Navigating Near-term Volatility

By: Joseph Russo | Sat, Jul 28, 2007
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Down and Dirty
Nothing can be more exhilarating or rewarding than trading profitably amid fast-moving markets with expanding daily ranges.

Conversely, there can be nothing much worse than having to take personal responsibility for having your speculative trading account destroyed in a matter of months, weeks, days, or hours.

Below, we have provided a chart history of the Dow Industrials illustrating results of Elliott Wave Technology's recently archived trade-triggers and price-target captures from the Near Term Outlook.


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Our Complete and Objective Focus
We provide all analysis with patience, discipline, flexibility, and proven adaptive dynamics. Since we do not "trade" that which we forecast, we harbor no emotional or financial interest in the outcome of any particular set-up or guidance measure.

Our only focus is to identify all evolving bi-directional trading dynamics. Simply put, we effectively map out variant market paths, patterns, and price projections before they unfold.

Do You Have What it Takes
There are a several essentials, which are continually required to execute profitable trading campaigns in any market climate. All of which carry proportionately more impact amid heightened periods of market volatility.

In certain cases, it may be prove wise to step out of the fray to avoid expanding levels of risk exposure.

For those maintaining strong directional opinions, and are intent on exercising those views in the marketplace, allow us to suggest a short list of attributes to assist with such endeavor.

First and foremost, one should make diligent attempt to abandon all strong directional opinions. Although such efforts are in direct opposition to ones initial motivations to trade, the less emotional commitment one has to specific outcomes, the better-prepared one will be to adapt to rapidly changing conditions.

Additionally, one must fully accept the increased risk, and be steadfast in limiting losses, while maintaining swift and decisive ability to accept respectable profits when presented.

The Bottom Line
By no means is the process a cakewalk. It requires a lot of hard work and diligence on the part of the analyst, and an equal amount of effort and diligence on the part of traders.

We routinely map, and archive all of the highest probable outcomes. All short-term trading charts clearly illustrate trade-trigger locations, price-targets, and risk-levels.

How Does it Work
Often times, traders will be required to exercise discretion and trade style preferences when conflicting signals of equally plausible merit present themselves. For example, say a market is overextended, and both the wave-counts and momentum readings suggest it prudent to evaluate campaigns to launch relatively low-risk counter-trend trade probes. At the same time however, various price patterns exist, telegraphing prospects for a further advance in the direction of the current trend.

What we are called upon to consistently deliver
As such, our primary obligations are to alert traders of all pending prospects, and to provide them with as much ancillary information surrounding each. As the market unfolds, we maintain responsibility for monitoring status and progressive conditions relative to all working targets, forecast preferences, and probes.

Each session brings with it fresh data points forming a continual dynamic evolution to every given price series. Each new set of data-points either supports or negates progression toward achieving targets outstanding.

In addition, all new price action lends itself to generating new signals, be they bullish or bearish. Naturally, we are also obliged in keeping traders informed of every new development be it large or small. Upon achievement, failure, pending, changing, or vacillating price movements surrounding each signal, trigger, and target, we graphically update our charts with easy to grasp color references and label tags.

How are traders expected to take advantage of actionable information
Despite the enormous advantage of possessing a concise mapping of trade triggers, price targets, and signal alerts, it remains the task of the individual trader to prudently access and appropriately align his or her money management, trade style, and risk tolerances with the opportunities routinely presented.

Once a position is on, traders must then take responsibility in managing their trade according to similar criteria along with the evolving market dynamics monitored by the outlook.

Examples
For instance, your strategy and opinion may favor the counter-trend set-up. Having as much information as to how much further the market may extend in opposition, will provide valuable insight as to where it may be most prudent to provide cover prior to launching counter-trend campaigns. If such levels are outside of your money management boundaries, you then have critical foreknowledge in aiding decision for either placing a trade with acceptable levels of risk, or passing it up until conditions improve.

Conversely, your strategy and opinion may favor trading momentum in the current direction of trend. Not only we will have defined clear trade-triggers and price-targets for such set-ups, but we will have also provided you with ancillary information regarding risks and boundary levels associated with the opposing counter-trend signal. Should your short-term trade elect and hit target - great! However, what happens if your trade elects, but your target fails to achieve prior to the market turning against you? Having clear understanding the opposing counter trend forces at work, knowing what may set them off and where, will provide you with immense advantage in knowing when to take early pre-target profits, cover losses, or completely reverse your position on the side of the counter move.

Can You Sense the Truth
The levels of accuracy and achievements depicted in the chart above are archived, and routinely commonplace in the Near Term Outlook. What the chart does not depict is a systematic record of specific time-sequential buy and sell-recommendations. Expectation or allusion to such would be unrealistic, impossible, flat-out hype, and a rather insulting misrepresentation of services rendered.

The art and science of effective short-term forecasting is compromised the moment an analyst embarks upon issuing individual trade recommendations, or becomes overly emotional relative to his or her ongoing duties. To do so would be akin to taking an emotional stake in the outcome of each specific recommendation or market call.

Further complicating such endeavor would be the follow-up necessity required by the analyst in rendering specific ongoing management advice for every cited market call.

Bogged down in arriving at, and administering to a one-size fits all trade management doctrine; such analysts are likely to lose touch with their craft and forecasting acumen.

Caveats
In order to render and realize the competitive edge inherent to the highest levels of bi-directional accuracy in forecasting guidance, there will be times when:

  1. General guidance turns out to be flat-out wrong. (very rare, but possible)
  2. Multiple opposing signals and/or trade triggers are present at the same time.
  3. An identified trigger fails to meet its target objective or flat-out fails.
  4. Counter trend signal alerts require a succession of low-risk probes prior to paying off.
  5. A position taken from guidance will experience an uncomfortable level of drawdown prior to reaching its intended target.
  6. Traders inadvertently mismanage campaigns or tactics even though guidance targets ultimately succeed.
  7. Traders will not be at resource to enter orders at the time a signal triggers.
  8. Set-ups and triggers develop between regularly issued posts.
  9. Traders become over-confident and begin faltering after a string of big wins
  10. Nothing seems to work in your favor and times when campaigns string together with stunning brilliance and perfection.

In closing, to maintain a true and lasting on where the major markets are heading in both the long and short-term, there is simply no better roadmap than the Near Term Outlook.

Look for our regular market update for index traders in a separate post.

PS
Should you have interest in obtaining special access to Elliott Wave Technology's forthcoming blog-page, forward the author your e-mail address for private invitation.

Until next time ...

Trade Better / Invest Smarter...

 


 

Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the dot.com 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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