Recent history with [UVXY]

A recent comment from a frustrated reader reminded my of my early days in trading and I think there is value in reviewing the sentiment and the facts.  The comment centered around the commenter's obvious loss of money trading in UVXY and the frustration with the lack of fairness and honesty in the world and in the marklets.  The commenter also questioned whether I really made any money from the recent triple in UVXY.

I  do not want to belittle trading losses.  They can hurt financially as well as hurt the ego.  At the same time, without examining these things, how will anyone get better?  First I have to say that if you are not an experienced trader with the ability and discipline to use stop loss orders, or if you cannot detach yourself emotionally from the trade then you need to either quit trading OR stick to trading issues that do not have time value in them where the fundamentals will eventually catch up to a badly timed trade OR focus on longer term investing in miners OR find another blog to follow (in that order). 

This is not meant to be mean or unfeeling toward folks that are not winning in the markets but rather to be plain honest talk.  If something is not working for you, why continue?  I know that not every reader has been here a long time but when I first picked to trade TVIX and then UVXY as well as JNUG, etc. my goal was to pick the most leveraged thing I could find because I felt that my EW skills were good enough to give me the upper hand.  But I have been doing this for quite some time and it is not nearly as easy as it looks.  So none of what I write here is meant to be trading advice because very, very few people have my experience in counting waves because very, very few people even ever heard of Elliott waves much less believe that they are a real thing.  As far from perfect as my models have been, you do not get anywhere near my level in 3 months or even 3 years.  You have to do it long enough for your brain to actually rewire itself to become an EW pattern matching engine otherwise the nuances will lose you more often than not. It also takes a long time for people to become emotionless traders and many will never overcome this hurdle.  I know I still struggle with it even though I think about it every single day.  This blog is little more than my documented models on a few stocks and occasionally I will post trade details.

Over the past 18 months I have gotten stopped out of UVXY many times because the model went bust.  That is just the way it is.  I think of it like a poker ante.  If a stop goes off it is not a failure.  In fact, getting stopped out and watching the ticker continue to plummet without me in it always makes me smile because I know it is affording me a lower entry price.  You have to play the cards you are dealt.

In any case, my models shown in these pages are not always correct even though my wave count to that point might have been.  The herd has the ability to change direction in real time and that is just part of it.  So the models are not always right and in fact if I get it right just 70% of the time I consider that fantastic odds enhancement. 

The key is that when I get it wrong to quickly take my losses and not continue playing a bad hand.  That is where most people mess up.  They don't want to take their losses because it hurts their pride to do so.  Wall St knows this and believe me it is built right into their trading algos.  They know what most people are thinking before the people do.  Do not take this as conspiracy theory talk.  This is fact.  They know the bid, the ask, the size at each, the trading habits of every single individual in play.  They have seen and logged every single one of your trades!  Do not be surprised to find that they have profiled every single gambler in the game.  Remember, your broker knows every move you make and your broker is a wall street player.

Does this sound outlandish?  If so then let me tell you that when I was at AMD one of our biggest customers for servers was Wall St.  What do you think they are doing with literally hundreds of thousands of super powerful servers?  Storing emails????  Really?  Running their website maybe?   PLEASE!!!  I know what they are doing because the technology exists to do it and it is what I would be doing if I were in their shoes.  They have completely tilted the odds in their favor by modeling human herding behavior and human emotional reaction into their trading algos.  The trader is playing against Watson, Wall St edition.

But despite this overwhelming advantage I contend that by using EW and discipline you can still win.  Anonymous commenter was incredulous that I actually made money on the recent triple by UVXY.  So let's review the recent record.

In this post I was clearly modeling that the bottom was very near.   So this is not a matter of the bottom happening and then changing direction and then me talking about trading long.  No, folks, I was still looking for a bit of downside on UVXY but already planning my long side trade.  That is a matter of public record.  I did not write that post after the fact, I wrote it in advance.  Period.  Here is the bottoming model that I posted.  Red primary path was $24.50.



That post was Thurs July 30.  Here are the next few trading days showing actual bottom at 24.35, just 15 cents below my target low.



So I anticipated a bottom, the bottom occurred very close to my time frame and price target and wave count.  Doubt me all you want but yes I traded heavily to the long side of UVXY on this.



Then, as UVXY was skyrocketing I was modeling the first motive wave up to be complete in the $84 range.  Here is the chart from that post.  After cyan 1 was complete we had to expect a big pullback into cyan 2:



The actual peak spiked momentarily into the low 90s:.  At this point I was looking for a strong pullback per above model.  Do doubters really think I just sat there and held on??  Folks I was modeling a bottom , I traded long.  I was modeling a top, I got the F out.  Buy low sell high.



Well, instead of pulling back to the prior 4th it decided to do a deep vee 2nd which is something that I have warned people about many times as being quite common.  If people do not heed warnings of experience then there is nothing I can do for them.  Did I try to go long at the prior 4th?  Yes.  Did I get stopped out for a small loss?  Yes.  Gotta play the odds.  In fact I made other trades on the way down where I won some lost some.

But at this point I model that wave 2 is done and 3 or C has begun.  I model that it will reach a higher high than the last move.  I also have clear stops set because wave 2 can never go below the start of wave 1.

Folks, this is about odds and not certainties, I have been clear on this matter.  But the fact that wave red 1 was very likely motive and the fact that the decline since then looks not motive but corrective coupled with the fact that UVXY could not put in a lower low (at least not yet) tells me the odds are very good that my model is correct.   And the fact that I know exactly where to throw in the towel tells me I will not lose much if the model fails.

I don't know of any other web site or blog that lays it out so simply.  This is gambling.  EW is an odds enhancement tool based on common herding patterns.  My models are not always correct but they are never gut feel or random.  And my documentation is pretty complete so coming in at this point and wondering if I actually made any money on something that I so clearly documented is the sign of someone who is hearing but not listening.