Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
Slopefest is Happening! Yes, after all this time, it's your opportunity to meet face-to-face with your favorite fellow Slopers. We'll be gathering for a fun, lively dinner at the Sugarcane Lounge at the Venetian (Las Vegas) on the evening of Monday, May 10th from 6 p.m. to 10 p.m. This coincides with the Money Show, which runs from May 10-13.
The cost to attend SlopeFest is $195 per person, which is to cover food, drinks, and other surprises. You can sign up here to reserve your spot today.
There is a frequently used quote in orthopedics that highlights a
very important general concept, “The enemy of a good result is the pursuit of a
better one.” Those few extra tweaks and
adjustments at the tail end of a successful knee replacement operation could
prove counterproductive, and just might result in the entire procedure failing.
Have you ever found thoughts such as these running through
your brain?
“I sold my position for a three-point gain, and naturally it
shot up another two. I must figure out
how to capture the remaining move from now on.
That’s $2000 in profit I left on the table!”
“My trading account rose 40% last year, but Trader X made
$125%. My goal next year is to beat him.”
“My trading has been so spot-on lately I’m going to use options
instead of stocks to juice up the return.”
“This trade is going exactly how I envisioned, and I’m up
15%! My target is now 2% away; too bad
the trading day is about to end… I think
I’ll hold this overnight. “
On a similar note, a concept called the Nirvana Fallacy is often observed in
trading circles. This line of thinking
is present on other blogs, but certainly not on the Slope!
“The Nirvana fallacy is the logical error of comparing
actual things with unrealistic, idealized alternatives. It can also refer to the tendency to assume
that there is a perfect solution to a particular problem. By creating a false dichotomy that presents
one choice which is obviously advantageous – while at the same time being
utterly implausible – a person using the nirvana fallacy can attack any
opposing idea because it is imperfect.”
We all deal with flawed systems. We all screw up, bite the bullet, screw the
pooch, and get taken to the cleaners periodically. We all have great trades, feel like a champ,
and perform admirably in stretches. The only difference between us is the magnitude
and frequency of our victories and failures.
Beware of pie in the sky statements from others, especially if they are selling something or pushing an agenda.
Happy trading, everyone!
As many good traders know, it is important to view a potential swing or
position trade on various time-frames. Say for example you're trading
daily charts. It's worth your time to look at the weekly charts for more
languid price patterns that may offer tradeable psychological break
points. Or if you're swing trading 60-minute charts, looking at the
dailies for possible nearby support and resistance or Fibonacci levels
would be helpful for stop loss placement so you don't get whacked.
It
can be equally helpful to view markets through different types of
charts. You don't want to over analyze the markets (paralysis by
analysis), but what you don't see with a chart filled with high, low,
open, close, time and volume data you might see if you eliminate a few
of those factors.
(Click on images to make larger)
Renko
charts are a Japanese style of charting that focuses solely on price
moment while ignoring the passage of time and volume. They fall into the
same category as Point and Figure, Kagi and Three Line Break charts.
Renko charts have been around for quite awhile, but only gained traction
as a charting style in Western stock markets after being introduced by
Steve Nison through his book Beyond Candlesticks. As with the other
charting styles listed above, Renko charts are a trading system and
charting style all in one.
How Renko charts are constructed is
actually quite simple. From a StockCharts.com article:
Renko
charts have a pre-determined "Brick Size" that is used to determine
when new bricks are added to the chart. If prices move more than the
Brick Size above the top (or below thebottom) of the last brick on the
chart, a new brick is added in the next chart column. Hollow bricks are
added if prices are rising. Black
bricks are added if prices are
falling. Only one type of brick can be added per time period. Bricks are
always with their corners and no more than one brick may occupy each
chart column.
By ignoring the passage of
time and volume data, Renko charts can effectively filter out noisy
markets giving you a cleaner look at support and resistance levels,
potential bottoming and topping patters and prevailing trends. By
nature, they are trending charts just the same way Point & Figure,
Three Line Break and Kagi charts are and thus, make excellent charts of
filtering market noise.
Filtering
Noise
Renko charts are completely trade worthy in
themselves, but I find many traders are uncomfortable (re:wussies)
trading without time and volume data. In that case, Renko charts can be
used as a way to filter minor market noise. Let's take a look at a
60-minute Renko chart of the Biotech ETF (IBB).
The first thing you'll notice
with this chart as well as the other two examples is just how clean the
charts are. Price is your primary focus and it's right up front. Renko
charts force you to keep your analysis simple.
You can clearly
see the trends, the support & resistance levels and key reversal
points. Once (IBB) was able to clear the descending overhead resistance
around 85.50, the trend took hold for a good 5 to 8 bucks before a
significant pullback into consolidation which is taking on the
appearance of a large descending triangle in a strong uptrend.
How
is this useful to your trading? By stripping out some of the sideways
chop, Renko charts simply focus you on levels that become obvious
psychological points of contention within the market. This gives you an
advantage for placing stop losses or spying breakout/down areas. With
Renko charts you're able to draw out cleaner, more visible support &
resistance levels that give you an edge over other traders who might
not see them through the clutter of bar or candlestick charts.
There's
no guess work involved when using Renko charts as you're not concerned
with the minor price fluctuations…just the results of price follow
through and resolution.
Would I use the Renko chart of (IBB) on
it's own? Not in this example, no. I'd trade off it if that's where the
trade began, but that's another blog post entirely.
I would,
however, use this as one type of view of (IBB) if I were already swing
trading it off time-based bar or candlestick charts. Because Renko
charts lack visible evidence of gaps, and some gaps are important bits
of information, in this form, a Renko chart is just one part of the
nightly analysis.
I didn't hit on every aspect of Renko charting
and didn't get into trading with Renko charts, so if you have an further
questions, hit me up in the comment section. Good luck and good
trading. Cheers.
Jack Damn
=^.^=
My Dad (jerk or not) was right about messing around with penny stocks, just look at CPE on Tuesday (even though it hit over $8, I still consider it a penny stock). I wish he would have taught me about risk management before he left. I had to learn that on my own, and it was expensive.
CPE started out today another 9-10% up then quickly dropped 30%, punishing those who went long this morning and the past couple of days. Now again; I don't really fool around with penny stocks much. If I have a $10,000 trading account (I'm no millionaire like lots of folks here), I would never use more than one tenth of it on these types of stocks. So I might take $1000 and split it up into 3 or 4 different positions.
Before buying any, I would make sure they are in some sort of recognizable pattern, look for a good entry and realize that all of these could drop drastically. Emotionally, I prepare myself that these could all end up worthless so if they do have a huge drop, I will not panic and sell right away. I measure my risk before I buy, and am ready to lose whatever I risk before I buy. I also don't set stops initially since they could go down 10-20% or more then up 10-20% in a matter of minutes, and I never double down or add to a loser.
CPE worked out well, I bought 178 shares @ 1.40 = $249. I was able to sell half of the original position at $4.00 x 89 = $356. I am already in the green even if my remaining shares plummet; I see them as free shares now since I made my money back and then some. I did set stops after I sold half though, they are very loose since this is "buy and hold" for me, and they were not hit with today’s crazy price action (another day like today and they probably will be though). If my stops are soon hit, I will still pocket close to another $512. Gaining a total of $356 – (249 (original investment)) + 512 = $619.
Even if my two or three other risky penny stock positions end up worthless; this one will almost cover all of them. If the other two work out well, I might be able to purchase my Fiero. I saw several nice ones for sale in New Jersey. I will then be able to drive it out to Vegas for slopefest. You can call me "The Fiero Guy", and I will take you all out for personal tours in my new ride.
Leisa, you can have the first ride!
Editor's note: I will be looking for you to pull up in this one
Thanks to all who sent entries into the SPX Contest (http://slopeofhope.com/2010/03/spx-guessing-contest-and-slopefest.html). Also, thanks to Market Sniper and Biff for providing the prizes. So, I tried to think of something creative I could do with all of the entry data. But all I could come up with is a lame histogram. You can say more about data that has already occurred but you can only gather so much from a data series of educated guesses.
The day the contest entries closed, March 31, SPX closed at 1169. The mass of the entries is in the 1100-1150 range. Our guesses were, in general, below the close on March 31. Perhaps this is collectively our own bias showing up?
The mean of the entries is 1124 with a standard deviation of 72. The shape is, in general, a bell-curve shape. Assuming a normal, or Gaussian, distribution, this means that about 68% of entries were within 72 points of the mean. The entries aren't necessarily a normal distribution … a Weibull distribution may fit the data better. We can try to fit all kinds of distributions, but we can't gather much more information from doing that. What would be interesting to see is a volume profile of SPX from April 1 – May 7 (day after all of the entries closed until the contest date). Would be interesting to see how well the actual volume profile matches up to the histogram of the entries. Right now, all we'd have is some volume traded in the 1170-1200 (oh, so close on Monday!) range.
