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July 21, 2012 / redman59

Have You Ever Traded This Way?

I recently read a blog post written by Ricky Roma of the iBC blogger network (@ibc_bn) titled Revenge trading and shorting crazy momo stocks … like mating hedgehogs. Its a very good read that encompasses the psychology of a trader on any given day as I believe many have been there on many occasions. Overall a well written and detailed post.

In the comments section I mentioned how I like to inverse the charts when looking at shorts. For me this helps psychologically as I am constantly looking for bullish setups and the patterns start to get ingrained in one’s head. For me it is at times a challenge to look at the charts in the opposite way. While many others can successfully short, it is one thing that I am cautious of and in times when markets are like they currently are I either short with small capital or step aside.

The time frame for the inverse charts are on daily/weekly charts and not so much for daytrades. Reason for this is time in the trade and execution speed. On the inverse charts I am more looking for patterns, longer term targets, & using indicators while daytrading it is mainly price action and volume.

Below are the inverse charts of the major indices. While not sure of other platforms, I use thinkorswim and just put a minus sign in front of the stock/index symbol. So with the mindset of the chart in the up direction, even though we know it is inverse and would represent a short position, would you buy or sell these charts. Charts listed in following order from $DJI, $SPX, $COMP, $RUT.

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