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发表于 2009-3-23 11:30
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Notice the previous uptrend which really wasn’t extended beyond reason, but the pattern still emerged. Buying pressure eased (which is evident from indicators not shown above) and price swings consolidated until a lower low was made (condition 1), a peak retest swing occured resulting in a lower high (condition two), and once you identify these two conditions, it is merely a waiting game until price TAKES OUT the low of the most recent swing low. When it does, that is your trigger for entry. Your stop is placed just above the trend’s price high (which is logical because you are betting that the trend will not take out that price, and if it does, your trade idea was wrong and you need to exit your position - in this case, a short sell trade).
Let’s see what happened when you entered short close to $44.oo:
In my experience, “Sweet Spot” trades often take heat near the beginning when price often makes another upswing test. Conservative traders/investors may wish to enter the trade at this price swing instead of the initial “sweet spot” to play for better position. Either way, price never threatened your stop, which should have been placed just above $47.50. Essentially, you are risking approximately $3.00 to play for a longer term position that could yield you upwards of $10 to $20 if you stay patiently with the trade until the reverse pattern occurs.
Another recent example comes to us from Bear Stearns:
This uptrend did become slightly extended and bulls gave it a last chance breath before rolling over to concede defeat.
The first ‘warning light’ condition occurred with the lower low at $155; the second conditioned occurred with a failure retest higher that ended the swing just shy of $170. With the first two conditions in place, we wait and see if price can take out the $155 lower low.
Price does so with a compelling gap through the zone, indicating blatant strength on the part of the sellers attempting to make their stand. Entry wasn’t perfect, but it was signaled as close as possible to $155 (which would have been filled nearer $150 most likely). This - again - is a short sell trade. Because of the gap, your stop is - for some - an uncomfortable distance of $20 away. Remind yourself that your target may be upwards of $40 to $50 or more. Only take trades your account can handle and practice good position sizing - in other words, don’t bet the whole account on a trade that requires a stop of $20.
What happened to price?
Price stands now at less than $110. I probably would recommend exiting to take profits due to the possibility of a price exhaustion move - notice the volume spike.
Again, price never threatened your stop and ‘rolled over’ as anticipated after a consolidation period of indecision between the buyers and sellers. Sellers had the edge and their dominance played out over the next few months.
As always, two charts do not create overwhelming proof of this strategy. Run through your own chart examples in both directions (uptrend death/birth and downtrend death/birth) to fully understand the concept.
Also, you can use your newfound knowledge as ‘confirmation/non-confirmation’ for trading candidates you are considering. For example, do not go long a stock which is showing a possible or confirmed “Sweet Spot” short-sell condition.
I consider myself a retracement trader, and I look for the patterns of highs and lows to determine entry. I have greater confidence in the potential of a retest trade in an uptrend when it is not showing a ‘trend death’ pullback pattern.  I often play for ’small targets’ which simply are retests of previous highs only. However, I’ll almost always have at least one ’sweet spot’ position trade on in my accounts at all times, albeit with very few shares usually.
The “Sweet Spot” pattern occurs across all timeframes; as such, the concept of “Large Target” is relative to your timeframe and normal ‘targets’.
I do want to emphasize the point: Do not anticipate “sweet spot” position trades. Let the market “tip its hand” and confirm direction before entry. Doing so will never allow you to enter at the exact top or the exact bottom, but it will not only greatly increase your odds of success, but also give you a clear exit point if your idea did not play out in the market as expected.
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Who’s Pulling the Strings in this Game?
August 3rd, 2007 by Corey Rosenbloom
I’ll be honest - I am SO relieved the weekend is here. This week has been the most surprising week of my trading career. I have seen many sharp increases in volatility in the market (not associated with a major economic report), but those events tend to be isolated and relatively rare.
This week, we saw the Dow Jones index swing 250 points down last Friday at the last hour (July 27); 250 points down in the last two hours Tuesday; 250 points up Wednesday in the last hour, 150+ points up Thursday in the last hour, and now 250 points in the last two hours Friday.
These volatile events have occurred within the last two hours… and in one case the last 15 minutes! Despite the rampant end-of-day volatility (major price swings), the index really hasn’t moved directionally up or down from the trading range that is being carved out.
The S&P 500 showed a similar trading/volatility pattern:
Note that in the above examples, each ‘bar’ represents 30 minutes of trading time. Each gray divider line represents the close/open of a day. I am showing slightly beyond this week’s action above.
I wish to call your attention to the large ‘candles’ that occur at the end of each of the trading days - they look rather normal in this context, and are seeming unimportant in the daily or weekly chart views, but if you examine the 5-minute charts of each day, the pattern literally leaps out at you.
I have heard many reasons for the cause of the action - let’s just attribute it to skiddish, uncertain large firms or traders struggling for position in an uncertain economic climate. Remember the stock market is an anticipatory vehicle, where all that can be known is discounted immediately, such that conditions that exist now were forecast in the past, and news items/data that occur now are discounted (price changes) to anticipate what these data mean many months into the future.
This is often the case where a market will plummet on good news or rise rapidly on bad news, or some seemingly nonsensical combination of the two. What’s known and available to the public is already in the price as it stands now - there is generally little to no information edge for retail traders.
I recommend scanning the news and blog articles that will be written this weekend regarding various perspectives on why we had the week we had in the market. It was said that last week was the worst week for the market in five years, and that this week was the most volatile for the market in many years.
For those of you who traded actively through this week and came out either unscathed or slightly wounded, my hat goes off to you. I took some minor short-term hits both ways this week! For those of you who took some major his this week, don’t give up - chalk it up to knowledge and experience. It is my guess that we won’t have such a wild week in a long time - if you survived, know that the water is unlikely to be so choppy for some time.
Wear your wounds proudly and document as much data as you can from your experience. Don’t get complacent and be aware that the market can always change at a heartbeat’s notice. Even experienced traders took some hits and were surprised greatly this week - that’s what makes this ‘game’ fun!
It would honestly be boring if everything was the same day in and day out. Isn’t that part of what attracted you to trading in the first place? The thrill of the chase; the anxious heartbeat of racing prices; fortunes being won and lost in a moment’s notice; greed, euphoria, and fear raising their spectres all through the action; traders loving and hating the market simultaneously.
Stay alert, learn from this week’s action, clean the wounds this week no doubt inflicted, and live to trade again (thanks to risk control measures!).
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Focus on the Trade - Not the Money
August 2nd, 2007 by Corey Rosenbloom
We all trade for one reason, right? To make money. So why does it seem that achieving that simple goal is so difficult at times?
Also, if we trade to make money, why do many successful trading professionals advise us “not to focus on the money” - doesn’t that seem entirely ironic?
In fact, in my experience, it is true. In the beginning, I was wide-eyed and money-focused and thought the money would come to me. After a few successful trades, that belief was reinforced. It took only two major losing trades to shatter that worldview and force me back to the ‘market classroom’ for a while to learn as much as possible about the trading endeavor - I realized it clearly wasn’t as easy as I had expected or hoped.
One factor that can help smooth the transition from beginner to more experienced trader is the process of learning how to focus on the trade itself, and not what the outcome means to you monetarily.
Yes, one trade can pay your rent for a month; one or two trades can buy you a nice vacation trip or cruise; a few trades might buy a nicer car, etc. But professionals have said time and time again that if you focus on the money aspect, you’ll lose because you’ll trap yourself in so many psychological and mental games that you’ll do exactly the opposite of what it takes to profit as a trader.
Some examples of such psychological traps:
- Holding on to a loser past your stop-loss level
- Buying a larger position in a stock you love that has declined (aka - doubling down)
- Putting on positions (risk) too large for your account
- Placing stops too tight (with larger positions)
- Exiting your trade early before it hits your stop (panic)
- Exiting your trade early before your profit target (again, panic that it will reverse)
- Exiting your trade before it has enough time to ‘run’ (let your profits run)
I imagine the majority of the points are easy to understand, but the final point may be the most difficult.
Say for example you have a set dollar amount in mind, at which point you will exit a trade (maybe you’re trying to pay rent or some other specific monetary goal). Now, assume you entered a strong uptrending stock in a great sector early in its potential trend move. Now assume you capture a $5 move and exit now that you have made $1,000 or more. You stop trading for the month.
What happens? Your analysis indicated that there may be a potential for a $10 move but you exited far too soon and you knew it - had you held the position, you could have extracted more profits based on what the market was telling you, not what your pocketbook was dictating.
I’m sure you’ve heard it many times that a handful of trades per year can make up your entire year, especially if your system is a trend following type. You literally cannot afford to sacrifice short-term profits you’ve made at the expense of longer term, annual performance measures.
In addition, I’ve had it happen so many times where I was too oriented on the money and purposely placed my stop far too close to market action, only to be nipped out of the position and my stress relieved… just long enough to see the stock reverse and the position carry upwards as anticipated. Instead of a 5% gain, I experienced a .25% loss. Quite ridiculous, actually, when you go back and analyze your performance.
Exiting before a stop is hit is actually worse than placing stops too tight. In the event you place stops too tight, your analysis can show you where you went wrong and how to correct it. When you exit on a whim or feeling, you can’t analyze the action properly because there are no objective facts or data points (in terms of stop placement). It hurts to see a position go against you, but exiting before the plan calls for it can result in “the death of a thousand cuts”.
Focus on the trade itself, why you should enter, and where you should exit, and base it on a technical analysis parameter - one of your choosing and understanding. Follow the position ‘hands off’ until time to exit, or some predetermined condition occurs that prompts exit. Your mindset when you enter a trade, especially if analysis is done nightly, is often better than when you are in a position and making judgments on the fly. Honor your analysis and focus on support/resistance, price, volume, etc.
Focusing on the trade, and not the money, will create the objective data necessary for improvement. Focusing on the money - more than not - will result in losses and disallusionment… which is exactly what you don’t want or expect when you enter a trade.
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Golden Last Hour Trading
August 1st, 2007 by Corey Rosenbloom
The last hour of the trading day is becoming ‘golden’ in the sense that volatility and range become rampant as traders struggle for position before the close.Today’s action was a reverse of yesterday’s down action in the last hour… only this time, the 250 point sudden increase in the Dow took place over the last 30 minutes of trading. For specifics, the Dow Jones Index showed 13,150 just before 3:30pm (Eastern) and if you blinked, you missed the Index reaching 7 points shy of 13,400.
While there will be many posts regarding this action, I thought Arthur Hogan (article link here) summarized the action - as well as the overall market - in his quote:
“We’ve got a tug-of-war going on. We’ve got that dichotomy between fear and greed. This is greed kicking in,” he said of the rush of last-minute buy orders.
“You get to a point where are you more afraid of the fallout from credit spreads or are you more afraid of missing the market bottom?,” he said of investor sentiment. “I think it’s going to be a recurring pattern over the next several weeks,” Hogan said of Wednesday’s volatility.
Analysts attribute the ‘last hour buying’ to various hedge funds, or even simultaneous market buying programs. Regardless of the reason, many day traders (and I suspect even swing traders) were taken by surprise, especially those who were short stocks or market ETFs going into that last hour. I’m not sure the action could have been forecast or predicted by any retail trader - correct me if I’m wrong here.
Just like yesterday’s charts provided an educational example of market volatility, today’s chart does the same:
Dow Jones 5 minute Chart:
Dow Jones 60 minute (hourly) chart:
I mentioned the positive momentum divergence forming on the longer term intraday charts and perhaps this a partial resolution of that divergence. Both the RSI and the 3/10 Oscillator are showing crystal clear ‘textbook’ divergences worth studying. This indicates odds have shifted to favor higher prices in the short term.
Perhaps the pressures of ‘greed’ in the sense of “I can’t miss out on such good prices while the market goes up!” has overtaken the ‘fears’ of investors worried about lower prices ahead. Either way, the momentum clearly speaks in favor of the buyers now, as selling pressure appears to be drying up in the short term.
Times like these make trading fun. What a way to start off August!
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