Long/short bias and when to shift your perspective

[u0362565]

Hi all,

As a solely long trader at the moment which in an uptrend as we see in many markets right now, it works.  However, one day retracements will become a reversal, meanwhile its not easy to know that in advance so you might still be blindly trading long when its actually turning into a downtrend.  The key thing for me would seem to be that you need to realise this as soon as possible and shift to short trading to avoid too many losses-easier said than done.  Anyone got any experience or advice on this?  The price moving below and not breaking above a long term moving average doesn't seem to be a bad indicator, lower lows etc but i'm just looking at past data.  If you've been so biased to long trading its kind of hard imagining switching to the other side.  I never wanted to have a strong bias to long or short but when i wasn't i struggled to make any profit although that was for day trading which i've given up on.

Thanks for any input

 

[THT]

"The Trend is your Friend, until the end" - but all the "experts" out there fail to tell you how to work out when it is over! (they don't know the answer to that)

You just need to devise some form of method that you're happy with here

Depends what you're trading - if its the SP500 Index then its natural bias will always be UPWARDS - due to the mechanics of what it represents and all that pension/Investment fund money sloshing about

If you have a long method that works - then it shouldn't constantly show up to trade during a down period, you might get caught out once or twice but we all do

 

 

[u0362565]

If we take the 2008 decline on the US500, I've attached a daily chart of this. You'd be better off shorting but of course you don't know that it's going to be an ongoing decline and the risk potentially is that you switch to a short preference and then the market does revert back to an upward trend. The market stayed below the 100 day MA for an extended time so maybe that's an indication of which way to trade but I know it's not always reliable. Probably also helps if you use a trailing stop at least to minimise damage.

[u0362565]

These are relatively rare events but I do find myself getting hung up on them. 

[THT]

You need to get hung up on them, because they happen - I know for a fact that during 2007-09 bear market you could have traded long and made money, because I did it, but the easiest route was shorting and down

Get a chart WEEKLY of any forex market or commodity - go back as far as poss and notice the big turns/swings - much more volatile than the SP500 - there's a reason for that 

I always say anyone who's making a packet from trading or Investing on SP500 etc go have a crack at the forex or commodity markets - the stock markets natural direction is UPWARDS - especially buy and holders, fund managers would get ripped apart on the forex + comm markets

OK - Its totally Impossible to know EXACTLY what the SP500 is going to do on a daily/weekly basis, but it WAS possible to know that a) 2007-09 was going to be a bear market before 2007 even arrived and b) that the market would stop around the level it did.  But this is ultra advanced and very few people are bothered about it

I've written a thread on Time Cycles on here - it covers what the SP500 is doing in terms of TIME - if you understand it and think about it, it will put you ahead of 99.99999% of traders out there, because these really big corrections and crashes do not happen out of the blue - they are predictable and forecastable with high reliability years in advance 

Look at the chart below - think about what I'm saying:

In 1909 WD Gann said that markets always seek their gravity centre, the half way point - that's the 50% level to you and I

Traders go on about fib levels - the 50% level is clearly much more important a level 

What if you KNEW 1974, 2003 and 2009 should be low points? What an opportunity both long and short!

This is why I researched and spent hundreds of hours on Time and Time Cycles for - I missed 2000-2009 because I didn't know what I know now, but I know when the next ones are and I have no plans of missing them

These are key once in a lifetime turn points that don't happen often

So what I'm trying to point out is that on the stock market the big plunges like 07-09 aren't the norm, but they do happen with very regular intervals, that will catch a lot of people out during certain cycles that the market moves through.

with regards to identifying bear markets - yes using a MA to say price below this level is bearish, but it's already bearish as it approaches the level if using price formations such as lower lows etc

You don't need to know what I've discovered about time to be able to trade successfully - I was just intrigued if it was possible to be able to time the really big turns etc as I'd prefer to to know if it was

 

 

[Caseynotes]

13 hours ago, u0362565 said:

If we take the 2008 decline on the US500, I've attached a daily chart of this. You'd be better off shorting but of course you don't know that it's going to be an ongoing decline and the risk potentially is that you switch to a short preference and then the market does revert back to an upward trend. The market stayed below the 100 day MA for an extended time so maybe that's an indication of which way to trade but I know it's not always reliable. Probably also helps if you use a trailing stop at least to minimise damage.

5 Best Trend Indicators That Tells You the Direction of the Trend (tradingwithrayner.com)

[u0362565]

Thanks both, with the time cycles i struggle to believe that these big events can be timed.  But if in history it shows that every x years something big happens then that's surely more than coincidence.  The problem i have with that is i don't understand why they would repeat like this-i know a lot of things repeat in markets! But with crashes i cannot see any logical reason why they would conform to this because aren't they triggered by unexpected world events and how can they be timed, perhaps its my lack of understanding of how the markets work.  Anyway its certainly interesting.

I often look at forex markets out of interest and i just can't see the patterns at all, they look all over the place to me but i have upward trends ingrained in my retinas so maybe no surprise!

Thanks for the article Caseynotes, some good general tips, nothing particularly groundbreaking there but does at least make you realise everyone is basically using the same tools and very few have higher levels of insight.

 

 

[u0362565]

Forgot to mention your 50% lines THT, i see what you mean shaving off 50% of the market value does seem to be common when there is a big dip.  Again don't see the sense why though but you can say that about a lot of things.  

[Caseynotes]

23 minutes ago, u0362565 said:

Thanks for the article Caseynotes, some good general tips, nothing particularly groundbreaking there but does at least make you realise everyone is basically using the same tools and very few have higher levels of insight.

Nothing new in basic principles since Dow, Wyckoff and Gann a hundred years ago. The key is not to find something new but to not make the 1001 potential mistakes.

Maybe correlations rather than patterns. Fundamental analysis for direction and targets but technical analysis for how price goes about getting there.

 

 

[THT]

21 minutes ago, u0362565 said:

Thanks both, with the time cycles i struggle to believe that these big events can be timed.  But if in history it shows that every x years something big happens then that's surely more than coincidence.  The problem i have with that is i don't understand why they would repeat like this-i know a lot of things repeat in markets! But with crashes i cannot see any logical reason why they would conform to this because aren't they triggered by unexpected world events and how can they be timed, perhaps its my lack of understanding of how the markets work.  Anyway its certainly interesting.

I often look at forex markets out of interest and i just can't see the patterns at all, they look all over the place to me but i have upward trends ingrained in my retinas so maybe no surprise!

Thanks for the article Caseynotes, some good general tips, nothing particularly groundbreaking there but does at least make you realise everyone is basically using the same tools and very few have higher levels of insight.

 

 

99.999% of people don't understand how the markets work, let alone the TC's, but they still manage to make money from so don't dismiss your knowledge - the markets are doing things most people haven't a clue about - I'm not prepared to divulge the cause nor the mathematical formula to work out the TC's, if I did you'd be able to see very clearly the repetition - I know exactly where you're coming from, I'm the most sceptical person you will ever meet  about the markets, so I know its hard to understand or believe

They repeat because humans buying and selling still make the same decisions now as they did hundreds of years ago - human behaviour is very predictable, even in different economic times

There's always a reason attached to plunges so the media and fund management world can say this caused X but they never tell you in advance - I've published elsewhere in advance the dates so to dispel anyone challenging I did it after the event 

Forex - EXACTLY - they are highly erratic - they work to different Time cycles than the stock market, which is why they act differently - but the overall laws of the market regarding swings, price action etc still apply and can be exploited to our advantage

The 50% is the balance point - the laws of physics apply here - markets respect a lot of the laws of physics and mathematics in certain ways, which is why the TC's work etc

It happens on all time-frames - If the market is abiding by the laws of physics for an up trend then if price crashes down through the 50% level of the prev range/swing then it should revert back up through that level purely down to the laws of motion and physics 

 

 

[u0362565]

Thanks again for your comments