The Trading Digest

Because we remain under 20 onn t2108 I scanned for ETF’s that crossed below the 30 level with the Ultimate Oscillator. Only one met my liquidity requirement but I will let the other one slide in because our exposure is so low for the system with only one holding.

I am going to select EWG and IEO be the new entries for tomorrow open.

This morning was absolute panic/fear and not many blogs or financial sites recommended a trade like I did today. I knew through testing that risk was actually less in those emotionally tense moments before the open. Contrary to what the trading community believes. Either way there are no guarantees in trading only probabilities and it’s understanding these probabilities that allows me to “frame” a trade into a set of rules that define entry and exit - unemotionally. Within a 15 minutes our first target was hit one the XLE and in another hour the DIA target was hit.

Think about that…an index moving 3% in such a short period of time- an index. In system design and backtesting I see this quality in a metric called “profit per bar”. Meaning as I evaluate all of the trades over the data set, they are the systems that tend to produce outsized gains in short time periods. Those types of trades tend to happen near emotionally charged and fast moving downward markets. It happens over and over and over. In every decade, yet I will implore readers or colleagues and friends to take the trade and they almost invariably prefer to “wait and see”. And of course they miss the trade. They fear open ended risk yet they allow their index funds in their retirement funds to be in stocks. If you can not clearly define risk then the trade must remain small - a very simple rule. But whatever you do don’t pass up the trade. The longer you follow this trading game the better you will be able to sense that panic opportunity yourself.

This morning the lemmings froze at the wrong time.

Have a Great Night!

Dave Johnson

2 Responses to “We remain under 20 on T2108 - some thoughts”

1. PhilC Says:
   January 23rd, 2008 at 11:58 am

   – quote —
   I will implore readers or colleagues and friends to take the trade and they almost invariably prefer to “wait and see”
   – end quote —

   Exactly! This sums it up perfectly. I takes a lot a training to follow the numbers and take the trades you are describing. I’m still part of the “wait and see” crowd.

   This was underlined to me this morning as I read this post and said to myself “Two days in a row! Impossible! Plus the European indexes are way down I can’t put on a buy for EWG! I’ll wait an see…”.

   And here we are an hour later at +3%.

   You guys do wonderful work. Keep it up. You deserve every million you made this week

2. Dave Says:
   January 23rd, 2008 at 4:46 pm

   Thanks for the comments. I believe people confuse a trade with being bullish or bearish. Those are other systems doing other things. This is a specific system with specific parameters. Certainly not influenced by my own wretched opinion.

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