On my One-A-Day hotline and faxout, I try to prescribe a trade, in advance, that can be executed as prescribed. One of the challenges with the increased volatility, has been to adjust our prescriptions to match the current conditions. Additionally, we have been learning how to better use the MoonTides. Research has given us a formula for the MoonTide shift, which seems to be working.
To cope with the increased volatility, we have switched our Trail In-Trail out technique from a fixed point amount, to a swing method. This worked great on September 2nd, 1998.
This is the faxout sent to clients the evening of September 1st. It has a two day view of the market, with the MoonTide forecast for the next day. The One-A-Day prescription said to look for a high, a low, a high, and to sell a late drop.
To execute the trade, one has to be able to recognize a "swing." I use colored one minute candlesticks to find the swings. They are white going up, red coming down, and normally 10 to 20 minutes. Normally, 7 of these swings form a larger move, of 2 to 4 hours duration. It is these longer moves the MoonTides forecast.
With practice, seeing the swings is easy. They tell you where you can put your stops.
The first High came in at A, right on time. Then a low came in at B, close to the forecast time. Then the rally to a new high came from B to C. Note the 7 swings in this Chaos Clamshell. At 1:08, the market made a swing low at 1010. That was the time to put in the sell stop at 1008. It was hit just before 2:00.
That required a protective stop, placed above the swing high before the sell. The green line that stairsteps down is the trailing protective stop. As new lows are made, the stop can be moved down to just above each swing high.
This technique works on breakaway moves. It will bite you in a congestion. But if the market dows not break, you want to be out.
The trade worked nicely. The late drop forecast by the MoonTides came right on time, letting us CASH IN ON CHAOS at E at 989, for a nice 19 point ( $4750 before commissions) gain. Not a bad day for anyone!