Friday, February 8, 2008

Whipsaw Continued

Following the VLA Sysyem, we exited the long position from 45.58 at 42.35 for a loss of 7.1%. Ouch! However, for those able to do so waiting for the early morning low and placing a stop around 42.05 would have allowed you to stay in the position with the chance that it will reverse again and go long or allow for an exit with a lesser loss.

Following the system one would have entered short at 42.35 at the open.

Again, this kind of action is what keeps most traders from following a system. However, the discipline to take losses is what leads to future profits.

I am truly amazed at the amount of excellent material that is available in trading blogs. I can only hope that with experience I will be able to produce that level of work. However, I am also committed to keeping the commentary to a minimum while simply providing trading methods information. Much market commentary is just opinion and confuses the view of things.

Currently, Elliott Wave International is calling for wave 3 of (3) down. If this happens, we will necessarily be short per the systems given. If it doesn't, we won't be holding onto our shorts all the way back to the top waiting for the market to go down to prove us right. It's fine to offer the possibility to give one a framework of potentialities for market movement, but trading should be based on the price action itself. What the understanding of potential outcomes can do is temper one's appetite for risk, i.e. don't bet the farm on a long signal when there is a crash potential.

Relax and follow the trend.

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