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Defining Trend - Trading Long And Short

Summary

Qualify trend using an Exponential Moving Average (EMA9).

Price Action above the EMA9 = up trend, trade long.

Price Action Below the EMA9 = down trend, trade short.

Confirm the trend using 13 technical indicators.

Links provided to define today's long, medium and short term trends.

1) Instrument Traded

If your not familiar with futures they are agreements to buy or sell at an agreed price on or before an agreed date.

Long = own the contract anticipating the price to move higher, once a long position is established it has to be sold on or before the contract delivery date, example ESH18  has to be offset or before March 16th 2018.

Short = Owe the contract, selling a contract you do not own, once a short position is established it has to be bought back on or before the delivery date.

Contract information

ESH18 
ES = Chicago Mercantile Exchange S&P contract
H = Delivery month (H = March)
18 = Year

Value = $50 X the index, an index at 2,825.00 = $141,250
Margin requirement = $5,050 (1/28th of contract value)
Margin call, if your balance falls below the margin requirement
Trade cost, $30.00 or less per contract (all bid/ask and fees)
Contract volume, in excess of 130 billion USD daily
US Taxation, 1256 rule 60% long-term, 40% short-term

2) Defining the Trend

Defining the short, medium and long term trends using simple technical indicators probably already programmed into the platform you're using.

2.1) Qualify the trend using an Exponential Moving Average

Exponential Moving Average 9 (EMA9)

Price action below the Exponential Moving Average 9 = Down trend
Price action above the Exponential Moving Average 9 = Up trend

Example, the monthly chart below price action is trading above the Exponential Moving Average (EMA9). The EMA9 is telling us this market is in a long-term up trend. Today's long term chart using an EMA9


2.2) Confirm the trend defined by the EMA9 using this opinion link 


2.3) Confirm the long term indicators the overall average and 3 long term indicators on this link, have to agree if they don't agree stand aside.

2.3) Applying these rules to define today's short, medium and long term trends

Long-term trend = is monthly price action, above or below the EMA9  linked here? above = buy, below sell.

Do the overall average and long-term technical opinions linked here  agree with the EMA9?

If they all agree long-term trades are permitted with the trend (long-term trade duration = 30 to 60 days).

Medium-term trend, is weekly price action, above or below the EMA9 linked here above = buy, below = sell.

Do the overall average and medium-term technical opinions  linked here  agree with the EMA9?

If they all agree medium-term trades are permitted with the trend (medium-term trade duration = 15 to 29 days)

Short-term trend, is daily price action, above or below the EMA9  linked here  above = buy below = sell.

Do the overall average and short-term technical opinions  linked here  agree with the EMA9?

If they all agree short-term trades are permitted with the trend  (short-term trade duration = 2 to 7 days)

3) Always trade with the trend and collar every trade.

Down trend

2,900,00 Buy a call 2,900.00 to define risk (using collected premium put sale)
2,800.00 Short a futures contract 
2,700.00 Sell a put at you profit objective collecting premium 

Up trend

2,900.00 Sell a call at your profit objective collecting premium
2,800.00 Buy a futures contract
2,700.00 Buy a put (using collected premium from call sale)

4) Technical tools used to generate the opinion

Opinion = the overall average of 13 indicators

Short Term 5
4.12) 7 Day Average Directional Indicator
4.13) 10 - 8 Day Moving Average Hilo Channel
4.14) 20 Day Moving Average vs Price 
4.15) 20 - 50 Day MACD Oscillator
4.16) 20 Day Bollinger Bands

Medium Term 4
4.17) Opinion  (reference medium term indicators)
4.18) 40 Day Commodity Channel Index
4.19) 50 Day Moving Average vs Price
4.21) 20 - 100 Day MACD Oscillator
4.21) 50 Day Parabolic Time/Price

Long Term 3
4.22)  Opinion  (reference long term indicators)
4.23) 60 Day Commodity Channel Index
4.24) 100 Day Moving Average vs Price
4.25) 50 - 100 Day MACD Oscillator

5) Using the same EMA9 & Opinion on related and unrelated markets, (15 minute delay on price data and opinion)

5.1) Last 10 EuroStoxx  
5.2) Opinion
5.3) Last 10 FTSE 100 monthly O/H/L/C
5.4) FTSE opinion
5.5) Last 10 DAX Index monthly O/H/L/C
5.6) DAX Index opinion
5.7)  Links to every stock in  the S&P 500
5.8) Last 10 Gold monthly O/H/L/C
5.9) Gold opinion
5.10) Last 10 Euro monthly O/H/L/C
5.11) Euro opinion
5.12) Last 10 British Pound monthly O/H/L/C
5.13) British Pound opinion
5.14) Last 10 Australian dollar monthly O/H/L/C
5.15) Australian Dollar opinion
5.16) Last 10 Canadian dollar monthly O/H/L/C
5.17) Canadian Dollar opinion
5.18) Last 10 Brazilian Real monthly O/H/L/C
5.19) Brazilian Real opinion
5.20) Last 10 Russian Ruble monthly O/H/L/C
5.21) Russian Ruble opinion
5.22) Last 10 on 2 year US Treasuries monthly O/H/L/C
5.23) 10 Year Treasury opinion
5.24) Last 10 Euro Bund  monthly O/H/L/C
5.25) Euro Bund opinion
5.26) Last 10 NY Crude Oil monthly O/H/L/C
5.27) Crude Oil opinion
5.28) Last 10 Copper monthly O/H/L/C
5.29) Copper opinion
5.30) Last 10 Lumber monthly O/H/L/C
5.31) Lumber opinion
5.32) Last 10 Cotton monthly O/H/L/C
5.33) Cotton opinion
5.34) Last 10 Orange Juice monthly O/H/L/C
5.35) Orange Juice opinion

When this market rolls over it's going to be more fun than 1987

2,000 - 2002

2007-2009

Combined.

Good trading people, hope this motives you to define trend, learn to short and collar every trade to define risk on the trade and for the duration of the trading period. 

Additional disclosure: I've been a professional trader and run a family office from Tortola, British Virgin Islands for the past 20+ years, zero income, corporate, sales and inheritance tax and would like to keep it that way. Because of the potential tax implications I do not manage U.S. accounts or sell advisory services to U.S. clients. I do however manage funds for qualified non-U.S. investors and entities. I may at times for my own accounts or for the accounts I manage have positions on that could be contrary to the ones mentioned in my reports, additional disclosure.