maybe i was kidding around. i am really really bad when it comes to trading. i pay close attention to your NFV and i am amazed almost every day for the last few months. but being amazed and trade it successfully are not the same . occasionally i do throw a swing at it using NFV as my main guide but generally i am nervous to trade somebody's else signal. most often this is how i use NFV/SPX divergence. if i have a busy day with many stock trades: long, short, short, long i may accumulate too much on one side (long or short). at that time i am getting worried about being overexposed to one side so it really helps to know where NFV is pointing out. I can hedge my total exposure based on NFV and go on trading. Because NFV often does not converge the same day, i use it to hedge swing positions that i have some flexibility when to exit. i think for somebody who reads nitro's thread one approach is to wait for a large divergence ~20pts, enter and just wait for convergence. also it is good to be prepared to add a couple of times and to sit through ~5% drawdown from the first entry. with smaller divergencies one has to use stops, maybe other rules, etc if the bankroll is limited. in addition dealing with smaller divergencies is dangerous because one is dependent on the updates from nitro through the day. but smaller divergencies are helpful if one use them to hedge his portfolio as i wrote above.
Take today for example. Below is my program that computes NFV, which barely moved from ~1104. The chart is of that of SPX. If you bought at -7 then at -14, you would have just gotten about 20 total handles on convergence, depending on how good your entry is. How many of these layups do you pass up because this may be the one day that SPX takes a dive and gives you an ulcer? This is where knowing the regime you are in (the pdf) is so huge. Trading is at least 75% courage to follow your discipline.
agreed, here is a link to Taleb's latest paper, I get a headache reading it but the point is pretty clear. That is why you have to have stops, you never know in the epistemic sense how many sigmas a trade may move against you. http://www.fooledbyrandomness.com/OxfordBTLecture.pdf "that the variance (or any measure of dispersion) for a probability distribution maps to a measure of ignorance, an epistemological concept. So uncertainty of future parameters increases the variance of it; hence uncertainty about the variance raises the kurtosis, hence fat tails. Not knowing the parameter is a central problem. " Taleb
NFV 1110.18. SPX goes out at 1,125.86. That is > +14 and therefore decent short edge if you want to try to make a few handles overnight.