Short-Term Trading Success

By: Joseph Russo | Thu, Apr 15, 2010
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Before we get to our brief on Short-Term Trading Success, kindly indulge us to first digress with a short dose of ranting, and raving.

From Brink to Bubble and Back

With the Dow knocking at the door of 12K, and the S&P breaking above 1200, it is clear that major equity indices are enjoying the benefits of a "too big to correct effect."

A contrived V-shaped goldilocks (Wall Street) recovery occurring so soon following systemic collapse is testament to the magical powers at the behest of coordinated government intervention.

In our view, interventions of such magnitude can only reflect a cover-up of similar proportion.

The dysfunctional "extend and pretend" policy that skews the laws of arithmetic and reality is nothing more than an illusion to mask complete failure and insolvency.

Dressing a corpse for a night on the town - then hoping they get lucky - WHAT!

Far beyond putting lipstick on a pig, dressing up Wall Street with astronomical levels of fraudulent legal tender (because they can) is akin to the behavior of Norman in the movie Psycho, where a very disturbed man dresses up his mothers corpse and believes she is alive.

Those in monopoly control of this systemically flawed structure continue selling us on such fairytales (horror stories) simply because they can. We buy into them simply because there is no other alternative, and perhaps because the proper medicine (easier taken decades ago) may be a little too bitter to swallow today.

If they get lucky again, (which it appears they may) they will convince us that all of their machinations will amount to nothing more than a harmless, all in good fun, weekend at Bernie's. Bring it on Ben.

Too Big to admit the Biggest Mistake in all of History

They are all out of their Keynesian minds. Sadly, the ruling elite is perpetually drawn to the insidious influence derived from a highly potent elixir which grants omnipotent monopoly power to will endless amounts of valueless fiat money into existence, to direct wherever and to whomever they see fit.

We have opined on such matters in way back in June of 2009 in an article entitled Shepherds of Illusion, and again in August of 2009 with a brief titled The Bullish Stampede Persists.

Until we change em' for good - we must continually beat em' at their own game

Until things change radically for the better, it is our collective job and patriotic duty to beat the pants off these fascist bureaucrats and the entire lot of their bottom feeder underlings.

As we shall highlight in this article, our short-term efforts are doing just that.

Longer-term we have no choice but to follow the contrived uptrend, while our medium-term counter-trend operation has been temporarily stymied by the "too big to correct effect".

Engaged in the broad equity indices at every level and timeframe, we remain optimistic that good reason and vigorous dissent will eventually triumph over the dysfunctional evil that continues to saturate every nook and cranny of civil societies around the globe.

Despite the imposed reality dictating otherwise, Buy and Hold is DEAD

Don't be Fooled Again empowers Joe and Jane Six-pack to fire their brokers and expensive financial advisors, and paves the way for assuring absolute returns for long-haul Index investors.

It is the least costly, most profitable, and safest way to play this crafty charade shrewdly, and without risk of getting whacked hard when one least expects it. Okay, we're done now.

Whew, thank you for permitting us to vent. Since we rarely if ever convey any emotion in our publications, we feel as though we have just raided the cookie jar and got away with it.

Now that we have gotten all of that ranting and raving out of the way, we shall return to our originally intended topic, Short-Term Trading Success.

Ancillary views, and Statistical Snapshots of Performance

The chart below shows the Dow reaching the 10950 level in late March. Thereafter, most all of the indices became stuck in a general levitation range.

Such choppy and extended ranges present challenging conditions for any type of active trading methodology.

The only thing somewhat assured in such instances is the minimum distance and direction price is likely to travel upon breaking out of, or breaching beneath such a range. Both of which have nothing whatsoever to do with our specific short-term trading discipline.

We provide this type of ancillary picture of price action for general perspective only. The short-term trading methodology is more or less on automatic pilot. Such overviews are somewhat helpful in understanding outcomes, as short-term trades are reconciled.

Beneath this chart are the performance stats on Dow trades documented from the formal inception of our strategy in May of 2009

Dow Performnce Stats

Good Sportsmanship is Mandatory

As the tables and graphs show, LOSING gracefully plays a major role in the long-term success of a winning short-term trader.

In baseball terms, we are batting 358, which translates to quit a few singles, a lot of doubles, a few triples, and the occasional home run.

Dow - Open Equity

We monitor performance of a non-levered ETF for illustration purposes only. Ironically, albeit less commissions, non-levered returns are keeping pace with the benchmark Dow.

Obviously if one is trading at such frequency, a tradable carrying a relevant level of leverage is essential to balancing risk and reward.

S&P / Level-V

The reconciliation dashboard for the S&P 500

The above chart reconciles and exemplifies recent favorable outcomes generated by our short-term trading technology.

Once one grasps the simplicity of this reflexive and dynamic methodology, the traders' sole task is to monitor the dashboard, and within a one-hour notice following a confirmed alert, place his or her orders at the next price bar.

Plan, Purpose, and Intent

To become a successful short-term trader one must resign oneself to becoming a zombie of strategic and tactical discipline.

In our view, the same applies to all levels of speculation/investment regardless of one's timeframe.

This means tuning out all emotions associated with rants, raves, news, rumors, or otherwise, and committing total dedication and focus upon executing orders. Preferably, orders methodically derived from a strategy that is free of subjectivity, easily reconcilable, and a method that harbors a statistically proven edge.

The only thing that a successful short-term trader should pay attention to and care about is getting his or her orders properly aligned with trade signals derived from strategies proven to contain a reconcilable advantage.

When trading the short-term, there is no time for analysis, counting Elliott waves, cherry-picking set-ups, or pondering Fibonacci retracements.

The system that we have built allows a rather generous one-hour window from which traders have to interpret the criteria and prepare their orders accordingly.

Daily trading sessions are spent monitoring indicators and price for alert warnings. Once an alert condition occurs and confirms, traders have one hour to get their orders ready to go.

Order arrangements consist of placing a single market order entry with a concurrent initial stop loss order.

In the case of a reversal-order or SAR, (stop and reverse) traders must adjust their stop orders in order to stay in the market. I.e. if one is long 1 contract or 100-shares and wishes to SAR short an equal size, they must sell 2 contracts or 200-shares to exit longs and reverse short accordingly.

Sometimes the general task of execution is very clear and easy to accomplish, and at times it may present a quite a bit of a challenge, especially for the undisciplined novice.

No matter what type of scenario may arise, win, lose, or draw, our systematic short-term trading methodology is able to produce a concise reconciliation record for each entry and exit signal generated.



Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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