Wednesday, October 20, 2010

A closer look at Low-Risk vs. High-Risk exit on losing trades.

I find this to be the biggest grey area of my trading. Before I jump into trading with more capital I want to nail down this part. First you have to know what kind of trader you are and I've been playing high risk most of the time (especially in longer trades.) I'm going to document this trade through to the end and as I see it we might hold on this bearish divergence and even top 1200 SPX and I'll still be holding short. This is the high risk part of holding through a tight break in the divergence trend. (see chart below)

Notice in this chart that we had a break in the divergence trend on the 60minute chart. (Note, this trade is 30/60/daily time-frames). I believe the 60 minute chart shows the breakdown better and the full range of the trade history. One think to note about not exiting on the "low risk" exit and hold to see if the "high risk" breaks is that your chance to exit near the bottom fib. retraces lines (below 50%) decreases as far a profitability of the overall trade. As you can see from the chart below we are now on a new bearish divergence slope from the test of the existing highs of the indicators (CCI,MACD,ADX,RSI). Also you can see how the channel resistance breaks along with test of the previous highs on the indicators.

NOTE: I'm still short because the "High-Risk" criteria was not met (breaking existing high's on the indicators), even though it was very very close.

Monday, October 18, 2010

I'm back and nothing has changed

Well, I'm back from my journey across the US and I wish I had something better to post but I'm still holding onto my short position and the more the market goes up the less I will get from my profits if my trade becomes true. Not exactly what i like, but documenting the process of a losing trade is more important to me than documenting a winning trade. The problem is that when your still holding on to a losing position, the fib lines get expanded and based on the trade exiting around the 61.8% and 38.2% Your overall profitability in the trade decreases. Instead of a large gain you end up exiting round the same price you entered the position. Whipsaws, overbought, oversold conditions mulling around is the killer of this type of trade.

I'm playing this trade as "high risk" which means I am expecting the previous highs of the indicators like CCI (20) and RSI on the chart below to hold which it did. If you look at ADX indicator you see +DI holding true to the bearish divergence. ADX is a great indicator because with -DI (Sellers) is more holding around previous bottoms while + DI (buyers) are getting less and less. This tells me that buyers are getting weaker and losing conviction while sellers are waiting for opportunity to jump in. As we know from general market understanding, the market inches up and drops very fast. 60 minute chart posted below.

Friday, October 8, 2010

Off next week.

I will be traveling next week and will not have access to the internet. I'm still holding short as long and this bearish divergence in the daily,60/30 minute charts stay in place.

Good luck everyone and happy hunting.

I will still have access to email so if you want to contact me click on "feed back" on my publich charts. (link on the right)

Tuesday, October 5, 2010

Why 1163 high?

Interest look at the weekly chart. Maybe this why were getting some resistance at the 1163~ish mark. I tie this with the divergence trends as well as a good stop on this rally. I'm forgetting my first rule of looking at the biggest pictures first.

Bearish Divergence being tested but still intact

If you see the CCI(20) and MACD the bearish trend line is in tach but we need to hold the high today or I am in risk in my trade. Using SPXU (spx 3x ETF) in this short trade, I'm currently down 3.8%. Exiting a losing trade is 2 fold, high risk and low risk. For lower risk, exiting off of the bearish divergence trend line shown below and higher risk where CCI(20), RSI, MACD make a new high. from your entry of the position. Here is the 60 minute chart below:

Monday, October 4, 2010

Short trade progress

After the market mulling around on top waiting for the trend to change, I have had nothing much to post but to rather wait. Today we tested that dreaded 1132 support line. This is a key for us to break from a short prospective. Tonight I am going to post the 3 trade chart time-frames (daily,60,30) and see what is taking place. I put notes on the charts where I thought it was important to do so. Let take a look at the longest time-frame, the daily.

We continued on our bearish divergence and now CCI(20) is breaking 100. You really see the momentum building up in this chart for a trend change. Also, you can see we have plenty of room to go down for a longer-term trade. If everything works out correctly, CCI (20) will break -100 and I will exit before it breaks -100 again. I will use the 30/60 minute charts to exact the exit while the Daily chart gives me an idea of how much potential I have for profits. For more information on this CCI concept look to the right links on the Divergence trade of 3's, more specifically "Indicators with different time-frames" Here is the daily:

Below we see the 60 minute chart:

Below you have the 30 minute chart. We got a double whammy going on with the 20 Day Moving Average and the dreaded 1132 support area. I would be surprised if we break through this tomorrow, but I've seen crazier things. I'm expecting some kind of right shoulder to form here we another stab at the 1132 line. If broken, look for the 200/150 MA's then the gap to be filled bellow the MA's with a back test at the 1120~ish area then we head down with a strong wave 3/C wave to the Fibs, shown in the 60 minute chart.

~Good luck and Happy Hunting~