Buyers In Control - December 2, 2011

[Billy]

This morning we have the following

As suggested by Billy (if I understood correctly, I took a BASE position in IWM and added a 2/3 position in TNA.
-1- Under what condition(s) are we to enter the last 1/3 position in TNA, if your care to comment Billy?

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.



The first retracement line is at 23.6% retracement and puts me on alert for potential stops triggering.

Again, these are not backtested rules but just an example of my current handling of leverage in the context of the robot because I was asked and tried to help.
Billy

[Pierre Brodeur]

Again, these are not backtested rules but just an example of my current handling of leverage in the context of the robot because I was asked and tried to help.
Billy

First of all, thank you for answering my question given my past history. I am used to trading 2x leverage which are dangerous. This is the second time I trade 3x (the first was TZA) and those are VERY dangerous. It is known that you are an "expert" in trading these instruments and therefore your knowledge of managing the risk of that trade is invaluable to me and others, I am sure.

This explanation now makes it very clear to me. Thank you

[jerpk]

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.

Attachment 11690

The first retracement line is at 23.6% retracement and puts me on alert for potential stops triggering.

Again, these are not backtested rules but just an example of my current handling of leverage in the context of the robot because I was asked and tried to help.
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

[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

[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.