I’m charting the Russell 2000 for the first time on My Trader’s Journal to add some more variety to my charts. I haven’t traded much the past 1-2 weeks for precisely the reason that shows in this chart. I saw us coming to another turning point and didn’t want to leg in too deep before I saw some of the indices cross the ceilings that have been the top of this trading range since January. They didn’t past the test and I held back.
We kissed that ceiling again last week and faltered. Throw in the declining VIX and I see no reason to go in heavy long right now. I’m actually thinking of taking a suggestion from a frequent commenter, Kadena, and buying options to day trade. (I’ll post some of his results later this week). If I’m reading this chart correctly, 650 seems a possible near term price for the Russell 2000.
It just hit the same ceiling that’s been plaguing it and that coincided with the longer term downward trend of lower highs. It fell below the 10 day, 20 day and 50 day moving averages this past week too. Each of those five technical indicators is bad on its own, together I’m getting more bearish. And then I turn to Williams %R and see that $RUT just broke below the overbought range for both the 14 and 28 day indicators. The 14 day %R is already as low as the oversold range, but what’s important with those this indicator is when it moves out of the range, not in.
Now, after all that ranting I’ll pull back some to say that this week could throw us for a loop with earnings season and options expiration Friday upon us. I might stay on the sideline a little longer while I somewhat papertrade my new plan to trade index options, but then again I’ve never been a big fan of papertrading as much as just placing my orders and learning through real life experience.
i hope you will papertrade for a little while, it would just make me feel less of an influence if you ever lost some real money, because you had practice!! anyway, the risk advisory on options is pretty loud and clear to everyone everywhere, so tread lightly, but hey, papertrading is a great idea (my dad papertraded, seemingly well, then went on to lose with real money, sheez)
I agree with paper trading to learn, but it doesn’t account for emotions and changes in market conditions. I don’t think many will argue, day trading relies a lot more on technicals than fundamentals. I’ve been charting for a while, so I feel I’ve already done half the paper trading work. The next step will be to add the emotional side to it. I’m much better at selling options than buying options when it comes to keeping emotions in check, but I have to step it up at some point.
This may be a bit contrarian, but I’m not a big fan of papertrading. It’s psychologically different. I have learned far more by using real money. Even if it’s a couple hundred dollars, it will make it much more real. And most people care far more.
Andrew, you are right. Paper trading is only good if you know your mindset for when money is on the table. Emotions run trading decisions for too many. For what I was referencing, it is in addition to my regular trading and to check my theory before applying cash. Paper trading is probably not the right term to have used, but instead I should have said, I’d keep watching.