June 17, 2008
Like a Lead Balloon
All this talk of bubbles in commodities prices (corn, crude, rice, etc.) makes it necessary to look at a bubble that already burst. The price of lead has already dropped over 50% from the high made late last year. Any “true believer” has given everything back and those late to the game are surely sunk.
(It’s worth noting that the weekly Sequential nailed the high in lead to the very week.)
Cat: | Time: 10:33 am (utc+8)
June 17th, 2008 at 11:42 am
Hi CM,
How the green/red numbers get calculated?
Does it mean that after the numbers get to an extreme (like over 10), a reversal is more likely to happen?
thanks.
June 17th, 2008 at 2:17 pm
Try Renko or 3-Line Break on this Chart,CM
June 17th, 2008 at 2:36 pm
@lionel: I should find a link to a good explanation of the Sequential because every time I mention it someone asks me about it. Google DeMark and Sequential and see what you can find.
@BL: What do Renko or 3-line show?
June 17th, 2008 at 11:09 pm
Chairman
I am very fascinated by the Trender on your charts.
And that might be a good trailing stop for your box ideas too. Kinda lazy non-greedy rich man’s stop.
Un-scared money stop.
Inspired by your charts, I tried to create one for myself. My quest led to a percentage trailing stop - trail fixed percent below the highest close in last n-days. To be effective, (i) it cannot be a intraday trailing stop that goes up and down with the market. It has to be a EOD stop manually adjusted (ii) It is less greedy because it tracks the close, not the highest of the day.
Inspired by two different sources - Russian article by Konkop (Percentage trend stop, he calls it) and Percentage Trailing Stop by Leon Wilson.
Is your Trender a percentage trailing stop too?
Thanks
Ravi
June 18th, 2008 at 6:46 am
Ravi: I asked Bloomberg for the formula for Trender but they refused to give it to me. What I’ve been able to figure out, with the help of others, is that it’s an average true range band around some average price — exactly what sensitivity they use and number of periods for the average price is the rub. If you had some time and were properly motivated you could try to reverse engineer it to figure out those values.
June 18th, 2008 at 6:47 am
is demark’s sequential programmed in your charting, or do you do it manually?
he talks about it in one of his books, i forget which one.
June 18th, 2008 at 6:51 am
bob: I’d go nuts if I had to do it manually. It’s all pre-programmed.
June 18th, 2008 at 8:22 am
Thanks Chairman. I have realized that I dont need to exactly match the trender as long as I get a similar one. The real issue with me is the accuracy of my indicators but my money management indiscipline.
In other words, my money managemement mistakes are far more expensive than my trender accuracy errors :)
Regarding Demark: he is one of the most unusual
prose-writers. The fogginess of his writing is very high and one has to invest quite a lot into his
books to get value, but his Sequential is an unusually rare TYPE of indicator. An exhaustion
indicator. He is basically counting down days, but
only those days where close is less than 4 days ago.
He counts 9 such days as setup period and then counts
13 days as real move period, so in fact, if a markets
rallies for 22 such days, it is way overbought. :)
What is funny though is why 9, why 13? One reason
why demark sequential works is that it is probably the most patient countertrend indicator.
Ravi
June 18th, 2008 at 8:55 am
Hi CM,
Thanks for the reply, and I happen to come across one nice one. Thought I would share it over here.
http://www.researchlabtrading.com/public/382.cfm
June 18th, 2008 at 8:56 am
@Ravi: The important thing about money management, the one tip I can give, is to make sure that your initial risk is a fraction of your expected reward. There’s no such thing as a “smart stop,” no ideal stop trailing method, so the best we can do is make sure the trade makes sense (from a risk/reward perspective) to start.
I’m familiar with the mechanics of the Sequential, and have read one of DeMark’s books, though like you, I found the writing totally pretentious (foggy is a kind way to say that).
I assume he did a huge amount of backtesting to come up with the 9 and 13 figures for the countdowns. Exhaustion indicators are unusual for sure.
As Linda Raschke taught me long ago, the method doesn’t matter as long as it makes you focus on price. The Sequential could be complete voodoo but it sure makes all of us focus on price like crazy.
@lionel: Thanks for the link. There are tricky aspects of the Sequential (such as recycling the count) and I’m not sure if those Tradestation charts in the article would exactly match the Bloomberg count. Apparently it’s a very difficult thing to program so I’d be wary of relying on code written by amateurs. :)
June 18th, 2008 at 9:09 am
Thank you, Chairman.