It's true- most things do follow SPY- and a single focus from a trading point reduces time and effort- My mix of holdings is somewhat random at this point- - and experimental - some with a dividend focus, but also looking for growth potential. I felt the dividend focused funds would be less reactive and easier to trade. and perhaps be less volatile- That remains to be seen though- The end goal is to develop confidence in my ability to manage a larger & more diversified retirement portfolio -possibly within 2-3 years when I retire. At that time, I will likely move everything over to a Vanguard brokerage IRA account- I should consider adding SPY in this trading account-virtually everything else should be compared against it. Thanks again for the input- I will look for your journal over this long holiday weekend.
When I started doing this "study" - I somewhat "knew" that the tactical approach would outperform the Buy and hold approach- After all, the tactical approach would get in early and get out early and would actually outperform in terms of gains in the same period. I'm coming to realize that - in the case of CURE- a low volume instrument- that is not necessarily so- Indeed, What seemed like a couple of basic trading parameters- easy to follow- and execute- has not achieved the results i expected- I think I believed if the approach worked with Cure- it could be applied over a wider universe- Very simple- This simple approach sounded logical- Enter after a pullback on a close above the declining ema- And raise a stop only after price closes below the uprising ema- This assumes it gives the trend the opportunity to continue higher- What was 'wrong' with this model? It did not account for volatility- Volatility pushes the price to a high, and then volatility pulls it back. We see this in the charts- Price moves up and away from a nice and perfectly smooth uptrending moving average- only to stop and drop back to rejoin - or drop below that ema. Can one simply react to the wider volatility and get a larger gain, earlier exit - instead of waiting for price to drop Below a moving average? Due to it's low volume , CURE may be an extreme example of a lack of liquidity-adding to volatility moves. This daily chart from Frame 3 illustrates 2 conditions- a widely volatile environment in the beginning of that chart, evolving to a more sedate- trending environment- where the entry/exit method appears to work- It does get you out of the declining trade as it develops. It is time to consider a different approach ? More tactical?
OK- enough of the chart study in CURE - That approach worked during smooth trending markets. I want to reintroduce a chart i had posted previously that simply eliminates price- It's just a couple of moving averages- I think it is very important that I recognize what this chart tells me- It is a longer time frame view- This chart shows the time periods when the faster moving average pulls away from the slower average, and then comes back closer again- The high points allways come back to the straighter slower average- This is momentum. Notice where we are on the chart- Not only did we start from a momentum low on the prior pullback, we have overshot the top- exceeding all prior periods of gap wider- The MACD indicator below the chart does a good job of illustrating this Excess move. This chart tells us that this recent move is an extreme move well beyond the "norm" Recognizing that this is a period of excess momentum, I will choose to no longer take the wider approach and to become more tactical in my trading this position. Instead of trying to "Stay the Course" and maintain a position with the wide stop loss- I will now trade this to lock in a higher gain- aggressive stops at $126.50. & $124.00 FOR 10-28-14
I have to remind myself- I don't know what today brings-- I do realize that price can swing, hit a tight stop- and close higher-I have backed off both of these tight stops-and will see how the day unfolds- Typically, I am not watching the market Intraday- For the moment - I have backed off to $119.76 on 2/3 and a Wide stop at 105.00 with the remaining 1/3. The reason I am still in this and the other trades is because i did not follow too closely with a stop- did not watch a minor intraday move- did not react on a daily pullback. The trend looks extended on 1 time frame- and yet not so much on another.....
i DECIDED TO DO SOME ACTUAL MATH on what visually looks to be an excess move- Looking over the past year - using a 3 to a 30 ema line value-comparisom - when price has made a "Peak" followed by a pullback or decline- There were several recent moves of 19% gap and prior peaks the gaps were 23 & 24% ( approx price of the ema at that time) Today's chart shows the gap to be a 24.9%- slightly higher than the prior high gaps. Does this mean this is the peak? Not necessarily so- Price could still move higher- but it suggests that taking a partial profit here- could be a prudent decision. The fact that price just moved out of a lower consolidation suggest there should be additional upside- After working on this weekly chart, I looked at today's daily chart and decided to sell 1/3 of the position. Approx a 28% gain based on the higher average cost of the added shares . If I had not added shares- and increasing the average cost- the profit based on the initial entry would have been 44% on this partial trade. It is possible this trade goes higher- but it is also possible that it retests , pulls back into the consolidation . I will consider to have a limit buy order near the lower end of the target range- Once $$$$ clear. 2 charts- Weekly & 60 minute
BABA STOPS OUT - The trade went tepidly in my direction for a few days and then rolled over- It failed to participate when others gained- I raised the stop intraday - and did not raise the stop directly up to my entry cost- The trade spiked down in the remaining 30 minutes and activated my stop- I was filled $.02 above the low of the day. No regrets- a .04% loss - less than 1/2%.
TDIV SOUNDED LIKE A CONSERVATIVE WAY TO GET EXPOSURE TO THE tECH SECTOR-has a dividend focus-in a strong sector- I may have posted this chart earlier in this thread- What is coincidental is the timing of this trade- I happened to have monies freed up- was on the sidelines- and waiting to get into some investments when the market had a quick sell-off. It was also a Friday-I think- and allowed me to not have to stay focused on work all Day ( Normally a shorter work day) . As i was looking at the charts tonight, and preparing to adjust stops- I looked at the chart of TDIV prior to my entry- and asked Why was i not a Buyer earlier? Why did I not get sucked into the bull trap moves that occurred earlier in the decline-? It is easy to NOT enter when everything is in a solid decline- and under a falling ema-. The specific answer I don't have- Perhaps $$$ had not cleared, perhaps i wasn't considering TDIV -Perhaps too tied up with work to worry with the market....... I also had the belief that some of the bears might be right- The point I am working through- to myself- is that it is easy after the fact- but- as the trade is developing- one has to have a systematic approach that also contains some guidelines that will still -allow one to take what seems like a valid entry signal- but recognize that it is a more hazardous trade- and to that end- make some money management rules to limit Risk- both in stops as well as how much position size one puts on in the entry. I took a full position on the TDIV entry - believing it was a more conservative holding and thus "safer" - But safer is a relative term. Getting back to the point- What happens WHEN (Not If) TDIV rolls over- and some early reversals are signaled-and i have free cash available and consider this as something I'd like to reenter...... If i want the earlier- lower Risk entry - how do I qualify that entry -so it does not turn into whipsaw after whipsaw? Even in a conservative and 'safer' dividend paying ETF. A downtrending reversal should be approached differently than a pullback in an uptrend- What separates the 2? Not the same animal-both could be dangerous- both should be approached cautously- But when the trade closes in your direction- and a second day goes your way- it might be the real deal. In the chart I am posting of TDIV- notice the prior bullish attempts to move higher-the 1st attempt did not look very promising- but the second attempt did- What would have held me back? The slower PSAR value/ ? the prior high? These are important questions to ask- because it likely will not be long until the market provides me with an excess of freed cash as I raise stops to protect gains-
The initial look at the CURE -frame 3 period- using a 10 & 30 and a simple entry/exit condition rules certainly got chopped up. The take-away from that type of approach , is that it performed well when price was relatively smooth and trending- the last 2 trades captured profits, and got out of the position on larger multi bar declines, but failed during the earlier trades on the chart. Cure is a good example of low volume & volatility- Potentially, trading a more liquid etf (high daily volume) could apply this -or a similar approach with some success, and some safety built in- How does one tackle the issue of repeated entries when it appears that the signal is there to get in , but the trade does not develop as trending? You only find out when it fails- What about taking the very next entry? And it fails? And then a 3rd entry- also fails...... And after getting stopped out for 3 consecutive losses- you don't enter trade 4- which becomes the trending trade you hoped would develop in Entry 1. I think this happens to me - and other traders as well- and we get discouraged because we just got successive losses of perhaps 5,6,7% based on our belief in our "system" . We know it works- when it trends-We just cannot know when that trend is about to appear. There are some money management things I can do on entry- Take a partial entry- add to the position as it passes my initial entry cost- I can wait for the trend to be clearly evident-on the daily or weekly charts- my choice- or can I try to be more tactical- take some entry and exit lessons from those that use volatility to their advantage- The chart in this post takes a look at momentum as defined here as the increasing gap between the 2 ema & the 30 ema- and takes some measurements of what % away the peaks represented. The price would be significantly further and a higher % away from the moving average line-when price peaked- if you knew in advance- that once a momentum move higher exceeded 6% , a reversion would likely occur soon- perhaps within a bar or two- and that 8% would be extreme- 10% very unusual- Would having an approach that sold some of the position while price was moving higher into that extended zone- and perhaps keeping a portion of the winning trade above the entry level- (Present Cure position partial sell is such an example) Chart today is just of the ema's themselves- I will look to see if I can improve on the results of the 10,30 approach, using a faster chart, faster emas- and possibly add a split-position stop-loss - or even a limit sell % to capture a momentum move higher- Just a trading note here- Flash crashes can occur to even "Solid" stocks or ETF's- A flash crash can activate a stop loss but get a much lower fill- only to find the price closes 5 minutes later back where it was- A flash crash shows on my fast charts for Cure- but did not show on the daily- It exceeded my stop-loss- but did not activate it- I'm starting to use a stop- with limit order to protect an unusually low fill occurring. Another note- As J suggested- I'm going to start also looking at SPY- and I think SSO as a 2x - As he pointed out, most everything correlates along with SPY- Cure Chart :
Some Random Thoughts to share this Sunday pm- Stops are in , waiting for some trades to clear. When one thinks about Trading as a way to achieve above average financial gains- and when one hears the statistical evidence that the majority of professional traders struggle to meet the passive market returns-..... Those 'other' guys are the professionals- What makes me think I could possibly match someone whose entire livelihood is based on excelling in this craft? And- really? -do the majority of these pro's fail to excel vs the passive index? reportedly....on ayear over year basis they do- "Active management" comes with higher costs that may not be supported by the market passive returns. When i think about actively managing a single account that would include my entire 'investments' and not a smaller 'trading' account- it raises the bar significantly. Before i would jump assets from an investment type of account into a trading focused account, I would want to see Years of success in the Trading approach before engaging that type of personal risk to one's desire for wealth creation. Or at least a better future if Wealth is too large a word. Why turn to trading at all? My excuse is that i came into investing too late in life and need to turn smaller assets into larger assets to try to make up for decades of every day life and expenses- where Investing was a word never heard nor explored- because the Here and Now of everyday expenses- and then children...and then the other expenses that come in - even as our standard of living may improve. The truth is, as a society, we- older- (baby boomers) came up in a time when affluence was granted to those that were in the right place at the right time- Along the way, we never experienced the trauma that our grandparents lived through in the great depression and following years of austerity- We lived in a booming economic cycle as children and adults- Our standard of living -improved - as growth was our inheritance- all you had to do was be there- participate- BUT Wait- The economic engine of growth stalled in the 2, 000 era- and in 2007-09 - As the growth engine popped and real estate values crashed- Many that had ridden the wave of ever increasing paper values - Housing-refinance at a higher value.... Retirement accounts- ....... seemingly shattered. Come full circle to 2014- Growth is modest at best- and the recovery is slow- Baby boomers - became the casualities in the economic downturn as they had too many benefits and were paid too highly based on a growing economy-Are also among the 1st disenfranchised - let go- replaced - in the new leaner and meaner business cycle- as cutting excess expenses came 1st in order to survive as a redifined business model that no longer respects longevity as a desireable asset Despite the carnage tht has occurred in the past decade +- Having a regular investment theme has proven to withstand the ups and downs- and has even come out as a winning strategy during the most difficult recent era in several decades. How many trading approaches would have survived during this same time frame? The past 5 years - Who would have thought? What is in store for the next 5? No one knows. Does a trading approach one develops for today's market- survive tomorrows? Being in the 'Baby-Boomer demograhic - my focus may be different than those with decades to succeed ahead of them. I find myself in the situation of protecting what i have, yet needing more than the market will deliver- If only I had been in this position & awareness 20 years earlier! One site I visited- for those seeking an investment based approach- that was interesting- Josh Brown- seemingly principled contributor- CNBC- has an investment service with a very low fee- I took the quiz- and found that my desire to double my assets in 3 years was unrealistic- It suggested getting the market return of 7% and 5 + years to achieve that goal- I don't expect that too many here on ET are concerned with retirement and asset allocation- and all that tedious stuff- But- for the 1 or 2 that may be- take the free Risk profile and see what occurs- Nice to get an unbiased opinion. https://liftoff.advplatform.com/