Lets review today's action.
1. Our bias is still pointed downwards and the more bearish scenario is in effect. The bias is determined through a variety of factors. I showed you how to look at the S&P through 9 different sectors and 10 different stocks. I showed you how commodities and even the vix can effect our bias. I only trade in the direction of my bias meaning up (long) or down (short).
2. We sold off big at the open. The number one rule is to follow the trend with a trailing stop. The stop is set depending upon your good judgement, basically an educated guess. Ride the trade until the stop is either triggered or cash out at the end of day. If you are a daytrader, then daytrade, cash-out at the end of the day.
3. We have developed a master chart which I will attach again. This is our master trading chart (for now). Price sold through the 874 level with conviction. At about 10am, we went short. Remember that we do not trade the first 30-90 minutes of the trading day. We need to watch the trend. During that 30-90 minutes, you develop a trading plan.
4. We had a volatility event that we established a guideline. In the past, when either Bernanke or Paulson have talked, the market has sold off from the very first word out of their mouths. This guideline proved to be good. Bernanke came out and spoke. The market tanked at some point. I didnt watch the speech, I just knew the times when he spoke. I dont need to know what he said. I just need to know what usually happens when he speaks.
5. When price sold below 840, then if you were not short you should have gotten real short. When price falls below one of the retracement lines on our chart, then you know it will sell off even harder. When price falls below established lines then you know that someone's stop will go off and there will be additional margin calls for the longs.
6. As price fell, I got even shorter throughout the day. You never go all-in with these trades. You want to set a trial position and then add to that position as price falls. Another method is to make several trades and to set several trailing stops with different prices. As price falls, you get even shorter. As price goes up, you cover. Simple formula. Remember, there is no one at Brite or Swift trading looking over your shoulder. You are the risk management department. This is how we manage risk. When these stops cook off, it may prove frustrating, but our goal is to make money everyday and not lose it. As long as you turned a profit, thats not frustrating.
7. Jesse Livermore never made one dollar by either watching CNBC, following Bloomberg or sitting at screens looking at price the entire day. Turn the television off and get up out of your seat during the day to do something else. The trailing-stops will take you out of the trade. Trust the charts.
8. When your stops are triggered, do not jump back in but watch and develop a new strategy.
9. There are two scenarios to every chart. I painted two pictures with the same chart using commonly known chart patterns. Acknowledge the two potential realities, but place odds on each. When you are sitting at the poker table, the odds flow in real time in your head. The poker table, however, is unforgiving. This table allows you to get out of the bet with trailing stops.
10. Here is our chart. I covered my trade at the end of the day as my trading rules dictate. Watch that level at 805. It wont get there all at once, or it might...I have constructed a chart suggesting that the time period to reach lower lows (sub-740) is about 10 days.
11. No matter what I post on this thread, things can change in a matter of seconds from day to day. The charts can change quickly. When the stops get hit, you have to revisit all of your charts and see if there is a different reality folding. Things are never as easy as they sound and the market is dictated by 1000s of factors.
12. Look at the pattern forming on the master chart. Your vision might have caught that line. After looking at charts for years, these things may just jump right out at you. I drew a thick line to demonstrate.
This chart is an updating chart and will change depending on what time you look at it.
1. Our bias is still pointed downwards and the more bearish scenario is in effect. The bias is determined through a variety of factors. I showed you how to look at the S&P through 9 different sectors and 10 different stocks. I showed you how commodities and even the vix can effect our bias. I only trade in the direction of my bias meaning up (long) or down (short).
2. We sold off big at the open. The number one rule is to follow the trend with a trailing stop. The stop is set depending upon your good judgement, basically an educated guess. Ride the trade until the stop is either triggered or cash out at the end of day. If you are a daytrader, then daytrade, cash-out at the end of the day.
3. We have developed a master chart which I will attach again. This is our master trading chart (for now). Price sold through the 874 level with conviction. At about 10am, we went short. Remember that we do not trade the first 30-90 minutes of the trading day. We need to watch the trend. During that 30-90 minutes, you develop a trading plan.
4. We had a volatility event that we established a guideline. In the past, when either Bernanke or Paulson have talked, the market has sold off from the very first word out of their mouths. This guideline proved to be good. Bernanke came out and spoke. The market tanked at some point. I didnt watch the speech, I just knew the times when he spoke. I dont need to know what he said. I just need to know what usually happens when he speaks.
5. When price sold below 840, then if you were not short you should have gotten real short. When price falls below one of the retracement lines on our chart, then you know it will sell off even harder. When price falls below established lines then you know that someone's stop will go off and there will be additional margin calls for the longs.
6. As price fell, I got even shorter throughout the day. You never go all-in with these trades. You want to set a trial position and then add to that position as price falls. Another method is to make several trades and to set several trailing stops with different prices. As price falls, you get even shorter. As price goes up, you cover. Simple formula. Remember, there is no one at Brite or Swift trading looking over your shoulder. You are the risk management department. This is how we manage risk. When these stops cook off, it may prove frustrating, but our goal is to make money everyday and not lose it. As long as you turned a profit, thats not frustrating.
7. Jesse Livermore never made one dollar by either watching CNBC, following Bloomberg or sitting at screens looking at price the entire day. Turn the television off and get up out of your seat during the day to do something else. The trailing-stops will take you out of the trade. Trust the charts.
8. When your stops are triggered, do not jump back in but watch and develop a new strategy.
9. There are two scenarios to every chart. I painted two pictures with the same chart using commonly known chart patterns. Acknowledge the two potential realities, but place odds on each. When you are sitting at the poker table, the odds flow in real time in your head. The poker table, however, is unforgiving. This table allows you to get out of the bet with trailing stops.
10. Here is our chart. I covered my trade at the end of the day as my trading rules dictate. Watch that level at 805. It wont get there all at once, or it might...I have constructed a chart suggesting that the time period to reach lower lows (sub-740) is about 10 days.
11. No matter what I post on this thread, things can change in a matter of seconds from day to day. The charts can change quickly. When the stops get hit, you have to revisit all of your charts and see if there is a different reality folding. Things are never as easy as they sound and the market is dictated by 1000s of factors.
12. Look at the pattern forming on the master chart. Your vision might have caught that line. After looking at charts for years, these things may just jump right out at you. I drew a thick line to demonstrate.
This chart is an updating chart and will change depending on what time you look at it.
