Buyers In Control - December 2, 2011

[nickola.pazderic]

Billy,

I'm playing along at home here, and I'm also currently at 1/3 my original position. So far so good. I know this is not a universal prescription, but I certainly appreciate your candor in the service of education.

My question may have been addressed implicitly or explicitly previously. If so, my apologies.

It is this: At this point I set my speculation in the robot trade at approximately 125% account, calculated according to net exposure. Acting in this manner I've secured fantastic gains at times with a risk of only 40%of my capital in the account.

In your calculations, do you wager your entire account at 100% in 3X instruments and then adjust your holdings according to the risk management tactics you adopt? Or, do you like me, wager only an amount that would equal an exposure to a given percentage of the net liquidating value in your account?

For example:

An account of 73,140.00 USD would have allowed me to enter a 100% position of IWM at yesterday's robot price of 1000 shares-- a 1000 share or 100% exposure. However, with the same amount of cash I could purchase 1671 shares of TNA, which would increase my total exposure (as I calculate it) to 5013 shares of IWM, which seems to me to be an exposure of over 500%.

Any thoughts?

Many thanks,

[Billy]

Billy--I don't understand how you determine the point from which you draw the fibonacci lines to determine your exit points. You mentioned a higher high and higher lows, but I see lots of them. Forgive the stupid question but I have a lot to learn! Thanks for all the great teaching on this site. Jerry Kuhn

Jerry,
I like to use the 30-minute chart highs and lows references. At the open today, we knew that yesterday’s close was the first higher low since entry and we had our higher highs. I draw the fib retracement up to the new highs and keep adjusting with additional new highs.
Billy

[Billy]

Billy,

I'm playing along at home here, and I'm also currently at 1/3 my original position. So far so good. I know this is not a universal prescription, but I certainly appreciate your candor in the service of education.

My question may have been addressed implicitly or explicitly previously. If so, my apologies.

It is this: At this point I set my speculation in the robot trade at approximately 125% account, calculated according to net exposure. Acting in this manner I've secured fantastic gains at times with a risk of only 40%of my capital in the account.

In your calculations, do you wager your entire account at 100% in 3X instruments and then adjust your holdings according to the risk management tactics you adopt? Or, do you like me, wager only an amount that would equal an exposure to a given percentage of the net liquidating value in your account?

For example:

An account of 73,140.00 USD would have allowed me to enter a 100% position of IWM at yesterday's robot price of 1000 shares-- a 1000 share or 100% exposure. However, with the same amount of cash I could purchase 1671 shares of TNA, which would increase my total exposure (as I calculate it) to 5013 shares of IWM, which seems to me to be an exposure of over 500%.

Any thoughts?

Many thanks,

Nickola, I have a visitor now and will reply this weekend.
Billy

[sesorensen]

Pierre,
There are no position-sizing rules from the robot. All position-sizing and leverage decisions are your own responsibility.
I previously gave an example of my own discretionary guidelines in the current conditions.
First, I always enter a full TNA position at the initial limit, say 1,000 shares at 43.77 yesterday. I place my initial stop for 666 shares just under the first support cluster and for 334 shares at the robot’s stop.
Once I see a higher low from my entry followed by higher highs, I exit 333 shares at a 39% retracement and 333 shares at a 51% retracement. The remaining 334 shares are managed exactly like a robot position.
The proceeds of the 666 shares should only be reinvested at a robot’s entry limit if there are buy settings and the same stops and retracements guidelines apply from there.
Today, 1/3 of my TNA (entered at 43.77) was stopped out at 45.29 and 1/3 at 44.99. I am still long 1/3 position but wont scale back-in my 2/3 position before a new active buy limit price.
Billy

Billy,
I have three questions re your discretionary trading:

1. In your Cluster Strength comment for IWM on 1. December 2011 you mention that “I place my initial stop for 666 shares just under the first support cluster”. You also mention a “massive floor support confluence from WR2 (72.26), MPP (72.00), YPP (71.84) and QPP (71.25)”

From your IWM chart illustration the “just under” first cluster support would be between 71.90 and 72.00. This is about 1.55% below entry point. I assume that identifying the “just below” for the first cluster support level of the TNA will then be 3x1,55%=4.65% below 43.77, which is about 41.75. Is that a correct assessment of a TNA initial stop price “just below” first support cluster?

2. One may also experience a lower high and a lower low scenario after a limit buy entry. Would you always stick to your initial stop (“just under the first support cluster”) or may exit if a lower-high, lower-low scenario occurs before hitting the initial stop?

3. You also mention that these are discretionary guidelines as they apply to the current situation. Would you already now be able to hint other types of guidance applied for other market conditions? If not, we would all be very pleased to have you presenting them as they emerge. Thanks a lot. best Sorensen

[Billy]

Billy,
I have three questions re your discretionary trading:

1. In your Cluster Strength comment for IWM on 1. December 2011 you mention that “I place my initial stop for 666 shares just under the first support cluster”. You also mention a “massive floor support confluence from WR2 (72.26), MPP (72.00), YPP (71.84) and QPP (71.25)”

From your IWM chart illustration the “just under” first cluster support would be between 71.90 and 72.00. This is about 1.55% below entry point. I assume that identifying the “just below” for the first cluster support level of the TNA will then be 3x1,55%=4.65% below 43.77, which is about 41.75. Is that a correct assessment of a TNA initial stop price “just below” first support cluster?

I actually opted for an initial leverage stop reference at 71.80 because it was below the strongest support of YPP (71.84). That 71.84 stop was 1.83% away from the 73.14 reference entry level.
Converting for TNA, the stop was 43.77 – (3x1.84% =5.50%) = 41.36.
Note that I will only enter a hard stop order at 41.36 if I can’t be present at my desk. I will normally monitor the price/volume/TICK/RT 20DMF behavior of IWM at the yearly pivot (71.84) and sell TNA only once I see evidence that IWM is failing as support.

[/QUOTE
2. One may also experience a lower high and a lower low scenario after a limit buy entry. Would you always stick to your initial stop (“just under the first support cluster”) or may exit if a lower-high, lower-low scenario occurs before hitting the initial stop? [/QUOTE]

That scenario happens quite often. As long as the robots daily settings remain on a buy signal, I will stick to my initial leverage stop and wait for the first higher low and higher highs on 30-minute bar charts.

[/QUOTE]
3. You also mention that these are discretionary guidelines as they apply to the current situation. Would you already now be able to hint other types of guidance applied for other market conditions? If not, we would all be very pleased to have you presenting them as they emerge. Thanks a lot. best Sorensen[/QUOTE]

Yes, this is my favorite technique for choppy market/high volatility conditions only. The leveraged positions stopped out at a profit can often be re-entered at the recommended robot limit price. Sometimes several days in a row. Now, if volatility declines for long enough, and gaps/choppiness calm down, I would switch to trend-following or mean-reversion leverage risk management techniques. I think it is best that we wait for practical real-time opportunities to discuss these.
Billy

[ilonaross]

Billy, Pascal and Thanassis:

In case I haven't said thank you lately, well, thank you.

What a great education!

[ilonaross]

The debt ceiling has faded from the headlines, but it's still an issue.

http://seekingalpha.com/article/3116...-as-next-month

I don't understand whether the action by the six central banks, which seems to imply QE3 and money printing, is at odds with the debt ceiling.

Is this apples and oranges, or is it pertinent?

Can someone please explain....

[EB]

The debt ceiling has faded from the headlines, but it's still an issue.

http://seekingalpha.com/article/3116...-as-next-month

I don't understand whether the action by the six central banks, which seems to imply QE3 and money printing, is at odds with the debt ceiling.

Is this apples and oranges, or is it pertinent?

Can someone please explain....

The central bank liquidity swaps are a monetary, as opposed to fiscal action. Monetary actions do not directly affect government debts, though they do indirectly inasmuch as they affect borrowing rates. Accordingly, the Dollar swap lines lent by the Fed will affect the Fed's balance sheet but not that of the US, so the debt ceiling is not really an issue.

[sesorensen]

I actually opted for an initial leverage stop reference at 71.80 because it was below the strongest support of YPP (71.84). That 71.84 stop was 1.83% away from the 73.14 reference entry level.
Converting for TNA, the stop was 43.77 – (3x1.84% =5.50%) = 41.36.
Note that I will only enter a hard stop order at 41.36 if I can’t be present at my desk. I will normally monitor the price/volume/TICK/RT 20DMF behavior of IWM at the yearly pivot (71.84) and sell TNA only once I see evidence that IWM is failing as support.

[/QUOTE
2. One may also experience a lower high and a lower low scenario after a limit buy entry. Would you always stick to your initial stop (“just under the first support cluster”) or may exit if a lower-high, lower-low scenario occurs before hitting the initial stop?

That scenario happens quite often. As long as the robots daily settings remain on a buy signal, I will stick to my initial leverage stop and wait for the first higher low and higher highs on 30-minute bar charts.

[/QUOTE]
3. You also mention that these are discretionary guidelines as they apply to the current situation. Would you already now be able to hint other types of guidance applied for other market conditions? If not, we would all be very pleased to have you presenting them as they emerge. Thanks a lot. best Sorensen[/QUOTE]

Yes, this is my favorite technique for choppy market/high volatility conditions only. The leveraged positions stopped out at a profit can often be re-entered at the recommended robot limit price. Sometimes several days in a row. Now, if volatility declines for long enough, and gaps/choppiness calm down, I would switch to trend-following or mean-reversion leverage risk management techniques. I think it is best that we wait for practical real-time opportunities to discuss these.
Billy[/QUOTE]

Thanks a lot Billy and Pascal. With Ilona and others i'd like to commend you all (incl. Eric, Bob, Mike, etc.) for your transparent and professional way of servicing us... It is really so different from other sites that claim to deliver the same... Sorensen.

[taw55]

Taw 55,
The best indicator I know for sector rotation is relative strength.
The best book I know on the topic for multi-month investment timeframes is by Michael J Corr:
http://www.amazon.com/Smarter-Invest...2853400&sr=1-1
But the paradox for short term trading is that you must buy the worst short term RS sectors on a 20 DMF buy signal when confirmed by Pascal’s sector lists.
Billy

Billy,
Thank you very much for the book reference and great tip - I will definitely try that out! I also remembered that the SIGR file available on the site has a kind of sector ranking, and so am looking at that as well.

Thanks Again,
Terry