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Brian:
In markets like the past two days, I find that to trade and make money, I
have to be more persistent than in more subdued or 'normal' market. These
are very volatile markets and constant tug of war going on in the index
markets can stop you out of your position right at the top or at the bottom.
When I was an institutional trader in the early 1980's, I was an assistant
to a senior trader and she constantly reminded me that good traders often
buy the top and sell the bottom--It's what you do after that that determines
the outcome of the day. On day's like yesterday, you need to be persistant.
Don't violate your trading rules, but you may often have to jump right back
in after getting stopped out without much 'down time.' If you can't be
persistant [because either your capital won't allow it or because your
methods do not allow it] either stop for the day after being whipsawed out
once or play smaller and try to be more persistant.
Here's an example:
I was short several units coming into Tuesday's market. I had stops in at
1427.75. I was stopped out at my price [not very far at all from the high of
the day. After getting my fill on my stops, I watched the market trade
listlessly around the 1425 area and when price didn't immediately begin
marching over 1428 again, I sold again, and put stops above the market. I
rode these shorts through most of the day. I snugged my stops down to
1413.50 at one point, but while I was watching the last 30 minutes of
trading, it seemed obvious to me that the S&P pit would try the same short
squeeze near the close that it had used so effectively on Monday's close. I
cancelled my stops and watched price run from the lows of the day right up
to my stop area of 1413 and change...and then turn down hard after the cash
close, finally closing at 1403 [what a whipsaw ride! Imagine how many
traders whipsawed themselves out of their position on this wild ride!]. I
had a partial profit order resting in the market at 1391.75...
When I walked into my trading room on Wednesday morning, I was filled on my
partial profit order at 1391.75. I refreshed my analysis and thought we
would see a very aggressive sell off and test what I considered to be three
important support areas: 1389, 1376 1/2 and eventually 1364. I was now only
short one unit, so I wanted to 'reload' to a full three units. I re-sold my
second unit [which I had taken profit on at 1391.75] at 1393. I then worked
an order to sell a third unit at 1398 and I initially put a stop on the
lowest add at 1400.75, thinking that if price filled the gap, we might run
into the low 1400's and perhaps as high as 1405 [outside chance of running
to 1409, which seemed to be what I call an acceleration level] and I did not
want to be fully short above 1400.
After running down to 1385, the market screamed out of the hole and I soon
sold my third unit at 1398. And my 1393 add was soon stopped out at 1400.75.
I had an additional stop in at 1406 for the second unit, which did not get
hit. It quickly became apparent that price was not acclerating to the upside
above 1400, so I sold my third unit again at 1399.50. Price never really
tested the upside again and I was filled on my first profit order at 1382
and my second at 1377.
The point I am trying to make is that often, the areas a trader identifies
for stops turns out to be a critical area--so critical, in fact, that we
often do not give the market enough room to test and fail at that area. You
can address this two ways: Either try using wider stops [if you can afford
this...if you can't, make certain you are not over leveraging your trading]
OR keep using the same stops but be agressive in re-entering the markets
when you feel certain the market has tested the area you thought was
critical and then returns to the direction of the trend, indicating a
'successful' test.
I hope this is clear. And helpful in these frantic markets. I can't stress
enough that it pays to be underleveraged in these conditions, because you
often have to take a few losses to find the fast lane to your profit levels.
Best,
Tim Morge
Brian Keith Voiles wrote:
> How valid is Taylor's 3-Day Cycle Theory and how can I tell
> what day the market is at in the cycle: Long, Sell, or Short Sell?
>
> My S&P method has been doing well... but today I beat myself
> up and lost $1250. ("I beat myself up" means I'm taking
> responsibility for my loss, and not blaming it on external conditions)
> yet I'm looking for any advise on how to confirm a breakout is
> occurring. Today my trades were whip-sawed all over the place.
>
> Thanks to all -- I appreciate all the valuable contributions to this
> list and how they've helped me achieve some success.
>
> Warmly,
> Brian Keith Voiles
>
>
> To unsubscribe from this group, send an email to:
> realtraders-unsubscribe@xxxxxxxxxxx
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