HINDENBURG SELLS ARE THEY ANY GOOD
There has been alot of talk recently about the Hindenburg Sell signal. Cramer apparently mentioned it on his show recently, and the Elliot Wave people have also been discussing it. I have overlayed in RED on the chart above a couple of the recent sells indicated by this strategy/signal. You can see that the first one was not bad but for the most part here, you were selling right into a significant low. Here are some other charts displaying some of the others going back in time a bit.
You can see from looking at all of these charts that some very nice signals have in fact come from this concept over the years. There are also others that are not so good. However, the majority of them are good enough where it does make sense to take notice of them when they show up. I intentionally showed one of the bad ones in the first chart for the following reason. When you research ideas on how to trade going forward, this is exactly what seems to always happen. You stumble upon something that you think it the holy grail, you test it over and over, then when it comes time for the first trade with it you lose money. Most commodities traders are convinced that Murphy was in fact a trader himself. How else could he have made up his primary rule!
This is just reality. The goal is to establish edges in the marketplace and then try and exploit them knowing that often those edges will not play out favorably. As long as they play out favorably more than they do not, the edge is valid and is a good tool to make money. I hate losing just like the next guy, but I have learned to accept it as part of this business. In any other job say for example a sales position, you lose alot of sales you think you might get so this is no different. You just have to have good techniques and try and implement them the best way you see fit.
I will not get into the exact formula for this indicator, but it is basically a ratio that looks at new highs and new lows on the NYSE and qualifies that with a couple of other things. I am sure you can find it on the internet if you do a search