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.

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