sd's -Adapting in 2011

[sd]

Trying the su charts again-
The su trade worked out well. The last chart illustrates the temporary advantage a shorter time frame chart has in capturing profits within a narrower field of time. The exits turned out to be very well situated up to this point, as the stock has started to decline. SD

[bankedout]

Taking your EMA 'ribbon' idea one step further. Actually hiding price from the chart. Is it possible that price is just noise? Would we do better as traders without price plotted on our charts?

[bankedout]

The colors in the above chart weren't as legible. Now looking at SLV with some better contrast colors. Would we as traders sit tight better if price is missing? I find this concept interesting.

[sd]

Friday, March 11, 2011.
Got home this afternoon, and found the market was in rally mode, and I really had thought there 'should' be further downside in this correction , and was surprised to see what had happened today.

I wish I had been at the screen earlier in the day, but Friday's early afternoon off is the only time to view the market live.

The market rallied going into the weekend, despite unrest still about the middle east, Saudi's Prince Alaweed saying Saudi Arabia could fill the gap from Libiya if it occurs and that $100/barrel of oil is too high .
Japan was struck by a mammoth earthquake/ 8.9 , .tragedy for many of those people, tsunami, nuclear plants damaged and taken off line etc. and the Yen rallied.

Today's rally was not huge, but it pushed a lot of stocks up that had sold off some- the past few days.
With the remarks from the Saudi prince about holding the line in oil, I didn't jump back into SU, although I did buy the energy ETF XLE and FWLT-
I did take a full position in SLV-, as it had popped back up above the faster ema's.

and then I decided to take a position in ACN- a business/management resource play, where the chart suggested it may have reached a bottom in the recent pullback and a potential reversal.

And looking at some financials, I was debating on the recent pullback, considered BAC, C, JPM and looked at San- a SA bank in a decided downtrend that tried to rally .I decided I'd try the bounce on SAN as it seemed oversold, looking for a 5% move higher with a 1% Risk.

Work Saturday, and a beautiful spring weekend here in NC means loads of yard and garden Sunday.
stockcharts is off-line for some issue , will try to get some charts posted .
these were the entries- late Friday afternoon:

[sd]

Taking your EMA 'ribbon' idea one step further. Actually hiding price from the chart. Is it possible that price is just noise? Would we do better as traders without price plotted on our charts?



Now that's interesting Bankedout!
I like that concept- Weekly chart? Great trend!
Entry on the upside move, exit when the 10 crosses the 20, reenter when the 10 turns back up, and again takes the leadership above the other ema's.
The simpler the system, the less operator discretion/error.

I like the idea- although I like to look at the various candlesticks and think I can discern some market sentiment at the moment via the candle- But that is -as you point out "noise" . If the question to buy or sell is based on a set of lines crossing one another, things get really simplified.

Did you check on the use of faster ema's or a sma?
Note that those peaks on the fast ema represented price that had pulled away from the trend lines, and then were drawn back.

The critical point in assuming this trade is getting the position beyond Break Even. Assuming this is a weekly chart, it would typically call for more initial Risk on the entry than a daily/60 minute. Unless one graduates a winning faster time frame entry into the next time frame with successive stops rolling over-?

Since stocks trending are the exception, rather than the rule,we never know when the small pullback in price is the fore runner of a breakdown , or a buying opportunity of the new uptrend. I've heard that stocks trend only 30% of the time- and that may be in either direction?

I really like the idea of simplifying the trade, I like the simplified concept of establishing buy and sell levels based on something as clean as a ma crossover.

- Thanks for presenting it.
Obviously , the SLV chart you presented offered significant gain during that trending period! The small whipsaws that a faster time frame chart has that takes one out and back in generates a lot of trades. That chart only had Entry, Stop, reentry, and follow the trade- and a very substantial gain.
Figuring out which next trade will become the next big trending trade or whipsaw trade is the key.
your point is valid that if you take price out of the equation, whatever the emas do provide the tradable information- on any time frame. In that simplicity, you eliminate price bar or candlestick interpretation- sometimes a very subjective interpretation. That's about as mechanical a system as one can employ, and takes out the human edge.
Great food for thought! Thanks for Sharing!
! SD

[bankedout]

I can add Parabolic SAR but I'm not sure what settings you are using.

One could use something as simple as when 10 EMA (white) is above other colors the item should be bought or held. When 10 EMA is below other colors the item should be sold.

Below is the daily chart of the ETF which tracks Chile and you can see why your Chilean bank stock is struggling in that environment.

[sd]

I modified the post, as I thought through further what your price absent chart shows, and stockcharts got back on line, Sar caused a lot of whipsaws. It caused me to reconsider it's application there altogether..
The last post of San really illustrates how the trend is your friend!
Obviously, one should trade with the primary trend, and this is definitely down . I recognized the near term trend was also down, and knew the trade was a "hope" for a pop higher. As you can see by the entry time, this trade came at the wire.
I realized it was not a "better" trade, but looking at the price action today, on the 60 minute, the chart suggests it will try the other direction- I'm not expecting a true reversal of trend- just a 5% pop- It was/is indeed a Frivilous experimental trade - albeit with a tight risk- frivilous none-the-less.

Your chart illustrates exactly what I know but I failed to employ- The best opportunities are those that are in alignment.
It also illustrates a strictly impulsive trade on my part - calculated against other financials as perhhaps being the most oversold- but a larger gamble none-the-less.
Now, whether I happen to be "right" and the trade pops 5% in the next few days, so I can get out of it as expected is not the point- It is actually a much lower probability trade,due to the primary trend; and perhaps I should have not taken the arrogant approach . Nip a quick trade with a minor risk.
It's good to be challenged !

In total , Today's trades were unexpected and not planned for- I wasn't expecting a market rally! even a small one. I actually had anticipated the market to go down lower.... Again, the market surprises me in what it "should "do.
And that illustrates a chronic weakness in approaching the market without a set plan to have a specific group of stocks in a variety of sectors to turn to. Target stocks that one follows/stalks/ and waits for the moment to enter. Should have a group in a variety of sectors to choose from, as sector rotation will take some areas out of favor and others back in-

Last thought this evening, is that while taking a trade is a simple endeavor, to develop and follow a trading discipline is paramount to a longer term success. Impulsive trades are usually not successful trades-
Thanks for posting! SD

[sd]

Continuing Bankedout's concept of using multiple ema's and instead of reacting to price volatility, react to what the ema does.
The ema/ma automatically smooths price action.
If price is removed from the screen and only the emas are left, the trader following the position does not respond to the ups and downs that occur in each time frame- Price action is smoothed out by the math in calculating the emas.

One thing to keep in mind, is that trending price is always higher than the emas, which trail. Price may bolt much higher , but the ema will only have a gradual turn. Thus, when the final turn does arrive, price could potentially retrace 15-25% from the price high before the ema crossover occurs.
While that seems like a lot of give-back, if that approach had kept one in a choppy uptrending stock that gained 90% and then gave back 20- not many would mind.

The issue becomes, since not all stocks turn into trending plays, (don't we know!) how does one develop the bigger trending plays without sustaining big losses on entries that don't work out.?

I would say that I would not expect any trade to become a trending trade until it had passed the BreakEven threshold- where the trailing stops could gradually be widened.
This is not a unique concept - Landry suggests a similar approach in "the layman's guide to Trading Stocks" as do several other trading authors - (let your winners run) by giving them some room is the conventional wisdom. However, it's important that the winners prove themselves before being given much leeway.
I do like the concept, and have a daily chart to post of a choppy uptrending stock . I took the name off , because it doesn't really matter what the stock is- just what it did .
I included a very fast 6ema with a 10 ma. The premise was to analyze a choppy price chart , and find the best way to enter, exit, reenter etc. on the daily- But this potentially could be an hourly or weekly chart with perhaps different emas.

I was actually very surprised, because price moved high and lower, but still uptrending, and the emas kept the action smoothed. Several times there were some close calls - I expect the fast ema to cross the 10 sma and the sell signal is a cross of the 20 ema. this approach of following the emas would have kept a trader in the position for 6+ months.
The 'weakness" in this , is that it requires a trend following trader to assume a lot of volatility in price action- up to 25% give back on this chart- off a 90% gain.
So if a trader jumps into each trade expecting it to be a 6 month trender, and gives that much leeway to his stop, he will be much the wiser and poorer .
I like this part- it fits my present thinking:
So, since we will never know if today's trade is the next big trender or the next sad story , an approach to the market that
"graduates" a trade as it progresses in the proper direction is called for.
I like taking a trade with a tight stop. If the trade heads in my direction, I'm in good stead. If it falters or turns, I'll be exiting- perhaps at 2 different levels- one very tight, and one a bit wider-
Never 8, 10,20 percent though! Usual Risk is 2-5%.
I will also scale my stops , with the first stop being larger than the remaining stop.

Let's assume the trade progresses higher where we feel comfortable in raising all stops to the Break Even (B.E.) level.

If the trade continues to move higher, I tend to break the trade in 50%, 30%,20% with the 50% part of the trade aggressively following price action. I'm wanting to lock-in some gain after a point, and by closely following price with that portion, expect to see a nice profit there, and more modestly in the remaining staggered stops.
Using the 60 minute chart, a little price move is a big thing.
The daily chart less so, and the weekly chart even less.

How would one graduate/hand-off trades from a faster time frame (60 minute) to a daily time frame/ to a weekly time frame?
Only by being willing to back off the stop levels if price continues to head in the direction intended.

Or simply add longer emas on each chart reflecting a value from the next higher chart.

This ema crossover is a great way to view a longer term holding in my opinion. In my IRA account, it is the way I want to review my holdings periodically-

This should be a daily chart that didn't trend near as smoothly as the SLV chart - A lot more volatile.
At the end of the trade , price moves 20-25% before we are stopped out, but we wouldn't mind due to the substantial gain we had accumulated over 6-7 months. It also gives back 2-3 months worrth of recent price appreciation- HMMM......
We can't start the trade with a 25% stop-loss, because we know that will put us out of business in short order- Can we evolve an adaptive approach, that starts with minimal Risk to begin with and gradually gains flexibility as the trade proves itself as going in the right direction?
How many potential entries will actuall become long-term trending positions?

Interesting questions- I'm actually thinking that recent past years suggest that the "go away in May" thesis may best be started in April. before Tax selling occurs- So I don't know if a "trending approach " has much time left this year?

But that's another perspective alltogether- SD

[bankedout]

I absolutely agree that you should initiate a position with a tight leash. Let the position prove itself. Your first goal is to protect your capital. There are only 2 rules for investing/trading:

1. Never lose money.
2. Don't forget Rule #1

It's only after you think that danger has passed (price has moved far enough away from your entry price) that you have to consider how long should I own this? Focusing on the smoothed price behavior may allow you to ride it longer than focusing on price itself. If that is your goal. Unless your batting average is quite high, you need to have larger winning trades than losing trades. So that usually means you will own your winning positions longer than you own your losing positions. So how long is usually the question. Watching price spike down temporarily can rattle the nerves.

On entries, you don't need to enter because the ema did something or other. You can find your entry based on when you think the risk is lowest of being stopped out with a close stop. Assuming you will use the daily chart to track the 'winning' trades, it makes perfect sense to use an intraday chart to time your entry.

Using the price hidden charts can be valuable beyond deciding how long you should own a winner. I think there is also value in determining whether you should consider that item as a trading candidate. If the smoothed action shows a trend in place in the direction you want to go, the trade can be considered. If the smoothed action shows a trendless condition or a trend moving against the direction you intend to trade, the trade should not be considered.

Even when considering the smoothed action for exit of a long term profitable trade, it may be best not to have a hard and fast rule such as I will exit when the fast ema does this or that. It may be best to say I will exit when the smoothed action starts to look different than it has been.

Lots to think about as always.

[bankedout]

If you just focus on the smoothed price action, I think it will be easy to see when it no longer looks normal compared to the intact trend. We can watch FCG this way going forward to see when the (in this case 15 day EMA) no longer looks 'normal'.

[bankedout]

KOL would be a good example for watching for the smoothed action to change. Where I drew the blue lines was the 'normal' trend someone may have attempted to follow. Certainly by the point where I drew the circle, you would realize the course had changed and an exit is appropriate.

Let me know if I should be posting this stuff in a different thread SD.

[sd]

Posted by bankedout on Today at 9:44am
I absolutely agree that you should initiate a position with a tight leash. Let the position prove itself. Your first goal is to protect your capital. There are only 2 rules for investing/trading:

1. Never lose money.
2. Don't forget Rule #1

It's only after you think that danger has passed (price has moved far enough away from your entry price) that you have to consider how long should I own this? Focusing on the smoothed price behavior may allow you to ride it longer than focusing on price itself. If that is your goal. Unless your batting average is quite high, you need to have larger winning trades than losing trades. So that usually means you will own your winning positions longer than you own your losing positions. So how long is usually the question. Watching price spike down temporarily can rattle the nerves.

On entries, you don't need to enter because the ema did something or other. You can find your entry based on when you think the risk is lowest of being stopped out with a close stop. Assuming you will use the daily chart to track the 'winning' trades, it makes perfect sense to use an intraday chart to time your entry.

Using the price hidden charts can be valuable beyond deciding how long you should own a winner. I think there is also value in determining whether you should consider that item as a trading candidate. If the smoothed action shows a trend in place in the direction you want to go, the trade can be considered. If the smoothed action shows a trendless condition or a trend moving against the direction you intend to trade, the trade should not be considered.

Even when considering the smoothed action for exit of a long term profitable trade, it may be best not to have a hard and fast rule such as I will exit when the fast ema does this or that. It may be best to say I will exit when the smoothed action starts to look different than it has been.

Lots to think about as always.

Yes! Thought provoking post Bankedout- Thanks for taking the time!
I'll see if I can apply some of the price hidden approach to a portion of the trades once (and if) they are profitable.
I was trying to develop longer term trades by staggering my trailing stops at wider ema levels. However, I tend to move up those stops to the next higher level once the first stop is hit.
I need to consider not graduating those stops higher, but allowing them to remain. If the the move continues higher, stops could be progressively widened i.e. use slower ema's .

Price hidden - is a unique idea. I like the idea of verifying trade direction . or analyzing the trade direction. the smoothed ma change in direction ....

I will have to stretch my limitations (fear of Loss) to employ that approach. stock selection is also a critical component of a longer term approach. I've been pleased when I've retained stocks for a longer trade (usually increased gain). I'll go back and review some of my other trades taken in the past months and see how they fared since.
Also, I want to position myself with trades over the next few weeks that may see some April selling.
I see that Stockcharts does allow price to become invisible.
I will study this more.
Thanks again for taking the time to post and pushing the thought process wider.SD

[sd]

I like your FCG and Kohls examples-Please feel free to continue to post in this thread. I appreciate the posts and the ideas you are sharing! I would encourage anyone else to feel free to join in as well.! SD

[sd]

I had worked up 2 charts of the SAN trade-
I likely won't be trying many more of these- in the future .I'll hopefully direct myself with less of an impulse trade to one that looks to be more probable.
The first chart is a daily showing the downtrend, and the periodic attempts to move higher, all of which fail. I didn't take this trade thinking a bottom had been reached- just that there could be reason to think an oversold bounce could occur- risky trade.

The second chart is a 60 minute chart that illustrates why I thought this may occur.
I also used it to show how I view Par Sar as an indication of when to not jump into a trade until the sar level is broken.
Surprisingly often, the downtrending sar almost reaches the price before price moves higher.

This is also what I consider on price pullbacks in uptrending stocks to consider an entry. The Sar level has to be taken in consideration. Sometimes it's too wide, due to volatility, but many times it really merges well with the price action.
Got to get this posted and get outside in the Garden-
70 degrees this Sunday, and a lot of work needs to be done.
would love to spend the day reviewing how to approach my other trades- perhaps laterSD

[sd]

Friday, Japan had an earthquake,the largest ever recorded; tsunami, , and that has now led to 4 of their nuclear reactors losing the cooling capacity, potentially losing containment . This ongoing disaster is being assessed by the market for implications in what to sell and what to buy.

I was aware of the news Friday afternoon, but didn't appreciate the true impact . We get somewhat quickly immune to the periodic disasters- Hurricanes, volcanos, earthquakes , floods etc that happens around the globe and sometimes closer to home.

I thought my SLV trade would rise on wider unrest, but that was not the case.
Each position I took Friday has now stopped out for a net 2% +
portfolio loss.
Monday, some trades had moved higher, and I had stopped out on XLE and ACN. Today, every remaining position stopped out .

Reportedly the market had dropped low at the open , and then moved higher. My tight stops were hit, usually at a much lower price as the positions gapped down with a general sell.

Prices moved back higher later in the day -

This is when the market is led by emotion, and quick short term trades - rally in copper, FCx- Auto's , sell nuclear- Shaw, CCJ, USU;
Big construction should happen in Japan- WY-plywood-

Coal and Nat gas for energy-

I decided to jump into 2 solar plays - TAN, and YGE to see if there is some follow through momentum. The best time of course, was to buy these Friday.
SD