See this is what makes Big Mike's different than other forums. I have been emphasizing homework heavily since I came online in 2009 to talk openly about trading with the public. Folks cite things like 10-handle rule and 80% rule but they have no clue what context, assumptions and parameters were used for the results. If you are not looking at market data and then dissecting it on your own, then you are at the mercy of the next guru that comes along. This is what we do best at Stage 5 Trading. We want to look at the market in terms of probabilities. This makes it ok to take losses when they come and keeps us open to whatever happens.
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If I'm in a position and it is beyond 1 harmonic rotation, then I use a hard stop and will hold through. Caution though! There is a risk to doing this in that the market might trade through your stop.
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In some circumstances where a trader has little confidence or emotional capital, I have recommended a daily target to build on. However, I don't stop. Every trade has some edge and I will trade as many as I can under normal circumstances.
One thing though: I'm very aware of my state of mind and mental condition. If I'm getting irritated or feel very tired, I generally stop early or don't trade at all.
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FT,
This is SPX and we're in a channel this entire CY so far. This channel has been on my chart for a long time, since middle of January or so, and held so far.
Do you pay any attention to such channels?
Panel 2 is McClellan breadth and is diverging a lot on recent highs in the last 2 months.
Everyone likes to say "Sell in May and go away", do you think the past three years make a trend?
Yes, I do watch channels. I don't trigger trades off of them, but they are useful in giving us a bird's (or "drone's eye view" nowadays) of what is happening to the price action.
Note that the market is having a harder and harder time getting to the upper channel line and you almost have to draw another one that has a more horizontal slope. I'm seeing several signs of fatigue as we climb hire on the profile as well.
I posted a similar image in the S5 Trading chat room today and on twitter for a shorter time frame. That chart also has my measured-move targets on it as well. Here is what it looked like:
Here is another perspective on that chart with the quarterly profile in grey and some comments:
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I didn't catch the second part of your question. Under normal market cycles, I think you can make an argument for seasonalities like the one you mention. However, I can tell you that none of those seasonalities have played out as they traditionally do in energies, grains, etc where there is a behavior change that elicits that behavior.
I prefer to see the action as it is now and react to it. I'm too short-term a trader to care if they sell in May or June or crash in September again. To me, all movement is good movement.
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Do you have any rules regarding gaps how you trade with them ? (for eg. if we have a fairly large gap out of range, would you trade that differently than a large gap in range. Same question about smaller gaps. Do gaps influence your thinking in the morning or bias?)
Do you trade each and everyday (barring 1/2 days or expected slow days eg. shortened weeks in holiday season) or you base your bias if you are going to trade on the first hour's action etc ?
Thanks
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