Archive for December, 2007
Monday, December 17th, 2007
The Rule of 3
I use the Rule of 3 to smooth out my equity curve and to pyramid safely.
In this post, I’ll explain the first use. It’s important to understand that the Rule of 3 will reduce my bottom line in strongly trending markets. But in markets such as I have been trading recently, it prevents heavy losses […]
1 Comment » - Posted in Written Plan by ray
Friday, December 14th, 2007
Exit Strategies
A little early today. With CPI due out and the volatility up, I may not get a chance later.
Today I want to talk about exit strategies. Now every newbie will tell you (he may not do it, but you can bet, he’s heard it) that every entry needs to be accompanied by a stop loss. […]
2 Comments » - Posted in Written Plan by ray
Thursday, December 13th, 2007
Trading and Making Money
Two trades in Crude Oil illustrate my approach to making money in the trading game. If there is a Holy Grail in trading, it’s reflected in the formula:
(Avg$Win x WinRate) - (Avg$Loss x Loss Rate) = > $0
In other words, what is important ( taking the win rate into consideration) is for our $ win […]
2 Comments » - Posted in Written Plan, Money Management by ray
Wednesday, December 12th, 2007
Reviewing Decisions
My assessment last night on what the FED was likely to do was off the mark. I assessed a 67% probability that it would cut the Fed Fund Rate by .25 and the Discount Rate by .50. Instead it cut both by .25.
I always do a post analysis assessment especially if it proves off the […]
2 Comments » - Posted in Psychology by ray
Tuesday, December 11th, 2007
FOMC Rate Decision
There are two services I subscribe to that I find invaluable for the assessment of fundamental data:
Shadow Stats: www.shadowstats.com
ECRI Light: www.businesscycle.com
Shadow Stats provides an alternative data source to official US statistics and ECRI Light provides reliable leading indicators on the state of the US economic growth and inflation. The two together provide data on […]
4 Comments » - Posted in Miscellaneous by ray
Monday, December 10th, 2007
Zones in a Sideways Market
In “Negative development As A Setup”, I attached the chart in Figure 1.
FIGURE 1 S&P Zones in a Sideways Market
I have been asked to explain how I use them and how they are calculated. So here it is.
Zones 1,2, and 3 in Figure 1 represent 1st, 2nd and 3rd standard deviations of the boundaries of […]
7 Comments » - Posted in Written Plan by ray
Friday, December 7th, 2007
Preparing for Figures in the S&Ps
Non-Farm payrolls tonight. The forecast range is +110,000 to - 10,000 and the mean is around 85,000.00. The mean was around 65,000 to 70,000 until the ADP employment number last night. With that coming in at 189,000 (against the expected 50,000), the expectations have edged up.
In this post, I’d like to show the process by […]