Archive for the ‘Uncategorized’ Category

PostHeaderIcon The Three Primary Time Frames Traders Have To Consider










In trading, the past is where you go to test ideas. Studying past price data will reveal historical patterns and trends. You will see how the emotions of fear and greed can effect financial markets causing things to move far beyond what should be possible based on fundamentals. The past is a great place to see how the market reacts to popular technical indicators, support, resistance, and key moving averages. The past is also a great place to curve fit back tests until you find noise that you confuse for a signal. The more simple and the less degrees you use to find a trading signal the higher the probability that it is real and will work with out of sample data. Just because something happened in the past it is not an indication that it will repeat again it is only a possibility. The proper use of past price data is to see if you trading idea would have worked historically through mulitple types of different  historical market environments. The past is a great place to get an good idea of possibilities and probabilities of your trading systems future success.

The present moment is the only place we can trade because we are not time travelers. In the present we take a robust signal, we set a stop loss, and we position size to avoid the risk of ruin. We don’t expose ourselves to too much open risk with multiple positions and are careful with having too much correlation between or positions.

The future does not exist. No trader or subscription service knows the future becasue they do not possess a crystal ball or a time machine. The future is where we will be stopped out, trail a winning trade, or exit a trade to lock in a profit. Since we do not know what is happening in the future we have trade based on the current price action and use our trading plan and react as time unfolds.

PostHeaderIcon Ten Fast Facts About the Current Stock Market

  1. After the long run up from the recent bottom the risk/reward has shifted against the bulls. The downside risk of a pull back is  greater than the potential upside for bulls to gain more profits at these lofty levels.

  2. In the short term time frame $SPY has begun a trading range with basically a $199 support and $201.00 resistance. This is the first five day trading range since the bounce off the near term bottom at $191 and near the 30 RSI level.

  3. The stock market indexes need to create a longer price base here before the potential of higher prices are sustainable.

  4. Historically the 70 RSI on the daily chart has acted as resistance as an overbought indicator.

  5. $SPY $200 and $SPX 2000 are going to be key resistance levels here.

  6. The Geo-political risks always create the potential of a sharp sudden sell off with any unexpected news that is not already priced in.

  7. I would be a buyer of a pull back to the 50 RSI and/or the 50 day sma level.

  8. I would open a weekly bearish credit spread at-the-money with a break above the 70 RSI.

  9. What the hell does volume have to do with these last two $SPY rallies? Why do so many still mention it? They were both low volume rallies. Only price pays, you can’t trade volume.

  10. All the doomsayers with all their predictions are just noise. Trade price, trade a robust system, follow the chart and it is possible to make money in the markets.


PostHeaderIcon Five Great Trading Articles For Weekend Reading 8/30


Mental Model: Circle of Competence

The Essence of a Trading Process

Goals vs. Systems

Why Being Yourself Is The Key To Being A Successful Investor

PostHeaderIcon Top Trading Tweets of the Week 8/29


PostHeaderIcon Five Reasons I Sold My Stock Index Positions Today

My entries for my last $SPY trade was at the end of day on the reversal up day off the 30 RSI near the $193.30ish level then the next day I added at the end of the day on the gap up near the $194 level. I took a half of my full account position on day one and doubled it on day two. My entry was a reversal off the 30 RSI and then a gap up that held the next day. I suspected all the traders that wanted out were already out as the Geo-political fears escalated. The best trades are the uncomfortable trades, we have to be zigging while the other 90% of traders are zagging if we want to be profitable.

  1. Today we gapped down showing an absence of buyers over the $200 level. Even as we rallied the concrete ceiling of $200 held strong.

  2. We closed below the previous days low of day.

  3. The $SPY trend flat lined near the 70 RSI level on the daily chart over the past four trading days which is what I expected due to the historical resistance found there.

  4. The risk/reward is now skewed against longs after this strong rally back near overbought levels. There is more potential and probability of a down move than a up move from here.

  5. The $SPY chart needs price consolidation here to set up for a run higher.

  6. I suspect there will be opportunities at lower levels to get back  in as a swing trader before the next big run higher. I will be watching the 50 RSI and 50 day sma for potential long entry levels.

  7. The MACD lines have a wide divergence here after this run.