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MrHankydoesWallStreet

Gann for Stoolies

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Up to the 50 again in Gold. Do we go for the .618 around 410 with volume or are we just rangebound? This is getting interesting. The fundies support a further rise but only time will tell. Finally some decent volume in Ole granddad NEM but nothing earth shattering.

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Getting close to 60 days from the May 10th lows. Time for at least a short term change in trend. Getting overbougth in the metals here. At best a pop tomorrow morning then we go down a bit. I would buy a sharp two day break here. Gold around 398-402 and Silver 6.10-6.15. Volume has improved but not enough to get me to think we will go straight up from here. Nice move in silver today though to resistance at 6.40 which is the 33% retrace of 8.40-5.40. Could try for the .38 but I don't think we close over 6.50 before correcting.

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Here is a monthly chart of Intel, with 1 point per month angles drawn from the all time high and also from zero at the time of all time high.

So far, the rally stalled at the 1x1, and now is testing the 1x2, which has supported recent declines.

post-13-1089848056.gif

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My version of the Square of 52 on the SPX; it is almost certainly not correctly done so criticism would be greatly appreciated.

 

Nevertheless price does seem about ready to meet time so everything else aside it would seem to indicate a change in trend is imminent. I am betting up based on my EW read, but who knows.

post-13-1089887308.png

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Haven't updated here in a while but we finally have had great summer weather and I'd much rather be outside doing things. Just finished a nice 20 mile bike trip trying to keep up with Laura!

 

This is a bit off of TA but more important words have never been spoken, they have been respoken by others and sometimes they have taken credit for the concepts. But having studied Gann, I know who was the original trading genious that discovered and applied them.

 

Just some of Gann's comments on "The Psychology of Trading":

 

1) You should plan your trading in such a fashion as to keep yourself out of stressful situations. If your normal position is 10% and you see a great trade coming up and you put in 50%, you will panic when the trade moves against you.

It is one thing to be certain that a trade is a good trade and take a position, but it is another thing entirely to be greedy and over position in that trade...over positioning and investing too much capital in a single trade is a trader's worst mistake.

 

2)Hope or belief will also manifest itself in such a fashion as to foil an excellent treading plan. If you buy a security in the hope or belief that it will go up in price with no method or evidence, or buy based on a "tip" or what you may think is a piece of inside knowledge, then you have entered the market on the wrong basis.

Remember - when hope is the basis for an investment strategy - BEWARE!

 

3)You can know that you have reached a point of being psychologically able to trade when you can make a plan and not change it. When you watch the market move against you, with your plan is in action - your stop in place, and not have the desire to get out before the market hits it, you are ready...

From our earliest days we are taught that to be wrong is undesirable and bad. Being wrong in trading means taking a loss, admitting defeat. We are taught in our youth that to be wrong is not acceptable, but in the trading business, we are going to be wrong AND MUST PLAN ON IT. Take the loss when you are wrong, make it unemotional and move on.

 

MONEY MANAGEMENT = 1)assessing risk + 2)position sizing

 

1)Assessing risk = Where do I get out if I am wrong and place the stop loss level?

 

In pattern trading, you have to study pattern traders and what set-ups they look for and how they place stops within the pattern. Alan Farley is one of my favorites and I use many of his set-ups (7 bells)

In system trading, this is all automated or should be and not based on patterns but an indicator system with statistics behind it to control risk.

 

 

2)Position sizing = How much of my total capital do I risk on any one trade?

 

Lots of books and articles on this but Van Tharp's "Disciplined Trading" is the ultimate resource on my shelf. Very generally, pattern trades should never have more than 5% risk allocated to them. Bulkowski has some statistics on patterns which help determine the most reliable ones to trade. System trading it is quite different and depends on your system so I won't even begin to get into it.

 

Lets take an example:

 

Here AU formed a small 2 b bottom when retesting the last bottoming area.

The doji gave a perfect place to enter towards the end of that trading day.

Stop goes just below the doji or 2B bottom low. So your in at 31 and your stop is at about 29.8. How much risk here? Easy = 1.2 points.

 

OK now position size: Assume $100,000 trading account and you are using 3% risk per trade or $3000 per trade.

 

Buy enough shares so that a 1.2 point loss = $3000 or @2500 shares.

 

 

So anyway I just want to point out Gann was the first trader to emphasize the concepts of risk and money management and apply them in a trading plan.

Without them no one can successfully trade.

 

Hank

post-13-1090761770.gif

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Great post Hanky. Modern day example of buy and hope is all the good people who have bit hard on the advice given by some gurus who argue with the market. Another wise man said the market can remain irrational longer than you can remain solvent. Beware the gurus who say I'm not wrong the market is. :D

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Nice stuff, Hank!

 

Agree with your analysis.

 

Here is a very simple system that I use for my IRA. I'm position short NDX.

 

big.chart?symb=ryaix&compidx=aaaaa:0&ma=3&maval=10,40&uf=0&lf=4&lf2=256&lf3=2&type=4&size=2&state=11&sid=117142&style=350&time=9&freq=2&comp=NO_SYMBOL_CHOSEN&nosettings=1&rand=7131&mocktick=1&.gif

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A close up look at its carnivorous brother....200% leveraged, into which I slowly shift my funds, as the trend grows.

 

big.chart?symb=ryvnx&compidx=aaaaa:0&ma=3&maval=10,40&uf=0&lf=4&lf2=256&lf3=2&type=4&size=2&state=11&sid=180732&style=350&time=7&freq=2&comp=NO_SYMBOL_CHOSEN&nosettings=1&rand=943&mocktick=1&.gif

 

 

The SPX carnivore is lagging a bit.

 

big.chart?symb=rytpx&compidx=aaaaa:0&ma=3&maval=10,40&uf=0&lf=4&lf2=256&lf3=2&type=4&size=2&state=11&sid=181178&style=350&time=7&freq=2&comp=NO_SYMBOL_CHOSEN&nosettings=1&rand=6975&mocktick=1&.gif

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good time to add to energy stocks.

 

Hi Met,

Glad to see your on the short side here too with the exception of energy, OIH looks great.

The current rally in NDX has a glaring volume divergence developing and my cubetrader system is right on the verge of giving another short signal, but for now in cash!

HI-5 B-line is leading indicator and is starting to diverge bearishly, but the HI-5 itself has not given a bearish divergence, yet!

 

Hoping my CT system will catch another profitable short trade here soon, will post as soon as it flashes!

 

Hank

 

VN = volume normalized to 50 DMA of volume, 1 = 100%

post-13-1093722359.gif

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