I was talking specifically about the first chart from the top.

  3. Thanks GV, I'll play around with it.