Buyers In Control - December 2, 2011

[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.