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Posted by entropy, Mar 14 2008, 01:00 PM

on todays charts...its extremely high odds we test the lows in the next hour, and there is a Ewave setup for another huge bounce off that, it would be the last though. ..i'd put the odds only about 25% of it though, for many reasons -
1. Its friday afternoon, who is going to step up in a buying frenzy with such a news driven environment? oh, yeah, your right...the 'people' who have on every panic...yeah, but I generally not on fridays or mondays , tend to be Tue-Thur.
2. hourly are rolling over
3. Gap magnets below on Q's and DIA.

Far MORE likely, and has me very twitchy, is the area of 1250-1260....I will most likely step asside all short positions I happen to be holding IF we get down there....I want to see what occurs.....will post at the time if so....but of course, still looking for what I outlined for a while ie.1220, maybe alot lower.

Mark.

Edit:** I make a point of not saying 'how to trade such things', I'm too busy trying to focus on my own stuff and don't want to be distracted trying to kee this updated, however, just something I'll pass along about situations like this today -
If I am holding shorts (I am infact), then I will not cover unless I see 5 waves off the low on a 5min chart, and the retrace of that 5waves can hold Fib 0.618 retrace, and in addition, can clear the 5min 60EMA, cross the 20EMA back ABOVE the 60EMA and hold it on retrace AND the 5min MACD goes above zero.....without those conditions, nearly every 'rally' attempt fails in my experience...just an FYI....that's a 'soft stop' based on indicators, I also have a 'hard stop' based on where I entered etc...its always higher than the soft stop. ...this message will self destruct later. laugh.gif



Comments

  beta, Mar 15 2008, 01:23 AM

"If I am holding shorts (I am infact), then I will not cover unless I see 5 waves off the low on a 5min chart, and the retrace of that 5waves can hold Fib 0.618 retrace, and in addition, can clear the 5min 60EMA, cross the 20EMA back ABOVE the 60EMA and hold it on retrace AND the 5min MACD goes above zero.....without those conditions, nearly every 'rally' attempt fails in my experience...just an FYI....that's a 'soft stop' based on indicators, I also have a 'hard stop' based on where I entered etc...its always higher than the soft stop."


Wow, that's an interesting observation -- never saw anything like that described before as a "stop." Can you provide a more concrete example ? Would like to understand how this works in action ... thanks.

This post has been edited by beta: Mar 15 2008, 01:23 AM

  entropy, Mar 15 2008, 12:24 PM

QUOTE (beta @ Mar 15 2008, 01:23 AM)
"If I am holding shorts (I am infact), then I will not cover unless I see 5 waves off the low on a 5min chart, and the retrace of that 5waves can hold Fib 0.618 retrace, and in addition, can clear the 5min 60EMA, cross the 20EMA back ABOVE the 60EMA and hold it on retrace AND the 5min MACD goes above zero.....without those conditions, nearly every 'rally' attempt fails in my experience...just an FYI....that's a 'soft stop' based on indicators, I also have a 'hard stop' based on where I entered etc...its always higher than the soft stop."


Wow, that's an interesting observation -- never saw anything like that described before as a "stop." Can you provide a more concrete example ? Would like to understand how this works in action ... thanks.


Beta, I'm sure you have, I just expalined it badly, because I don't have much time when I'm supposed to be focussing on the market.

OK I said 'soft stop', I could have said 'exit signal'
I didn't really make much sense above, I'll try again.

First, I forget to define what type of trade I was referring to. I was referring to a multi-day..say 1 to 3 day type trade entered off an 30minute trend SIGNAL. I'll have to use an example based on Friday.
a. Lets say your short SPY at 132 and its fallen to 128
b. your system remains on SELL ( short)

Now a sudden large rally occurs like the one at 3.00pm Friday. Setting stops in a high volatility market is very difficult. If the stop is too close, you get taken out in this market most of the time. If the stop is too wide, you risk losing a big gain in a blink of an eye.

Basically, what is the point of a 'stop'?
Essentially a stop is a protection against your 'signal' being wrong.
*Without stops you have unlimited risk, and are gambling not trading.*

The only proof you were wrong, is an opposite signal, in this case a BUY - This the 'soft stop' I mentioned. There are thousands of potential buy signals, but I gave some conditons I look at for this particular type of trade.

Note, obviously though, if you wait for a 30minute trend SIGNAL BUY signal to stop out your 30minute trend SIGNAL SELL signal, you'll probably lose most of your gain and may even end up with a loss! in this crazy market volatility you'll also get an ulcer!


That is why I was using 5min chart here, to look for a 'buy' at a lower trend as a exit(short) i.e. soft sto. For example, just take one of the conditions I gave - "PRICE can clear the 5min 60EMA"
- On friday that occured at 129.5 at 3.15pm

Its 'soft' because unlike a hard stop -
1. the PRICE at which the stop out occurs MOVES - it depends on the speed of the price move etc
2. I have to do it manually. Most trading systems don't let you set stop at a moving average and a bunch of other conditions....maybe some do but it would require some tricky programming... I prefer to manually stop the trade out....hence its 'soft'.

Obviously soft stops run the risk of being 'soft in the head' as you change your mind or fail to act...also its more work as you have to pay alot of attension to the market....hence why I ALWAYS have a hard stop price as well usually just above where I know my soft stop should be taken.

To trade you have to have 'an edge', and that means having some signals here that beat the odds. For example the 60EMA is very widely known, which means it is ALSO a PERFECT FADE i.e. the point at which price tries to cross the 60EMA is usually either:
A breakout buy signal OR
A reversal down signal (faded)

That is why you need a better system than that which gives you an edge...I'm not going to explain my system obviously...but I did list some very well known ones above.


Hope this makes more sense.

Mark.

  beta, Mar 16 2008, 01:52 AM

Thanks, Mark. I just backtested your exit signal system, and it has some interesting results. In general, it seems like a more sophisticated way of confirming a breakout from a 5-min descending wedge. In most of the examples I backtested, it tends to "confirm" such a descending wedge breakout, esp. the MACD zero crossover.

I dont have much experience using either MACD or the 20/60 MA crossovers, but this provides an intriguing point of inquiry.

Many thanks for sharing this. I really enjoy reading your blog.

/beta

This post has been edited by beta: Mar 16 2008, 01:53 AM

 
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