Sunday, October 3, 2010

Answer to Mary: Exits, targets, etc.

Mary, as this blog is an educational blog for beginners, I use simple ichimoku cloud analysis and demonstrate there a very easy technique to determine liquidation points.

I really like ichimoku. It's a nice combination of moving averages, trend calculation and visualization.
Details can be found here:

http://stockcharts.com/help/doku.php?id=chart_school:technical_indicators:ichimoku_cloud

We have 2 units of SPX.
1 unit is a core unit. I only exit if 1-day and 2- day chart gives clear signal of liquidation on RUA.
Second unit is liquidated based on 60-min charts or other market conditions.

In order to protect us against any major surprise (unexpected natural phenomenon, vis major etc.) every week-end I show an ichimoku chart with a:
-cloud support (soft liquidation - if volume momentum remains, we don't sell, so we just alert ourselves something is going on an unexpected way)
-major supports inherited from former cloud cycle or logical TA. I pinpoint a classic TA soft liquidation if an important support breaks
-hard liquidation: mechanic and immediate liquidation

If we purely take volume based TA, we don't need to put targets and exit points. Simply we check market health as information streams. This is an unusual approach, where we don't want to tell the market when it's weak, we trust in our indicators listen, and let market to tell us when internals are weak.

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