FX equivalent trades

Today was to have been an FX trade for the Australian to US dollar (AUDUSD pair). Seeing as I do not have a forex account I looked for an alternative in the ETF world. FAX is an Australian dollar trust which closely follows the AUD so I figured it would be my best bet.

Seeing as there were no short funds (reverse correlation) I would have to short the ETF in order to take advantage of the expected pullback. The stop was about $1 higher than entry and the target was over $3.50 lower, a nice risk/return ratio... except for one hitch.

The order was rejected at the broker.

I did wonder as volume was not huge on this fund whether I would be able to short it in the first place, I guess not. As a result I am sitting on the side lines out of the trade. Too bad I did all the math to get into it.

I fully expected to not be able to take part in all trades through this newsletter service, so this is the first. I will be able to take the long side at least as there will be no trouble buying this fund at such time as appropriate for a long position.

Oh well. I am curious to see if this trade works out anyway.

Jeff.

Gold... short for the pull back.

I am not a gold bug by any stretch of the imagination. I know I used to do some day trading off of the gold indices some time back, and had fun with that, but I would take the long and short with equal ease.

Today I closed a gold short that I entered and managed by using a newsletter service that I started earlier in the month.

This is not a typical hyped newsletter or trading service. It's inexpensive, informative, membership is small and is based on personal trades made by the newsletter author. The only reason I am doing this is I have followed this fellow for some time now and have seen his ideas play out well. Also I was on his mailing list when it came time for him to actually monetize his ideas. Based on his fee and number of readers he is not doing this for the money.

That is the good side, the not so good side is that he bases his trades on futures contracts, CFDs (Contracts For Difference... which I have to research more to really understand), FX and commodities. These are all less familiar to me than typical stocks and options.... but that is half the fun.

The last trade was a short gold play to take advantage of the counter trend move as gold pulls back (my style of trade in the first place). He based the trade on CFDs that are worth $10 for every $1 (research needed here). Not only do I not have access to these I doubt that my broker has them anyway and there are restrictions that do not allow US citizens to even trade these... not that I am American but it just makes them likely harder to get into.

In order to be able to trade in my current arena I need to convert everything over to ETFs... which was easy enough as I just plotted the Gold March contract prices (highs and lows over 6 months) compared to the corresponding ETF highs and lows (DGZ for short and IAU for long), calculated the current price correlation and the current ratios, plugged in the target entry, exit and stops and VOILA! ETF conversion.

My entry was bang on and my exit was 5 cents lower than the exit target... but that is due to me not being able to trade ETFs afterhours as futures and CFDs are, so I took a 5 cent loss of potential to ensure a pre-market exit. It turns out I could have nailed the target, but that is the nature of trading.

DGZ entry at $15.73 jan 18th (short Gold ETF)
DGZ exit at $16.30 jan 28th (today)
3.6% gain in 10 days. a 100 share trade pays for the annual membership to the newsletter. Nice start.

I played it small in order to be able to not be concerned about how much I had in the trade and to ensure that I could take part in other trades that may come up. We had a S&P500 trade that I lost a few pennies on but it was opened and closed as a daytrade and I had to wait until the next day to close mine out... obviously a hinderence being restricted to typical stock trading hours.

Jeff.

Lethargic Trading Strategy

... at least that is what it feels like.

I closed two trades this month one winner and one loser.

I started looking at gold ETFs to see if I want to dabble in those, perhaps look again at some others. Gold should be set for a pullback, in fact it already started without me so I will likely wait this move out.

That was exciting.

Jeff.

CMC surpasses targets this morning

Today my CMC trade has passed the $15.00 target. The trade had called for a possible entry at $13.50 and $13.00 but the $13.00 mark never was hit.

That makes a nice 11.1% gain in about 3 weeks and change.

Now, I have not closed the trade myself yet as I let it run past the profit target, something I am apt to do if I am trading with a trend. I have placed a tight VTSO of 25 cents which puts me somewhere above $15.00 now. I will probably close the trade before the end of the day even if the VTSO is not activated.

The reversal trade for this is coming up for a short at $16.00... I need to double check that entry as I did not think that CMC was going to hit target so hard this morning... so I did not do the chart work to determine the short yet.

Jeff.

Slow month

This month has been rather slow, or maybe that is just me.

I am in 9 active trades right now, closed a loser and a winner... one closed I reversed the trade to go from a profitable short to enter a long immediately.

I gave some thought to only trading with the trend but found that the historical studies and long term trial period supported the idea of playing both sides of the trade under the majority of circumstances. While this does increase the risk a bit there are entry rules to skew the trades in favour of the "with the trend trades" that, while consistently applied, produce reasonable win rates.

Currently I am at a 75% win rate as I have closed 3 winning trades of four trades taken since starting the trading in my margin account last month. Although I obviously need more trades to make any stat relevant I still have all the back data to support 75% as an acceptable expectation for a win rate.

I just double checked and I am in 5 short and 4 long positions... which just goes to show how undecided the market seems to be... perhaps that is not really relevant as the prices on each stock with fluctuate as they will without too much input from the market overall.

Not much to talk about yet.

Jeff.

Free Time

I have not had this much free time in a while, at least as far as trading is concerned.

I have pared my hit list down to 14 stocks that are active, that means they would be traded the very next time that a setup occurs. I have 6 open positions (five of which are currently showing a paper profit) with 2 or three that I place orders on each day (shorts cannot be GTC, only day orders) and the rest I am actively tracking for the next entry possibility.

With all this free time I am getting other things done that I have been procrastinating on and, when I get free time from that I run another stock or two through my wringer to see how they would rank. Tonight I eliminated a possible tradeable due to some nasty volatility that would have me whipsawed out of trades far too often to be worth the bother. I am sure that it could make a very good candidate under one of my other trading plans but I am being very diligent in sticking to only one for the time being.

I do have another to be added once I finish my analysis of it. I know that I had about fifty from last year, and most worked out very well but they are outside of my criteria now and I need to replace a good chunk of them. I will feel comfortable once I get 20 active stocks in my own portfolio but I will continue to add to that number in order to be able to continue tracking and analyzing my trading plan over a wider selection of tradeable stocks.

All in all I am quite satisfied with things as they stand right now. Being able to run a new stock for suitability in about 45 minutes and end up with a ranking, profitability and next trade setup without having to agonize over charts, read accounting statements, financial reports and check for news events certainly is a nice way to trade.

Jeff.