Trading for Financial Freedom

Thoughts

2010-08-23T03:09:00.000+08:00

What a weekend it was! Memorable in many ways, socializing and networking.

Met and exchanged views with so many local "celebrities" in the local markets, in their own way or another. I shall not attempt to describe the interaction, as my journal is mainly about the financial markets and my trading journey. Here's a quick snapshot of key highlights, not in any order of importance.

* Trade what the market tells you, not what you anticipate of the market. If the latest trend is down, do not fight the tape and try to "buy at support" like the herd does.

* When trading futures, take a position and put a trailing stoploss, and let the market take you out. Putting a target price is equivalent to anticipating where the market might move to. Doing so may stop you from holding onto the gains in a trending market. That trade could potentially be the biggest win of the year!

* Reassess your position by asking yourself 2 questions:
(a) Is this a retracement (corrective wave) or a reversal (impulse wave)? Assuming you trade with the trend (as most people claim, but few actually do, myself included), if there are signs of a reversal, close the position, and reverse it (more for futures and currency traders)
(b) Would you still enter the trade in the original direction, at the current price? If you would not, why are you still holding onto the original position?

* Losers average losers (Paul Tudor Jones quote). For trading, never average down, only average up (adding to winning positions). A wise old man said: never mix trading with investing!
(This implies that one should keep separate accounts: trading and investing)

* Do something well and keep it simple. Have a daily or weekly simple target (if time permits), and aim to make small consistent gains. Little drops make an ocean; a journey of a thousand miles start with a single step.

* Never trade with an ego or think you will be right or cannot fail. The markets are always right, and we cannot control the markets. Work on controlling your emotions, and executing your plan.

* Always give back to society and place your priority on your loved ones. "Becoming a better trader and becoming a better person seem to go together." - Ed Seykota

SG Stocks - 16/Aug close

2010-08-16T22:09:00.001+08:00

1. Capitaland - Took profit at 4.04, on the day it hit above 4.1, and stayed below 4.05.

2. Singtel - Bought at 2.96 today.

3. SMRT - Still holding, bought at 2.05 first week Aug.

US Market holdings - 6/Aug close

2010-08-08T19:21:00.000+08:00

Holdings as of 6/Aug close.

1. Long EWJ Jan 2012 $6 Call at $3.45 (Long-term).
EWJ closed at 9.86, nearing 200 MA at 9.9.

2. Long YHOO Oct 2010 $10 Call at $4.10 (Swing, hold till Aug expiration)
BUOB, YHOO closed at 14.34.

3. Long XLF $14.31, Short equivalent XLF Aug 2010 $14 Put (Had closed Short equiv XLF Aug 2010 $15 Call at $0.19 for small loss)
XLF closed 14.78, just above converging 20 & 50 EMA, just below 200 MA at 14.91.

4. GLD Iron Condor Aug 2010: Added more contracts and holding onto 122 C, -121 C, -111 P, 110 P
GLD closed 117.84.

5. SPY Iron Condor Aug 2010: Opened contracts 119 C, -118 C, -108 P, 107 P
SPY closed 112.39.

SG Stocks - 6/Aug close

2010-08-07T13:42:00.002+08:00

1. Capitaland (click for chart)
6-Aug close: 4.09

R2: 4.44
R1: 4.2
S1: 4
S2: 3.84
S3: 3.65

Strategy: Sell close to 4.2, wait to buy back at S2 or bounce off S1.

2. SMRT (click for chart)
6-Aug close: 2.05

R2: 2.19
R1: 2.1
S1: 2
S2: 1.88

Strategy: 3 inside bars within 1 black bar. Look to buy if bounce off S1.

3. Noble (click for chart)

R3: 2.1
R2: 1.92
R1: 1.74
S1: 1.6
S2: 1.38 (stronger support if look-back 3yrs). Near-term support 1.48

Strategy: Buy at S1

Disclosure: Holding longs on Capitaland and SMRT

FNSR - possible C&H

2010-07-25T04:28:00.002+08:00

FNSR: Possible cup and handle formation on long-term (weekly or monthly chart)

http://slopeofhope.com/2010/07/volume-by-price-bars-look-fnsr-by-leisa.html
http://finviz.com/quote.ashx?t=FNSR&ty=c&ta=0&p=m

GLD, XLF and YHOO

2010-07-22T02:27:00.000+08:00

1. GLD Iron Condor Aug 2010 - Scaled in on some positions for 122 C, -121 C, -111 P, 110 P (Credit of $0.30). Will continue to scale in over the next 2 weeks, no stoploss.

2. Long XLF $14.31, Short equivalent XLF Aug strike 15 Call $0.19, no stoploss.

3. Long YHOO Oct strike 10 Call $4.10 (Delta 0.95). After-earnings gap down to 15 month support. Timeframe: 3-4 weeks max (up to Aug expiration), stoploss if weekly close below $13.

Manually closed Euro short at 1.2772 (+108 pips).

Japan ETF and Euro

2010-07-20T21:56:00.004+08:00

1. With the Nikkei 225 closing at 9300 today during Asia close, i wanted to go long EWJ, the Japan ETF which traded at $9.3 at US opening. (Position trade)

Instead of going long the underlying at $930 per lot, i have entered Jan 2012 $6 Call at $3.45.

Comparisons:
$6 Call at 3.45 average (Delta: 0.8935) (Bid-ask: 3.3, 3.55)
$5 Call at 4.4 average (Delta: 0.9421) (Bid-ask: 4.15, 4.6)

Cutloss: If Nikkei 225 closes below 9000 (EWJ equiv of 9) for 2 consecutive days.
Take profit: Will evaluate if Nikkei 225 rebounds nears 10,000.

2. EURUSD - possible key reversal off 1.3. (Max 1-2 days, which can be a long time in FX!)
The Euro is forming a BEOB (Bearish outside bar) on a daily basis. Entered Short at 1.288, Stoploss 1.304, Trailing step 80pips, TP 320 pips. (Note: This is a set-and-forget position)

APWR - closed, V call - opened

2010-07-20T01:04:00.000+08:00

APWR:
Today i decided to close out both positions (long stock and short call), for a small gain. The selldown in this low volume stock doesn't look too good, as it is diverging from the market movement.

Have also closed out long position i added on Friday to APWR, which is smaller than my original holding.

V call:
Have entered Sept 80 call for V at $1.10, which has earnings on 28 July.
Reason: Near $70 support (V currently trades at 71.25). Will look to close the position after earnings.

LVS - closed

2010-07-15T23:01:00.003+08:00

Closed out LVS position.

Obviously if i held the stock position only, profit would be larger. On the other hand, closing the position early means capturing only a fraction of the extrinsic premium.

Actn Qty Underlying Description Price Crrncy Exch. Time Order Ref. Comm
SLD 1 LVS AUG10 21 Call Option 3.15 USD CBOE JUL 12 22:47:03 OptTrader
BOT 100 LVS Stock 23.08 USD NYSE JUL 12 22:47:30 OptTrader 1.00
BOT 1 LVS AUG10 21 Call Option 3.95 USD CBOE 02:12:36 1.01
SLD 100 LVS Stock 24.18 USD NYSE 02:13:02 1.00

Long stock and short ITM call

2010-07-13T23:39:00.000+08:00

APWR: Weekly close above 7.75 and it has held above 7.75 so far. Looking to possibly add max 2/3 to 1 portion of current holdings. Last Friday i attended an interesting dinner at a local association formed by the local stock exchange and former floor traders, and thereafter had a coffee with a veteran of the trading floor, who gave me an idea on options.

Instead of a covered call (long stock + short OTM call), or married put (long stock + long OTM put), why not long stock + short ITM call for front month (synthetically equivalent to married put)? So i sold the equivalent of Aug 2010 strike 7 call option for $1.10, and collected a small portion of time premium $0.20. Did the same for LVS, opening both stock and option positions simultaneously.

Current positions:
APWR: Long 7.27, short Aug 2010 strike 7 call for $1.10. Extrinsic premium $0.20
LVS: Long 23.08, short Aug 2010 strike 21 call for $3.15. Extrinsic premium $1.07

No entries on current watchlist, will stay out for rest of week and prepare plan for next week after 16 Jul options expiration.

Watchlist:
RIMM: Breakout last Fri above $51-52 on higher than average volume. May test $58 to cover the gap, which coincides with 50 EMA.
BP: Tested the 20 EMA before continuing its up move. No retracement, so did not enter long position.
C: Closed above $4 last week, and continued up. Volumes are not higher than average (14 EMA)

Back - APWR and a few...

2010-07-09T02:15:00.000+08:00

After a short break from the markets (most of May and June), am slowly getting back into trading and doing small positions.

1. APWR- Long at $7.22 on 30/Jun, watched it bounce off $6.8 support (did not have a plan to add), and sold it on the 5/July opening pop at $7.7 (felt the upmove was a bit overdone).

Watched it close the previous gap, and queued to long again at $7.24 & $7.31 (currently holding). Will consider adding if it stays above $7.75.

2. RIMM - Watching. Looks like catching a falling knife, will consider going long if it clears and stays above $51-52 on high volume. Keeping a close watch on 45 mth low of $35, should form strong support. Will consider entering partial position if it comes close to $40, followed by more if it bouces off $35.

3. BP - Watching. Probably a bit overplayed, would like to see it retrace to $30-31 and reverse up, forming an inverse H&S.

3. C - Watching. Need a clean break of $4 on high volume.

On the bigger picture, everyone seems to think the S&P500 support of 1040 is crucial, and we have bounced back above it this week so far. As long as 1040-1050 holds, will continue to hold long positions for equities.

Review - 5/5 to 8/5

2009-05-10T21:09:00.001+08:00

A short review for last week.

1. Intraday trade on LVS, 6/5
Enter LVS 10.77, exit 10.41. - 3.3%.

Positive: Mental stop was slightly below 10.5, so the loss was taken quite quickly.
To improve: Tried to pick a bottom, but probably did it a bit too early. Stop could have been tighter if bottom fishing.

2. Intraday trade on BAC MAY 14 Put (BYOQN), 7/5
On this day, BAC opened with a huge gap up at $15 (prev day close $12.25), and the trade was intended to fade the gap. Trade was taken when a lower high was formed on BAC after watching the first 45 mins. Trade closed when BAC came back above $14.

Entry 0.84, exit 1.05. + 25%.

Positive: Controlled trade, good entry (lower high on a huge gap up day), good exit.
To improve: To recognize it was a down-trending day for the indices and financials. Pullback on downtrend day would mean an opportunity for another short entry.

3. Straddle on FAZ, 7/5
Entered FAZ MAY 6 Call (FAYEF) at 0.6 and FAZ MAY 6 Put (FAYQF) at 0.9, when underlying FAZ was around 5.7-5.8. This was on the day of the bank stress test results, announced after mkt close at 5pm EST. The option chain will profit only if FAZ goes above 7.25 or below 4.75, and the intent was to close the position on Fri 8/5.

Unfortunately, i did not stick to the strategy, and instead sold off the put leg when it seemed the market was turning, and closed the other at the end of the day, when the FAZ indeed hit the profit zone, hitting a low of 4.43 at 3.50pm EST.

Exited FAYQF at 1.1, exited FAYEF at 0.2. + 22% & - 66%.

Lesson: Plan the trade, and trade the plan! I followed the first half, but not the second half. Thought to self: Remember, sticking to a written strategy is far more important than the trading outcome.

Links

2009-05-08T01:09:00.001+08:00

A few good reads:

1. 10x Equals X - The Importance of Hard Work.

These new traders believe that if their work output is X then their reward must be X. If only that were the case. When you begin as a trader, your work output must be 10x to make x.

2. “V” Right on the Open - Where I Want to Be - Excellent example of market opening trade.

3. Bullish on VIX

4. Full Q&A With Investors and Traders on Twitter - stockguy22

5. Volume Weighted Moving Average Price (VWAP)

Review - 27/4 to 4/5

2009-05-05T00:22:00.004+08:00

An eventful week, closed all positions and entered/exited Visa calls, and a brief stock trade in MasterCard.

Old positions (all closed):

1. CCJ JAN 2010 30 Call (LTAAF) - entered 0.45 on 14/4 when underlying CCJ was 18.19. Exited remainder 2/3 position at 1.925 average on 30/4, near the end of a strong surge (when CCJ was 24.52 & 24.56). + 327.8%

Talk about the power of options: the stock gained 34.9%, while the options gained 327.8%.

2. SPY MAY 90 Put (SWGQL) - entered 4.65 on 24/4 (when SPY was 86.81). Was waiting for a break in support of the SPY, however breakdown did not happen. Exited 5.3 on 27/4 (when SPY was 85.75). + 13.9%

3. HL SEP 2.5 Call (HLIZ) - entry was 0.45, exited 0.6 on 28/4 (when HL was 2.59), at the end of a strong day surge. + 33%

4. SLV JUL 16 Call (SLVGP) - entry was 0.65, cutloss at 0.25 on 27/4 (when SLV was 12.85). - 61%

New positions (all closed):
1. V JUN 70 Call (VFN) - was quietly confident on Visa's earnings results on 29/4 after mkt close, but waited for the right moment.

On 24/4, Visa climbed to a high of 60.75, and the calls hit about 0.85.

Waited for a dip, and on 27/4 morning, entered the calls at 0.70 (when V was 59.13). Since the calls doubled and hit 1.4 on 29/4 morning, i decided to sell off two-thirds of the calls at 1.45 and 1.35. + 101%

The stock went on to reach a high of 63.74 on 29/4 late afternoon, before the earnings after market close, which were slightly favourable. But on the next day 30/4, the market shot up, and Visa went on to hit a high of $68, taking the calls to bid price high of 2.9. Exited remainder at 2.75. + 292.8%

Now, most people might say, they could have kept the calls since they were already 100% up. But like the recent Goldman case of buy-on-rumour and sell-on-news whereby the calls collapsed due to time decay and stock sell off on results, there was a possibility of losing a large amount of the gains or more, hence i decided to close two-thirds of the position before the results.

That the calls went on to double again after i sold most of the position, giving almost 300% gains is immaterial. The key is to recognize when not to be too greedy, and take what the market gives you. Before the trade, i would have been happy with a 100% gain from the calls, hence the decision to lock in most of the gains was a right one.

2. MasterCard (MA)
This was another earnings play i was eagerly anticipating, results were due on 1/5 before mkt open. I was looking to enter on 29/4, but partly due to the Visa's earnings, there was a hesitancy to be place too many eggs into one basket, since both are electronic payment companies. The option i was looking at: the MA JUN 220 CALL (MALFD).

Here's what happened. On 29/4, the stock hit a low of 168.17, before really taking off to the races, hitting 177.83 near the close. During the day, the calls went from 1.35 to 1.7. On the next day, the stock gapped up above 180, and went on to hit 188.77 before closing below 184. The calls opened at 2.46, and hit a high of 3.4.

Hence the calls had more than doubled before earnings results.

However on 1/5, earnings results were out before mkt open, and due to the company's warning about continued weakness in revenues, the stock gapped down and briefly hit below 164. What happened to the calls? They collapsed with the drop in volatility, and ranged between 0.55 to 0.8 that day, since there was little chance of the stock hitting the strike price.

Instead, i took the opportunity to take an entry on the underlying stock at 170 at the end of the trading day, and exited it on the next trading day morning.

MA stock - entered 169.96 on 1/5, exited 177.08 on 4/5. + 4.2%

Lessons from Brett Steenbarger, Part 1

2009-05-03T14:38:00.013+08:00

Lessons from Brett Steenbarger, author of several psychology trading books, including the recent release - The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist.

This blog post will focus on: How to avoid overtrading, and why you should not overtrade.

1. How Do I Avoid Overtrading?

Essentially, overtrading consists of: "trading size that is too large for one's portfolio (i.e., taking too much risk per trade) and trading too often (i.e., when an objective edge for the trade is not present)".

The solution is to formulate one's trading rules explicitly, and to stick to it always. As Ed Ponsi mentioned in a seminar i attended last November:

Always stay with your strategy. Never change your strategy even if the outcome is positive from a case of not following your strategy.

Judge the success of your trades based on whether you followed the strategy, not based on the outcome.

2. In a related post - Position Sizing and Risk Management in Trading, Brett shows why position sizing is so important.

The example used shows a peak-to-trough drawdown of 12% for a portfolio whereby returns per trade is only 1%, on the assumption the trader has entered a period of flat performance (average zero return per trade).

Brett goes on to say:

When we trade size that is too large for our account size, we subject ourselves to drastic swings in P/L, and that subjects us to drastic swings in mood. In turn, we then make trading mistakes that bring a negative expectancy to each trade, and the size eventually blows us up.

3. Finally, a few nuggets of wisdom.

From a medical doctor, from Risk Management and the Biology of Trading Psychology.

... risk management is perhaps the preeminent tool of trading psychology. When we trade with excessive leverage, exposing our accounts to potential drastic drawdowns, we create the kind of stress-based learning that overwhelms the executive abilities of the prefrontal cortex.

There are many guides for risk management, but perhaps this psychological definition is simplest of all. You should always ensure that any loss you are likely to take in a position will not be large enough to generate an emergency response of mind and body. The size of your positions relative to the size of your portfolio will serve as a kind of magnifying glass for the stress responses of mind and body.

Risk management is a biological--as well as psychological--trading imperative.

From Brett:
(a) Take What the Market Gives You: When your idea pays you out quickly, take some profits; (the winners that turn to losers are especially painful)
(b) Focus on profitability for the week: Don't get caught up in individual trades; focus on profitability over a series of trades and days.

Solar

2009-05-03T02:25:00.004+08:00

Firstly, my watchlist of Solar companies: http://finviz.com/portfolio.ashx?v=1&pid=3392922. More analysis to follow in the next few weeks.

News and articles:
Solar Stocks Up Nearly 7% for Week

First Solar rallies after profit triples, First Solar Rockets Higher; An Exception To The Rule, FSLR - Jan 09 Review by Green Market blog

Solar Industry's Long Term Outlook

Solar Stock: Recovery and Comparative Market performance - article from The Green Market

Links

2009-04-26T00:40:00.003+08:00

Useful links:

http://chart.ly/user/terchua - to share stock charts for twitter and stocktwits

How to buy a stock for a 15-20% discount - excellent option writing strategy.

The key is to pick stocks that are:

Trading near lows
Fairly volatile
NOT likely to go bankrupt/Undervalued
Either pay dividends or have good growth
Have a clear path of continuing contracts to write
You don’t mind owning long-term

Review - 13/4 to 24/4

2009-04-25T23:40:00.005+08:00

It's been a busy two weeks with ups and downs.

A. The positive trades:
1. DNDN MAY 7.5 Call (UKOEU) - entry was 1.55, exited 12.4 and 10 on 14/4. +622% average

2. C MAY 5 Call (CEP) - entered 0.21 on 13/4, exited 0.42 on 14/4 (2/5 position) and 0.48 on 15/4 (3/5 position). +100% and +128%

The calls went up to 0.72 on 14/4, but did not adopt a limit stop to protect profits, and kept the remainder position overnight.

3. FAZ MAY 7.5 Call (FAYEU) - intraday, entered 2.4 on 22/4, exited 2.7 and 2.6. +12.5% and +8%

B. The negative trades:
1. GS APR 140 Call (GSDH) - entered 2.23 on 13/4, exited 0.2 on 14/4. -91%
Lesson: Chased the calls too late in trading session after a strong surge, the day before results.

2. TCK MAY 10 Call (TCKEB) - entered 1.05 on 13/4, exited 0.75 on 15/4. -28.6%
Lesson: No rationale for short-term position, except for results on 21/4. This one is a longer-term hold.

3. C stock - entered 4.07 on 16/4 day before earnings, exited 3.16 on 21/4. -22%

Lesson: Always use stop to protect profits, never be complacent and think the unexpected will not happen.

Did not sell in pre-market hours at 4.3 on 17/4, and stock dropped quickly when market opened, missed opportunity to cutloss at 3.9-3.99. Held onto the loser till i was tired of watching it.

4. SPY MAY 90 Put (SWGQL) - entered 7.05 on 20/4 (when SPY was 83.88), exited 6.75 on 23/4 (when SPY was 83.93). -4%

Lesson: This was a bit of a boo-boo, as i just realized the entry was 7.05. Had mistaken it to be 6.05, hence the early exit was taken. This stresses the importance of record keeping and reviewing them!!

5. FAZ - intraday, entered 10.82 on 21/4, exited 10.06. -7%

Lesson: Swing low was 10.46 on 21/4, hence stoploss would have been tighter (around 10.42) to cut losses fast.

C. Holding:
1. CCJ JAN 2010 30 Call (LTAAF) - entered 0.45 on 14/4 when underlying CCJ was 18.19, exited 1/3 position 0.85 on 24/4, +88%. Holding remainder 2/3 position.
Rationale: Uranium miner (Cameco) for long term. Strong 3 day move made the underyling CCJ overbought, with $21 resistance. Intend to scale in further if it breaks $21 and establishes $20-21 as support.

2. SPY MAY 90 Put (SWGQL) - entered 4.65 on 24/4 (when SPY was 86.81). Rationale is that SPY 87.5 has strong resistance, and there might be a pullback in the next 2 weeks.

3. HL SEP 2.5 Call (HLIZ) - old position

4. SLV JUL 16 Call (SLVGP) - old position, may evaluate to consider cutting loss and enter Oct 09 or Jan 10 calls instead.

Earnings watchlist

2009-04-12T21:00:00.002+08:00

No changes to positions in the past week.

For the week of 13-April, more earnings are in the pipeline, including:

Goldman Sachs (GS), Tuesday, before market open
Johnson & Johnson (JNJ), Tuesday, no time given
Google (GOOG), Thursday, after the close
JP Morgan Chase (JPM), Thursday, 6:30 a.m. ET
Citigroup (C), Friday, before market open
General Electric (GE), Friday, before market open

Trade Review 30/3 - 3/4

2009-04-04T13:44:00.008+08:00

Firstly, no changes to positions in the past week.

1. Current Holdings:
(a) HL SEP 2.5 Call (HLIZ)
Entry was $0.45, closed 3/4 $0.4. The underlying took a hit on 27/3 and 30/3 with Silver dipping, but recovered slightly and closed 3/4 at 2.06.

(b) DNDN MAY 7.5 Call (UKOEU)
Dendreon soared on Friday 3/4, as investors looked ahead to long-awaited data on the company's experimental Provenge vaccine to treat advanced prostate cancer.

Entry was $1.55 (when DNDN was at 4.14), closed 3/4 $2.04 (as DNDN closed 5.99, up 38% on Fri with vol of 22.78M compared to avg vol of 2.56M).

(c) SLV JUL 16 Call (SLVGP)
Entry was $0.65, closed 3/4 $0.45. The underlying SLV ETF dropped off it's 20/3 high of 13.6 and closed 3/4 at 12.6. Watch this closely, as SLV's support of 12 to 12.5 must hold.

2. Next, the one i was watching the past few months, but did not trade, Research In Motion (RIMM) which reported earnings on Thur after market close.

The April 60 calls (RFYDL) closed Wed 1/4 at $0.22 (up $0.1 that day), closed Thur 2/4 at $0.58 before the results. RIMM reported better-than-expected earnings, hit $60 in the Thur after hrs trading and a high of $60.95 in early Fri trading.

The April 60 calls hit a high of $3.9 on Fri, and closed at $2.82.

3. Watching:
(a) STP (Suntech Power Holdings Co. Ltd.)
STP JUN 20 C (STPFD): 3/4 close 0.7-0.85 (bid/ask)
STP SEP 22.5 C (STPIX): 3/4 close 1-1.2 (bid/ask)

(b) TCK (Teck Cominco Limited), Industrial Metals & Minerals - Results 20/4 after mkt close.
TCK MAY 10 C (TCKEB): 3/4 close 0.3-0.4 (bid/ask)
TCK AUG 10 C (TCKHBTCK): 3/4 close 0.8-0.9 (bid/ask)

(c) IVN (Ivanhoe Mines Ltd.), Industrial Metals & Minerals
IVN JUN 7.5 C (IVNFU): 3/4 close 0.85-0.95 (bid/ask)
IVN SEP 10 C (IVNIB): 3/4 close 0.7-0.85 (bid/ask)

(d) V (Visa Inc.), Results 29/4 after mkt close.
V MAY 70 C (VEN): 3/4 close 0.9-0.95 (bid/ask)

(e) HBC (HSBC Hldgs), provided support of $31-32 holds, after gap up on 2/4.
HBC JUN 40 C (HBCFH): 6/4 0.9-1.05 (at 12.30pm when underlying HBC was 32.75)
HBC JUN 45 C (HGKFI): 6/4 1.05-1.15
HBC SEP 45 C (HGKII): 6/4 0.4-0.45

News and Links from the past week

2009-03-28T23:43:00.001+08:00

General News:

- The Amazing Surprising Trend Day of March 23
- Monday Options Update: XLF, JPM, C, AGN, RHT, SU, SWY
- China calls for creation of new currency to replace the dollar
- Bear Market Comparisons
- Friday Outlook: Commodities, Global Markets
- Elliott Wave Update - Possible Count for March 26
- Geithner's Financial Reform Is Doomed to Fail
- China Chastises West in Leadership Bid Before G-20

Investment Ideas:

- Exclusive Interview With the 'King of Copper' - Juan Villarzu
- Fast Food Rising Quickly: MCD, YUM, CMG
- Speculating on Chinese Solar: Throw a Dart and Smile - STP, TSL, LDK, YGE, JASO
- 2009 Country Performance: BRIC Countries All in the Black
- ETF encyclopedia - list of ETFs by category

Gold and Silver:

- Silver Market update (news)
- Bob Moriarty: Act on Contrarian Thinking (interview)
- Richard Russell articles, on Gold-eagle.com
- Roger Wiegand: Senior and junior gold, silver mining stock picks: Part 1 and Part 2.
- Jim Sinclair's Mineset - excellent blog!

Trade Review (23/3 - 27/3)

2009-03-28T23:06:00.001+08:00

1. Trades Closed:
(a) MS APR 30 Call (MSDF) - entered 16/3 $1.1 (when MS was $24.42), cutloss 24/3 $0.85 (when MS was $25), - 23%.

The calls went to as low as 25 cents on 20.3, before the market rebound brought MS back up. However after comparing the underlying chart with the option chart, the time decay was apparent. The calls hit $1.55 when the stock hit a high of $26 last week, while today (24/3), the calls hit $1 with the stock at $25.5. Decided to cutloss, since i have the longer-term XLF call. (MS subsequently hit a high of $27.2 on 24/3, but closed the week at 24.35).

(b) XLF SEP 11 Call (XJZIK) - entered 23/3 $0.94 (when underlying XLF was $8.88), closed 25/3 $1.22 (when underlying XLF was $9.28), + 29%

The XLF had a strong first half trading session on 24/3 (hitting 9.66 twice), but faded along with the market selldown and closed below opening. However on 25/3, after a small gap opening (see *Note), there was slight divergence with the SPY, as the XLF failed to hit the previous day high, only touching 9.55 while the SPY took out the previous 2 days high of 823 and touched 826. In view of this divergence, i took a small early profit. As of 1.50pm on 25/3 (US time), the SPY indeed covered today's gap up, and was sold down to 806 (with XLF at 9).

2. Trades Entered:
- SLV JUL 16 Call (SLVGP) - entered 27/3 $0.65 (when underlying SLV was $13.16).

Have been watching this call, which ranged between 0.6-0.7 on 25/3. The bid-ask was 0.55 and 0.65 on 27/3, but decided to enter an initial position first.

3. Current Holdings:
- HL SEP 2.5 Call (HLIZ)
- DNDN MAY 7.5 Call (UKOEU)
- SLV JUL 16 Call (SLVGP) (added this week)

*Note: SPY gap up (or gap down) of $1 or more are a strong indication of the market strength (or weakness), and the gaps are usually not filled. Gaps of < $1 are usually filled. Stats from Traderfeed and Quantifiable Edges.

Links - Silver and Gold

2009-03-23T21:32:00.001+08:00

- Short Squeeze in Silver - How to Profit
- Silver's discount to gold sticks out like sore thumb
- Apples of Gold, Settings of Silver, and Barrick Gold
- Dow/Gold Ratio and the Dollar: What Does It Mean for Value Investors
- Gold report - interview on gold and precious metals

An opposing view - Gold Bulls Should Stay Away from Gold Stocks

RunToGold.com
Silver Blog Spot and Silver Investor - good list of articles
The Gold and Oil Guy
Silver Brothers
Wikipedia - Silver

Trade Review (16/3 - 20/3)

2009-03-20T02:29:00.008+08:00

1. Trades Closed:

(a) XLF Sep 10 Call (XJZIJ) - entered 26/2 $1.04, sold 16/3 $1.1, + 5.8%.

Decided to cash out as there is a possible short-term resistance on the XLF at 8.6, on a day when Citi was +40% and BAC +14% within the first 2 hrs. Will consider re-entry on a pullback.

2. Current Positions:

(a) MS APR 30 Call (MSDF) - entered 16/3 $1.1, still open.

MS has been on an uptrend since the $1 opening gap up to 17.5 on 10/3 Tue, before hitting a high of $25.5 today. Took this trade when MS dropped to around $24.4, on the basis of 23.6 support holding. It has hit a YTD high, hence this is a play on the least path of resistance.

Note: Admittedly, this trade was not my idea. Checked the chart and saw a possible opportunity, especially with a possible rally in the current options expiration week.

(b) HL SEP 2.5 Call (HLIZ) - entered 19/3 $0.45 (when underlying HL was 2.02), still open.

Hecla Mining - proxy to Silver and metal's strength.

(c) DNDN MAY 7.5 Call (UKOEU) - entered 19/3 $1.55 (when underlying DNDN was 4.14), still open.

Dendreon - biotech play.

Trade Review (9/3 - 13/3)

2009-03-15T11:37:00.002+08:00

Managed to stick to the discipline of only taking trades that were planned out in advance. It was tempting to stray, particularly since it was a huge upmove in the markets, with the S&P500 moving up about 9-10% for the week, and clearing the 700 level convincingly. The next resistance level to watch is 800.

For the upcoming week, will be watching XLF, BAC, JPM and DXO.

1. Trades Done:

(a) IBM APR 95 Call (IBMDS) - entered 9/3 $1.3, exited 11/3 $2.0. + 54% (before comms)

(b) POWERSHARES DB CRUDE OIL DOUBLE LONG (DXO) - entered 11/3, exited 12/3 $2.4 (when Apr Crude was around $44.4 and $45.4 respectively), + 2.2%.

Thoughts: Due to the uncertainty of the US indices on Thur 11/3, i took an early exit for the IBM calls, when the underlying stock took a temporal high for the day, which turned out to be the case. Subsequently, the calls retreated and went to a low of $1.45 on 12/3, before the market rally brought it to a high of $2.4, when IBM hit 90.53.

For DXO, it was a maiden Oil ETF trade. Observed that crude oil increase of $1 equates to about $0.1 increase in DXO. The entry was done after release of crude inventories figure of 0.7M, against 0.1M expected. April Crude rallied to $45.8, before coming back down all the way to $42.08. The lesson learnt is to avoid such entries immediately after a news release, and instead wait for the news to filter through to the markets.

2. Current Positions:

(a) XLF Sep 10 call option (XJZIJ) - entered 26/2 $1.04, still open.

With financial stocks leading the past few days' rally, the XLF will remain a hold, with a view to add to this position.

Articles:
Wednesday Outlook: Commodities, Emerging Markets

Trade Ideas

2009-03-08T16:59:00.007+08:00

Here are my ideas for the upcoming weeks till mid April. Prices quoted at 6/3 Fri close. At this point, am favouring positions in XOM, IBM and possible DXO. Will also consider a short-term trade on XLF, plus closely watch NG and IVN.

(a) SPX - Straddle on the SPX or SPY, using April options.
- Long SPY APR 2009 69 Call (SWVDQ) and Long SPY APR 2009 69 Put (SWVPQ). However breakeven is 60.65 and 77.35, which makes it too wide a range. Max loss is $835 per 1 contract, if SPY stays at 69. One possibility is to do the reverse, and Sell both the options, earning $815 premium, with $2,538 margin required. Premium-margin ratio is 32%. However given the possible volatility, the margin required may increase, hence will pass on this possible trade.

(b) XOM (Exxon Mobil) - Support at $60-$62, and as a proxy to oil's strength.
- Long Apr 70 calls (XOMDN - 1.55/1.59) or Apr 75 calls (XOMDO - 0.59/0.62). Cutloss if XOM closes below 60, target 70-75.

(c) IBM - Closed 85.81 on Fri, possible support at 80.
- Long Apr 90 calls (IBMDR - 3.1/3.2) or Apr 95 calls (IBMDS - 1.5/1.55). Cutloss if IBM closes below 80, target 90-95.

(d) Gold - Will stay out of GLD, am considering GDX or GLD/GDX options. The alternative is to own Gold explorers like NG (NovaGold Resources Inc.) or IVN (Ivanhoe Mines Ltd.).
- Short GLD MAR 2009 93 Call (GLDCO) and Short GLD MAR 2009 93 Put (GLDOO), earning $514 premium, with $2,821 margin required. Breakeven point is 87.86 and 98.14. Premium-margin ratio is 18.2%.
- Short GDX MAR 2009 33 Call (GBJCG) and Short GDX MAR 2009 33 Put (GBJOG), earning $330 premium, with $1,152 margin required. Breakeven point is 29.7 and 36.3. Premium-margin ratio is 28.6%.
- Will consider NG or IVN Apr options, depending on how the US indices and Gold move in the next 2 weeks. 6/3 close: IVN 4.17, NG 2.70.

(e) Crude - Long a small position in DXO. Watching DBE (energy ETF).

Other commodity ETFs include DBC (Commodity ETF) and DBA (Agriculture ETF).

(f) Aussie and Canadian Currency - Watching FXA and FXC, in particular FXC, especially if USDCAD resistance of 1.3 holds. 6/3 Fri close 64.07 (FXA) and 0.6402 (AUDUSD); 77.76 (FXC) and 1.288 (USDCAD). Checked the FXA and FXC options, however the spreads are quite wide, hence not viable.

(g) XLF - Possible short-term reversal trade, given it's large drop the past week. Stoploss has to be tight, around the 6-Mar low of 5.88.

Trade Review (23/2 - 6/3)

2009-03-08T13:51:00.009+08:00

Been formulating some ideas in my mind the past few weeks, and i realized i need to concentrate on fewer markets, and formulate my trading plan and stick to them, including an appropriate exit strategy.

Firstly, a review of the past 2 weeks results, my first venture to the world of options!

(a) BAC Aug 6 call option (BYOHF) - entered 23/2 $1.10, exited 26/2 $1.88. + 71% (before comms).
Plus: Exited on a strong upday when the underlying was up 12-13%, even though my original intent was to keep this for a few weeks.

(b) XLF Sep 10 call option (XJZIJ) - entered 26/2 $1.04, still open. Call closed $0.29 on 6/3.
Minus: Did not have exit strategy, had opportunities to exit 25-30% down.

(c) JPM Apr 25 call option (JSADE) - entered 4/3 $1.30, exited 5/3 $0.67. - 48% (before comms).
Plus: JPM continued going down subsequently, hence a 50% cutloss was appropriate.

(d) GE stock - entered 4/3 6.16, exited 4/3 6.33. + 2.8% (before comms)
Minus: Could have held onto this a bit longer, as the position became profitable quickly, and stayed it that way subsequently till Friday close.

(e) BAC stock - entered 4/3 3.78, exited 5/3 3.46. - 8.5% (before comms).
Minus: Need to stick to a tighter stoploss. Unfortunately, it was a gapdown day on 5/3, and subsequently it hit a low of $3 on 6/3, hence this is an example of the importance of cutting losses.

(f) GLD ETF - entered 5/3 89.8, exited 6/3 92.56. + 3% (before comms). The reason for the early exit was because the GLD ETF has little upside gains in terms of %, and i found an alternative which i'm observing, GDX (Market Vectors Gold Miners ETF).

Overall Plus: Exited BAC calls on a strong upday when the underlying was up 12-13%.
Overall Minus: Overexposure to the financial sector. Also, due to the high comms on optionsXpress, i need to cutdown on trades until i've opened a lower comms broker such as Interactive Brokers.

Links

2009-03-08T13:29:00.004+08:00

- Looking Back on the 1929 Stock Market Crash, March 7 Weekend Look at the SP 500 Index, Elliot Wave: Where are We in the Wave Structure?

- Aussie, Canadian Currencies Hold Promise In '09, Dollar Shines in a Depression, While China Buys Metals

- **Useful link** The Complete List of Commodity ETFs and ETNs

- A Personality Questionnaire for Traders, and Subjective Well-Being: Why It's Important for Traders

- Visa’s Golden Opportunity

SP500 at critical juncture

2009-02-28T12:09:00.003+08:00

Extract from Corey's post, SP500 Support and Fibonacci off 1980s Low:

It’s on the chart permanently now - the S&P 500 officially closed February beneath the 2002 Bear Market lows - but let’s look beyond that. Did you know the S&P 500 is at a very critical potential long-term Fibonacci support level? Let’s see it on a Monthly chart that dates back to 1980.

(You’ll definitely need to click on the chart to see the larger file)

Do you see something rather interesting?

Taken off the 1987 price low, a Fibonacci grid drawn from that level to the 2007 high price of 1,570 shows that the deep 61.8% Fibonacci Retracement comes in at roughly 735. Today’s (and the month’s) closing Low? 735.

Perhaps there’s absolutely no significance whatsoever with that number, but it’s certainly worth observing and being aware of the possibility that buyers might swoop in at this level simply because of this development that might be taking many traders unawares.

Also, note the November lows found support 6 points above this level that formed the floor for a rally that took the index back to the 950 level.

If this Fibonacci support zone fails, then it’s likely the next possible zone of (Fibonacci) support would come in at 665, which would be the 61.8% Retracement of the Beginning of the Bull Market in 1980/1982 (when the S&P index was near 100).
Should this level fail, all bets are off.

Links

2009-02-28T02:41:00.008+08:00

- Citigroup Arithmetic Explained and Citi Bailout Math, and Preferred-Common arbitrage, after the Citi rescue. C prefers some Preferred shareholders over others, as GIC converts

- 7 Signs of an Economic Bottom

- Sage Advice To Save Your Portfolio - picks using the strategies of Buffett, Benjamin Graham, Peter Lynch et al.

- Three Trading Losses, How NOT to Blow your Day-Trading Account

Quotes

2009-02-12T22:20:00.002+08:00

“There are two requirements for success in Wall Street. One, you have to think correctly; and secondly, you have to think independently.”
- Ben Graham

“I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities. The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you follow these three rules, you may have a chance.”
- Ed Seykota

“One of the most helpful things that anybody can learn is to give up trying to catch the last eighth - or the first. These two are the most expensive eighths in the world.”
- Edwin Lefevre

“Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there. In particular, you should spend no time at all thinking about those rosy scenarios in which the market goes your way, since in those situations, there’s nothing more for you to do. Focus instead on those things you want least to happen and on what your response will be.”
- William Eckhardt

“If you’re playing for emotional satisfaction, you’re bound to lose, because what feels good is often the wrong thing to do. Richard Dennis used to say, somewhat facetiously, “If it feels good, don’t do it.” In fact, one rule we taught the Turtles was: When all the criteria are in balance, do the thing you least want to do. You have to decide early on whether you’re playing for the fun or for the success. Whether you measure it in money or in some other way, to win at trading you have to be playing for the success.”
- William Eckhardt

Links

2009-01-31T14:51:00.004+08:00

- January ends with grim news, but don't write off 2009 yet. Is this the end of Warren Buffett?

- Turning off indicators and using MAs on trend days, Why you should never buy because it's cheap, and Open-gap trading setup.

- The life of a daytrader (NY Mag), Strengths of the emotionally intelligent trader.

- Possible turn in USDJPY?

Cartoons

2009-01-28T23:59:00.003+08:00

Source: Wed morning - bad banking & Bernanke

Mining Stocks

2009-01-24T15:30:00.009+08:00

1. Article on junior gold miners.

2. Charts of a few mining companies.

Yamana Gold, Inc.
Yamana (big cap) - has just broke the wedge, with immediate resistance at $8. Keep an eye on gold prices which have hit $900, with immediate resistance at $930.

Ivanhoe Mines Ltd.
Ivanhoe (medium cap) - recently broke out of the double-bottom to hit $4, before coming back below $3. Needs to break and stay above $4 for further upside.

Central Sun Mining Inc.
Central Sun mining (small cap) - penny which has made a higher low. Immediate resistance $0.50.

Links

2009-01-24T15:14:00.002+08:00

Interesting links for the week.

- John Thain leaves Bank of America, but see what he spent at Merrill Lynch.

- RIMM - Research in Motion, a possible cup-and-handle coming up? Find out with Bulkowski's Pattern Recognition Software.

- Optionetics' on options and VIX ratings, and a blog on options commentary.

- Yesterday's mirror image of the previous day for the DIA & SPY and Swing trading eBay, from Corey's excellent blog.

- U.S. Dollar Strength and Implications for Gold, and an opposite view on gold.

- Preserving Wealth During the Global Banking Crisis - charts and examples of why "Accepting losses is the single most important investment device to insure safety of capital".

- New FX site: FX360.com.

- Singapore's 2009 budget unveiled.

- The late January indicator:
a) If the stock market registers a net gain during the last five trading days of the year, the rest of the year will be up.
b) Conversely, if the last five trading days of January witness a decline in the stock market, then the market should in theory decline between the end of January and the end of February.

- And more from the Kirk report and Friday's mailbag.

Weekend reading: Toby Crabel - Day Trading With Short Term Price Patterns And Opening Range Breakout

Updated: 24 Jan.

ONS Strategy

2009-01-16T02:15:00.005+08:00

ONS Strategy

1) GBP/USD, EUD/USD, USD/CHF, USD/JPY

2) Buy only on Fridays -- at one pip above the highest high of the last ten days -- if the 10 day simple moving average is above the 40 day simple moving average based on Thursday's closing price.

Sell only on Fridays -- at one pip below the lowest low of the last eight days -- if the 10 day simple moving average is below the 40 day simple moving average based on Thursday's closing price.

3) If you get filled on either rule, exit on Monday morning's open, or Tuesday morning's open, if Monday is a holiday.

4) Traded with fixed-fraction money management applying 4% of capital per trade, it's had an annual rate of return of 68% and a profit factor of 1.87 with 59% profitable trades.

Source: Infiniteyield

FirstStrike Plus

2009-01-16T01:29:00.008+08:00

FirstStrike Plus

Buy/sell distances from the week's open are adjusted by current volatility -- wider when the markets are volatile, and much closer when the markets are calmer. Reliability and an increased win/loss ratio is a primary benefit.

1) GBP/USD, EUD/USD, USD/CHF, USD/JPY, GBP/JPY, starting line is every Monday 06.00GMT open.

2) Calculate the total range of the previous week (high - low = range) and multiply that figure by .30 to obtain the values which will determine our entry points for the next week. (Example: EUD/USD: Week's range (Oct. 6-10, 2008) was 527 pips (high:1.3785, low:1.3258). Multiply 527 x .30 = 158.1, and round up to get 159 pips.

3) After Monday's morning open be ready to buy on a stop at the opening price + the quantity from step (2). Or, be ready to sell at the price on a stop of the opening price - the quantity from step (2).

4) Stoploss: If previous week's range was a total of 527 pips, multiply 527 x .10 = 52.7. Again, round up to get 53 pips. If you get long you will place a position stop below the week's open a total of 53 pips (total risk in this example: 159 + 53 = 212) to protect your capital.

5) If you are not stopped out, wait for the open of the next weekly bar, which would be the next Monday 06.00GMT. (For a short trade, reverse these instructions)

If exiting at the open of the next week would result in a profit, exit the market. If not, continue holding until a succeeding week's opening price is profitable or you get stopped out for a loss. It is possible, but not very likely, to be in a trade for a number of weeks after entry.

6) Keep monitoring and placing your current buy and sell prices for each week. Your new buy or sell orders for the week, under some rare circumstances; may be closer than a protective stop loss order for an existing position put on the week earlier that hasn't exited profitably yet.

Source: First Strike and Infiniteyield

ETF links

2009-01-14T21:33:00.009+08:00

Compilation of ETF links.

The Complete List of Commodity ETFs and ETNs

Firstly, ETF education, from ETF trends.

Next, Seeking Alpha's ETF articles, and list of Oil ETF.

What ETF? ETF screener, WSJ's ETF Screener and Yahoo's ETF Center.

IndexUniverse.com, and iShare fund screener - list of ETF with stock as part of holdings.

Dave's daily ETF blog.

Taken from Kirk Report ETF Resources.

ETFs: Chart Trend Comparisons - useful list of country and bond funds

Updated: 28th April 2009

Weekly scalping Strategy

2009-01-14T20:59:00.003+08:00

Weekly scalping Strategy

1) EUR/USD, starting line is every Monday 06.00GMT open
2) Place buy and sell orders: 06.00GMT open + 30 pips and - 30 pips, with SL of 45 pips
3) SL for the 1st order that is hit is also reverse order = if SL gets hit, open a reverse position, with SL of 45 pips. We do this only ONCE (so maximum 2 trades per week). The other order is cancelled.
4) TP is ALWAYS 3:1 = 135 pips (3*45).
5) Money management: For the first order we use 3% of equity. For the second order we use 5% of equity. So all in all, we risk maximum per week 8% of equity. If we reach TP with first order, we have +9%. If we reach TP with second order we have +12% (5*3-3 = 12%).

Source: Weekly scalping

Strategy - Week of 12th Jan

2009-01-11T21:46:00.006+08:00

Strategy for the week of 12th Jan and list of the key events with currency impact.

Key Calendar events:
Tue 13 Jan 9:00pm USD Fed Chairman Bernanke Speaks
9:30pm USD Trade Balance

Wed 14 Jan 8:30am AUD Home Loans m/m
9:30pm USD Retail Sales m/m

Thur 15 Jan 8:30am AUD Unemployment Rate
9:30pm USD PPI m/m and Unemployment Claims

Fri 16 Jan 9:30pm USD Core CPI m/m
10:55pm USD Prelim UoM Consumer Sentiment

1. GBPUSD:

Close - 1.516
R - 1.537
S - 1.511, 1.499, 1.48

Strategy:
(a) Short at 1.527 to 1.53, SL 1.542, TP 1.513 and 1.501
(b) Short below 1.51, TP 1.501 and 1.482

2. EURUSD:

Close - 1.3469
R - 1.382, 1.375, 1.3635, 1.353
S - 1.331

Strategy:
(a) Short at 1.375 and 1.3635, SL 1.382, TP 1.353 and 1.331
(b) Long above 1.385, SL 1.374, TP 1.4

3. AUDUSD:

Close - 0.703
R - 0.726, 0.713
S - 0.701, 0.695, 0.685, 0.676

Strategy:
(a) Long at 0.701 and 0.695, SL 0.675, TP 0.72 to 0.726
(b) Short below 0.695, SL 0.703, TP 0.685 (Hedge LT long position)

4. Crude Feb 09 futures

Close - 40.36
R - 42.2, 41.77, 41.27, 40.86
S - 39.92, 39.36, 38.43, 38

Strategy:
(a) Long above 41.27, SL 39.36, TP 43 and 44.77
(b) Long above 39.92, SL 38, TP 41.27 and 42.2

5. Gold

Close 853.35
R - 930, 890, 868
S - 838, 828, 800

Strategy:
(a) Short below 828, SL 840, TP 800
(b) Short below 868, SL 880-885, TP 838 and 828

Journal

2009-01-06T23:59:00.001+08:00

Finally i have embarked on my Forex trading journal.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=149921

Swingtrade Strategy

2008-12-28T13:57:00.003+08:00

Swingtrade Strategy

Pairs:
EURUSD, EURJPY, GBPUSD

Timeframe:
Daily chart and weekly chart - used for illustration.
4hr chart and daily chart.

Trade only if shorter TF is in direction of longer TF.

Use:
Parabolic SAR settings: (0.02,0.20)

Setup:
- Check the daily chart at the close/open of a new daily candle.
- If an opposite SAR is shown, check against the weekly chart for overall trend.

Entry:
- If the weekly and daily SAR’s are in agreement, enter the trade immediately at new candle.

Exit:
- Check once a day at the open/close of the new daily candle and wait for a reversal SAR to appear.
- If reversal SAR appears, DO NOT exit trade until completion of THAT daily candle, this is to ensure that this is a definite reversal signal as sometimes the SAR dot can repaint itself in the opposite direction. When this candle is complete and the next daily candle appears EXIT THE TRADE.

Await the next DAILY entry signal.

Source: Shakesfx GBPJPY Parabolic SAR

Intraday Strategy

2008-12-28T13:12:00.009+08:00

Intraday Strategy

Pairs:
EURUSD, EURJPY, GBPUSD

Timeframe:
15min charts, check 1hr & 4hr chart for longer TF.
1hr charts, check 4hr & daily chart for longer TF.

Trade only if shorter TF is in direction of longer TF.

Use:
13 EMA (high) and 13 EMA (low)
MACD Hist (3,8,13 or 7,14,5)
QQE 5

Setup:
- Find the wave (A-B-C) (L-H-HL for long or H-L-LH for short). For illustration, only long positions are used.
- B should cross the EMA channel, and C is a pullback either almost touching EMA channel, or into EMA channel.
- EMA channel should be pointing upwards for long, and pointing downwards for short.
- QQE above 50, or sloping upwards sharply.

Money Management:
- Enter 2 lot sizes, with SL at point A.

Entry:
- Point B as entry point or first candle free from the EMA channel (wait for a quick pullback creating another wave before entering a pending order).
- Point A as the stoploss or nearest resistance.

Exit:
- Use Parabolic SAR as 1st lot exit, and candle close opposite to EMA channel as 2nd lot exit.
- If unable to monitor after entry, put trailing stop + X with trailing step X, whereby X is initial SL.

Source: sonicdeejay

Trading in the zone

2008-12-24T17:02:00.006+08:00

From Mark Douglas, Trading In The Zone.

Five fundamental truths:

To think in probabilities, you have to create a mental framework or mind-set that is consistent with the underlying principles of a probabilistic environment. A probabilistic mind-set pertaining to trading consists of five fundamental truths.

1. Anything can happen.

2. You don't need to know what is going to happen next in order to make money.

3. There is a random distribution between wins and losses for any given set of variables that define an edge.

4. An edge is nothing more than an indication of a higher probability of one thing happening over another.

5. Every moment in the market is unique.

The seven principles of consistency:

I am a Consistent Winner Because:

1. I objectively define my edges.
2. I predefine the risk of every trade.
3. I completely accept the risk or I am willing to let go of the trade.
4. I act on my edges without reservation or hesitation.
5. I pay myself as the market makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.

Options Expiration and Links

2008-12-19T01:46:00.009+08:00

A few articles about options expiry week (3rd Friday of the month):

Stats for each day of the options expiry week
Commentary for Nov 2008
Options expiry week = stock market strength?

Updated Options Links:

- Ben's option journal - elitetrader
- Options mentoring - good reviews
- Options insider - list of unusual option trading activity
- Option addict
- Daily options blog
- Covered calls blog
- Covered calls video

Lessons 16 Dec 2008

2008-12-17T01:42:00.002+08:00

When using the High-high and lower-low wave on 1 or 5min, don't chase the price, let it come to you.

Observe the general trend using 5min or 15min TF, but use 1min TF for entering trade. Never trade against the general trend!

For example, if the candle crosses below the EMA channel on 1 min TF, check the 5min TF for the general trend! If there is a higher high even on the 1 min TF, do not take a short immediately after candle crosses below EMA channel.

For long trades, use the 5min swing lows for initial stop, and always move up the stop based on the most recent swing low.

Quote

2008-12-16T02:05:00.001+08:00

Before I start, I am going to give you the only bit of professional trader advice I have for you in this entire document.

One, investigate a method that you believe makes money over time and stick with it [whether it's tunnels or something else].

Two, try to understand the theoretical underpinnings of the model.

Three, trade small until totally convinced method works.

Four, your success [profits] comes from implementing the method correctly, not guessing where the market is headed.

Five, read number 4 again.

Six, give up thinking during market hours. Thinking comes when the machines are turned off, not in the heat of battle. Markets are to be reacted.

~ Quote from FF

Triple Play

2008-12-16T00:23:00.010+08:00

Playing for Keeps in Stocks and Futures, Tom Bierovic.

In this book, there are 3 top strategies - am concentrating on Triple Play for now.

Triple Play, which tries to catch changes in momentum in a trend move by spotting certain divergence patterns between prices and the MACD.

Required: Candlestick or bar chart, EMA channel of 13 highs and 13 lows, and 3-8-13 MACD.

Trading the Long side:

Setup:
1. The lows of the 3 (or more) declines that comprise the multiple divergence pattern must all be below the EMA channel.
2. The MACD line must form a multiple bullish divergence pattern.

Entry:
1. Buy when prices penetrate the top of the EMA channel (the basic entry technique). In addition, consider other factors, such as breakaway gaps, candlestick patterns, and trendlines, to fine-tune your entry.

Exit:
1. Set an initial protective stop below the low of candle C (the low of the multiple divergence pattern).
2. Trail a stop to lock in some profits while giving the market some room to run.

Going back in the last few weeks, these are a few examples found in futures and forex.

And a few more examples found on a low timeframe in today's market, 15 December 2008.

1 - Successful one in the Euro-Yen:

2 - Potential one in the Euro-Dollar, but even though there was a setup, there was no entry critera:

3 - Almost a triple play in Gold. This is based on similar divergence, though the setup is not exactly correct based on Tom's rules. Should serve as a good example that observing the pattern requires a lot practice!

4 - Finally, this is a classic reversal in Crude oil, reinforced by the Head & Shoulders bearish pattern:

Pointers from Ed Ponsi, Forex professional

2008-11-25T21:26:00.003+08:00

Attended a one-day forex course by Ed Ponsi, thought it may be good to share the salient pointers, as most of the pointers apply to trading in general.

A. General pointers:

1. Trading is a Game, don't think in terms of Money, but in terms of % gain and staying with your Trading Plan and Objective.

2. Always Follow the Trend. It takes a lot of Discipline to stay in a trade, in a Trending market.

3. Never add to a losing trade.

4. Never loosen stops, only tighten stops. For example, if you trade on the daily charts, move your stops daily.

5. When the odds are in your favour, you must play the Game. For example, consider entering carry trades when the perception of interest rate cuts are over.

6. Always think like the institutions and professionals, and keep it simple. As the saying goes, "Amateurs are concerned about how much money they can make, professionals are concerned about how much money they can lose".

7. Never lose big (Always cut your losers fast), and stay in your winning trades, so as to occasionally win big.

(Ed Ponsi goes on to elaborate how, at the beginning of his trading career in his first job in Wall Street, his bosses noticed he was the fastest to cut his losses, and even though he wasn't making big wins, that trait saved him from losing his job. Eventually, when he learnt to stay in his winning trades, the larger profits came in.)

8. Trend traders should not be concerned with % of winners, as they could be wrong most of the time. Also, never trade a breakout against the Long Term Trend.

9. Trade Management is key to managing risk, and riding the winners.

(In the Forex example of trading with 2 lots or 3 lots, a suggested approach is to take profit on the 1st lot when the trade hits a profit equal to the amount risked, followed by moving the stop to breakeven. Set target prices for the next 1 or 2 lots, and let the trade either hit the breakeven SL, or TP. If the next TP is hit for the 2nd lot, move stoploss to the 1st TP for the last lot. This concept is probably more apt for shorter-term trades, where the importance is to minimize risks, and also to ride the winners. Ed adds that manual stoplosses are preferred to trailing stoplosses.)

10. Always stay with your strategy. Never change your strategy even if the outcome is positive from a case of not following your strategy.

Judge the success of your trades based on whether you followed the strategy, not based on the outcome.

11. Before entering any Trade:
- Always Trade with a Definite Plan
- Ensure there is a clear-defined, rational reason for entering a trade
- Complete the decision-making process before entering a trade (this includes stoploss and target profit)

B. Forex-specific:

1. Always use max 2% stoploss per trade.
(This seems to be the de-facto No. 1 rule in Forex for non-professionals. I know Leo mentioned he uses 4-5% per trade, but this is an exceptional case from a professional with a proven track record of returns.)

Also avoid taking too many correlated trades.

2. Pick the strongest-weakest pair combination to trade.

3. Scaling in - consider scaling-in or pyramiding only if trade is considerably profitable and stop has been moved to above break-even. (While a number of traders do not advise this to amateurs, but under certain strong trending conditions, there may be opportunities to do so. Caveat: not recommended for volatile market conditions like these!)

4. Set modest, achievable goals and increase your goals gradually. For example, a 2% monthly gain over 1 year, will compound to a 27% annual gain, which beats the majority of mutual funds and hedge funds.

5. Movies to watch:
- Rouge Trader
- 21 (Based on the book: Bringing down the house)

6. Measures of volatility:
- VIX
- Libor rates (measure of the interbank rates, the higher the Libor, the higher the risk)
- Committment of Traders (contrarian indicator of big/small traders)
- TED spread (the difference between the three-month T-bill interest rate and three-month LIBOR) Also see:
http://en.wikipedia.org/wiki/TED_spread
http://www.econbrowser.com/archives/2008/09/understanding_t.html
http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND

DIBS inside bar method

2008-07-30T01:14:00.004+08:00

DIBS inside bar method
Source: http://www.forexfactory.com/showthread.php?t=86766

What: EURUSD, GBPUSD, USDJPY, USDCHF
When: 0600hrs GMT onwards, when any hourly "inside bar" is formed
Where:
(a) First rule: We buy on a break of an IB if price is above the daily open and sell if it’s below ("buying breakouts of inside hourly bars if the prices are "up" on the day, and selling downside breakouts of inside hourly bars if the prices are "down" on the day).

(b) Put the buy/sell 1 pip outside the IB range and remember to add the spread.
Example: IB range is high @ 1.5500 and low @ 1.5400. Buystop: 1.5501 + spread, SL 1.5399, BE 1.5603 + spread. Sellstop: 1.5399, SL 1.5501 + spread, BE 1.5297.

(c) Should we not take the high/low of bar prior to IB for our breakout range?
This is not by PC’s rules, if you feel that this is what suits you, then go ahead.

(d) What is the TP? Or the FTT (Free Trade Target)
We are looking to exit half of our position at 1:1, which means that once you’re up the amount of pips which equals the amount of pips you’re risking (IB-range + 2 (1 up and 1 down for the breakout) + spread) then you close half you position. This is your FTT (Free Trade Target) If after this price comes back and takes you out, you haven’t lost anything. Do not move the SL on the remaining 1/2.

Final Word, from Market Wizards, by Jack D. Schwager

2008-07-14T00:14:00.004+08:00

Final Word, from Market Wizards, by Jack D. Schwager.

There is no holy grail to trading success. The methodologies employed by the "market wizards" cover the entire spectrum from purely technical to purely fundamental - and everything in between. The length of time they typically hold a trade ranges from minutes to years. Although the styles of the traders are very different, many common demoninators were evident:

1. All those interviewed had a driving desire to become successful traders - in many cases, overcoming significant obstacles to reach their goal.

2. All reflected confidence that they could continue to win over the long run. Almost invariably, they considered their own trading as the best and safest investment for their money.

3. Each trader had found a methodology that worked for him and remained true to that approach. It is significant that discipline was the word most frequently mentioned.

4. The top traders take their trading very seriously; most devote a substantial amount of their waking hours to market analysis and trading strategy.

5. Rigid risk control is one of the key elements in the trading strategy of virtually all those interviewed.

6. In a variety of ways, many of the traders stressed the importance of having the patience to wait for the right trading opportunity to present itself.

7. The importance of acting independently of the crowd was a frequently emphasized point.

8. All the top traders understand that losing is part of the game.

9. They all love what they are doing.

More Quotes

2008-04-29T00:32:00.004+08:00

Quotes from Way of the Turtle, by Curtis Faith:

The market does not care how you feel. It will not prop up your ego or console you when you are down. Therefore, trading is not for everyone. If you are unwilling to face the truth about the markets and the truth about your own limitations, fears, and failures, you will not succeed.

Trading is not a sprint; it's boxing. The market will beat you up, screw with your head, and do anything it can to defeat you. But when the bell sounds at the end of the twelth round, you must be standing in the ring in order to win.

Quotes from Market Wizards, by Jack Schwager:

Paul Tudor Jones:

Don't focus on making money; focus on protecting what you have.

Don't ever average losers. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don't have control. For example, I don't risk significant amounts of money in front of key reports, since that is gambling, not trading.

If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in. There is nothing better than a fresh start.

The most important rule of trading is to play great defense, not great offense.

Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you so, you are dead.

Ed Seykota:

The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system.

There are old traders and there are bold traders, but there are very few old, bold traders.

Fib Trades 14-Apr week

2008-04-14T00:54:00.003+08:00

Fib Trades for 14-Apr:

AUDUSD 1 hr
Long 0.9346, TP 0.9365, SL 0.9308

USDJPY 1 hr
Long 101.69, TP 102.20, SL 101.20
Short 100.59, TP 100.23, SL 101.05

EURUSD 1 hr
Short 1.5773, TP 1.5755
Long 1.5802, TP 1.5850 & 1.5896

Livermore Quotes

2008-04-06T01:09:00.004+08:00

Quotes from Jesse Livermore.

"Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance."

"All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical (technical) formations and patterns recur on a constant basis."

"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor."

"Don't take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don't be an impatient trader."

"It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind."

"Few people succeed in the market because they have no patience. They have a strong desire to get rich quickly."

"When a margin call reaches you, close your account. Never meet a margin call. You are on the wrong side of a market. Why send good money after bad? Keep that good money for another day."

"Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend."

"A prudent speculator never argues with the tape. Markets are never wrong-- opinions often are."

"The big money is made by the sittin' and the waitin' -- not the thinking. Wait until all the factors are in your favor before making the trade."

Reviews of Sunday's analysis and Trades

2008-03-25T00:08:00.011+08:00

Reviews of Sunday's analysis:

USDCAD - hit target and slight beyond at about 1.03, before a major retracement.

EURUSD - had keyed in my short overnight at 1.545, but missed on the entry. High was 1.5425, before dropping to the low of 1.5341, missing the original target prediction by 6 pips! After retracement, it hit back to the 100 level (1.5396) and missed the 61.8 level (1.5457) by 3 pips.

USDJPY - had keyed in my long overnight at 99.2, but missed on the entry. Low was 99.36, before the healthy run up to 100. It bounched off 100 a few times as expected, before a surge near the US mkt opening brought it past 100, and past 100.2. From then on, target is 138.2 level (101.16). Currently 100.7.

Conclusion: Fibonacci works wonders with practise, as long as the trend is correctly identified.

This week's trades:

1. Long USDCHD 1.0122, close 1.0190 (took profit before 1.02 resistance), +68 pips
2. Long GBPUSD 1.9841, close 1.9875 (took profit before target 1.988), +34 pips
3. Long USDJPY 100.75 & 100.58, close 100.78 (took profit after it hit 101 and bounced down), +23 pips
4. Short GBPUSD 1.9992, close 2.0019 (took loss as GBP stayed above 2.00), -27 pips
5. Long GBPCHF 2.0236, close 2.0191 (keyed in trade overnight to test intraday fib), -45 pips

Week total +53 pips

More Fibonacci threads

2008-03-24T00:58:00.034+08:00

Using Fibonacci Extension Levels to find Counter Trend Trade
Indicator Free Trading - Skunny (Forexfactory)
Fibonacci Trading - Bobokus (Forexfactory)
Thexder's Journal (Forexfactory)

Video: Fibonacci Forex Trading

Quote: "In order for a swing on any TF to be fibbable, one must wait for at least a 38.2 retrace of the previous move for the swing to be valid (fibbable)".

"Many traders can't figure out where to start a Fib grid. Here's a trick to help you place it where it'll do the most good. The absolute high or low in a price wave isn't the best starting point for a grid most of the time. Instead, look for a small double bottom or double top within the congestion where the trend began. Swing one end of the grid over this second high (or low), instead of the first. This will capture a specific Elliott Wave that conforms to the trend you're trying to trade."

Fibonacci Analysis - 24th Mar week

2008-03-23T23:07:00.005+08:00

USDCAD

Draw 0-100 fib (in purple) when an uptrend forms. In a trending pair, 61.8 retracement offers a good entry, with target at 138.2. Stronger trends will have target at 161.8.

In this case, 161.8 was hit. Short term traders may have taken a short at 161.8 with target at 138.2, which is this case was also hit.

Analysis:
At this point, 138.2 level (1.0239) could either represent a buying opportunity at retracement.
Alternatively, 161.8 level (1.0281) if hit again, could represent a double-top with an opportunity to short with target at 138.2 or even 100.

Combining the technical view with fundamentals, the USDCAD is expected to strengthen further should Oil and Gold prices continue last week's retracement from highs, hence will stay sidelined unless a clear break of 161.8 develops, or the 161.8 becomes clear resistance.

EURUSD

Draw 0-100 fib (in purple) when an uptrend forms. In this case, the bullish EURUSD pair hit well past 161.8 target.

On the first daily red candle, draw the 0-100 reverse fib (in yellow). Retracement was quite strong to 23.6, before descending to the 61.8 level. Traders who were wary of another whip would take the safer short at the second 100 hit, after which 161.8 target was hit easily.

Analysis:
Zooming in to the 1 hour charts, draw another 0-100 reverse fib (in white, 2nd chart). 61.8 level could be an opportunity to short (1.5458), with stoploss at 1.5508(coincides with midlevel of the long red candle), and target at 1.5335 (138.2 level of white fib), and next target of 1.53 (161.8 level of white fib, which happens to be 100.0 level of original purple fib).

USDJPY

The USDJPY has been on a strong downtrend as we know. The purple fib represents the continued downtrend after some sideways movement (101.5 to 103). The yellow fib represents the recent attempt to breakout of the bottoming trend.

Analysis:
Using the breakout attempt yellow fib, 61.8 level (99.2) could represent a long opportunity, with stoploss at 98.61 (have chosen the 38.2 level, instead of 50 level as it's a bit too close), and target at 101.15 (138.2 level). Traders wary of the 100price level, may take a partial position first, and add on to the long at 100.2 (100 level).

Pinbar analysis

2008-03-21T14:03:00.005+08:00

"70 percent of a market's moves occurs 20 percent of the time." - This makes multiple time frame analysis particularly important because no trader wants to lose sight of the overall big picture.

1. Significant trend: Nil.

2. Possible trend:
USDJPY: Downtrend reversal on 17/3 weekly, 17/3 reversal on daily. Major resistance at 100 and 101.1.

USDCHF: Downtrend reversal on 17/3 weekly, 17/3 reversal on daily. Resistance at 1.016.

USDCAD: Bullish candle on 17/3 weekly, 19/3 break past 1.00 on daily (55 day MA). Major resistance at 1.0375 and 1.052.

AUDUSD: Bearish candle on 17/3 weekly, daily shows slight bearish bias. Resistance 0.906 (55 day MA), Support 0.9 and 0.888. Avoid longer term trade, unless commodity prices continue to plunge.

AUDJPY: Bearish candle on 25/2, 3/3, 10/3 and 17/3 weekly. Daily shows range between 89.2 and 93.5. Avoid longer term trade, and wait for possible reversal. Resistance 90.4 and 92.2.

3. Watchlist only, new pairs:

EURCAD: Bullish candle on 3/3, 10/3 and 17/3 weekly. Bullish bias, but avoid longer term trade as recent trend was too bullish.

EURAUD: Bullish candle on 25/2, 3/3, 10/3 and 17/3 weekly. Bullish bias, but avoid longer term trade as recent trend was too bullish.

GBPCHF: Downtrend reversal on 17/3 weekly, daily shows range between 1.967 to 2.016.

EURCHF: Downtrend reversal on 17/3 weekly, daily shows no significant trend. Resistance 1.586 and 1.6.

4. No clear trend, to avoid:

GBPUSD: Indecisive doji on 10/3 weekly, followed by bearish candle on 17/3 weekly. Slight bearish bias. Support 1.976 (55 day MA)

GBPJPY: Avoid due to opposite correlation between GBPUSD and USDJPY.

GBPCAD: Indecisive doji on 10/3 weekly, followed by bullish candle on 17/3 weekly. Resistance 2.06. Slight bullish bias.

EURUSD: Slight bearish on 17/3 weekly, bearish on daily. Support 1.535 and 1.52. Slight bearish bias.

EURJPY: Indecisive candle on 17/3 weekly.

EURGBP: Bearish candle on 17/3 weekly, daily shows range between 0.777 to 0.789.

Strategy for the next 4 weeks

2008-03-21T12:57:00.007+08:00

"Although risk management is one of the simpler topics to grasp, it seems to be the hardest to follow for most traders."

Combining all the recent statistics (Best Times to Trade for Currency Pairs and OmniTrader Forex backtest), this will be my general trading method the next 4 weeks, with a possible view to specialize.

1. Risk-Reward Ratio:
For longer term trades - min. 1:2
For shorter term trades - min. 1:1

2. Stop-Loss Orders:
For longer term trades, Two-Day Low Method - set stoploss order approximately 10 pips below the two-day low of the pair. Use 50 to 80 pip trailing stoploss with trailing distance of 5 pip.

For trending trades - set stoploss to 2/3 of daily ATR with 2/3 ATR as trailing stoploss.

For shorter term trades - set 30 pip trailing stoploss with trailing distance of 5 pip. When trade moves up 30 pips, set stoploss to breakeven, and close 1/2 to 2/3 of the position.

3. Money management:
Risk 1% to 2% of your capital.

4. Pairs to trade:
For longer term & trending trades - all pairs.

For shorter term trades:
USD/JPY (Asian & US session) - watch Nikkei and Dow
USD/CAD (European & US session) - watch Oil and Gold prices
EUR/USD (European & US session)

5. Charts to consult:
For longer term & trending trades - use daily & weekly pinbar analysis.
For mid to longer term trades - use 4 hour & daily charts.
For shorter term trades - use 1 hour & 4 hour charts.

Best Times to Trade for Currency Pairs

2008-03-21T11:56:00.006+08:00

Best Times to Trade for Currency Pairs, based on 2002 to 2004 data.

Underlined bold are the ones i currently prefer - USD/CAD and USD/JPY are recent new ones, while i've dropped GBP/USD due to the volatility.

1. ASIAN SESSION (TOKYO): 7 p.m. – 4 a.m. EST
Less volatile: GBP/USD, USD/CHF, AUD/JPY
More volatile: USD/JPY
Most volatile: GBP/CHF, and GBP/JPY (also into Europe session)

2. EUROPEAN SESSION (LONDON): 2 a.m. – 12 p.m. EST
Less volatile: USD/CAD, NZD/USD, AUD/USD, EUR/CHF, AUD/JPY
More volatile: EUR/USD, GBP/USD, USD/CHF
Most volatile: GBP/CHF, GBP/JPY

3. U.S. - EUROPEAN OVERLAP: 8 a.m. – 12 p.m. EST
The range of trading constitutes on average 70 percent of the total average range of trading for all currency pairs during the European trading hours and 80 percent of the total average range of trading for all currency pairs during U.S. trading hours.

4. U.S. SESSION (NEW YORK): 8 a.m. – 5 p.m. EST
Less volatile: USD/JPY, USD/CAD
More volatile: EUR/USD, GBP/USD, USD/CHF
Most volatile: GBP/CHF, GBP/JPY

Note: Most currencies in the FX market are quoted with the U.S. dollar as the base and primarily traded against it before translating into other currencies.

In the GBP/JPY case, for a British pound to be converted into Japanese yen, it has to be traded against the dollar first, then into yen. Since GBP/USD and USD/JPY have negative correlations, which means their direction of movements are opposite to each other, the volatility of GBP/JPY is thus amplified.

OmniTrader Forex backtest

2008-03-20T23:33:00.004+08:00

Over last weekend, have decided to use OmniTrader for Forex. Here are the backtest results.

Weekly and Daily periods have the best hitrates, with Daily the most profitable.

Meanwhile, will be using the following trailing stops:
i. For trades taken on 1 hour or 4 hour candles, will be using stoploss of 40 pips.
ii. Once the trade moves up 30 pips, will set stoploss to breakeven, with trailing distance of 30 pips and trailing step of 5 pips.
iii. With continuing volatility in the equity and commodity markets, may be manually closing entries.

1. Weekly backtest:
Long, Short, Combined
# trades 20, 16, 36
Profitable Trades 16, 10, 26
Hit Rate (%) 80%, 62.5%, 72.22%

Average Profit ($) 1,439.71, 2,447.80, 1,827.44
Consecutive Wins 9, 6, 9
Average Loss ($) -990.39, -1,255.11, -1,149.22
Consecutive Losses 1, 2, 2

Worst Draw-Down (%) 1.82, 2.86, 2.86
Average APR (%) 2,923.41, 840.44, 1,251.16

2. Daily backtest:
Long Short Combined
# trades 5, 5, 10
Profitable Trades 4, 3, 7
Hit Rate (%) 80%, 60%, 70%

Average Profit ($) 190.46, 1,784.63, 873.67
Consecutive Wins 3, 2,,5
Average Loss ($) -6.57, -210.90, -142.79
Consecutive Losses 1, 2, 2

Worst Draw-Down (%) 0.13, 0.35, 0.35
Average APR (%) 3,272.78, 1,623.22, 1,739.66

3. One Hour backtest:
Long Short Combined
# trades 27, 25, 52
Profitable Trades 15, 19, 34
Hit Rate (%) 55.56%, 76%,,65.38%

Average Profit ($) 365.22, 1,141.72, 799.15
Consecutive Wins 6, 5, 7
Average Loss ($) -351.07, -673.57, -458.57
Consecutive Losses 3, 1, 3

Worst Draw-Down (%) 0.83, 0.93, 0.93
Average APR (%) 14,520.85, 20,805.97, 20,216.10

Week ending 14th Mar

2008-03-15T23:10:00.005+08:00

Forex showed how news-driven it was, with the short-term surge in the USD last Tue evening (11th March), immediately after news of the Fed's stimulus came out.

It made me realize my trading methods are very much in the "demo" mode, and should continue to be so, until i've successfully made consistent profits by following a system. Afterall, i demo-traded only for 1 day (18th Feb), before plunging into Live trading.

Hence, i've decided to scale down trade sizes, and instead concentrate on making consistent pips and improving hitrates. Results were encouraging, for 12th to 14th March:

GBPUSD : 2 wins, 0 losses, +110 pips
EURUSD : 5 wins, 1 loss, +228 pips
USDJPY : 5 wins, 1 loss, 1 breakeven, -8 pips
GBPJPY : 1 win, 0 loss, +8 pips
USDCHF : 1 win, 0 loss, +4 pips

Have also tallied all my trades, and realized the GBPUSD and EURUSD pairs have been the most successful, partially because of the clear uptrend. Whilst the GBPJPY and EURJPY has been least successfully, due to the inherent volatility.

Hence i'll continue to trade the GBPUSD and EURUSD pairs, and possibly look for a non-USD pair, such as the AUDJPY, GBPCHF or EURCAD.

Found this quote from forexfactory which is quite true:

Before I start, I am going to give you the only bit of professional trader advice I have for you in this entire document. One, investigate a method that you believe makes money over time and stick with it [whether it's tunnels or something else]. Two, try to understand the theoretical underpinnings of the model. Three, trade small until totally convinced method works. Four, your success [profits] comes from implementing the method correctly, not guessing where the market is headed. Five, read number 4 again. Six, give up thinking during market hours. Thinking comes when the machines are turned off, not in the heat of battle. Markets are to be reacted.

Source: Vegas Wealth Builder

2008-03-09T23:10:00.001+08:00

2 posts to read for the rest of the week.

The Holy Grail --Found, and The Pip Nailer.

Week of 10th March - Weekly GBPJPY system

2008-03-08T23:18:00.004+08:00

Reference: http://turtletrades.blogspot.com/2008/03/weekly-gbpjpy-system.html

Will be trading 2 pairs this week based on the weekly system.

In terms of execution of SL and TP, a few possible methods:
A. Follow SL and TP exactly.
B. Use two-thirds of the range as SL. Leave TP unchanged. Once a trade is taken and moves +100, move SL to breakeven or -10 and leave TP unchanged.
C. Position sizing method:
i. Enter initially with 1 lot with SL 100.
ii. When position moves +50 close 1st lot and enter 3 more lots with SL 50.
iii. Close the 2nd one at +100, move SL up 50.
iv. Close 3rd at +150, move SL up 50 again.
v. Let the 4th run, close whenever you want.

Since these 2 pairs are fairly volatile, will use method B.

1. GBPJPY
GBPJPY High 207.96, Low 205.65
Daily ATR 2.25, Current 206.73

Calculating Risk-Reward ratio of the methods:
A = 1:1 (loss 231, gain 231)
B <= 2:3 (max loss 154, max gain 231)
C >= 1:4 (max loss 100, max gain 400+ on assumtion position hits TP)

Method B:
Place entry stop to sell 1 lot at 205.65 (SL 207.19, TP 203.35), and to buy 1 lot at 207.96 (SL 206.42, TP 210.26).

Once a trade is taken and moves +100, move SL to breakeven or -10 and leave TP unchanged.

2. EURJPY
EURJPY High 158.40, Low 157.03
Daily ATR 1.40, Current 157.65

Even though the EURJPY is an untested pair, a few visual backtests indicate this pair could work on the weekly system, with less volatility.

Method B:
Place entry stop to sell 1 lot at 157.03 (SL 157.93, TP 155.66), and to buy 1 lot at 158.40 (SL 157.49, TP 159.77).

Once a trade is taken and moves +50 (due to lower volatility of this pair), move SL to breakeven or -10 and leave TP unchanged.

High Low 8 hours GBPJPY

2008-03-05T03:24:00.003+08:00

Source: http://www.forexfactory.com/showthread.php?t=51365

Find the high and low between the hours of 1700GMT (Sun) and 0100GMT (Mon) and place a long order at the high for that time frame and a short order at the low for the same time frame.

Max range allowed is 300. For both orders, set TP 90, SL 55.

If you get stopped once, do not reopen with same numbers.

Close all orders at 1800GMT.

Do not change the SL and the TP.

See suggested settings for other pairs. So far it is said to work best on GJ.

GbpJpy
SL: 55
TP: 90
RangeStart: 18
RangeEnd: 2
MaxRange: 300

EurJpy
SL: 40
TP: 40
RangeStart: 21
RangeEnd: 5
MaxRange: 80

GbpUsd
SL: 40
TP: 40
RangeStart: 23
RangeEnd: 7
MaxRange: 80

3 Mar - 8 Mar

2008-03-03T23:08:00.009+08:00

Missed out on Shorting GBPJPY, as there was a huge gap down.

Trades 3rd March:

1. Short USDJPY 103.15, Cover 103.26.
Outlook: Short-term downward term.

2. Long GBPJPY 204.81 , Stopped 205.07. Resistance1 205.94 (29 Feb low), Resistance2 207.73. Surged to 205.76, before getting stopped out 205.07.
Outlook: Short-term technical rebound, before resumption of downward trend.

3. Long EURUSD 1.5175, Stoploss 1.5083. Closed manually at 1.5181. Trade was taken after the surge to 1.5274 saw profit taking to 1.516 level.

Money Management (modified OzFX)

2008-03-02T10:41:00.001+08:00

Money Management (modified from http://www.ozfx.com.au/)

Use an alternate method of money management that doesn't risk a possible 500 pip loss.

1. Enter initially with 1 lot with SL 100.
2. When position moves +50 close 1st lot and enter 3 more lots with SL 50.
3. Close the 2nd one at +100, move SL up 50.
4. Close 3rd at +150, move SL up 50 again.
5. Let the 4th run, close whenever you want.

6 Possible Scenarios:

-100 (1 x -100)
Price move against us from the beginning and first lot hit SL.

-100 (3 x -50, 1 x +50)
After entering 3 more lots at +50 price hit SL. First lot closed at +50

+100 (1 x 50, 1 x 50, 2 x BE)
Price moves to second target, remaining lots stopped out

+200 (1 X 50, 1 X 50, 1 X 100, 1 X 50)
Price moves to third target, last lot stopped out at +50

+300 (1 X 50, 1 X 50, 1 X 100, 1 X 100)
Price moves to third target, last lot closes at same level

+300 upwards (1 x 50, 1 x 50, 1 x 100, 1 x 100+)
Price moves past third target, last lot closes at +500 or so

With this method the maximum loss you could sustain on any one trade would be 100 pips instead of 500.

Weekly GBPJPY system

2008-03-02T10:17:00.001+08:00

For GBPJPY only.

Source: http://www.forexfactory.com/showthread.php?t=66210&page=4

Take last 2 candle's on 4 hour chart of the previous week as a breakout boundary. Entry at the break either way, SL at the out of break out. TP 1x to 1.5x stop loss.

When the price hits stop loss in a way, take the opposite trade (TP 1x to 1.5x SL). Trade ends with SL or TP hit.

Only take 1 or 2 trades a week. The 2nd trade only occurs, if I get stopped out on my 1st trade. If I hit the TP on the first trade, I cancel the other order.

Close both trades before end of Friday trading.

1. GBPJPY (29th Feb last 2 4Hr candle: 207.43 to 206.22, downtrend. closed 206.32)

3rd March: Place Sell 206.2 and Buy 207.43. If either order is filled, place OCO Sell order (SL at the other boundary, TP 1.2x SL range).

2. EURJPY (29th Feb last 2 4Hr candle: 158.49 to 157.45, downtrend. closed 157.47) - Under observation. Could fall back to old range 155 to 159.5