Using Market Bias for Short Term Trading!
I
am always researching and looking for better and easier ways to profitably
trade the markets. Trade Bias, which is
a consensus of all of the Market Bias Indicators, is the most reliable market
forecasting tool that I have ever seen and has been and continues to be the
cornerstone of my market research!
There are five Market Bias
indicators that are based on various stock scans. Trade Bias is the composite of all of five Market
Bias Indicators. When they are all
POSITIVE, the “Trade Bias” is POSITIVE, when all are NEGATIVE, the “Trade Bias”
is NEGATIVE and when all of the Market Bias Indicators DO NOT agree the Trade
Bias is 0 (zero) and if the S&P Bias is 0 (zero), the Trade Bias is 3 if
the Mortgage Index is Positive or 4 if the Mortgage Index is Negative! If only one of the Market Bias Indicators has
the same number of Positive and Negative results, the Trade Bias is the
direction of the other Market Bias Indicators.
Depending upon the opening gap, the Trade Bias and the Mortgage Index,
there are several possible different market positions. These are described as follows:
In ALL CASES, if the
Mortgage Index is 53 or over, either Positive or Negative; the Mortgage Index
is OPPOSITE what the current readings show and should be used in this
manner. Adjust the Mortgage Index based
upon this, ALWAYS!
Trade Bias POSITIVE:
1.
If the opening gap is UP over 15¢,
but less than 30¢, the position is LONG.
2.
If the opening gap is UP over 30¢
and the Mortgage Index is Negative, the position is SHORT. If the Mortgage Index is Positive, the
position is Long.
3.
If the opening gap is DOWN over 15¢
and the Mortgage Index is Positive, the position is LONG. If the Mortgage Index is Negative, the
position is Short.
4.
If the opening gap is 0 or UP LESS
THAN 15¢ and the Mortgage Index is Negative, the position is SHORT. If Mortgage Index is Positive the position is
Long.
5.
If the opening gap is DOWN LESS THAN
15¢, the position is SHORT.
Trade Bias NEGATIVE:
1.
If the opening gap is DOWN over 15¢,
but less than 30¢, the position is SHORT.
2.
If the opening gap is DOWN over 30¢
and the Mortgage Index is Negative, the position is SHORT. If the Mortgage Index is Positive, the
position is Long.
3.
If the opening gap is UP over 15¢
and the Mortgage Index is Negative, the position is SHORT. If Mortgage Index is Positive the position is
Long.
4.
If the opening gap is 0 or UP LESS
THAN 15¢ and the Mortgage Index is Negative, the position is SHORT. If Mortgage Index is Positive the position is
Long.
5.
If the opening gap is DOWN LESS THAN
15¢, the position is LONG.
Trade Bias is 0 (zero) or
S&P 0 (zero): These are the hardest
to trade for profitable results so use the following:
1.
A Gap up over 30 cents and Mortgage
Index is Negative is a Sell.
2.
A Gap up over 30 cents and Mortgage
Index is Positive is a Buy.
3.
A Gap up 35 cents or more is a Buy,
use a 15¢ trailing stop with a 20¢ profit gain.
4.
A Gap down over 30 cents and
Mortgage Index is Positive is a Buy.
5.
A Gap down over 30 cents and
Mortgage Index is Negative is a Sell.
6.
A Gap down 40 cents or more is a
Sell, use a 15¢ trailing stop with a 20¢ profit gain.
For Trade Bias 0 or
S&P 0 positions with openings not described above (gap up or down less than
30 cents):
1.
If the majority of T2118, TRIN, VIX
are POSITIVE and the Mortgage Index is POSITIVE - A LONG position, but if the
Mortgage Index is NEGATIVE – A SHORT position!
2.
If the majority of T2118, TRIN, VIX
are NEGATIVE and the Mortgage Index is NEGATIVE - A SHORT position, but if the
Mortgage Index is POSITIVE – A LONG position!
FOR ALL POSITIONS:
1.
Once a 30¢ or more profit is
achieved use a 20¢ trailing stop the first hour, a 15¢ trailing stop the second
hour and a 10¢ trailing stop after that to capture profits. These trailing stops usually return the
highest profit for the trading day.
2.
In the unlikely event that the
position is wrong, always use a 30¢ stop loss to limit the loss.
3.
DO NOT CHASE THE MARKET! If the market gaps on the open, ALWAYS use
the above Bias Trading Rules. These
rules should always allow a position!
The Trade Bias 0 (zero) or S&P 0 (zero) positions are a little
different so please understand the above rules!
With this said, if the market gaps 90¢ or more in the direction of the
expected position, it is wise to take the day off and have no position.
4.
Regardless of the position, NEVER
LET A DECENT (14¢ or more) PROFIT, BECOME A LOSS! Exit at break-even and wait till
tomorrow! If the profit is 12 to 13¢ or
less during the first two hours of trading… NO BREAK-EVEN stops until after
first two hours of trading! It is normal
for the market to move up and down during the trading day, but if the position
is or has been profitable in the first two hours of trading, NEVER let the loss
exceed 20¢ per share. EXIT at the entry
price if at all possible, which is a breakeven trade!
5.
Once in awhile the entry is the best
profit point of the day. If there is not
at least a 5¢ to 10¢ per share profit early in the trading day, exit the
position with no more than a 20¢ per share loss. Sometimes the market will move against the
position to less than a 20¢ loss and return to the entry point. In this occurs, exit the position at
break-even.
6.
On both Long and Short trades, if a
60¢ gain or more has been achieved, JUST TAKE THE PROFIT WITH THE USE OF A 10¢
TRAILING STOP! DON’T THINK TWICE! TAKE GOOD QUICK PROFITS! On the other hand, if during the last 90
minutes of the trading day and the minimum profit target has not been achieved,
just exit the position. Profitable or
unprofitable, just exit!
7.
Regardless of profit or loss for a
position, the trade will be terminated by or on the close for the day.
There is a position every trading
day, unless #3 occurs for Positive and Negative Trade Bias! Sometimes I BUY the open and sometimes I SELL
the open! The position is based upon the
Trade Bias, the Mortgage Index and the opening price! The position is always liquidated by or
before the close and the position is never carried to the next day. Market orders are used to be sure an entry
and an exit occurs! I have used “Limit
Orders” for years, but there main problem is that the position may not get filled
at entry and exit. I never carry a
position overnight, so I use “Market Orders” just to be safe.
FINAL NOTE! This short term trading plan is the same as I
have used for a VERY long time and has been averaging over a 250% annual
return. My research has shown that this
applies to about 30 different stocks or ETF’s.
In my ongoing efforts and research to make investing and trading easier
and more profitable, I discovered that the above trading method ALMOST DOUBLES
the annual return and this can be applied to over 400 stocks and ETF’s with
similar returns. My goal was to make the
trading model easier, but I have found that I made it much more profitable and
the same trading method applied to a vastly greater number of stocks! This is ONLY a MINOR change from how I have
traded in the past!
My research is ongoing!