Procrastination, Perfection, and the Plunge
Okay, so it's been a while since I posted here. In my quest to lessen procrastination I found that this project was yet another way for me to procrastinate. Why do the dishes / laundry / clean the bathroom, when I have so much to learn about Trading? So this project took a hiatus while I struggled to get things under control. The struggle isn't quite over but I'm at the point where it's equally important to make time for the (worthwhile) things I want to do. You'll also note a few procrastination related books in the book corner, I highly recommend them if you to are struggling with that particular imp.
One of the other insights my end-of-procrastination quest has lead me to is I'm a little bit of a perfectionist. More accurately, I wish things were perfect, and if they're not I avoid them. How does this relate to trading? Well looking and learning at the 'middle' of the chart is one thing, but things get "murky at the hard right edge" to paraphrase Dr. Elder. Since I can't see a 'perfect' trade I'm reluctant to pull the trigger. One suggested solution is to paper trade until you gain confidence. The problem with that is, with no penalties mistakes have less meaning. It doesn't hurt to loose paper money, it really hurts to watch your account dwindle. Since perfection isn't realistically atainable, I'll have to make do with what I got. And so ....
On the left you'll see the "Tide view"" for AT&T (click to enlarge). This is the weekly price data for the past year. My handily drawn yellow lines (the ones with arrow heads) show the increase in price and upward slope of the EMA's in the top price chart. Prices are well above the 26-week EMA (orange), and are near the upper price channel (teal). The strong positive MACD histogram tends to confirm the strength of the bulls in pushing prices even higher, however, the slope of the MACD histogram is starting to head downwards (as indicated by my yellow line). Combined with the steadily decreasing volume as prices drift upwards (more noticeable in the Force Index which accounts for both volume and price change), this may mean the recent bull trend is coming to a close. Even if this is a simple retracement, with prices temporarily returning to the 22-week EMA (as seen during March and April) there is still money to be made on the short side.
On the right you'll see the "Wave view" of AT&T. This is the daily price over the past three months. Again there is a general increase in prices, along with an upward sloping EMA. The big change is the bearish divergence in the MACD and (2-day) Force Index. The decreasing "tops" of the MACD and Force Index, while price plots increasing "tops" suggests an end to the bull trend. Further the Stochastics shows that just a few days ago AT&T was "oversold". It looks like there is money to be made on the short side.
So what am I going to do about it? Well I'm going to place a Stop Market order to sell short at $31.16, which is 0.13 points below the previous closing. The Stop Market order will trip if the price falls to $31.16 or below. I'll go one further and use a feature of MBTrading to hold the execution until a certain time, after the opening madness. The price channel is roughly 5 points wide, I'm looking for at least 0.5 points of movement (in my favor). If my stop order is filled, I'll set a trailing stop 1 point above my purchase price to stay within my 2% Rule.
WHOOOPS! "Cash accounts may not short" says MBT. I'll have to find the paperwork for a Margin Account. I'm too tired now, hopefully I can resolve this soon.
One of the other insights my end-of-procrastination quest has lead me to is I'm a little bit of a perfectionist. More accurately, I wish things were perfect, and if they're not I avoid them. How does this relate to trading? Well looking and learning at the 'middle' of the chart is one thing, but things get "murky at the hard right edge" to paraphrase Dr. Elder. Since I can't see a 'perfect' trade I'm reluctant to pull the trigger. One suggested solution is to paper trade until you gain confidence. The problem with that is, with no penalties mistakes have less meaning. It doesn't hurt to loose paper money, it really hurts to watch your account dwindle. Since perfection isn't realistically atainable, I'll have to make do with what I got. And so ....
On the left you'll see the "Tide view"" for AT&T (click to enlarge). This is the weekly price data for the past year. My handily drawn yellow lines (the ones with arrow heads) show the increase in price and upward slope of the EMA's in the top price chart. Prices are well above the 26-week EMA (orange), and are near the upper price channel (teal). The strong positive MACD histogram tends to confirm the strength of the bulls in pushing prices even higher, however, the slope of the MACD histogram is starting to head downwards (as indicated by my yellow line). Combined with the steadily decreasing volume as prices drift upwards (more noticeable in the Force Index which accounts for both volume and price change), this may mean the recent bull trend is coming to a close. Even if this is a simple retracement, with prices temporarily returning to the 22-week EMA (as seen during March and April) there is still money to be made on the short side.
On the right you'll see the "Wave view" of AT&T. This is the daily price over the past three months. Again there is a general increase in prices, along with an upward sloping EMA. The big change is the bearish divergence in the MACD and (2-day) Force Index. The decreasing "tops" of the MACD and Force Index, while price plots increasing "tops" suggests an end to the bull trend. Further the Stochastics shows that just a few days ago AT&T was "oversold". It looks like there is money to be made on the short side.So what am I going to do about it? Well I'm going to place a Stop Market order to sell short at $31.16, which is 0.13 points below the previous closing. The Stop Market order will trip if the price falls to $31.16 or below. I'll go one further and use a feature of MBTrading to hold the execution until a certain time, after the opening madness. The price channel is roughly 5 points wide, I'm looking for at least 0.5 points of movement (in my favor). If my stop order is filled, I'll set a trailing stop 1 point above my purchase price to stay within my 2% Rule.
WHOOOPS! "Cash accounts may not short" says MBT. I'll have to find the paperwork for a Margin Account. I'm too tired now, hopefully I can resolve this soon.
Current Trades
What is it? BlahBlah
Ticker: XXXX
Cost: $X.XX
Value: $X.XX
Exit Point: $X.XX
Current Balance: $5,000.00
Current Value: $5,000.00
Highest Value: $5,000.00
Lowest Value: $5,000.00
Highest Drawdown: 0%
posted by Jeremy at 9:45 PM
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