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Archive for May, 2008

Summer has started. The 10 point range and meager volume today suggested that the jr staffers were instructed to maintain the monthly mark up bias.

Staus quo.

The best thing to do for the next month or two may be to sharpen up our trading range skills; sell high, buy low.

 Erratic, listless markets are not easy to trade. Stop losses still need to be respected, and profit targets may need to be adjusted as price meanders with no clear direction.

If my attention wanders, I need to be careful not to overtrade, or develop other bad habits like forcing trades for “action” without having proper setups that give me an edge. 

No harm in taking some time off to play golf, go sailing, work in the garden. Anything that is a change from my normal routine that allows me to recharge my battery.

Robert Prechter has continually theorized that social mood and the markets are intertwined. This study caught my attention, as it got me to wondering about traders and our emotions. Revenge trading and road rage seem to be similar behavioral expressions.

With higher taxes, higher mortgage payments, and gas prices and food costs rising daily, many people are in financial distress these days.

When I find myself stressed and undisciplined, I know it’s time for me to take some time off.

I hope those drivers do too.

 

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Limbering up with some exercise is wonderful for traders, especially if you sit in a chair all day.

Getting up, stretching, getting some fresh air into our lungs, and mentally recharging ourselves is healthy for us.

Having our stops in the market stretched, however, is annoying at a mimimum, and downright frustrating no matter how many times we rationalize the experience.

Each entry into the market is a “seed” that is planted. Some will bear fruit, some will not. Stops keep  a bad apple from ruining the rest of the apples, (and their seeds) in the barrel.

The weekly trend stalled today during the afternoon session. Patient fibonacci traders got rewarded, while those who jumped in at the front end of the zone suffered through a drawdown, or got stopped out.

Missed trades are better than lost money in my opinion, so I am usually conservative in my approach. I prefer to stick with an intraday trend until we get to a compelling reversal area. Today’s top came right at such a zone, and the risk/reward changed dramatically at the 123 higher top.

Stop placement is an art, and I can honestly say there is no one method that works best for everyone. We need a little breathing room, but not too much. Better to lose a little, go to the sidelines and think clearly.

Some traders use a one point stop, some use 1.5; some use 2 or 3 points. A few use 5 to 10 points. The most I have heard a trader admit to using is 30 points, and his target is 10 point profit.

Works for him, not for me.

My reverse button works just fine when my dynamic pivot gets hit. I figure it’s better to be making money than to argue with the market.

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Hindsight is a wonderful tool to help explain technical analysis.

With it, we all can predict within a minute and a tic the exact times of turning points.

The moving averages can be explained, the pivots are all logical, and we can clearly see why something did what it did.

Making the call for directional trading is sexy and sophisticated.

Unfortunately, it’s not enough.

Take a look at the image in this website’s header.

Instinctively I knew that this was the right choice; there were so many items of symbolism that caught my eye.

“Mistylook” perfectly captures the inherent beauty and paradox of the markets: hidden in plain sight is the action of the markets, minute by minute, hour by hour, and day by day.

Yet somehow there is always a reason to see that both sides have merit, that the market could go either way.

The trick is to make some money when our judgement is right, and get out of the market. Period.

If we are going the wrong way, then take our stop out. Period.

That’s enough to compensate for our lack of clear vision.

Late day breakouts like today’s action steam roll hapless traders who cannot discern them. A well known wall st adage is that amateurs play the open and professionals play the close.

I continually remind myself that I want to play on the side of the professionals or I will soon be back in the minor leagues nursing some injuries to my portfolio. 

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Dig dig digging

After digging itself into a hole last week, the market is trying to put the brakes on and reverse the slide.

The secret code of course helped us understand that we are at a significant area and likely the bulls will not give up without a fight.

Marginal lows like the overnight 70.5 are meant to misdirect our attention. The market could go much lower of course, but usually it would prefer to frustrate a few late shorts who are one dimensional traders and forget that bounces occur.

I find that the safe trades are usually not safe; they just give you that illusion.

When the market digs itself into a hole, it takes time to dig itself out. The patient shorts are usually the best ones, and catching a piece of the action both ways is likely the best strategy if you expect range trading after the obligatory head fake bounce.

The double bottom on secondary indicators like the $vix.x and the xlf need to be monitored closely, as well as the action of the comp to provide us with clues for the next major move.

Stay tuned, and don’t get married to any month end markup.

I follow this great trader’s column, and so should you if you are serious about trading.

 

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Friday’s action put an exclamation point to the daily chart.

The market has bounced significantly off it’s winter lows, but the sell in May and go away traders took their profits as the market entered into the expected fib zone at the beginning of the week.

Day traders just need to get the intraday direction right, and we don’t need to know the long term direction.

That is not as easy as everyone makes it out to be, so I will let the arm chair analysts and Ivory tower pontificators theorize ad infinitum.

To make money, we need to be in the game, with real money, real targets, and real stop-losses.

The pullback this week is inconclusive. Was it the beginning of the end for the Bulls, or was it profit taking before launching another attack?

Time will tell.

All I needed to know was that the daily direction this week said lower, and trade accordingly until the evidence of the tape said otherwise.

Spirals of despair for the Bulls, at least temporarily.

“Bulls climb the staircase, but Bears jump out the window.”

Being aware of that old Wall Street adage helps us understand the different timing mechanisms required to successfully take trades in alignment with the short term trend.

Have a great Holiday weekend, and remember those who sacrificed their lives so that we might live in freedom and enjoy the right to life, liberty, and the pursuit of happiness.

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It has been said that Bulls lift the market up with their horns, and Bear markets slap you down with their paws.

Who knows whether we are in a Bull or a Bear market, I am certainly not bright enough to know. Let the analysts continue guessing; I am happy to take my slice out of the middle and go to the sidelines. For now, the trend seems down so I love to take trades in the direction of the trend until provern otherwise.

Today’s pause predictably caught overtraders on both ends.

In an athletic contest like baseball, this  would have been a pitcher’s duel, a 1-0 game. After extra innings.

The defensive play was outstanding, and not much offense. I guess the bear’s bats were tired, and the bulls just played bunt and run, as they are in a three day hitting slump.

At least no one got badly injured.

Holiday weekend is coming up, the volume seemed light, and the boys are hoping for some nice weather as they head for the Hamptons.

Dont overtrade when they are hitting the links and having a few T and T’s. Get the morning trend trade right and take the afternoon off as a gift to yourself.

Like I always say, if you can’t beat them, may as well join them.

Here is another professional worth studying, in my opinion. 

Play it light tomorrow, and come back refreshed next week.

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Position trades that were initiated on Monday found their way home today after the FOMC excuse for the selloff.

There were many gyrations and range trades available until the market broke right before the announcement.

It looked like the insiders were already jumping in, as if the smart money knew something.

There is ony one way to play the break: jump in and join the winning team if you weren’t already short.

Now hindsight is everything, but being prepared by knowing the sequential lower (or higher) targets makes life easier for me as a trader.

You never know where the intraday trend will come to an end and reverse, but fading an intraday continuation move before seeing a formation occur is a high risk trade. Now and then the V bounce comes out of nowhere, but trading is about the summation of a number of trades, not just making one lucky guess.

Taking trades in the direction of the primary trend is safer and usually more profitable .

Peel ’em off as the market plunges and you attain the pre-determined lower rungs on the ladder according to the secret code of the Illuminati.

This trader is world renowned as sophisticated and savvy. I offer links like these for you as I believe the serious students who visit this site will want to explore a variety of options and to learn from the very best of the best.

 

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