Trading and Exits and Stuff

John your post of charts comparing this pullback to last summers correction got me to thinking how our short term swing trading system works in this environment. The latest iteration of the system had imposed some limits when the Nasdaq is trading below the 50 day moving average. In our testing we found slightly modifying the exit criteria allowed for less drawdown and comparable returns. That modification was simple. In weak markets use any strength as your sign to exit the trade. Whereas in technically stronger markets we could wait around for a larger pop. A good visual example of this is with CHRW which I mentioned as a possible swing trade for Wednesday.

 As you can see we have had 2 white candles since then and it’s time to leave. Trade over. Could go up 10% tomorrow and that has absolutely nothing to do with this trade. You see it’s rules based. Tested inside and out.  And it’s time to exit.

One of the goals of this blog is to address many of the major axioms of trading that are taken as gospel - and proving they only stand in the way of making money in the market. In my opinion that is why most traders fail to keep up with the market.

The other thing I wanted to mention tonight is about our private trading chatroom we have during the trading day. We have a good mix of traders that over the past year have not only become good friends but people you come to respect for their opinions and market analysis. One of our members is Stoolander (i know funny name) and his market analysis is a gem to behold, especially in real time as the market unfolds before your eyes. Here is one of his charts that he posted Wednesday. Thing of beauty eh? His timing models, incorporating the fading of extremes in sentiment and price, are something that have pushed me even harder to find edges in these areas for index swings as well. 

Last note. I strongly encourage you to go to www.marketfilters.com

Learn how to use the site. Read the available articles. read the FAQ,  and send feedback to the developer of new features you would like to see. If you have a blog or website they have an embeddable widget that can go on your site.

 Really last thing. This guy cracks me up. Look forward to reading his market views.

Have a Great Night!

Dave Johnson