Williams %R, uptrend and bear call spreads

Option spread trading involves determining where a price for a stock may NOT be in a particular time. There are strategies and spread structures that involve aiming for a particular price point upon expiry or at least a particular move in a set time...but those are for another time.

Considering that I need to place a spread where the price will not be seems odd, but easier than forecasting amplitude, direction and timing .

Building on my previous post regarding W%R (using stacked 5 and 20 day periods) and the state of trends leads to some very interesting trade ideas.

UPTREND

W%R can indicate nice entries for long trades in an uptrend which leads to a nice support levels developed along the 50 sma line.

Here is the chart for the S&P500 (SPX). I placed a linear regression tool that started near the bottom of the uptrend with a standard deviation of 1. The upper and lower deviation lines have remained on the same slope for most of this trend so they have been good channel indicators.

The red arrows above the price would indicate points to place a bear call spread and the red arrows below would be points to place a bull put spread.

For anyone who has happened to have followed anything I've done in the past this looks exactly like my old Counter Trend Positioning strategy...except I was trying to buy and short sell stocks to capture the actual moves. This method lets me just bracket the expected moves instead.

The bear call spreads are placed based on the idea that the price is extended (over bought) and would be expected to top out near the deviation line.

Following the first trade set May 8th or 9th for the May expiration, (3rd Friday or EOM), as the SPX is around the 920-930 level. Setting a spread above this at about 5 or 10% puts the short call at 975 to 1020. I do not know what the value of that trade was as historical options pricing is tough to get and tough to use without a paid service. I expect that at 5% I might see a 5% Return on Risk or at 5% above maybe 10% ROR. The closer to the price the short call is the higher the ROR.

The SPX never reached those levels until late July so the trades were profitable. In fact, every trade indicated was profitable and these are basically trading against the trend.

The lower arrows could be placed the same way or using the W%R as if a long stock trade was taken. Rather than tying the puts to the calls and forming an iron condor I would choose to just set put spreads on their own.

For risk management I could choose to increase the size of the position or decrease the proximity to the level to increase either the ROR or increase the absolute dollar return respectively. I could also run different expiries by entering a short term trade very close and a long term trade farther out but still keeping trades no longer than 30 days. I could also add trades as the expiry approached if it looked like the volatility was up at the time...volatility is a whole other topic but was a prime consideration when I placed the spread trade on Friday.

PERFORMANCE

12 trades, possible 5 to 10% ROR so I use a 7.5%. Only two trades concurrent so splitting my S&P allotment (another topic) would be in order. I would have trades on either side about 75% of the time or better...about 5 of 7 months. Simple returns are in the 45% neighbourhood. From a cashflow perspective this is $3 per day, on average, for every $1000 I invest in the plan. Interestingly this is an annual money doubling rate.

Seeing as this is an uptrend I might ratio my trade to favour the put side by 2 to 1 and keep the trades at the farther distance from the price levels. This idea keeps the risk low but bumps up the absolute profits rather than raising the risk to raise the profits. More to play with in future.

VOLATILITY

A VERY brief comment on volatility. Friday the volatility index (VIX) jumped 5 points as there was a gap down in price of SPY (SPX index being the S&P 500) and the price headed up to close some of the gap. This spike in volatility from about 20 to 25 drove the price of options up a bit making the selling of options more profitable. As the volatility drops off the option premium also drops off which secures more of the profit from the spreads. Sell when volatility is high and buy when it is low. I specifically liked the trade due to this setup as I doubt that the VIX will stay high.

Of interest to note my Optioneer trade lost some value (slight reduction in profit, not a loss created) as a result of this spike in VIX. The Monday trade is a higher value trade as a result as well so if the VIX drops right off that trade may not fill.

Jeff.

Monday June 8th, play testing again.

Today was a day to play. I decided to not trade, I resisted for all but one trade and I timed it just plain wrong.

I broke the charts into AM and PM for clarity as I may refer to these later, seeing as this is a journal of sorts, and I would like to be able to see more of the detail.

First is the TICK for the AM with the green trade setup arrows and the black trade arrows. From the top are the SDS trades and from the bottom are the SPY trades...I decided to stick with SPY rather than SSO for a variety of reasons.

Any setup arrow not followed by a black trade arrow means that the trade was determined not a good entry due to chart indicators, upcoming resistance, pivot points, 200sma, already in a trade and a variety of others.

Here is the chart for SPY. Note that the first setup arrow without a trade was while in a trade already. I probably would not have entered here as the price was approaching the 200sma as potential resistance. The second was basically the same situation. Not a high probability entry

SDS chart for the AM.

The green lines indicating the stop adjustments are placed real time, as much as they appear to be set to match the price activity after the fact, they are not.

The afternoon TICK chart. Notice how it gets rather hairy in the late afternoon. It is good to be in a trade before this goes nuts as trying to pick an entry is tough when the volume spikes.

SPY in the PM. With better stop management I could have stayed in the first trade for the whole period but I got a little close and stopped out. I considered getting a real trade on the last one but I decided to stick to my plan as it could have easily gone against me...even though most of today's trades went positive.

I am always concerned when my play testing works out so well and the wind rate, let alone the win value, is so high. I know I use the same ideas that I might while trading live but I think that I let the stops go wider longer than when I trade for real. This gets me stopped out too soon on runners and at a loss sometimes when it turns right afterwards. Most of today's play trades were 20 cents on SPY and 15 cents on SDS for initial stop settings.

I'll work out the numbers on these later.

Jeff.

Relative period volume

I revisited the chart that I posted a while ago looking at the relative volume of each 1/2 hour period over the course of the day...including the first 1/2 hour of post market activity. I was trying to come up with a method of being able to compare each period with previous day periods. I did not come up with anything terribly easy so I went back to over simplification.

Here I plotted the 30 minute simple moving average of the close which would basically track the high of each bar directly as if it were a line chart of the high points. Then I offset yesterdays' ahead by 14 periods which overlays yesterdays' onto today...easy comparison this way. I then went to town and created 10 SMAs and offset each by an additional 14 periods...effectively this creates a cascade of SMAs overlaying today's volume representing the last 10 trading days general average.

I considered, and started colour coding the averages so I could tell how far back each one came from...then I decided that it is not necessary. I may grey scale them to fade them into the past so the more current ones are darker and likely more relevant. I do have to remember that the averages are of the close, or high of each bar so the fact that the bars are hanging in the breeze below the lines has no bearing, only the top of the bar is important. I could run averages using H/L/C data and put the lines in the middle of the bars...naw.

It is worth noting that Friday's volume was low over the course of the day, remained low into the close then skyrocketed past all ten days values in the aftermarket. Most regular traders do not trade in the aftermarket so I expect that was the large institutionals and fund managers getting their positions in or out for the month end weekend. Toady's volume was shooting right up the middle of the range.

This is just another piece of information to judge the trading day activity as it has no direct bearing on trades other than to justify a bias. Range trading if volume is lower than average or watch for trend breaks if volume is higher...generally speaking.

Jeff.

S&P500 relative volume chart

I was looking for the best method to have the S&P 500 volume show up on a chart and I stumbled upon an unusual looking chart that may have some significance.

First, the S&P500 is an index and does not have any volume related directly to the value of the index, it is only a number representative of the group of stocks and their combined value. So I would expect that the volume would be representative of the combined volume of the underlying stocks. Well, the exchange does not send that information with it's feed to the various data processors, like Esignal, stockcharts.com etc. They have to generate this number themselves.

There is an index that I found, $TVOL, which is the total volume of the NYSE. This is not the S&P500 but I think it will be representative of the overall market sentiment.

I found a formula to let me plot this in the lower volume pane of the chart the same as any other volume on a regular equity chart with a moving average, which may be helpful as well. I am not certain yet how this may work on an intraday scale yet.

I have been thinking of trying to track volume at certain times of day to see if the current day is trading higher or lower volume than the same time over the past days. I had not got around to trying to chart this as I was not aware of TVOL yet and thought I would have to come up with my own cumulative market volume indicator, not an easy task.

Which leads me to my interesting chart. I plotted the $TVOL as the primary data on a chart and set it to an hourly chart and this was the result:

Each bar represents one hour, although the first bar is really only 0930h to 1000h as it is set for 0900h-1000h. Worth noting is the last bar as this one is for 1600h - 1700h. Quite a large volume traded after hours, far more than average.

Here is the same chart in a 30 minute period for the last few weeks:
I need to setup a formula to change the colours for each half hour so they are easier to distinguish...but I will only do that if there is any validity or use to the relative time period volume. I think that it will help to differentiate a trending vs ranging day as a high volume start could likely indicate a better moving day...or just a nasty whippy day.

I'll check that out historically a bit then watch it for the next week and see how it correlates. Given the big volume afterhours on Friday I might expect a big day on Monday.

Jeff.

May 27th chart followup

Here are the charts for yesterday's setups:

TICK:

SDS:

I started marking these as if I took every indicated trade based solely on the TICK, just for kicks, to see where that might have led. The terribly obvious resistance at yesterday's high could not be ignored as any trades to the upside of this line were doomed, I know as I tried one or two and they went nowhere. So this puts a short bias on any trades and I only posted the lead up to the large drop in the S&P500, everything before that was just tight range trading. The price chart is for SDS, the leveraged bear ETF

Interestingly this could have been played without the TICK altogether due to the solid resistance by just entering short as close to this line as possible...or even a bit over. There are far more ways to determine trade entries...I just like the way the TICK shows me what is going on.

The green arrows are the first indication of the following move and the black are the triggers to make the trade. Given the expectation of the move either of those two trades would have stop loss orders below the black low for SDS from Tuesday (which corresponds to the SPX high). Moving the stop up following the 50sma or the purple 100VWMA ( I am starting to recognize it as a decent stop setting once a move is underway).

Should I have been stopped out on the 50sma after 1430h there was another nice setup after 1500h to get back in for more of the move.

Jeff.

May 14th...nothing good to say.

Today was a perfect example of a good day to not trade...but not due to the market.

I was up late last night.
I did not sleep all that great.
The power went out early this morning... I have alarms to alert me to this for various reasons.
The dogs, due to being disturbed, wanted up and out.
The power never cam back on so I dealt with very limited water supply for morning routines.
I dragged myself into the office.

This does not provide a good mindset for anything so I should not be surprised that I was not on my game today...in fact I was not even in the same stadium.

Seven trades, all losers, most small, a few larger than my normal. I traded with an expectation, with a vengeance, with frustration...I finally threw in the towel.

Here is the NYSE TICK chart, for reference and for me to really see what really poor trading ideas I had. I dropped the bars and left the Bollinger Bands on with the various moving averages. SPY chart for reference to follow. The vertical bars are divisions between the apparent trending types over the day and this should give some direction to the trade styles to use during these times. I placed these lines in hindsight but without any other reference to charts.

Here is the corresponding SPY chart with the lines placed at the same times...only using the TICK references. The generalities of the TICK are pretty close to reality.

The light blue line is yesterday's opening price. The the low for today, during regular market hours, never broke the low for yesterday, the bottom of the chart is about $88.50, which was the low. Seeing as this was tested before 1000h it could be a good idea to stay long as long as the price stayed above that level with some conviction, found in the TICK trending up over the morning

Trades 1 and 4 could be timed to correspond with the rising low of the TICK and the testing of the 200SMA on the SPY.

Trade 2 was testing the 50 and 1/2 of R1 ( which I find useful often) and a TICK low, slightly higher risk but still a good pullback entry especially once the 30 crosses and the price tests both these SMAs shortly following the arrow.

Trade 3, a short, is the inverse of 2 as price tests the 30/50 on the underside. The heavy red line is yesterday's close, a decent resistance as it has been tested for about an hour. Target would be the 200SMA.

I have decided not to play the last hour as it is too volatile for my risk level right now...as long as I can follow that rule of mine.

While these are all hindsight trade setups they are setups that I will be watching for over the next while. The range market is the toughest to judge for me so I will try to stay away from it for a while.

Jeff.

April 28th, reflections and SSO vs SPY

Seeing as this is really for my benefit, as journaling has become a sort of habit for me on many levels, anyone reading along, well, you can stop at any time you choose.

I stayed at home for the morning so I figured I might get some one on one time with the computer and the markets, not quite but close. I made some trades, wrote down some trade ideas that I did not trade... usually due to timing or some other factor... and reflected on where I am heading with my trading next.

I have been slowly adding to the various pieces of information that I try to assimilate in order to judge a trade worthy of entering. I started out trying to fundamentally analyse a company for long term purchases. I decided that was as much a crap shoot as anything else so I dropped it in favour of technical analysis.

I tried to find the right combination of indicators and trendlines for medium term trading that I could mechanically trade with. Finding the right combination is likely as hard as learning the data moves behind it, so I did that next. I now find more information is available and I am adding that to my knowledge base.

I have gotten over the nerves of placing trades, grown accustomed to taking losses and have stopped berating myself for placing a poor trade.

Over the past year and change I have made many hundreds of trades and I am quite familiar and comfortable with different orders, although I still need to work on getting my stops at the right price, far enough away for price movement due to volatility but close enough to keep my losses low.

Enough reflection. I have tracked enough winning trades to know a good setup when I see one... I now need to recognize the daily trend earlier to judge the direction that the great setup is likely to take.

BTW, I considered taking the hedged entry for uncertain moves and felt that the loss (two trade commissions, loss allowance on one trade and the possibility of getting whipsawed out of both trades) was too great a risk for a single trade. Besides I tried that and it is just more complicated than getting to know the next most likely move and reversing the position if needed.

Rather than natter on about any trading today I am just going to make a few quick notes on some chart shots. The SPY chart: (I'd use the SPX but I cannot seem to get the pre and post market data for the index)

Nice start to the day with that smooth move off the start. Zooming in to that first trade setup on the SPY chart:

Now here is the same time on the SSO chart, note the slight difference of position of the price with respect to the 200SMA... just enough to sway my idea of the trade entry direction, pretty major tidbit. Between this descrepancy and the spiking of SPY more often I decided to go with SSO for trading as of today. It's a leveraged ETF so it does give me more position sizing flexibility as well.

Checking the TICK for the same period yields inconclusive information as it is pretty middle of the road so far. Tick does take a jump right at the end of the pullback but lags price by a bit, as any indicator usually does.

Now the Advance Decline chart is a little more promising. The value cleanly tests -1500 and, even though remains under the averages it looks to be saucering nicely near the end of the same time period.

I have a table of eight of the major index ETFs and I recall they were all looking reasonably positive (no major red off the start anyway).

Of course none of this is conclusive to give a trade signal and I am sure that there were a few other factors that I could have looked at to determine that this was a very high probability trade to the upside. There were four other similar setups later in the day but none with as large or as sure a move. As fate would have it those were some of the ones that I played with...win some lose some. I need to recognize quicker when a price is just going to wallow and get out with a small profit rather than holding it back into a loss.

Oh, here is the SDS chart for the same trade, this shows the testing on the downside of this ETF, seeing as it is a short fund this just validates the SSO long trade that much more:

Longish post and I didn't even get into the other trades.

Jeff.

S&P TSX Capped Energy Index, playing with charts

I didn't do any trading or even tracking of this today but while I was doing some other work I thought that I would see what a chart from Esignal would look like here.

So this is the S&P TSX Capped Energy Index for today with a little trailer from yesterday.

All of the lines are automatically plotted for daily and monthly pivot points, open, high, low and close from yesterday as well as a 120 period linear regression with 1 standard deviation brackets. The down side for blogging is the lack of flexibility for notations. I think with my fairly minimal trading over the course of the day now that should not be a big deal, I can just plot numbers on the chart and reference them below.

Even though I did not trade this let's take a look at the setup and possibilities.

Based on the gap down at the open I might consider a gap fade to the pivot point but there was no clear bottom to the start so I would not have actually traded it until the 30 and 50 were both crossed... even then the 200 is pretty close so I would have skipped it in favour of waiting for the 200 test.

1000h gives the first test, (anything within 50 cents is a test to me), 10 minutes later is the failed rally, in at the pivot point short. The stops may have been tricky on this but with the slow price action down I would use a combination of the 50sma and rally peaks so the peak after 1100h would be my new stop...deciding to stick to that until it is tested again of following the 50 would be tough at the time...I like to think that I would hold out as I am in the money already and wait for the next peak.

I checked the HED (Energy bear fund) and I would have held through those peaks as the sma's are lower and I do acknowledge them in the fund now, not just the index ones.

The second test gets me in at $11.73ish, the next peak does not break the 50 sma in HED and is over the 200sma as well, the third set of peaks breaks the 50 but the 200 is so close that I would be using it primarily. I would have remained in until about 1415h using stops on the HED chart but I would have bailed when the 30 and 50 went horizontal on the index chart regardless...puts me out at about $12.13. So about 40 cents, not bad.

I do like checking other charts to see if my PP200 holds, so far it does so I could be tracking a few indices with their related ETFs at the start to see who is setting up at any given time...but I would need proper stop loss orders to do this without undo complication.

I think that I may be forced into the US markets soon. We'll see where that leads me another time.

Jeff.

April 14th,

Not a spectacular day but satisfying none the less.

S&P TSX Global Gold Index:

The chart outlines pretty much the head space for the trades.

The opening was the most interesting part and it was the part that I managed to miss almost altogether. The three points that I started with yesterday apply today, as they almost do every day. This time the opening price was within pennies of the closing price which means that all of the moving averages were valid right off the start. Also the price was really just continuing yesterday's activity as the overnight was almost seamless with this morning...other than the morning volatility.

Given the start my plan going in was to catch the price as it bounced off of the 200sma the very first time, volatility is my freind at times like those, I was tied up with other issues and was not even there beyond the first minute, just enough to see the open.

10 minutes in the price peaked at the convergence of today's pivot point, yesterday's opening price and the 200sma...my kind of entry point as the price started to head down. Target was S1 but would hold with a smallish stop to see if it headed farther, target two was the low and I would have bailed at that point as I did not expect a trending day. Perhaps a 15 cent move in HGD.

Trades that I did take were 12 cents, (-4) cents and 12 cents. The second was not well thought out.

Jeff.

Easter Monday, the fallout

From my earlier post:

1) IF the price gaps or moves up quickly over the 200sma AND the market seems strong generally THEN look at fading the opening gap back to the daily primary pivot point OR wait for the 30 and 50 SMAs to catch up and re-evaluate the plan, best action could be to wait for the test of the 200 sma as it is likely valid earlier

Waiting for the 200 test usually works out better as the market has shaken off some of it's shenanigans.

The market was not strong so my first trade entry was not the best, I should have been expecting more ranging earlier than thought so even just waiting for the 30 and 50 to catch up was not enough. Thankfully I only made the one trade and realized my error. Waiting for the 200 was called for and worked out well enough. There were two good trades but I was not in for the second one as it tested the 200sma, yesterday's higha and 1/2 R2.

As I was only trading 200 shares of HGD I managed to end just even after commissions. The third trade would have been the profit for the day...about a 15 cent move in HGD.

All in all I am not really disappointed in the day...other than a nasty issue that came to my attention last week that I finally got a straight answer on today...another post for that though.

Jeff.

The Pivot Point Bounce, S&P TSX capped Energy Index

I didn't set both days on the chart but the previous day has some bearing on the entry decision. The late day rally crossing the 200sma and the opening price being close to the closing price leaves the 200 intact with respect to it's immediate validity... this is a whole topic on it's own sometime but this particular situation does not require the 200 minute catchup for the 200sma.

S&P TSX Capped Energy Index:

The ideal entry is at the daily pivot point just under the $200 mark as everything up to that point leads to a good likelihood of an uptrend day...or at least a R1 target which is a good enough initial target.

The chart pretty much says it all. This is one of my favourite setups as the stop looks so easy to follow along lazily with the nice slope right from the start, pretty much. I have a tendency to stop too tight too soon to try to lock in some profits, as small as they may be and the result is often getting stopped out too soon and watching as the trade runs away. I then lose sight of the rest of the chart setups as I think that it has moved too far to get in now...sometimes I am right and sometimes I am wrong.

Jeff.

Consolidation Triangle, S&P TSX Global Gold Index

This is a classic pattern that I always watch for and I was surprised to see such a fine example on Thursday. I was not trading, being the Thursday before the Easter long weekend I had a little too much to keep me occupied at work. I was able to jot down some of the prices that I would have entered at as the market unfolded so I will list those after the chart.

S&P TSX Global Gold Index:


The setup from the previous day was a downtrending afternoon with a short rally into the close which did not break the 200sma. So, from my journal "Expect a drop off the start similar to yesterday and rally to 200sma. If price crosses the 200 immediately, HGU, if not perhaps a momentum downmove, HGD, for a small target, tight stop, or wait."

Well, I wasn't far off the mark as my "prognosis" covered the two most likely outcomes. I waited rather than considering the immediate trade for the downmove...even though I was not trading for real I use the same thinking as if I were. If the price does not do what I expect then it is time to re-evaluate and watch for another setup given the new data.

First trade as the price tested yesterday's low, which held, so HGU. Second trade at 1000h as the price reached for, and did not attain, the 200sma... short or HGD. Next trade was long again, HGU as the price again tested the same low price, it held. Back to short, HGD.

Now, the apex is always interesting as the price normally breaks one way or the other for a decent target at least, this day it knocked me out as I had two active simultaneous trades when it faked a break up, then headed down. I even entered a long trade as the fake out tested the 200sma.

The final trade was as the 200sma caught up to itself at 1250h (200 minutes into trading) and the moving averages converged with the monthly S1 pivot in a general downtrend. Super high probability trade to the downside with two or three decent entry points.

HGU trades for the long plays:
0947h Buy $10.58 Sell $10.85 Gain 27 cents ps Return 2.5%
1025h Buy $10.58 Sell $10.72 Gain 14 cents ps Return 1.3%
1054h Buy $10.63 Sell $10.71 Gain 8 cents ps Return 0.7%
1200h Buy $10.73 Sell $10.69 Gain (-4) cents ps Return (-0.3%)

$ 0.45 gain per share or 4.2% overall return on trades

1000h Buy $8.42 Sell $8.55 Gain 13 cents ps Return 1.5%
1048h Buy $8.47 Sell $8.55 Gain 8 cents ps Return 0.9%
1105h Buy $8.53 Sell $8.53 Gain 0 cents ps Return 0.0%
1245h Buy $8.53 Sell $8.70 Gain 17 cents ps Return 2.0%

$ 0.38 gain per share or 4.4% overall return on trades

Overall this played out as well as I would expect.

Jeff.

The Opening Gambit, S&P TSX Capped Energy Index

I decided that, because I am a very visual trader, I would put some of my rules and setups on charts with some notations for easier reference. I had a hard time trying to write this stuff out so that it made sense without the charts, so here is the first.

The Opening Gambit

Earlier last year I tried a bit of very early trading, as in the first minute or so of the market open. I did not have much luck getting orders filled in a timely manner and I often got nailed with a bad fill. The problem was that I was testing the market open and had no real plan other than to see what kind of order fills I might get. I don't recall specifics but I am pretty sure that I was trading a stock that had a fairly wide spread which is indicative of a lower volume issue. I have since tried again with a plan and found that my earlier observations were clouded by the resulting losses for those early tests.

This is a reworking of the strategy with some rules for entry and exit.

First, some general comments about my use of the simple moving averages.

I use the Simple Moving Average (SMA). Some use the exponential, weighted or even volume weighted. I have plotted them all and none make any real huge difference, it is more a matter of using one consistantly so any will do. I like to keep it simple, literally.

The 30 and 50 SMA for the short term trending and the 200 SMA for the longer trending. All of these are based on the minute timeframe. I plot daily and monthly pivot points but those have no direct bearing on most of the entry and exit plans used in the chart studies. I will use them as they often will confirm an entry or provide a great price point for a stop order, so I may plot some that are relevent

In this example the trade is a rather speculative trade and has the possibility of backfiring, and backfiring very quickly so getting out quickly is important. Entry can be through the use of a limit order or market order, I prefer the later as it gets me in, period. The exit, early on, will be a manual market order or a stop market order if the price moves in my favour in the first few minutes. I do like to get the stop in as early as possible as the worst time to have a connection issue is on a busy market open day, slow transactions or and overloaded broker can cause major trauma to an account in a hurry...so it is a risk to be aware of.

S&P TSX Capped Energy Index:

(I put MACD on there just in case anyone likes it, I don't use it as it is far too slow an indicator for me)

In this case the price opens a little lower the the previous day close, about $2 down. It's not clear on the chart but the price drops about 70 cents from the open then heads back up and crosses teh 200 SMA in the next minute. There is no test of the 200 but the 30 is already over and the 50 was already trending up from the day before so the price is very quickly over all of the moving averages.

Part of the key is the previous day, the price dropped over the last half of the day and started a late rally into the close crossing the 200sma... essentially the next day is a continuation of the same rally and provides the 200 sma test. This makes it something to watch for, had the end of the day been different the initial action might have been to quick to consider.

The stop can be set right away at the 200sma as if the price hits this point again the trade was most likely wrong. Early trades will be expecting a fast move so the 30 or 50 sma can be used as a stop. I don't have the stats but if the price crosses the 30 it is likely lost momentum and may reverse or wallow anyway... if the 50 is crossed then this is even more probable. They are good stop points. I could always split the difference and use a 40 sma or just set the stop at he 30, move it back up to the 30 when the 50 catches up to the stop, basically steps connecting the 30 and fifty as they rise in unison.

For the sake of math, the profit on this move would be $7.75 or 4.1% of the opening price. This is important as trading HEU, the leveraged ETF for this index, would yield 8.2%, in theory, for the same move, less some allownce for spreads, commissions and other fees. Checking the chart it would actually only yield 6.9% or 24 cents per share given the most likely entry and exit points...again, less commissions only as spreads are included in that approximation.

Jeff.

Stepped exit stops for Friday

Here is the chart for HGD as it would appear using the pivot point and various sma stops along the day as Global Gold trended down:



The chart for Global Gold for the corresponding day showing the various support pivot points

March 10th, MACD

Today's chart for Global Gold:


I added the MACD after noting that the pattern would be a positive divergence, it fit to a "T". I feel that is one of the keys in trading is to get to know the price movement without having to rely on additional indicators.

The prime trade of the day started before the London market was closed, the setup was nice and the index was bucking the London market as well as the TSE. This pattern would be the SPTGD heading down, the London heading up the most likely outcome would be that when the London market closed the upward pressure would abate leaving the SPTGD to continue to find it's bottom.

I am finding less need to label some of these patterns or to even log them as a library of trade setups as they are becoming more and more apparent as I keep reviewing these days and going over the trades and fake trades of each day. Familiarity is the key. I just need to turn the key more often to produce some consistent gains based on these very same setups and calls.

I did figure out one of the reasons that I have not made most of these trades. I feel a need to perform out of a need, rather than just a desire. I do not NEED the income from trading therefore I do not NEED to actually make the trades. Perhaps this is a form of risk aversion. I do have a desire to know how all this works and be able to prove, at least to myself , that I am capable of trading profitably. I am doing that.

Jeff.

March 6th, the waiting game

Today was a no trade day as last night I decided to just watch. Very often I give myself a little kick when I do this as my trade calls are either bang on or just good movers after one or two mediocre trade calls. Today was no different. Here are the charts for the day, I posted both the Global Gold and the related trading ETF to show the actual trade plottings this time.

Global Gold in the AM:

The corresponding HGU chart for the major trade:


The Global Gold for the afternoon:


The corresponding HGD for the trades:

Total trades for HGU captured 53 cents ps at 300 shares grossed $159

Total trades for HGD captured 69 cents ps at 500 shares grossed $345

Even assuming one or two false starts that is a very good return.

Jeff.

March 4th, PM

Chart for the Global Gold Index.

The afternoon trading seems to be a bit more relaxed than the morning trading. Nice single passes through the various points of entry, perhaps a test here and there. These trades have about 3.5% return based on the index. Using the Beta Pro ETFs that are twice the return that would make them a 7% return on the actual trades...allowing for fudges and spreads that would be about 5%.

My estimates mean nothing as I need to get some decent trades in at these times when the charts are not so choppy, but they are interesting. That seems to be my lot in trading is to only be in when the market is churning, go figure.

Jeff.

March 4th

Here is the Global Gold Index chart for the morning trading. This time, as I mentioned, I did some trading and got caught in the morning churn. The overall up day that I was anticipating did not happen as of yet, but that is of little concern as I follow what the averages, pivot points and price movement are doing, so even a bias is not that big a deal.

I should have stopped trading sooner than I did once I realized what was going on...or more appropriately, what was not going on. The spreads were unusually wide, as much as five cents at a time which is unusual and probably is a good sign that the market is undecided...now this is only in the ETFs HGU and HGD. So there were no defined moves.

It should be noted that these quotes do not drive the market as they are reflecting the sentiment of ETF traders. Seeing as they were unsure I should have just stayed out. A good chunk of the actual loss of each trade was due to the spread as I entered three or so cents farther away than I needed in a lot of cases. I saw a number of even 100 lot quotes on both sides and about as far away from the inside bids, they did some dancing about as well. I suspect that these were the market makers doing their job of providing the necessary liquidity as they showed up when the quotes were very thin for quite some ways away from the inside. I definitely stayed away then as the spreads were larger and the price was flitting about.

I happened to try to trade off of the averages a bit. I should know better than to do that when they are so close to one side of a pivot zone. Although my rules were fine for yesterday and Monday I think that I will change my entry criteria a bit for tomorrow. Use the averages ONLY to determine if a trade has too narrow a target, the good ol' squeeze play. Confluences must be more confluent.

So, taking my plan back to some bare bones entry criteria now to eliminate the questionable trades and only sticking to those that are more defined. I think this will give me fewer trades as I use patience to wait for the setups, perhaps I will employ some limit orders again as they slow me down a bit. I never had enough of a move today to use them but I was going to use some manually trailing stops had I got on the right side of a decent moving trade.

Overall another learning day.

Jeff.

March 3rd, PM

Chart for Global Gold Index in the afternoon.



There was an extra $124 net in these trades. Not bad for a couple of hours trading. So today's total would be $343. Applying my various fudges, 30% reduction is $240, dropping my top two trades leaves $148. Either way the return is tax free so I would take them.

Jeff.

March 3rd, the AM, stuck on gold still.

Annotated chart for the Global Gold Index for the morning activity.

As usual red arrows indicate a short trade (Long HGD the bear fund)and the green are long trades (long on HGU the bull fund).

This is a far quicker method of noting these trades. It makes it easier to review them for me so they must be easier for someone else to read as well.

I am playing with a manual method of trailing stops so I am not actually trading these but using the stops to check how much of a particular move I may take. I was having trouble getting too far in the red on trades last week, even though they were small losses the small loss adds to the commission cost and drives down my profits. I determined that the stops are not great at profit protection (I knew this but it is a good reminder, they are called stop loss after all) so I will use them to keep me from taking a greater loss than I planned on and to also act as a safety in the case that I have a connection problem like I did last week.

My tracked trades today netted $219 prior to the noon hour. I was only able to use 300 shares per trade due to the price being around the $10 plus mark. The last trade was nice in that I used the stops and did not jump them too soon, I figured that since I was far enough into profits that I could let it sit until the next target was reached before moving it up...it worked to keep me in the trade past that little consolidation period.

Jeff.