Timing Market Turns

Market Timing Comment - 02/10/2006

At Elite Trader, I answered this question from a reader. I hope it offers some insight into how traders trade and how investors should mimic the same discipline, but in a different timeframe, of course.


--------------------------------------------------------------------------------
Quote from fader:

hi W.B.! - hope you are well and thanks for continuing to update the journal here - i'd be very interested if you could highlight a couple of points behind your rationale to re-enter long on Wednesday open (Feb 8) ? - it was a great entry by all means, although i am agreeing with you that the overall structure is looking a bit hectic at this time - thanks and all the best.
--------------------------------------------------------------------------------



fader,

Unfortunately, sometimes we enter at time loci that catch the momentum low and not the price low and vice versa. This can be costly if commissions are added to small losses when stops are hit. In the current deregulated brokerage industry, round trips are a negligible expense.

Also, the structure was allowable from the high to allow a completed look ot the internal structure. So, if we have price, acceptable structure and volume patterns corroborating at a time locus, then it's time to go and enter.

Re-entry was simply a matter of still being right about the trade and sticking with our discipline which centered around using the SPX stop to exit all of the swing position.

A look at the OEX, Dow, and NYA might have kept us in the trade, but that was not our plan. The SPX pullback intraday to nearly 100% was enough to shake out even strong hands - unless you noticed the smallish gap that it covered.

Sometimes gaps matter soon and other times they don't matter at all.

I'm still trying to 'learn' this blog medium. It can't be that hard! Lots of people displaying shallow thoughts have figured it out! :) I'm confident I will too.

Good Trading and God bless

W. B. Busin