How Not To Trade The Bear

There is no trading the bear market, forget trading entirely.

You need a completely different mindset, that could not be any further from that of a daytrader’s.

To thrive in the bear, you need to learn

  • position initiation
  • location of check points
  • hedging

If you look back the last 2 posts, you already have a good idea for where to initiate holdings: as close as possible to Mr. Maroon, but a cross beyond E32, sometimes even an approach would do nicely.

I would suggest scaling in to try to obtain the best average price and your required size.

Now comes the roller coaster.

You need to have and to hold shorts accumulated and with the wave structure in mind, you sit back and wait. Wait for check point 2 and check point 3.

Once the price is comfortable at CP2, you can bring your stop loss down to the top of CP1, or alternatively you could have a counter long – hedge initiated at that level with a smart trail stop this is the bear-roller-coaster-hedge option.

Once the price gets comfortable with the CP3 zone, you can move your stop / hedge long stop to the top of CP zone 2.

Consider lightening up on your shorts in the CO zone 3 if price made it there. Scale out, just like you scaled id.

The levels are at certain displacements calculated from there is a threat of the Market Breaking away from its shadow (magenta line, white highlights)

CP1 top: Low[i]-FSize/1.5*Point-300*Point

CP2 top: Low[i]-FSize/1.5*Point-760*Point

CP3 top: Low[i]-FSize/1.5*Point-1120*Point

Each and every zone is 20 pips wide. FSize is 32 pips

Sh/As stands for Short/Add to Short (you may increase your size at these levels)

the shadow-separation line is: OverDriveCover[i]=E32[i]-FMax*Point

FMax (fluctuation maximum) is 6/5th of FSize

Where to from here? Back to the Eagle Nest of the Market Makers, Mr. Maroon himself.

Wave structure below

In conclusion, you don’t open naked longs unless price is well into CP3.