Hammer Time "MAYBE"

This looks Positive...

So did this back in Aug 3rd 2011

Time to reset the Mayan Calander

As of this writing the $SPX futures have taken a nose dive to the 1430 level on news that congress is going to take off on their Christmas vacation while uncertainty runs rampant in the markets.

The retrace levels are approximately the 50dma for the 38% and the 200dma for the 62% retrace.  Let's see if things hold at those two important levels.

Isn't this apropriate for the Mayan End of Days Scenario.

Position Size Matters

Position Size Matters

If you are watching the twitter stream and wondering how traders can still have intact trading accounts after stocks like $AAPL ,which looked like they put in a bottom and are heading back up, do an imitation of an Acapulco cliff diver, then the answer is Discipline and Position Sizing.

Discipline is the harder of the two but either you have it or you don't.

Position sizing is easier to figure out.

Determine how aggressive you are with your trading account.  Some say that you should not risk more than 2 percent of your total account worth on any single trade and this value can skew to an even more conservative figure if you want to be trading for any length of time.  1%?  Less than 1% like a 1/4%?  This amount is up to you.  There are plenty of examples of how to assign risk to your capital on the Internetz.

Let's imagine you have a $100,000 account from which to trade with and you want to be relatively conservative and risk 1/2% for a possible 1.5% or more gain.  That gives us a $500 to risk on the trade.

The next step is to determine a possible support area for your equity.  Let's say you have identified $50 as a possible support area and the equity seems to be bottoming out at $52.  That gives you a $2 possible loss because if it loses $50 you are certain that it will continue downwards.

You take your maximum risk of $500 and divide it by your maximum loss value of $2 

which gives us 500 / 2  = 250 shares.  

When you enter your buy order, you also enter your Stop-Loss price of $50.  If more sellers overwhelm the buyers you are out $500 instead of $5,000 or more.  This allows aggressive traders to attempt a second or even a third catch at confirmed support points and walk away with winning trades of 100% or more at times.

If you are trying to catch falling knives you need to be prepared to get a few cuts here and there, but make sure they are just little paper cuts and nothing so serious where you can't use a keyboard like our fuzzy little friend down below.