The Wagner Daily Subscriber Guide
- High odds of the broad market following through to the upside and staging (or remaining in) a meaningful rally
- Positions sized at full (maximum) risk
- Long exposure typically anywhere from 100% of model account buying power to 200% (based on margin), depending on strength
- No short positions
- Market conditions have improved (when coming from prior decline) and are beginning to show signs that stocks are ready to launch a meaningful rally
- Positions typically sized at 25% - 50% of maximum position sizing
- Long exposure around 50-60% of cash value of the model account
- May still have 1-2 short positions in the portfolio if the buy signal is weak and the prior decline was significant
- Buy signal was recently generated as market was attempting to form a bottom, but the buy signal fails (false buy signal)
- Rather than immediately switching back to "sell" mode, we adjust the model to "neutral."
- In this mode, we can be positioned either long or short
- Position size of all new trade entries will be lighter than usual, in order to reduce risk
- Portfolio will be primarily (or fully) in cash, with only a few positions in either direction
- Current intermediate-term market rally is over and odds of the market pulling back are very high (when the broad market is extended from a muti-month rally)
- We immediately get off margin
- Will be focused on taking winners off the table, tightening stops on long positions, and/or reducing long exposure significantly
- In some cases, we will sell all positions and quickly move 100% to cash.
- A few short positions initiated
confirmed sell -
- Broad market is breaking down and the odds of a significant decline are high
- No long exposure, as we do not trade against the market trend
- Short exposure (including inverse ETFs) is at its highest level, in order to profit from a downtrending market
- today's watchlist - When clear stock or ETF swing trade opportunities present themselves, this is where the specific details of the technical setup are listed. Specific share size, trigger, stop, and target prices are all provided. The frequency of setups provided is dependent on both market conditions and our current number of open positions, but we typically target several new stocks or ETFs for entry each week. Holding times vary, but average between 1 to 3 weeks. Rather than inundating you with an unrealistic number of trades to follow, we use an actual model account that ensures we are never positioned beyond its maximum buying power. The model account is $100,000. With maximum buying power of 2 to 1 brokerage margin, this gives the model trading account a total buying power of $200,000. Traders can simply divide or multiply our pre-determined share size in order to match the proportionate size of their own trading account.
Note that any cells shaded in green color indicate a new addition to the watchlist since the previous day's report.
- Symbol - Ticker symbol of the stock or ETF
- Side - Indicates whether the trade is a long entry (buy) or short entry (sell short)
- Type - This is the order type for the trade. If new to trading, a basic explanation of order types can be found here.
- Shares - The share size we are targeting for entry, based on the $100,000 model account explained above. Maximum risk per trade (share size times the number of points to the stop) is no more than 1% of the model account size ($1,000).
- Trigger - Exact price that the stock or ETF must trade through before we will enter the trade. For a "long" setup, the stock or ETF must trade at or above the trigger price (for "buy stop") or the maximum price we will pay for the trade (for "buy limit"). For a "short" setup, it must trade at or below the trigger price ("sell stop"). Note that we will only enter the position if the trigger price is hit during the trading day. Entering a trade before it trades through its pre-determined trigger price substantially increases the risk of loss, and is not recommended.
- 5-minute rule - Market makers can and do manipulate the opening price action of stocks and ETFs. To avoid "false triggers" for trade entry, we have a very simple rule in place in which we do not take any entries (long or short) that trigger within the first five minutes of trading. After 5-minutes have passed (9:35 am ET), we mark the 5-minute high (or low if short entry) and add (or subtract) 10 cents to that number as the new entry price.
Buy setup example:
The night before the market opens, we list stock ABC as a buy with a trigger price of $40.00. During the first 5 minutes of trading, ABC stock hits our buy trigger price at $40.00. Because our entry triggered before 9:35, we ignore the entry and apply the 5-minute rule. After 5-minutes have passed, we see that the 5-minute opening high was $40.20, so we add 10 cents to the 5-minute high, giving us a new buy trigger price point of $40.30.
The process is the same for a short selling setup, but we use the 5-minute low and subtract 10 cents from that number as the new short entry.
Short selling setup example:
The night before the market opens, we list stock XYZ as a short setup (betting the price will go down), with a short trigger price of $50.00. During the first 5-minutes of trading, XYZ stock trades below our short entry at price of $50.00. Because our entry triggered before 9:35, we ignore the entry and apply the 5-minute rule. After 5-minutes have passed, we see that the 5-minute low was $49.75, so we subtract 10 cents from the 5-minute low, giving us a new short entry point of $49.65.
If you are unable to watch the market during the open (such as if you have a daytime job), we highly recommend opening a trading account with a brokerage firm that allows the placement of "conditional orders." This means you can set your order to automatically not go live until 9:35 am, rather than immediately on the market open. Two brokers we recommend for this are Interactive Brokers and TradeStation, both of which offer very cheap commissions and high technology for active traders.
With regard to opening "gaps," if the 5-minute high of the gap is more than 1.3% above the trigger, then the setup is cancelled. See below for details.
- Gap Rule - When a stock or ETF "gaps" (opening price change from previous day's closing price) more than 1.3% above or below a trigger price for entry, the setup is automatically cancelled. For example, if we list a buy trigger at $30.00 and the price the following day opens greater than $30.39 ($30 x 1.3%), the trade is is automatically cancelled. So, if the stock/ETF opens at $30.45 the trade is automatically cancelled. One must place a buy stop-limit order to execute this rule. This is done by placing a buy stop order to trigger at $30.00, with a maximum fill (a limit) at $30.39. It is generally only necessary to do this when the futures market is indicating a sharp "gap" from the previous day's close.
- Stop - If the setup triggers for entry, this is the initial price at which we will have a protective stop market order (we always use "stop market," not "stop limit" orders). As a position becomes profitable, this stop price will often be trailed higher in order to lock in profits. Any new adjustments to the stop price are also reported in the next day's newsletter, under the "open positions" section. Note that trades are automatically closed if they hit their predetermined stop prices during the next trading session.
- Target - This is the roughly anticipated price we expect the stock or ETF will move to. Note that we automatically close trades as soon as they hit their target prices (unless the "stop" price is hit first). However, this does not mean we will always hold the stock or ETF to that price. When conditions warrant, we will take profits before the predetermined target price. Again, any pre-market changes to the target price are reported under the "open positions" section.
- open positions - An overview of all open stock and ETF positions currently held in the model trading accounts. In this section, our current protective stop and target prices are listed for each position. When changes have been made to open positions, such as stop or target prices, the cells are highlighted in pink color for quick reference. New trade entries since the previous day's report are shaded in green colored cells. The abbreviation "CO" listed in the "stop" column means we are closing the open position on the next day's market open. "Current P/L" of open positions is based on the closing marked to market value of the most recent trading day.
- closed positions - An overview of all stock and ETF positions that were closed only since the previous day's report. A cumulative performance report of all past trades can be found on the performance page of our web site. When reporting closed positions, we use realistic entry and exit prices that account for normal slippage, rather than the exact, theoretical prices that were listed in the setup. "Net P/L" of closed positions is based on the model account size and includes realistic commission fees of 1 cent per share.
- ETF, stock, and broad market commentary - This section provides a brief technical recap of recent market action and discusses specific ETFs and stocks we are monitoring for potential entry on the long or short side of the market (depending on market trend).
- Legend to chart annotations - On the charts included in the commentary, here is a key for the various indicators on the charts:
- beige line = 20-day exponential moving average (EMA)
- teal line = 50-day simple moving average (SMA)
- orange line = 200-day simple moving average (SMA)
As always, please feel free to e-mail us with any questions, comments, or feedback on The Wagner Daily newsletter. Enjoy your subscription and good trading to you!
DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily ( hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have a position in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.
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