Musings on the Developing Trading System

We began the week with another downtrending price bar on the daily chart of the cash S&P500. Let’s review the trading system built to date.

1) Only take trades when granted permission by the next higher time frame. Currently the weekly chart is on a technical “sell” signal (as is the Medium term Price Pulse char) and so we can only go short the daily chart. One potential trading vehicle to use is the ProShares SH ETF.

2) When should the purchase of these shares be triggered? I propose that the position be entered when the Intermediate price pulse chart generates a “sell”. This occurred on Friday, February 29 when the previous B-pulse low was broken at 1327.03. The initial stop loss point should be at 1388.34, the C-pulse high.

The next question that needs to be addressed is “When is the position closed?” I think there are three instances. One is when the stop loss is triggered and another is if the weekly chart flashes a technical “buy” signal. The third would be if the Intermediate price pulse chart generates a “buy”. None of these three instances exist this morning and so the system remains on the short trade.