"Well, in my early years of trading, i belonged to the school "Fed is pushing on a string". Trading taught me the hard way "Don't fight the Fed". When the Fed announces some policy decision, which floods the system with liquidity, and the market responds with a range expansion, i have learn't to go with the flow. The power of central banks should not be underestimated IMO. Yes Bernanke will fail someday, the Fed will fail someday, the U.S Govt. will fail someday - the natural forces will overwhelm them. I have realized that it's not something that can be measured in years, but in decades. It's a futile intellectual effort to time that day of reckoning. It's monetarily disastrous to trade with such a perspective."
"Or... why not wait for a sign of strength in the VIX ETFs?
Or... a sign of weakness in the Indices?
Then get short on a retest?
We like ODDS, and the odds for shorting are best when a high is made and then retested on lighter volume... followed by a stronger volume decline and break of the candle lows from the highs of the daily/hourly candles.
"As for the technical aspects of trading systems, i have experimented on pretty much all kinds of momentum indicators, price based strategies and internals( for about 6 years using Tradestation and Amibroker). For my style of trading (hourly timeframe and less), i did not find much success with internals like A/D line, NYMO, NAMO, Breadth oscillators, VIX, TRIN etc. Too much of conflicts and too many good trades missed because of non-confirmations from them. My success came when i started trading momentum indicators. But trading momentum without due respect to context (or trend) cost me in terms of overall win/loss ratio. Traders-talk helped me a big way in understanding the importance of underlying trend. Watching folks fight the trend in traders-talk was an eye-opener, not to mention i was also a part of that crowd at some point. I then incorporated trend rules in my system using momentum methods. My success rate went higher. But i still missed some great trades because of non-confirmation of trend using my momo indicators. When a high amplitude move occurs and the pivots get wide apart, momo indicators take a lot of time to confirm sharp reversals in trend. There are many other situations where momo indicators fails to confirm trends. Finally to me the holy grail was defining the trend purely using price with my own rules, based on my observation of the price over a decade. Now my definition of trend is based on pure price, Entry trigger is based on one indicator, Stop is based on pure price, Exit is based on pure price. In other words 75% of my system is purely based on price. Only for the entry, i use a indicator based trigger. I am happy with my current system and have now pretty much stopped developing systems and focussing on trading and execution. It took me 8 solid years to settle with a system that i could fully trust and become consistent. It's one of the toughest professions in the world without a question."
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