It’s make-or-break time on my Short trade. I went short the market, based on a TD Sequential signal, with a fair portion of my portfolio back in mid-September using inverse etf’s. Bad timing. Several of them are down 25%. My overall portfolio is down about 6-7% across the several accounts I trade thanks to great performance from my stocks. Though I’ve handily beaten the market over the past few years it still hurts to underperform during a bull run.

Bad risk management. I put too much into the trade, and I should have analyzed the TD Risk Level before going in. The Risk Level is calculated by finding the bar (week) with the highest high of the TD Countdown, and adding it’s range to it’s High. For this trade the high week was week of April 19th, and adding it’s range to it’s high gives 124.0 The chart below shows this:

Note: to confuse matters, the TD Risk Level is either 124.0 or 125.0 depending on which data service I use – whether a trade week ends on a Monday or Friday. Anyway, we are up to these levels now and if the market closes above them, the trade is off.

So it’s now make or break. But last week I broke a little, and sold off a few triple-inverse etf’s (CZI and DRV) at a 25% loss. 25% is a standard stop-loss many traders use. I’m still holding three remaining short etf’s and plan to until/unless the TD Risk Level is breached.

I should probably quit this Demark thing and stick to picking value stocks. Partially due to my intense study of Demark this summer, I missed a 70% return opportunity in Gymboree (GYMB) – see my last post. Picking good stocks at great prices has made plenty of investors wealthy and I’m pretty decent at it now.

But I know this. These Demark signals very often make fantastic calls. I see it in my spreadsheet on hundreds of stocks/etf’s I’ve studied. I just need to learn to be a better trader in order to use it.