long term position trading -primarily etf's-

[sowterdad]

How do I narrow the field in ETFs?

Been trading mainly euro stocks the last few years (see journal thread). Mainly Euro 50 / SX5E, DAX and OMXS30 due to a combination of reasons:
- Europe looks cheap compared to the US and has done the last few years.
- Im based in Sweden and so its easier to get leveraged products on those indexes. I always want the option to buy/sell more if necessary without taking up lots of cash. I can easily buy options on the OMXS30 since im in sweden but the correlation with US and Euro50 is large anyway. I often try to spot the S&P bottom and then buy the Euro index.

Apart from CURE they will be highly correlated to the SP500 so why not just trade and concentrate on the SP500? Its keeps things simple and focused. You then concentrate on risk management rather than distractions of ETF selection etc. If you get the direction of the SP500 right it will likely dominate any gain coming from ETF selection formed from combinations of SP500 stock.

It's true- most things do follow SPY- and a single focus from a trading point reduces time and effort-
My mix of holdings is somewhat random at this point- - and experimental - some with a dividend focus, but also looking for growth potential. I felt the dividend focused funds would be less reactive and easier to trade. and perhaps be less volatile- That remains to be seen though- The end goal is to develop confidence in my ability to manage a larger & more diversified retirement portfolio -possibly within 2-3 years when I retire. At that time, I will likely move everything over to a Vanguard brokerage IRA account-
I should consider adding SPY in this trading account-virtually everything else should be compared against it.

Thanks again for the input- I will look for your journal over this long holiday weekend.

 

[sowterdad]

View attachment 146900 View attachment 146899 I THINK having stops in place is important in every trade- it takes the human element out of it if the stop is attached when the trade is entered- eliminates Hope as a co-pilot. Hope happens to be deaf , blind, and dumb, but is pretty optimistic regardless. I can't tell Hope to think any differently- won't listen because Hope is Deaf.
So, it is what i choose- to apply-
let's take a review of the present Cure position- As I look at charts and make final adjustments for tomorow- something that is coming to light from these recent charts is that keeping a tight stop is rewarded when the market is volatile and in decline- Keeping a tight stop as a matter of course may be inviting volatility to take one out- if one is too anxious and too close.
The Cure daily chart illustrates a very orderly sideways consolidation that has developed over 3 weeks-
This developing price has established a "support" level in the sideways action.
recognizing this- I have chosen to 'split' the stops- 1/3 at my new averaged entry cost- and 2/3 under the low of the 3 week consolidation-
Something I have noticed- is that the top of the consolidation is often penetrated into the consolidation mid range intra bar.- Yet the higher move continues.

When I started doing this "study" - I somewhat "knew" that the tactical approach would outperform the Buy and hold approach- After all, the tactical approach would get in early and get out early and would actually outperform in terms of gains in the same period. I'm coming to realize that - in the case of CURE- a low volume instrument- that is not necessarily so- Indeed, What seemed like a couple of basic trading parameters- easy to follow- and execute- has not achieved the results i expected- I think I believed if the approach worked with Cure- it could be applied over a wider universe- Very simple-
This simple approach sounded logical- Enter after a pullback on a close above the declining ema-
And raise a stop only after price closes below the uprising ema- This assumes it gives the trend the opportunity to continue higher- What was 'wrong' with this model?
It did not account for volatility- Volatility pushes the price to a high, and then volatility pulls it back.
We see this in the charts- Price moves up and away from a nice and perfectly smooth uptrending moving average- only to stop and drop back to rejoin - or drop below that ema. Can one simply react to the wider volatility and get a larger gain, earlier exit - instead of waiting for price to drop Below a moving average?
Due to it's low volume , CURE may be an extreme example of a lack of liquidity-adding to volatility moves.
This daily chart from Frame 3 illustrates 2 conditions- a widely volatile environment in the beginning of that chart, evolving to a more sedate- trending environment- where the entry/exit method appears to work- It does get you out of the declining trade as it develops. It is time to consider a different approach ? More tactical?

 

[sowterdad]

OK- enough of the chart study in CURE - That approach worked during smooth trending markets.
I want to reintroduce a chart i had posted previously that simply eliminates price-
It's just a couple of moving averages-
I think it is very important that I recognize what this chart tells me-
It is a longer time frame view-
This chart shows the time periods when the faster moving average pulls away from the slower average, and then comes back closer again-
The high points allways come back to the straighter slower average-
This is momentum.
Notice where we are on the chart- Not only did we start from a momentum low on the prior pullback, we have overshot the top- exceeding all prior periods of gap wider-
The MACD indicator below the chart does a good job of illustrating this Excess move.
This chart tells us that this recent move is an extreme move well beyond the "norm"

Recognizing that this is a period of excess momentum, I will choose to no longer take the wider approach and to become more tactical in my trading this position.
Instead of trying to "Stay the Course" and maintain a position with the wide stop loss- I will now trade this to lock in a higher gain-
aggressive stops at $126.50. & $124.00 FOR 10-28-14

 

[sowterdad]

OK- enough of the chart study in CURE - That approach worked during smooth trending markets.
I want to reintroduce a chart i had posted previously that simply eliminates price-
It's just a couple of moving averages-
I think it is very important that I recognize what this chart tells me-
It is a longer time frame view-
This chart shows the time periods when the faster moving average pulls away from the slower average, and then comes back closer again-
The high points allways come back to the straighter slower average-
This is momentum.
Notice where we are on the chart- Not only did we start from a momentum low on the prior pullback, we have overshot the top- exceeding all prior periods of gap wider-
The MACD indicator below the chart does a good job of illustrating this Excess move.
This chart tells us that this recent move is an extreme move well beyond the "norm"

Recognizing that this is a period of excess momentum, I will choose to no longer take the wider approach and to become more tactical in my trading this position.
Instead of trying to "Stay the Course" and maintain a position with the wide stop loss- I will now trade this to lock in a higher gain-
aggressive stops at $126.50. & $124.00 FOR 10-28-14

View attachment 146981

I have to remind myself- I don't know what today brings-- I do realize that price can swing, hit a tight stop- and close higher-I have backed off both of these tight stops-and will see how the day unfolds- Typically,
I am not watching the market Intraday- For the moment - I have backed off to $119.76 on 2/3 and a Wide stop at 105.00 with the remaining 1/3.
The reason I am still in this and the other trades is because i did not follow too closely with a stop- did not watch a minor intraday move- did not react on a daily pullback.
The trend looks extended on 1 time frame- and yet not so much on another.....

 

[sowterdad]

OK- enough of the chart study in CURE - That approach worked during smooth trending markets.
I want to reintroduce a chart i had posted previously that simply eliminates price-
It's just a couple of moving averages-
I think it is very important that I recognize what this chart tells me-
It is a longer time frame view-
This chart shows the time periods when the faster moving average pulls away from the slower average, and then comes back closer again-
The high points allways come back to the straighter slower average-
This is momentum.
Notice where we are on the chart- Not only did we start from a momentum low on the prior pullback, we have overshot the top- exceeding all prior periods of gap wider-
The MACD indicator below the chart does a good job of illustrating this Excess move.
This chart tells us that this recent move is an extreme move well beyond the "norm"

Recognizing that this is a period of excess momentum, I will choose to no longer take the wider approach and to become more tactical in my trading this position.
Instead of trying to "Stay the Course" and maintain a position with the wide stop loss- I will now trade this to lock in a higher gain-
aggressive stops at $126.50. & $124.00 FOR 10-28-14

View attachment 146981

i DECIDED TO DO SOME ACTUAL MATH on what visually looks to be an excess move-
Looking over the past year - using a 3 to a 30 ema line value-comparisom - when price has made a "Peak" followed by a pullback or decline- There were several recent moves of 19% gap and prior peaks the gaps were 23 & 24% ( approx price of the ema at that time)
Today's chart shows the gap to be a 24.9%- slightly higher than the prior high gaps.
Does this mean this is the peak? Not necessarily so- Price could still move higher-
but it suggests that taking a partial profit here- could be a prudent decision.
The fact that price just moved out of a lower consolidation suggest there should be additional upside-
After working on this weekly chart, I looked at today's daily chart and decided to sell 1/3 of the position.
Approx a 28% gain based on the higher average cost of the added shares .
If I had not added shares- and increasing the average cost- the profit based on the initial entry would have been 44% on this partial trade.
It is possible this trade goes higher- but it is also possible that it retests , pulls back into the consolidation .
I will consider to have a limit buy order near the lower end of the target range- Once $$$$ clear.
2 charts- Weekly & 60 minute

 

[sowterdad]

BABA STOPS OUT -
The trade went tepidly in my direction for a few days and then rolled over-
It failed to participate when others gained-
I raised the stop intraday - and did not raise the stop directly up to my entry cost-
The trade spiked down in the remaining 30 minutes and activated my stop- I was filled $.02 above the low of the day. No regrets- a .04% loss - less than 1/2%.

 

[sowterdad]

TDIV SOUNDED LIKE A CONSERVATIVE WAY TO GET EXPOSURE TO THE tECH SECTOR-has a dividend
focus-in a strong sector-
I may have posted this chart earlier in this thread-
What is coincidental is the timing of this trade- I happened to have monies freed up- was on the sidelines- and waiting to get into some investments when the market had a quick sell-off. It was also a Friday-I think- and allowed me to not have to stay focused on work all Day ( Normally a shorter work day) .
As i was looking at the charts tonight, and preparing to adjust stops- I looked at the chart of TDIV prior to my entry- and asked Why was i not a Buyer earlier? Why did I not get sucked into the bull trap moves that occurred earlier in the decline-? It is easy to NOT enter when everything is in a solid decline- and under a falling ema-.
The specific answer I don't have- Perhaps $$$ had not cleared, perhaps i wasn't considering TDIV -Perhaps too tied up with work to worry with the market....... I also had the belief that some of the bears might be right-
The point I am working through- to myself- is that it is easy after the fact- but- as the trade is developing- one has to have a systematic approach that also contains some guidelines that will still -allow one to take what seems like a valid entry signal- but recognize that it is a more hazardous trade- and to that end- make some money management rules to limit Risk- both in stops as well as how much position size one puts on in the entry. I took a full position on the TDIV entry - believing it was a more conservative holding
and thus "safer" - But safer is a relative term.

Getting back to the point- What happens WHEN (Not If) TDIV rolls over- and some early reversals are signaled-and i have free cash available and consider this as something I'd like to reenter......
If i want the earlier- lower Risk entry - how do I qualify that entry -so it does not turn into whipsaw after whipsaw? Even in a conservative and 'safer' dividend paying ETF.
A downtrending reversal should be approached differently than a pullback in an uptrend-
What separates the 2? Not the same animal-both could be dangerous- both should be approached cautously- But when the trade closes in your direction- and a second day goes your way- it might be the real deal.
In the chart I am posting of TDIV- notice the prior bullish attempts to move higher-the 1st attempt did not look very promising- but the second attempt did- What would have held me back? The slower PSAR value/ ? the prior high?
These are important questions to ask- because it likely will not be long until the market provides me with an excess of freed cash as I raise stops to protect gains-

 

[sowterdad]

When I started doing this "study" - I somewhat "knew" that the tactical approach would outperform the Buy and hold approach- After all, the tactical approach would get in early and get out early and would actually outperform in terms of gains in the same period. I'm coming to realize that - in the case of CURE- a low volume instrument- that is not necessarily so- Indeed, What seemed like a couple of basic trading parameters- easy to follow- and execute- has not achieved the results i expected- I think I believed if the approach worked with Cure- it could be applied over a wider universe- Very simple-
This simple approach sounded logical- Enter after a pullback on a close above the declining ema-
And raise a stop only after price closes below the uprising ema- This assumes it gives the trend the opportunity to continue higher- What was 'wrong' with this model?
It did not account for volatility- Volatility pushes the price to a high, and then volatility pulls it back.
We see this in the charts- Price moves up and away from a nice and perfectly smooth uptrending moving average- only to stop and drop back to rejoin - or drop below that ema. Can one simply react to the wider volatility and get a larger gain, earlier exit - instead of waiting for price to drop Below a moving average?
Due to it's low volume , CURE may be an extreme example of a lack of liquidity-adding to volatility moves.
This daily chart from Frame 3 illustrates 2 conditions- a widely volatile environment in the beginning of that chart, evolving to a more sedate- trending environment- where the entry/exit method appears to work- It does get you out of the declining trade as it develops. It is time to consider a different approach ? More tactical? View attachment 146979

The initial look at the CURE -frame 3 period- using a 10 & 30 and a simple entry/exit condition rules certainly got chopped up. The take-away from that type of approach , is that it performed well when price was relatively smooth and trending- the last 2 trades captured profits, and got out of the position on larger multi bar declines, but failed during the earlier trades on the chart. Cure is a good example of low volume & volatility- Potentially, trading a more liquid etf (high daily volume) could apply this -or a similar approach with some success, and some safety built in-

How does one tackle the issue of repeated entries when it appears that the signal is there to get in ,
but the trade does not develop as trending? You only find out when it fails-
What about taking the very next entry? And it fails?
And then a 3rd entry- also fails......
And after getting stopped out for 3 consecutive losses- you don't enter trade 4- which becomes the trending trade you hoped would develop in Entry 1.
I think this happens to me - and other traders as well- and we get discouraged because we just got successive losses of perhaps 5,6,7% based on our belief in our "system" . We know it works- when it trends-We just cannot know when that trend is about to appear.
There are some money management things I can do on entry- Take a partial entry- add to the position as it passes my initial entry cost- I can wait for the trend to be clearly evident-on the daily or weekly charts- my choice- or can I try to be more tactical- take some entry and exit lessons from those that use
volatility to their advantage-
The chart in this post takes a look at momentum as defined here as the increasing gap between the 2 ema & the 30 ema- and takes some measurements of what % away the peaks represented. The price would be significantly further and a higher % away from the moving average line-when price peaked-
if you knew in advance- that once a momentum move higher exceeded 6% , a reversion would likely occur soon- perhaps within a bar or two- and that 8% would be extreme- 10% very unusual-
Would having an approach that sold some of the position while price was moving higher into that extended zone- and perhaps keeping a portion of the winning trade above the entry level- (Present Cure position partial sell is such an example)
Chart today is just of the ema's themselves- I will look to see if I can improve on the results of the 10,30 approach, using a faster chart, faster emas- and possibly add a split-position stop-loss - or even a limit sell % to capture a momentum move higher-
Just a trading note here- Flash crashes can occur to even "Solid" stocks or ETF's- A flash crash can activate a stop loss but get a much lower fill- only to find the price closes 5 minutes later back where it was- A flash crash shows on my fast charts for Cure- but did not show on the daily- It exceeded my stop-loss- but did not activate it- I'm starting to use a stop- with limit order to protect an unusually low fill occurring.
Another note- As J suggested- I'm going to start also looking at SPY- and I think SSO as a 2x -
As he pointed out, most everything correlates along with SPY-
Cure Chart :

 

[sowterdad]

View attachment 147030
The initial look at the CURE -frame 3 period- using a 10 & 30 and a simple entry/exit condition rules certainly got chopped up. The take-away from that type of approach , is that it performed well when price was relatively smooth and trending- the last 2 trades captured profits, and got out of the position on larger multi bar declines, but failed during the earlier trades on the chart. Cure is a good example of low volume & volatility- Potentially, trading a more liquid etf (high daily volume) could apply this -or a similar approach with some success, and some safety built in-

How does one tackle the issue of repeated entries when it appears that the signal is there to get in ,
but the trade does not develop as trending? You only find out when it fails-
What about taking the very next entry? And it fails?
And then a 3rd entry- also fails......
And after getting stopped out for 3 consecutive losses- you don't enter trade 4- which becomes the trending trade you hoped would develop in Entry 1.
I think this happens to me - and other traders as well- and we get discouraged because we just got successive losses of perhaps 5,6,7% based on our belief in our "system" . We know it works- when it trends-We just cannot know when that trend is about to appear.
There are some money management things I can do on entry- Take a partial entry- add to the position as it passes my initial entry cost- I can wait for the trend to be clearly evident-on the daily or weekly charts- my choice- or can I try to be more tactical- take some entry and exit lessons from those that use
volatility to their advantage-
The chart in this post takes a look at momentum as defined here as the increasing gap between the 2 ema & the 30 ema- and takes some measurements of what % away the peaks represented. The price would be significantly further and a higher % away from the moving average line-when price peaked-
if you knew in advance- that once a momentum move higher exceeded 6% , a reversion would likely occur soon- perhaps within a bar or two- and that 8% would be extreme- 10% very unusual-
Would having an approach that sold some of the position while price was moving higher into that extended zone- and perhaps keeping a portion of the winning trade above the entry level- (Present Cure position partial sell is such an example)
Chart today is just of the ema's themselves- I will look to see if I can improve on the results of the 10,30 approach, using a faster chart, faster emas- and possibly add a split-position stop-loss - or even a limit sell % to capture a momentum move higher-
Just a trading note here- Flash crashes can occur to even "Solid" stocks or ETF's- A flash crash can activate a stop loss but get a much lower fill- only to find the price closes 5 minutes later back where it was- A flash crash shows on my fast charts for Cure- but did not show on the daily- It exceeded my stop-loss- but did not activate it- I'm starting to use a stop- with limit order to protect an unusually low fill occurring.
Another note- As J suggested- I'm going to start also looking at SPY- and I think SSO as a 2x -
As he pointed out, most everything correlates along with SPY-
Cure Chart :View attachment 147029

Tried to add the chart with candlesticks after posting

 

[sowterdad]

Some Random Thoughts to share this Sunday pm-
Stops are in , waiting for some trades to clear.
When one thinks about Trading as a way to achieve above average financial gains- and when one hears the statistical evidence that the majority of professional traders struggle to meet the passive market returns-.....
Those 'other' guys are the professionals- What makes me think I could possibly match someone whose entire livelihood is based on excelling in this craft? And- really? -do the majority of these pro's fail to excel vs the passive index? reportedly....on ayear over year basis they do- "Active management" comes with higher costs that may not be supported by the market passive returns.
When i think about actively managing a single account that would include my entire 'investments' and not a smaller 'trading' account- it raises the bar significantly.
Before i would jump assets from an investment type of account into a trading focused account, I would want to see Years of success in the Trading approach before engaging that type of personal risk to one's desire for wealth creation. Or at least a better future if Wealth is too large a word.

Why turn to trading at all? My excuse is that i came into investing too late in life and need to turn smaller assets into larger assets to try to make up for decades of every day life and expenses- where Investing was a word never heard nor explored- because the Here and Now of everyday expenses- and then children...and then the other expenses that come in - even as our standard of living may improve.

The truth is, as a society, we- older- (baby boomers) came up in a time when affluence was granted to those that were in the right place at the right time- Along the way, we never experienced the trauma that our grandparents lived through in the great depression and following years of austerity- We lived in a booming economic cycle as children and adults- Our standard of living -improved - as growth was our inheritance- all you had to do was be there- participate-
BUT Wait- The economic engine of growth stalled in the 2, 000 era- and in 2007-09 - As the growth engine popped and real estate values crashed- Many that had ridden the wave of ever increasing paper values - Housing-refinance at a higher value.... Retirement accounts- ....... seemingly shattered.
Come full circle to 2014- Growth is modest at best- and the recovery is slow-
Baby boomers - became the casualities in the economic downturn as they had too many benefits and were paid too highly based on a growing economy-Are also among the 1st disenfranchised - let go- replaced - in the new leaner and meaner business cycle- as cutting excess expenses came 1st in order to survive as a redifined business model that no longer respects longevity as a desireable asset

Despite the carnage tht has occurred in the past decade +- Having a regular investment theme has proven to withstand the ups and downs- and has even come out as a winning strategy during the most difficult recent era in several decades. How many trading approaches would have survived during this same time frame?
The past 5 years - Who would have thought?
What is in store for the next 5? No one knows.
Does a trading approach one develops for today's market- survive tomorrows?
Being in the 'Baby-Boomer demograhic - my focus may be different than those with decades to succeed ahead of them. I find myself in the situation of protecting what i have, yet needing more than the market will deliver- If only I had been in this position & awareness 20 years earlier!
One site I visited- for those seeking an investment based approach- that was interesting-
Josh Brown- seemingly principled contributor- CNBC- has an investment service with a very low fee-
I took the quiz- and found that my desire to double my assets in 3 years was unrealistic-
It suggested getting the market return of 7% and 5 + years to achieve that goal-
I don't expect that too many here on ET are concerned with retirement and asset allocation- and all that tedious stuff- But- for the 1 or 2 that may be- take the free Risk profile and see what occurs- Nice to get an unbiased opinion.

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