I have decided to switch from 75% long trading and 25% short trading, to 90%+ long trading, and short trading ONLY when there is just no other option. Long trading is just so much more reliable and predictable. Buyers always come back in at predictable points and times. I have went over the math multiple times and done a bunch of backtesting. The trade setups that work perfectly and nail it during uptrends... Their opposite signals DO NOT work at all during downtrends. This is with volume charting and time charting. When the market is falling it's more like random capitulations and if your doing trades around an hour or less long... It's way too hard to time them properly... I trade the best during slow uptrending and sideways trading during a bull market rally. The nice slow rounded tops are so easy to time your exits from a long trade. The big down moves are easy to avoid as they are always off some random ass overnight European black swan or news catalyst. A couple hours afterward the market is stabilized for long trading again provided internals are holding good enough. I advocate long only trading unless you have a LOT of market experience. Like cramer said... "Trade long only, upside comes naturally. Just avoid the downside." For daytraders avoiding the downside moves is a piece of cake... The market rises for around 4-6 years straight, and falls for around 1-2 years. The market behaves the same way on all timeframes.
Lets let the math speak for itself... This bull market has NEVER sold off without a divergence. Each selloff has been around 7-14 days... Once the market starts to top out on a divergence and go into a correction move all you have to do is take a quick break from the market and around seven days later you can start checking to see if the market is starting to stabilize for long trading again. If it's breaking down some key ranges and in a weekly bear cycle wait a little longer. Honestly, not sure why I am repeating something that pretty much everyone knows... La da de da... I'm kinda bored these last five market days. I'm waiting for this down move to burn off. Honestly, today was the first trading I have done since the market broke range on the 3rd. Not much opportunity to do longs during a correction... I mentioned this coming correction on the 2nd in this post. Everyone should have seen it coming anyway. http://www.elitetrader.com/vb/showthread.php?s=&threadid=241848 "Whos not looking forward to trading the downtrend next week?"
great posts rangetrader,about time. i use it as well and call it mirror, up 5 bars, down 5 bars, up 6 bars, down 6 bars
the problem with shorting the overall market, at least for now, is that there is no other place for big money to go. bonds have been exploited cash returns nothing. dips will be bought. its going to take an unexpected event to change sentiment enough to get a prolonged downturn. i dont think even greece blowing up would do it at this point. that has been discounted.
Well... I don't really pay attention to the news very much. Only "new" things matter. Everything is generally built in so you can just trade the technicals and not worry about news.
If you trade like me... 15 minute to hour long trades or so max... And, I don't trade within 15 minutes of news events or open or close... The news is always completely baked in for me because of the way I trade. The reality of most news is this... During a selloff good news sparks more selling, and unexpected bad news sparks heavy selling. Unexpected good news causes a bounce then parabolic selling. During a rally good news sparks buying, and unexpected good news sparks heavy buying. Unexpected bad news causes a temporary dip and then parabolic buying. The news interacts with the market momentum in a "relative" way. And then there is big black swan style news which is strong enough to break the market daily trend instantly... I have not seen it happen in the last three years...
============ Good points r-trender Its an election year bull market But even with that[ Yale Hirsch Traders Almanac book/election year /bull market ] Even on a 1 year candle chart of SPY, once it crossed the 50dma last AUG, it never crossed SPY, 50 day moving average until OCT.{a bit more than 7-14 days,LOL] Keltner channels are going down,which doesnt happen much; not that Keltner channels are as helpful as 50dma................. I like the main trend,long the strong; but short the weak some like C, CountryWide[no longer with us LOL] Bull trends tend to be more orderly, above 50dma, anyway.Thats wisdom.
I'm actually bearish up to the election. I expect to see a few small 40-60 point rallies, but nothing that gets us much of anywhere... Continual daily lower lows expected through summer. Bear market rallies are pretty nice trading though. I'm going to be trading long like mad in every one. Can't wait until the next on is started! Should be a bit though. Patiently waiting... And only taking a few trades here and there.
Or it goes down 20% followed by a 1,000% up. Either way, the strategy is short sighted. You must sell short after the market makes highs and buy when the market makes lows. You don't want to be exclusive to any one side of the market just because the decades of probabilities say that to be long is mostly right. Winning 60% of the time intraday, and 75% on swing in either direction is the key to trading.