Dow Intraday charts 02/06 - 06/06

[ChartMan]

Whipsaws... You need to take a stand on this. When the price is within 100MA +/- 20 points, DONT exit your losing trade... Take a winning trade if the opportunity exists, if you want.BUT then don't enter again UNTIL the price is > 100MA +/ 20. Backtesting has shown that once the price > 100MA +/20, the risk of the trade going against you quickly is minimal. Obviously there is a BIG risk here... if you go long at 100MA +18, the price could go down to 100MA -20 PLUS the drift in the 100MA and you could be 50+ down. SO in whipsaw areas, try and trade close to the 100MA, this will help reduce losses to 20 or so ....IF YOU MUST. Alternatively consider shorts only. These are likely to move quicker than longs giving you more time to think about an exit point. ( you should have done that anyway!) Best of all, just DONT trade inside the 100MA +/- 20. You get there after a big move - take today for example!
Go back and look at all the charts here and study what happens in this MA band. Look at the RSI peaks and troughs over the past few hours. Is there a "channel" formed by the peaks and troughs? What on earth are you doing going long at an RSI peak? What on earth makes you think it's going to break out here? Why go short when RSI is at 20? Making a few simple rules will ensure you don't get whipsawed in this area. OK you might miss the start of a breakout. No big deal. Catch just 50% of that big move consistently , with minimum losses, is the way to good points gains. Spend some time on this and write down some rules that you understand. Jumping on big moves and out for a decent profit is (relatively) easy. Staying out of the market in the 100MA band is really hard to resist. Every move through the 100MA looks like a breakout...

So today's effort. Premarket told it all with doe up 100 odd points. My initial target was 250 and it fell short. That said it all. 120 flag pole off the pullback to 9129. The interim target was easily met, 9170. 3 pk ND top delivered and you should have got out on the third peak. At this point a flip trade would have worked well, but risky....Safe entry was 9133 just by T1 but that was 60 points away from the risky entry Or as the price dropped through support on the bear flag at 9144... Going short anywhere would have worked.... but maybe just today... next time it may not. Lots of 5 waves today must have bought a smile to the EW'ers.
The short term divergences at the bottoms were good flip trade points.... but not easy to have the conviction one way or the other.Today was one of those days that the general 100MA trading rules would have had you at a disadvantage. I never said it was easy.... and it never will be.
Looks like 9064 is the key starting Monday.

 

[oatman]

Lockstock,

Are you running Indexia 8 and Indexia 121?

Cheers

 

[ccraig]

Ok a quick question folks. with binary bets what is stopping you bet long and short at the same time and making a profit each trade??

 

[lockstock]

Hi Chartman,

Read your posts with great interest. Just a few questions.

When the market is rising but loosing momentum- what does the ND in ND tops stand for?

You suggest in several posts that not to get whipsawed, hang on to your trade if the price action on the INDU doesn't deviate + or -
20 from the 100 ma( depending whether it's heading south or North).

I trade with CMC - spreadbetting & the cash/futures price hit 9100
offer at c. 17.45 hrs Fir 6th June ( first chart posted ) - it then proceeded to rise again as the Indexia Market Tracker suggested it would do- when it's in the minus 100 zone it has a 100%
chance of reversing ( many times it hugs the +/- 100 zone, so a clear signal is required- an upward or downward movement crossover & confirmation from other indicators).
As I was saying , it hit 9100 & then bounced to 9160 where it met reistance & the old high mark of Aug 2002 & pivot line on the day. Are you saying hold your position- in this case -short- thru' a 60pt swing ?

I can never seem to see what RSI & CCI settings you have on your 1 min charts.

Any chance of some postings as the action is happening ?


Oatman- the Indexia averages used are an optimised ( best fit for that particular object to maximise a profit with a short trade)
In my examples the software came up with a pairing of i8 & i121
for going short.

Cheers guys.

 

[sidinuk]

ccraig, with the binary bits I assume the two prices for up and down will add up to more than the max payout of 100. Don't know that for sure though as I wouldn't go anywhere near them. Sounds like pure gambling to me!

 

[oatman]

Hi Lockstock,
They are strange averages. I never got to grips with optimisation and never came up with anything I felt was consistent or useful. If you're looking at crossover you won't get many signals. As I see it, the 8 is on the price, and the 121 too far off to be useful. Trading off tick and 1min, I use I 21 and I 55(Fib numbers) crossover on the 1min. as a guide, and leave a S200 running all the time. My favourite Indexia indicator, I think I mentioned in another post, is the 1/3 2/3 Speed/Resistance tool as the lines are objective, rather than having the temptation of drawing trendlines where you like and moving them to suit! Additionally I keep an eye on P&F, mostly 3x3 on 1min.
Market tracker I use with 55 and E28 cross. I play with some of the others from time to time when I think I'm missing something, but mostly stick with the above otherwise it gets too complicated.
What works today may not work tomorrow!

Happy trading

 

[Bigbusiness]

ccraig,

It actually works out better holding one bet at a time. With two bets you have paid two lots of spread. If you close one in profit, the other bet will be loosing. Some days the Dow doesn't have a major reversal and the loosing bet will be worth more than the winning bet. If you wait for a move and then think the Dow might reverse, a single bet has only one spread and if you are right you will make more money.

Using only one bet, you also have the option of not trading. If you have a long and short bet at the same time, you have to decide when to close one or you will loose by the amount of the spread on each bet.

I like binary bets because I know the maximum loss when I enter the trade. It is no more gambling than using a normal spread bet. At times, a binary bet seems much better value than a spread bet. They can also be used to hedge a spread bet position.

 

[mombasa]

Hi CM,

Thanks for the earbashing

I guess that's where I'm going wrong - trying to catch every possible breakout - doesn't work if one is a beginner. Trouble is I'm trying to beat the fins spread and bias before the move gets going and that I think is suicide. Better to stick to th =/- 20 MA rule unless there's another TA indication for the entry to be safe.

Ah well, back to the charts again to backtest your post above - one thing that did strike me was the peak/trough bit on the RSI. Should that rule be combined with high/low rsi - ie don't long if RSI > 70 etc or does it just apply to peaks/troughs?

Cheers

 

[ChartMan]

ND stands for negative divergence.
Re your entry @17:45, u say the price went to 9160- I cant see that? The whole thing about the 100MA is it's subjective. Nothing is certain and no one thing works 100% of the time. The rules I have decised are a happy medium designed to keep less experienced traders out of trouble. 3 trades of whipsaws in this area with SB could easily cost you 100 points or more. Hence the broad statement "don't enter a tade inside the 100MA+/20 band". More experienced traders can probably extricate themselves if they get it wrong and walk away. Beginners have a tendancy to chase the losers and just end up losing their shirt. I could go on and on....
RSI is 14 and CCI is 150, both fairly arbitrary and not critical.
I rarely have time to do real time postings. I did a while back and people got very exited.....including myself.

 

[Bigbusiness]

mombasa,

I find with spread betting it is best to wait for a pull-back before entering a trade. If there isn't a pull-back, I just leave it alone and wait for another entry signal. It feels strange entering a short when the index is going back up but it is much better than entering a short while the index is going down only to find it is at a short term bottom. I used to be able to do that so often I felt the market knew I was trading and moved just to stop me out.

The other advantage of trading on a pull-back is the spread bet bias might not be against you and there might be a chance to get out for a small loss if it starts to go wrong. If you trade in the current direction of the index, with the spread bet bias, it can be hard to get out with a small loss.

It takes a while to time good entries and I haven't mastered it yet but I have found doing this has helped a lot. There are times when I don't wait for a pull-back but learning to spot those takes time and can be expensive.

 

[lockstock]

Chartman,

Thanks for taking time to reply.

agree with the posting of charts intraday can be time consuming and diverts your attention- thought yesterday was a prime example when it was fairly easy to do so.

Re. 9160 It hit that mark with CMC (offer)- bid at 9156, the above chart ( 1st one) is from Updata & that hit 9153- whichever way you look at it 53, 56 or 60 it still went down to 9100 & bounced back to c. 9160.

Probably mis- interpretated your posting on the 100 ma- still not 100% clear- but here goes.

1) Don't enter a trade long or short if you the price line is with-in + or - 20 of the 100ma ?

2) Did you state earlier that don't loose a winning trade by exiting too early where the trend is down ( example) and the price deviates from the 100 ma by 20 pts ?

If I have no2 correct, how would you have tackled yesterday, were it appeared to be a clear reversal day & the Dow touched 9100 then bounced c. 55- 60 pts, would you have held your position. I bailed out at 9103 after seeing the market tracker hit ---100. Didn't go long tho' on the bounce, just shorted when the market tracker & averages indicated the bounce was over.

Not critisising your observations as I stated earlier I like many others read your posts with great interest, if you don't ask you don't find out .


Respek.

 

[ChartMan]

It's tricky. You have to decide whether, after a decent move, to enter a short trade. The optimum entry can be taken on the first pullback after the price drops through the 100MA. You don't know if this is a winning trade. Chances are it will be... If not, then hold onto the trade , if it goes against you, until the price goes above the 100MA +20. Sooner or later, the price will exit the band. IF it went below the 100MA chances are it will continue to drop. The statement about not entering when the price is within the band applies if the price has seen prior sideways trading within that band. I guess it boils down to you either take the first chance, or not at all.
Point 2. I meant IF you entered a trade either way, inside the 100MA, don't exit at a loss all the time the price is inside the band.That is the whipsaw loser condition. It does mean that your loss can be greater depending on your entry point as stated.Each individual has to work out their own strategy and loss risk management. I can only pass on what are my observations as to the behavour of the DOW over the past few years. Nothing is certain, no strategy will win all the time, mine included. My aim is to help people stay on the right side and give the benefit of my observations so that they can fast track down the road to a better understanding of TA and at the same time minimise their exposure to the costly pitfalls that lie in wait for the inexperienced. Whatever I decide to trade, someone else is bound to say "why did you do that"? Every one has their own personal interpretation of opportunities and the TA picture.
If you get it wrong, you must get out either as soon as you see you are wrong, or at your own personal pain loss threshold.There is no way I would/could tolerate 50/60 points against.
This subject has been covered in great depth in the archives and there are numerous commented charts showing "safe" entry exit strategies/points. These are primarily based on solid text book TA formations, interspersed with my historic dow characteric observations. I don't profess to be able to teach people how to trade. Others are far more qualified to do that. What I can do is to teach people how to look after themselves an improve their TA ability with particular reference to the DOW. If someone insists on chasing their tail and getting whipsawed, I can't stop them. All I can do is show them why and how it happens and what course of action to take, should they so chose, to minimise their losses.
You can take a horse to water.....

 

[mombasa]

BTW, did I mention that this is the best site ever - fullstop !



Seriously - all you chaps are the best - If I don't get the hang of trading with all your advise etc I'll never do it.

 

[ccraig]

Thanks sidinuk

I was just thinking that I could open a long and short at the same time and close at the same time. OK i loose the cost of two spreads but gain the remaining points out of the 100 points for a win. I was thinking that the only way I could loose is if i closed when the price was between the spreads. I must have the wrong idea about binaries.