For those who are new to this, it is worth noting that while the basic ideas are as described, in real application, it can get a lot more complicated. In prolonged market movement, MACD(12,26) would give early but false divergence, and often gives incorrect oversold/overbought readings. It will get you to sell short into a rising market and buying into a crashing market, if you follow it blindly. In choppy market, macd will whipsaw you to focking nut. It does work as advertised in normal market conditions and a lot of people get seduced by that. Then they get their ass handed to them when the market makes a big move . It is the nature of the beast, ie the mathematical properties of the indicators.
In order to use an indicator effectively, you need to plot it over a long period so that you can have witness how it performs over different market conditions, and figure out under what conditions they would fail and how you are going to safeguard that.
Too many people take the text book description of how an indicator works, and they figure they got it. The truth is light year away. When the canned indicators do not work, as they inevitably will experience, people would blame the indicators, saying that they dont work.
Dread, Great charts and explanations. You are looking at a real estate play it sounds like. Also did you see the letter lester posted last night on SOH
I'm trying to avoid some of the chop by looking at all six of the $RUT based ETF's.
I hadn't realized it at the time, but when TNA flipped to a sell a few days ago, only 3 of the 6 ETFs flipped. Sure enough, TNA flipped right back. Now all six are aligned again.
I was thinking that myself. The unconfirmed signals that don't confirm are no problem, they just go away. It's the confirmed signals that immediately reverse that get really irritating.
See the chart I made for Monica. I think AB is going to have a lot of unconfirmed buy-if/sell-ifs while we chop sideways and make a top. I think MACD and RSI are telling us that the top is very near.
Pay attention to the MACD. See how the lines cross (red and black)? When red is on top, that's a bearish trend. When black is on top, that's bullish. We are approaching a crossover of those lines. For a conservative trader, that's the time to short. When black crosses over red heading up, that's when you cover. You don't get the entire move, but you do get most of it.
When the MACD is trending down, and price is trending up? That's a divergence.
Sometime next week, the lines should cross (barring shenanigans). There should be some retracement of this monster gain.
I didn't see the letter. Was it depressing?
For those who are new to this, it is worth noting that while the basic ideas are as described, in real application, it can get a lot more complicated. In prolonged market movement, MACD(12,26) would give early but false divergence, and often gives incorrect oversold/overbought readings. It will get you to sell short into a rising market and buying into a crashing market, if you follow it blindly. In choppy market, macd will whipsaw you to focking nut. It does work as advertised in normal market conditions and a lot of people get seduced by that. Then they get their ass handed to them when the market makes a big move . It is the nature of the beast, ie the mathematical properties of the indicators.
In order to use an indicator effectively, you need to plot it over a long period so that you can have witness how it performs over different market conditions, and figure out under what conditions they would fail and how you are going to safeguard that.
Too many people take the text book description of how an indicator works, and they figure they got it. The truth is light year away. When the canned indicators do not work, as they inevitably will experience, people would blame the indicators, saying that they dont work.
Dread, Great charts and explanations. You are looking at a real estate play it sounds like. Also did you see the letter lester posted last night on SOH
As hard as options are, $VIX options are crazy hard. I don't dare touch them. Better leave that to pros like Lester.
Or buy vix calls
Dreadwin,
I'm trying to avoid some of the chop by looking at all six of the $RUT based ETF's.
I hadn't realized it at the time, but when TNA flipped to a sell a few days ago, only 3 of the 6 ETFs flipped. Sure enough, TNA flipped right back. Now all six are aligned again.
Here's another piece of the puzzle. Real Estate. $DJUSRE:
http://www.screencast.com/users/dreadwin/folder…
It closed outside of the upper BB yesterday, and inside today. We need a lower close tomorrow to confirm the sell signal.
The MACD is all crazy and stupid, but RSI is really overbought.
I'd like to see the $VIX do a crazy stupid move beneath its lower BB. I wouldn't be able to hold back. I'd have to short something.
Dreadwin,
I was thinking that myself. The unconfirmed signals that don't confirm are no problem, they just go away. It's the confirmed signals that immediately reverse that get really irritating.
See the chart I made for Monica. I think AB is going to have a lot of unconfirmed buy-if/sell-ifs while we chop sideways and make a top. I think MACD and RSI are telling us that the top is very near.
I have charted $RUT for you.
http://www.screencast.com/users/dreadwin/folder…
Pay attention to the MACD. See how the lines cross (red and black)? When red is on top, that's a bearish trend. When black is on top, that's bullish. We are approaching a crossover of those lines. For a conservative trader, that's the time to short. When black crosses over red heading up, that's when you cover. You don't get the entire move, but you do get most of it.
When the MACD is trending down, and price is trending up? That's a divergence.
Sometime next week, the lines should cross (barring shenanigans). There should be some retracement of this monster gain.