Hi PaulTrader333 said:
So, based on your question to Gareth above, I take it you would NOT recommend even shorting a WEAK stock (gap down and still negative etc.) when MACCI INDU (3 timeframes) is OB while up so much on the day? Have you found the RELIABILITY of such a tactic too low to consider then?
I would appreciate your further feedback on this as I find myself tempted to take such trades myself quite regularly. I guess I do this because, in terms of strat3, I tend to only get such short signals. I struggle a little (though getting better) to have the patience to wait for a long signal!
Thanks again Paul,
Cheers
Steve
Paul
Thanks for your input.
It was clearly a mistake but the market (INDU) had opened only about +33 and at around 10:00 just prior to the signal was about +50 I think as far as I recall so I had not registered it as a proven uptrending day at that point. On the +-50 rule it would still at that point qualify as oscillating or consolidating I think. There was, (in my case with hindsight though others would probably have spotted it at the time) a rise in volume on the upmove so there were other signs I admit.
Any input on how you read the market at that point would be useful.
Gareth
Thanks for your input.
It was clearly a mistake but the market (INDU) had opened only about +33 and at around 10:00 just prior to the signal was about +50 I think as far as I recall so I had not registered it as a proven uptrending day at that point. On the +-50 rule it would still at that point qualify as oscillating or consolidating I think. There was, (in my case with hindsight though others would probably have spotted it at the time) a rise in volume on the upmove so there were other signs I admit.
Any input on how you read the market at that point would be useful.
Gareth
garethb said:
Hi Gareth,
As a precaution, when the dow reaches +- 40, I stop entering into a fresh trade and wait to see the market direction (started doing this a month ago-just to try to establish if the market is switching over to the 'trending mode')- and I find this helps me in taking a useful decision most of the times.
On a different note, I am trying the 'Darvas' (on the lines of G1s strategy) method on trending days and I find that to be very useful.
Raj
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evostik said:
Hi All,
This is a question I too would appreciate some comment or direction on.
In a clearly strong (or weak market), I find some of the Strategy 3 signals could be seen as 'countertrend'.
Should you still take the trade in these instances for a quick scalp when the MACCI is O/B (or O/S).
Thanks.
Trader333
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In my view it is best not to Short when the overall market is up unless there is very obvious oscillation which at 10.00am there wasnt. However, you can get a situation where the Dow is in positive territory and the after lunch session is like a new trading day where the market starts moving down relative to where it was at 11.30am and in this circumstance I would consider a Short on a weak stock. I have my alert system set up to automatically show stocks that are close to their high or low of the day. So if INDU goes OB or OS I can immediately see which stocks are best to take a trade on. I also combine this with a volatility and a MAMA / FAMA divergence measure that improves the probability of the trade being successful.
Paul
Paul
Hi Evostik,evostik said:
I agree with both Paul, and Rajibde that we do not Short a strong Market, especially when it is in a trend. Garethb great thread, and expecially now to discuss a difficult market.
This past weekend I placed a note onto one of my monitors to help me ID a Top Down Approach (in a step format), but first to ID what kind of market are we in? This checklist did help me yesterday (& today) by preventing me from entering a short in a strong market. So I’ll list the “Note” and my findings from yesterday (only - very similar to day tho).
1) Is DOW in a TREND or Oscillating? ____
a. DOW was not Oscillating. DOW > + 50 by 10:00 ET (Nov 6), possible Trend.
b. The DOW’s, 5 Min Chart also indicated a Trend, due to the 5, 10, & 20 EMA’s.
2) Is DOW 5 & 10 Min O/B or O/S? _______
a. Yes, both TF’s were O/B, but continued to be O/B.
3) DOW’s Direction? _______
a. DOW was moving Up.
b. By this time I concluded that the DOW was in a Trend, and No Shorts for me.
4) Stock must be in same direction.
a. Since No Shorts and with Trending DOW, started looking for Longs.
5) Helps if stock same O/B or O/S indicator.
a. Found RIMM but shook me out for a 0.07 loss. But, RIMM after a 0.50 P/B, broke thru my entry (15 mins later) and continued up. Stock was actually extended, but safer to enter after a P/B, which I didn’t do.
b. Found NVDA, but by the time I noticed, stock was extended.
Grey1 has told us many times; you short the weakest stock, when the market is O/B. But in this case the market was in a Trend.
Attached are the following Charts with annotations:
1) DOW 5 Min Chart, Trending (till 11:15 ET), Nov 7.
2) SOX, 5 Min Chart, Trending, Nov 7.
3) DOW 5 Min Chart, Trending, Nov 6.
4) DOW 1 Min Chart, Trending, but showing some consolidation, Nov 6.
5) NVDA, 5 Min Chart, Trending (News), Nov 6.
6) RIMM, 5 Min Chart, Trending, too volatile for me (LOL), Nov 6.
In a Trending Market your odds of success are against a trader thus the R & R flips to more risk than reward. In other words, it’s not worth the risk.
Hope this helps, we can’t trust the market. We need to ID the market we are in first (Oscillating usually, Trending, or Consolidation). Then look for O/B or O/S indicators in the market, then stock, etc.
Nas
Started this log on 10/31 and allowing for unavailability on 11/2 I have now traded 5 days so time for a mini review of progress. Attached are a spreadsheet log of trades and a short word document. I have determined a couple of actions for myself.
One clear area of contention is trading against trend. In summary, as this is a test excercise, I will continue to take all signals unless, as previously, the days trend is so established as to leave no candidate stocks in my watchlist. I will then apply trade management rules. By going this I hope to gather more information on the effectiveness of INDU +/- 50 etc. as an overall trend indicator for use with strategy 3.
Feedback, as usual, is welcome
Gareth
edit: attached revised trade management document including notes on the actions from my review and a couple of other minor changes.
One clear area of contention is trading against trend. In summary, as this is a test excercise, I will continue to take all signals unless, as previously, the days trend is so established as to leave no candidate stocks in my watchlist. I will then apply trade management rules. By going this I hope to gather more information on the effectiveness of INDU +/- 50 etc. as an overall trend indicator for use with strategy 3.
Feedback, as usual, is welcome
Gareth
edit: attached revised trade management document including notes on the actions from my review and a couple of other minor changes.
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12:32 OS Signal
L 500 VLO 52.32
12:39 Mkt made new low exit 52.28
P/L -30
OS Signal almost continuous with market moving lower until
12:45 L AAPL 800 @ 81.15
Sell 400 81.34 stock partially exhausted EE 122/26/59
Stopped 400 on trailing stop 81.15
P/L +60
L 500 VLO 52.32
12:39 Mkt made new low exit 52.28
P/L -30
OS Signal almost continuous with market moving lower until
12:45 L AAPL 800 @ 81.15
Sell 400 81.34 stock partially exhausted EE 122/26/59
Stopped 400 on trailing stop 81.15
P/L +60
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Hi Garethb,garethb said:
Great Trading Log, attachments describing your trades, actions, and planning.
I have some comments on your Market Entry Signal, and have the quote listed below:
Start Quote (from Strategy 3 Trade mgt.doc):
Signal
The trade signal is provided by use of MACCI in three timeframes, 1 minute, 3 minute and 5 minute. A short signal is indicated by MACCI > 100 in all three timeframes. A long signal is indicated by MACI <-100 in all three timeframes.
End Quote.
I agree with your statement, butI believe Gray1 has revised the MACCI Market entry signal to be either O/B or O/S in “two higher TF’s,” , not three, and doesn’t require the 1 min. This signal applies to the DOW (market) and not the stock, (not necessary for stock – but if available does give trade more strength/confirmation ). All of these statements can be verified in Grey1’s last paltalk session on 10/11/06, if my memory serves me correctly.
IMO – I’ve found the 3 min TF too short, which mimics the 1 min too often, thus have increased my TF’s from 1, 3, & 5 min. to 1, 5, 10 min. TF’s. To provide stronger market signals.
Nas
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