Here is the chart for today:
The one bounce area early in the day was correctly picked, but the system gets caught trying to pick bounce areas in a big wave of selling that comes into the market.... and doesn't do so well.
The massive and disorderly selling makes it hard to average with single contracts, and to remain profitable when the bounce or short-covering begins, a pyramid down scheme needs to be deployed.... so additions to the long positions would have to increase as the market goes down and higher probability areas are established. So for example, long 1 contract in the 1225 range, 2 contracts at 1220, 4 contracts in the 1215 range. This brings the average cost to the 1217.80 area and makes the trade profitable at the bounce.... but it increases risk with every down tick.
More selling than this would mean that at the next level you'd have to buy 8 contracts, and hold 15 contracts!! However, in 99.99% of time there will be a bounce as buyers find lower levels more attractive and as shorts start to cover positions, SO the more you pyramid down, the better that cost average and possibility of profitability in this type of sellers market. HOWEVER, that 0.01% of the time you hit the fat tail and a market condition that is NOT normal in anyway.... just like May 6th, 2010!! This type of day is guaranteed to wipe out your account in a pyramid down scheme! So traders beware!!!!
Trading is a game of probabilities.
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