The market is hovering at the resistance with a lot of noise recently. This is when I do not hold my trades too long. I rather prefer to take my money when I have it and trade the pullbacks to get back, and so on…
Have you heard the expression: “feeding the ducks”?
When a trader makes his money on a good trade, he waits for a moment to sell. What is the best time to do that? – When the crowd wants to buy.
Last Friday I was finishing some of my trades from earlier last week and also from previous weeks.
Let’s look at my exits from IWM. I had multiple entries. I mentioned previously that I consider every entry of the same ETF as a separate trade.
My goal is to never have a loosing trade. This is why I use very rigid size control to manage risk and hold the trade when at least I can get out even if the market is shaky.
I had 3 separate entries. First was from February 22nd at $81.95, second from March 10th at $80.49 and third from March 23rd at $80.53. All of them were entered using my favorite 10 day hourly setup (see my other blogs).
Look at the IWM daily chart to see that it was trading above $77 support. These trades are designed to take advantage of the short term dynamics of the market but still keep in mind the mid term support and resistance levels.
I started exiting these trades on March 22nd.
Market opened with a gap up on March 21st and went through the upper BB on the 10 day hourly chart.
I noticed that MACD went up fast and reached the high level, CCI was going down all day. On the daily chart MACD was about to cross above the zero line. I decided to exit one of my trades the next day, either at the strong open or at any push up later during the day. One of the trades would be already profitable. Daily chart was looking like pressing against the resistance.
What does it mean for me = I am ready to “start feeding the ducks” (aka selling my stuff to the other traders at profit).
And this is what exactly happened: IWM opened strong on March 23rd. I exited one of my trades at $81.48 (the entry at $80.49). There is a high probability that after getting above the upper BB the stock/ETF will retrace back. The CCI was sloping down and MACD was also sloping down with the histogram ready to cross below the zero line.
My second exit was March 23rd at $81.07 from the entry made earlier the same day at $80.53. And the third exit was on March 25th at $83.03 from the entry made at $81.95.
Let’s look closer at the last exit.
The daily chart shows that IWM is close to resistance of $84. IWM opened strong but it pulled back quickly in first 10 minutes – we may get some action!
My target was to exit this last trade at the best price during that day. I was watching the intraday chart to guide me. The candles reversed nicely at EMA(10) support at 9:45 am. Then it nicely marched in formations of flags until about 11am. Look at the long candle formed on the hourly chart, with good volume. IWM pushed above upper BB on the 10 day hourly chart to $82.82. It may still push a bit higher…
But notice what was happening to the MACD and CCI on the intraday 5 minutes chart: they both peaked and were slowing down. TRIN was neutral around 1. I also watch VIX for intraday trades. I will explain how I use VIX in a future blog.
I exited at 11:50 at $83.03 – MACD and CCI on intraday chart were slowing, and MACD and CCI on 10 day hourly chart were at high ranges ready to slow down. VIX was at the low for the day. For me this is the combination to take my profit.
Eva
Thanks for your weekly blog! It makes for very interesting read. My question is why did you buy on Feb.22 and Mar.10? MACD in the daily chart looks ugly. It formed a negative divergence starting in Dec/10 and crossed below its signal line about Feb.22-23 in a long decline. Wouldn’t the risk/reward be much better waiting till Mar.15-16 before buying. Then you can sit back and enjoy the two-week rise to present.
The problem is that I can’t see the future when I trade – would that be nice if I could? I follow rules and stay consistent when I trade. For me this is the only way that works over time. Every trader will have wonderful wins at times, but only consistency really counts. When you look at the daily chart on Feb 22nd IWM pulled back to nice support ready to test SMA(20) – this is when I like to enter if my 10 day hourly setup is there at the time. I like to be ahead of the game, close to support. March 10th, similar setup: on daily IWM close to support and ready to test SMA(50). MACD is dynamic and you can’t tell where it would turn. As you mentioned it crossed Feb 22nd/23rd, but how would you know it would have crossed? I would not. 50% of the time it would turn back up with successful test of SMA(20).
Please notice that in a market so close to resistance I trade based on 10 day hourly charts and use daily charts to manage risk,
Eva
Yes, hindsight is 20/20! I am a novice and it’s great to peer into a trader’s mind. MACD on the daily chart did cross below its signal line on Feb.23 and progressed downwards. Knowing that, why did you not sell the Feb.22/$81.95 on Mar.3 when it went as high as $82.85? I know you made slightly more at $83.03 but it was 22 days later and at higher risk, was it not? Also, to trade like you do seems like a full-time job. Are you watching the charts every hour when the markets are open 5 days a week? Thanks for your response.
Yes, I am a full time trader. However I do not sit in the front of the computer all day. Once I enter a new trade I set a sell order at my target price. Then if I can’t monitor the market during the day and the price is hit – I sell. On days when I can sit at the computer, I monitor and place sell orders with more flexibility. When I entered the trade on Feb 22nd I placed a sell order “Good till Cancelled” at $83.03, which was a penny lower than low of the candle from Feb 18th. On March 3rd IWM traded as high as $83.02 so my order didn’t fill. On March 25th I was at my computer all day, took the order off and just “day traded” the exit. What is really humorous about this trade: I exited it exactly at my initial “sell” order at $83.03, anyway.
Was that trade more risky? Not really, when I follow my risk management with sizes and setups.
Please, remember that what I write is NOT the recommendation on how to trade. I write to share what trades I make and what works for me. However there is no guarantee it will work all the time. This is why I always have an exit plan.
Eva
Dear Eva,
I’ve recently started to trade Fidelity ETFs (for free…!!!) sometimes on a daily basis, more often weekly, by simply putting in a limit buy order LOWER than the current price, and, when filled, putting in a limit sell order for a small profit. I’ve had decent luck just catching the range between highs and lows a few times, although much to my dismay, I’ve missed buying or selling sometimes by ONLY 1 point…!!! Do you happen to know WHY IWM consistently has the HIGHEST trading volume, EVERY DAY..?? What is it about this ETF that is different than, say, IWD or IWF, or any of the other ETFs available through Fidelity..?? Thank you very much.
Butch, sorry I don’t know why IWM has higher volume. The main reason that comes to my mind is that it is just traded more often. Because I am not really investing long term – I am trading them, I just look for volume = liquidity plus reliability of patterns. ETFs are not al trading in the same way. I just choose one or two to focus on.
Eva