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 […]

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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. […]

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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 […]

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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 […]

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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 […]

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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 […]

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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 […]

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For me, the two critical elements for entry are:

What is the trend? Is it likely to continue or change? This gives me my strategy i.e. it tells me if I am to be a buyer or seller.
Is the market in a zone where I want to take the trade? Unless there is a zone, I […]

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One of the questions I am often asked is whether I am a fundamental or technical trader.
I see myself as a discretionary technical trader, at least so far as entry and exit is concerned.
By discretionary I mean although I have a set of rules, one of my rules says I don’t have to follow to […]

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I had taken the view that the US Stock Market would continue rising because the economy was awash with liquidity. I argued that since housing prices in the US had entered a bear phase, the only home for the surplus funds was stock market. I had further postulated that the bear market in US stocks […]

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