SOME HELPFUL HINTS FOR TRADING WITH

OUR DAILY MARKET COMMENTARY V 1.42



If you are an experienced trader, you will know how to immediately benefit from Wall Street, Next Week and our Daily Market Commentary.
Otherwise we recommend avoiding the following all too common six beginner misteaks:
1. Our advice is NOT a substitute for doing your own work. The best results i.e. most profitable, are when our trading recommendations and your own or another market guide agree.
2. Unless you are running a 10 million dollar plus hedge fund, you will not be able to do all our recommended trades. Trade those instruments/stocks that are you are comfortable with.
3. You may wish to begin with practice trades, rather than using real money on some or all of trading the first month.. If necessary, take some classes or read some books or magazines on trading.
4. As a general rule, no more than 3-5 active trades at a time are a good idea.
5. Know in advance your exit strategy both if you are right And if you are wrong. The latter is most important.
6. Use prudent money management and capital preservation.  Never let one or two losing trades take you out of the game.


Trades proposed in our daily market commentary represent high probability, superior risk/reward trading opportunities. Exits (profit/loss) varies according to portfolio objectives.  If you are not an experienced trader, you should work with a broker who is.  Remember this area of our web site is about trading and not about investing.  When you buy or sell a stock have a trading plan; Do not turn a bad trade into a long term investment!

UPDATES
Often, we post the next day's update at market close for the benefit of our Asian/Pacific clients that want a preview of the probable US action.  This also gives us a relatively unemotional trading plan for the next day.  Should news or overseas market action change our view, this is posted pre-market open around 9 am ET.   Also, if Chris Cadbury's numbers (posted Monday, Wednesday and Friday) have changed, they are posted that morning.

Note: If you are trading the US market that day, we recommend viewing after 9 am in case an update has been posted.
Note: On some active market days, we may change our number intraday.  I recommend while waiting an alert price or time entry or even a day or position trade, especially in the afternoon, it often pays to check our webpage just before entering a trade to see if we have adjusted our numbers slightly up or down.


CALENDAR COLOR CODING
RED is down; Green is up.  Yellow is Volatile to be watched. Orange is negatively biased inbetween red and yellow.
Purple is a market market day.  Black is a national holiday and US exchanges closed.

ASTROTECHNICALS

The two most useful data indicators we are currently offering are our astrological calendar and Daily SP position number and risk to both long/short trading positions .  Our calendar highlights key dates from an astrological perspective when either market turns are likely, or key support and resistance prices are likely to be tested.  Our SP position number (1-3) indicates the strength of our call.  Should you own position be contrary to our view and our call is a 3, this represents maximum danger to your position. Similarly, a High risk position should be watched carefully and have a sufficient potential reward to warrant the risk involved.

TIME
If an intraday time is given, this is usually safe for the given trade.
Otherwise a time entry is +/- one time unit; a date entry +/- one day.

PRICE
Exact numbers usually need to be touched, much like gaps need to be fulfilled.
Target range numbers are approximate, and just the zone reached to justify entering or exiting a trade.
Note:     (X,Y) = We would consider buying at X or better, and selling or shorting at Y or better.  (X,Y,Z) = We would consider buying at X or better, selling at Y or better and shorting at Z or better.



RISK/REWARD
Ideally 3-1.  However, with high probability trades, a lesser payout is acceptable.

USE OF STOPS

We view Stops as primarily decision points about whether you are wrong about the market as much as money management.   The main point of any stop is TO STOP AND ASK THE QUESTION: Would I buy this stock NOW?

Most stops given in our trading area are end of day.  However, as I am watching a trading screen continuously, we may over-ride a stop point if we feel market action and forecoming astrological influences so justify.

The use of stops varies with each trader and investor.  Just as you should have a trading and investing plan for each purchase IN ADVANCE, so too should you have a defined EXIT strategy.
Because I am usually staring at market screen from 8:30 to 4:15 pm, stops are mostly WARNINGS points for me to question my trade.  I re-ask "would I buy this position NOW?"  If yes I hold, if no, I exit or closely stop depending on my "feel" of the day's market activity.

FLUID VS FIXED STOPS:  Mine are fluid, this is the time I begin to worry about my position.
EOD VS INTRADAY:  My stops are usually end of day.  They can be executed intraday if I project the EOD position to be more costly than a current exit.
SYSTEMATIC VS DISCRETIONARY:  I am primarily a discretionary player, and can overide a stop one time period (overnight) if my projection for the next stay is STRONGLY in the direction of my trade. 


USE OF OPTIONS

Since most options player lose money, they should be bought sparingly.  We find OEX options are best for day trading and occasional overnight holdings, while longer time moves, it is best to use STOCK options, where there is less time decay.   We do not recommend using options on days with positions of 1, and are most likely to make money on P3 days.

Ideally, option trading is a combination of focusing on options that:
1) Have a HIGH profit potential
2) Low Risk
3) Short Time frame

They are usually most profitable if bought when at P1 if in the direction of the trend or P3 positions ahead of a forecasted trend reversal.


CADBURY NUMBERS

1.  Cadbury number using the cash S & P 500 - SPX.
2.  Stops given are intraday, not end of day.
3.  Short Term:  under two weeks, Intermediate Term: 2-8 weeks, Long Term: Over 8 weeks.
4.  Christopher Cadbury uses sentiment, momentum, relative strength, and trading characteristic indicators. Chief among the sentiment indicators is the option premium ratio and the equity put-call volume ratio. Several dozen other indicators are used, too.
5.  For sample reports see Cadbury or subscribe at Cadbury Subscriptions


THE FOUR RULES OF SPECULATION

BEFORE YOU ENTER INTO ANY TRADE, DETERMINE IN ADVANCE:

 1. HOW MUCH MONEY YOU ARE WILLING TO RISK LOSING
 2. WHAT TIME FRAME YOU ARE TRADING
 3  YOUR PROFIT TARGET
 4.  WHETHER THE RISK/REWARD AND PROBABILITY IS ACCEPTABLE



Here are the ABC's of profiting with WSNW Alerts:

A. TRADING RULE ONE: NEVER PLAY AGAINST YOUR SELF! Use WSNW Alerts as a second opinion or signal confirmation of your trading system.
Note 1: If you break Rule A, do it only for one day ( and night), unless the trend is your friend.
Note 2: If you believe our views are counter trend, don't play or play only P2 and/or P3 positions to reduce risk of loss. Similarly, buy options only at P2 or P3, while futures or stock buying and selling can be done at P1 using appropriate risk/reward parameters and money management.

B. PLAN AND IMPLEMENT PRECISE ENTRANCE AND EXIT STRATEGIES
Note: I may personally recommend a position long term like Korea (KF) and hold it in our UIT, while simultaneously selling Korea or the KF at a trading top in our Global Opportunity Hedge fund. We may advise a day trader to exit put options, while suggesting an intermediate term trader add to his/her short positions.

C. Break rule 2 ONLY when market conditions justify it, and ONLY if you can afford the additional possible losses. 



"The person who wins in the market is the one who makes small mistakes. The person who loses is the one who makes big mistakes."
Greg Kuhn President Kamco


This bears repeating and memorizing:
The two biggest sources of losing money as a trader have little to do with forecasting markets: They are money management and choice of instruments.
Not being able to afford to take several losses (due to an "oversized" bet) and not understanding the time and price your instrument of choice, e.g. holding OEX out of the money options positionally instead of stock options.

Q & A

Q: Where can I find your abbreviations and explanation of the idoms you use?
A: See about WSNW Alerts.

Q: In your "Daily Market commentary you refer to the DJIA and SPX.
How do you trade these indexes? Are you trading options on them? How does it work? Up to this point I have only been trading stocks.
A:  I personally like to trade future contracts (indexes) over most options. Something like 90% of all options expire worthless.  So unless a major linear move, I prefer cash.  As a Series 3 CTA (Commodity Trading Advisor), I trade a variety of instruments depending on the client.  However, I cannot stress too strongly the need to practice, practice, practice any market extensively BEFORE committing REAL money.  Your synastry with futures may or may not be good.  Find out BEFORE you lose money. When I give SPU as well as DJIA markets in our commentary, this can be one broad general signal to buy or sell whatever instrument you are using.

If you are interested in the high risk/high return world of futures trading, the best place to start is to open a "virtual" account at  CME Online live simulated Trading Program.  This starts you with $50,000 play money. For $24.95 to $34.95 a month, you get Real-time prices, Real time accounts status and EXPERIENCE.

Q: Desperately looking for where any stop instructions were noted....
A: We don't give them. That is up to you as we have all types of traders using our material.
Stops points depends on whether you are a day or positional trader, whether hedging or speculation, whether this trade agrees with your trading system or is contrary and most important, what instrument you are using: Options, Futures or Cash.  If you are trading say options, are they stock and index options, in the money and out of the money, near and far out options -  all have different time and price decay.
If you do not yet have an established trading system that you double or triple screen with our work, I would suggest initially using the standard 3-1 R/R, that way even if you are right only 1/2 the time you make money.

READER: You said: "If you do not yet have an established trading system that you double or triple screen with our work, I would suggest initially using the standard 3-1 R/R, that way even if you are right only 1/2 the time you make money."
R/R is risk/reward, but what is the standard 3-1 you refer to?
HW: If you have a profit target of 6, use a stop of 2 (1/3 of 6). With a profit target of 300, then use a stop of 100 (1/3 of 100) etc.  Because I am constantly watching a screen, I use "end of day" stops.   If your stop is too tight and could be hit without invalidating the trade, you should not enter into the trade UNLESS the probability of success if very high.

READER: In the daily market commentary under the Market watch section, Do your #'s refer typically to: a week ahead, a month ahead..? For instance, the resistance levels for the NASDAQ of 2800, 2940 and 3000, are they within next week or next 30 days etc?
HW: The next trading period, often a week, but can be one day or two weeks or more.  There are reviewed daily as you may note.



READER: In deciding what option to buy - which is most important...the OI or the Volume?
HW: What is more important is first, what price target you have for the underlying instrument or stock and the cost of the option, i.e. how expensive or cheap


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