BPA trading room Q&A: November 20, 2015
Any advice for a swing trader who wants to stay with the Always In direction until the Always In clearly changes how they do this today?
Video duration: 4min 24sec
Video transcript—Swing traders staying Always In
Two ways to handle Always In
Yeah, I just talked about Always In. In general, there are two ways to handle Always In. You take every logical reversal or you only take the really strong reversals, so you can either buy above 1 or buy the 2 close. I think the bulls get out below 11. Some bears short below 11, other bears wait and they short either below 24 or maybe the 28 close. That’s getting pretty late.
And 34 is really not a major reversal. 52 is not a major reversal. 68 is, I think, an interesting reversal. I thought the odds were 66, 67, exhaustion gap and that we’d get up above 66, and probably back up to the open, to the high of last week. So theoretically, the bears either sell below 11 or they get short somewhere through here, and the bulls never really had a strong buy. So theoretically the bears stay short and they keep trailing stops above most recent lower highs here then here, and then here, and then they get out above 68 where they reversed to long.
Don’t choose the in-between road
I think that’s an okay way to do it. I’m sitting here all day long watching every tick, so to me I’d take more frequent reversals and just go to accumulate all those little moves that I was talking about. But there’s really no easy way. The worst thing to do is be in-between, right? You always hear that if you hang out in the middle of the road, you get killed. And with trading, if you’re choosing between frequent reversals and very few reversals — sell below 11, buy back below 68 — and instead, you choose something in between the two extremes, you’re almost certainly going to lose money. So either you take all the reversals: selling below 11, buying above 34, maybe going flat above 19 — right? — buying above 52, selling below 64. Either you’re taking all of those or you’re using the wide stops. If you’re trying to do something in between, you’re going to lose money. So in other words, you sell below 11 and then you think 16’s bad so you buy back above 16, and then you wait to sell until you’re down here, 29, and you say, “Uh-oh, 24, I’ll get out below 24.” Then you wait to sell until 49 or 50, and then you buy above 52. If you keep waiting and entering late, and then giving a lot of room but not fully the amount of room that you should, and you exit your shorts late and you buy late, then you’ll be buying high and selling low to get in and get out of trades and you’ll lose money.
Question follow up same session
Q: I entered short on bar 50 at 2085 with a stop above 48. [Okay, that’s okay.] When I saw the four bull bars, I exited while 55 was forming. Can you comment on the trade management?
Yeah, so we short down here. This is exactly what I was talking about. So he sold 50. I was talking about selling 51. I pay attention to the low closes. That lowest close of the day, the highest close of the day, the lowest close of a bear breakout, the highest close of a bull breakout. And then I watch what happens over the next few bars and it gives me an indication of what to expect. If you sold the 50 close for a swing, I think you might get out above 52 — I would not get out 56. That’s in the middle of the 48-50 bear breakout so, to me, that’s a sell zone. So if you did not get out above 52, I think you hold with your stop above 48 and you just wait to see what happens. That’s another example of the skunk in the middle of the road; you either get out above 52 or you get out above 48 and not anything else. Those are the two choices, and if you choose somewhere in between it’s just asking for trouble. Buying back a short somewhere in here, this is where bears are selling — a pullback to the middle of the bear leg, so that’s a sell zone, not a buy zone.
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