Ebb & Flow Management II

BarroMetrics Views: Ebb & Flow Management II

Last night in the S&P provided an great example of what I was referring to in my previous blog.

I was looking for the S&P to hit a minimum target at 1037 to 1019 with a preferred target at 1019 to 1025. This meant that as far as Maximum Extension (1220 to 1044 range), we’d see penetration but non-acceptance below it. I had been short from 1156 and my normal practise is to exit the second third of my position size within the Primary Buy Zone, and hold the last third with a breakeven stop.

On  Tuesday May 25, the S&P had given a buy signal off my favourite setup: the S&P dipped below the previous low, 1044 and ended the day with a bullish conviction bar; the sell-off on Wednesday, May 26, held above the Primary Buy Zone, with the Market Delta showing only light selling control. Usually, I’d have closed my shorts and taken a light long position. Then yesterday on the open-gap up, I’d have used the open-gap rule to add to my longs.

But here’s the point. My Psyche Capital was so shot that I had failed to notice the Buy Signal and frankly would not have closed until the end of trading yesterday. Exiting on May 25 or 26, would have meant exiting at around 1136 to 1137; exiting on May 27, would have seen an exit at 1103. That’s quite a difference.

I'[d love to say my exit on May 25 was due to the fact that I saw the buy. But truth be told, I had exited in ‘night’ session when I decided I had enough trading. And truth be told, there would have been a good chance that I’d have missed the buy signal and held on too long.

I couldn’t have asked for a better illustration of my point.

So what now the S&P? Back to the Primary Sell Zone  1199 to 1183 (basis cash). Of course we’ll need to watch the Death Zone at 1153 to 1132.

28-5-2010-8-14-10-pm-13w.jpg

FIGURE 1  13w S&P

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FIGURE 2 18-day S&P

3 thoughts on “Ebb & Flow Management II”

  1. Hi Ray, with the Ebb & Flow Management,have you noticed any correlation with the full moon? Ive read that crime increases.Maybe it can affect our trading decisions too. cheers Baz

  2. it is an excelent display of how a descretive swing trader perform in his psychology up and down rather than guided by the profitability of the trade itself.

    as a long term trend follower, i have to more often weather the up and down, especially during the draw down period of my equity movement.

    certainly it is not the best time i should be in.

    however i do share the joy of yours as it is undoubfuly that my time will come.

  3. oh and this being one of the hardest thing to learn in trading, as i’m still in the process of learning, the psychology up and down couple with the equity and has the discipline to stick to the plan that you know is correct.

    your example also shows that, if one is afraid to open the door in front of you, you’ll never know what is the opportunities lies on the other side.

    great staff.

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