How do you Enter a Run Away Market ?

[kevinqc]

After Fed's decision many markets are running away without any meaningful Retracements.

Even going to lowest time frames like 1 min & 3 min do not offer the shallow Retracement.

So how do you enter such markets where there is constant threat of a sharp correction. Verticle markets also drop vertically.

Any ideas ?

 

[coolweb]

patience?

 

[smilingsynic]

Quote from kevinqc:

After Fed's decision many markets are running away without any meaningful Retracements.

Even going to lowest time frames like 1 min & 3 min do not offer the shallow Retracement.

So how do you enter such markets where there is constant threat of a sharp correction. Verticle markets also drop vertically.

Any ideas ?

After the Fed's decision on Tuesday there were at least two retracements on the S&P (at least how I define it).

The easiest way to enter a runaway market is simply to buy new highs, especially after an inside bar.

But I do not recommend it, nor do I do it. One does not have to chase markets in order to succeed. There is definitely money to be made, but it is not my style.

The risk with parabolic moves is that they often end as V-shaped reversals. That is why stops are particularly crucial. I would do trailed stops moved up after every up bar.

There is money to be made, since the stronger the trend, the smaller the retracement.

 

[JSSPMK]

Quote from smilingsynic:

After the Fed's decision on Tuesday there were at least two retracements on the S&P (at least how I define it).

The easiest way to enter a runaway market is simply to buy new highs, especially after an inside bar.

But I do not recommend it, nor do I do it. One does not have to chase markets in order to succeed. There is definitely money to be made, but it is not my style.

The risk with parabolic moves is that they often end as V-shaped reversals. That is why stops are particularly crucial. I would do trailed stops moved up after every up bar.

There is money to be made, since the stronger the trend, the smaller the retracement.

SS, I read your posts and think highly of your experiences/knowledge, ImO your writings are most definetly based on real experience, not just some verbal diarrhea posted by some other members.

I would just add here my favourite and indeed banal statement of - Buy Lo & Sell Hi offers better reward vs risk in comparison to breakout based methods, but then again breakout doesn't have to be out of all time highs, it could be out of a narrow congestion range, which could be a countertrend/breakout all in one kind of trade.

Thanks for sharing.

 

[trend_guy]

Stock ABC

Portfolio Value = $1,000,000

Risk = 2% of portfolio or $20,000

Entry point A = Stock at $100

Stop = $95

Runaway entry point B = Stock is $107

Position size A = $20,000/(100-95) = 4000 shares ... 4000 shares x $100 entry = $400,000 position size

Position size B = $20,000/(107-95) = 1666 shares ... 1666 x $107 entry = $178,262 position size

Basically... if you have to get in late, you keep the same stop, but you size down accordingly so you can still manage your risk... another way to do it is... move the stop up, but I prefer having the stop where it's most effective and having smaller size.

 

[smilingsynic]

Quote from JSSPMK:

SS, I read your posts and think highly of your experiences/knowledge, ImO your writings are most definetly based on real experience, not just some verbal diarrhea posted by some other members.

I would just add here my favourite and indeed banal statement of - Buy Lo & Sell Hi offers better reward vs risk in comparison to breakout based methods, but then again breakout doesn't have to be out of all time highs, it could be out of a narrow congestion range, which could be a countertrend/breakout all in one kind of trade.

Thanks for sharing.

Thanks for the kind words, mate!

 

[smilingsynic]

Quote from smilingsynic:


The risk with parabolic moves is that they often end as V-shaped reversals. That is why stops are particularly crucial. I would do trailed stops moved up after every up bar.

I should have been clearer here (I wrote the post at something like 3 AM).

On DAILY charts I would not feel comfortable about hopping on a parabolic move, since I can more precisely find a good place for a stop if there is a retracement first; but I DO hop on strong moves on DAY trades late in the trading day, especially after 3.

Why? Simply put, there is not enough time left for a V-shaped reversal by that point.

Why not do the same for swing trades covering days or weeks? Because of the risk of a gap down after some brokerage firm reduces the rating of the stock to "neutral" before the open (I'm speaking of longs only, of course). Stops don't work well when the stock gaps down 10%, wiping out a week's of gains in twenty seconds.

A parabolic move late in the day will tend to get stronger closer to the close, especially on Fridays, and especially on down moves. A look at the intraday charts for the past couple of months will show several days in which the ES plunged 10 or more points in the last hour. Sometimes it plunged 10 points between 4 and 4:15 alone.

Late in the day, there is risk in waiting for a pop up or Fib retracement before shorting, because it may not come. That might not matter to those who might have already gotten their 5-10 points earlier, but I do not like missing opportunities like that.

 

[murray t turtle]

Quote from kevinqc:

After Fed's decision many markets are running away without any meaningful Retracements.

Even going to lowest time frames like 1 min & 3 min do not offer the shallow Retracement.

So how do you enter such markets where there is constant threat of a sharp correction. Verticle markets also drop vertically.

Any ideas ?

===============
Kev;
Small or not at all.
Its an old extended bull with more downside risk,since Feb;
so you have to figure in average years of trends also.

Favorites, include markets like QQQQ,DIA,SPY which seldom but occasionaly go against you 10% , but can happen.

Things/markets which trend tighter/better than those are worth studying also;
=========================================
& CFC mostly trending down past 3 years

 

[NihabaAshi]

Quote from kevinqc:

After Fed's decision many markets are running away without any meaningful Retracements...

There have been many meaningful retracements since the FOMC Announcement.

Mark

 

[kevinqc]

Meaningful Retracements ?

Look at these 60 minute charts. I am purposely not disclosing the names of instruments to avoid any bias. But they are highly traded very liquid markets.

Would appreciate any strategies that would help get in these runaway markets.

Kevin