3 Trades Explained $DIA $IWM $SPY

17 Nov
November 17, 2014


Trade #1

  1. I shorted $IWM three days ago by buying $TZA at $13.02 when $IWM was near the 70 RSI on the daily chart.
  2. My stop loss was to exit if $IWM closed above the 72 RSI.
  3. My trailing stop is to stay short unless $IWM closes above the previous day’s high.
  4. There is a potential that the 5 day ema acts as intra-day resistance.
  5. It is possible that $IWM goes to the 50 RSI or the 200 day moving average.
  6. I am currently up 6% on the capital at risk in this trade.

Trade #2

  1. I went short $DIA today by purchasing $SDOW at $21.67 as the $DIA chart was near a 72 RSI.
  2. My stop is a close above all time highs.
  3. If $DIA begins to pull back and the trade goes in my favor, I will use an end of day stop of a close above the 5 day ema.
  4. $174 is my potential first target.

Trade #3

  1. I sold $204 $SPY weekly calls for $1.20 and bought $207 weekly $SPY calls for .10 cents to create a $1.10 bearish credit spread when $SPY was near its 70 RSI. 
  2. If $SPY closes below $204 on Friday I will make $550.00 with the five contracts. This is a small trade for my account sizes.
  3. My stop loss to exit this trade is if $SPY closes over the 72 RSI on any day before expiration.

$SPY Chart With 10 Facts 11/16/14

16 Nov
November 16, 2014
 chart courtesy of stockcharts.com
  1. The long term up trend is still in place.
  2. All indexes are with-in striking distance of all time highs which remains bullish. $SPY $QQQ $IWM $DIA
  3. With all stock indexes pushing against the 70 RSI on the daily chart the potential upside is very limited putting the odds on limited momentum taking us to higher prices from here.
  4. $SPY has been in a $203 support $205 resistance price range for the past 5 days.
  5. In the past five days the 5 day ema has stopped being the intra-day support.
  6. The next line of support on the $SPY chart is the 10 day sma then the $200 price level.
  7. The risk/reward ratio here has skewed in favor of short selling  plays and call option sellers.
  8. All Time New Highs
  9. Chart Your Trade Weekly Report
  10. All-Time Highs Possible In Bear Markets

5 Great Trading Articles 11/15/14

14 Nov
November 14, 2014


Paul Tudor Jones on the 200-Day Moving Average

Determining Optimal Risk

Position Sizing and Expectancy

Want to succeed? You need systems not goals

Adding Tools to Your Mental Toolbox

Top Trading Tweets 11/14/14

14 Nov
November 14, 2014

Guest Post: Drug Your Trading

14 Nov
November 14, 2014


This is a guest post from Rajesh that blogs at Nifty Nirvana. Knowing why something works can be the key to everything:

Trading is a probability game. Right. I do not want to dispute that. I know very well that there are no certainties in Markets, only probabilities.

 But I can’t agree with the way many traders approach these probabilities. For example, take the case of “Gap closure”. People research and conclude that during the past 70% of the time, morning gaps closed. They bet on this probability and act on it. They believe the probability will work in their favor and in the long run and they will emerge as winners.

Usually Traders focus on one important technical set up and start tracking it. They do back testing and forward analysis on this technical set up for a while and compute the basic probability ratios for this. When they find this ratio favorable, they conclude that the pattern has a lasting and significant edge in the Market.

I approach this problem differently. Rather than finding the basic probability of the set up and betting on it, I try to find out the factors that made the set up work. I have drawn my inspiration from the Pharmaceutical Industry.

For centuries people relied on traditional medicines like plant extracts. Many of them were found to be very effective. The problem is these botanicals and herbal preparations contain various bio active components and identifying the exact effective component is a challenge.

First step is the extraction, isolation and characterization of active components in these herbal preparations and finding the exact effective molecule. Toxic studies and clinical evaluation follows before the drug is released. Easier said than done

I feel this is the right way to go. Instead of betting on the basic probability, we must go deep and find out the patterns inside these patterns. Identifying and isolating these favorable conditions will give us the real trading edge, I believe.