April 30th, a solid day

Today I actually followed my plan, cool. Five trades, three in the black and two in the red.

This is where the method of staying in the game throughout the day pays off as I am there for the decent winners and I cut my losers short, stacks things in my favour that way.

The quick count was +1 cps, +22 cps, -10 cps, -10 cps, + 52 cps. I missed a couple near the end due to some playing about.

The charts:

SSO for the morning SPX gains:

SDS for the afternoon pullbacks:

Part of the key is getting on the right side of the 200sma which is assisted by watching the TICK, observing near support and resistance as well as just seeing how the price behaves as it travels from one price to another. Basically being flexible about the ideas that the market may cause me to come up with, don't ignore a bias but allow it to shift with the information at hand.

Tidbits from my journal as I checked the various indicators, markets and whatnot:

Pre-market idea: "SSO long with a loose stop"
Based on the FTSE uptrend over it's duration...to that point. TICK was positive but not strong.
SSO gapped up 90 cents on the over night and was well over yesterday's high.

Early morning: "Price is testing yesterday's high (as support) uptrend day?"
TICK was strong but not spectacular, sector ETFs were all up with one or two exceptions

Mid morning: "Sector ETFs are mixed - range day now?"
Sector ETFs not so positive anymore, Tick not giving lot's of >+800 readings and slowly trending down against the gains.

Late morning: "Note Mid morning entry...wait for resolution, check near lunch"
I waited and saw the price cross the 200 on the upside in SDS, had a few tests and jumped in on market weakness.

I am still playing so my position sizing is small, 100 or 200 shares, so the profits are negligible, but the ideas are sound so I will continue with small positions sizing for a while until I can remain consistent enough to develop my edge.

Jeff.

April 29th, trading the news...or not

I have never been one to actively trade news, I just don't think that I can expect a rational reaction to any news whether good or bad and I certainly don't expect to be able to guess the reaction.

The US Federal Government Report today was no exception. Had I ignored the fact that there was news afoot I would have fared better. I had two outcomes in mind and I picked the wrong one based on jumpy streaming data as the traffic spiked. I should have just waited it out a few minutes THEN decided what to do.

Trading the chart alone and following my entry rules would have been a better course of action and would have given me the opportunity to cash in on the initial reaction to the report.

Here is the chart for SSO, it is worth noting that my preset limit price to enter this was $23.75 on the first round, I didn't place an order on the second round, in transit at the time.

I would expect momentum and target moves following reports of any kind so these would have been stopped tightly or just exited manually for profit targets or chart weakness.

From a purely techincal view this chart shows the increased volatility in price in conjunction with a spike in volume as the price tests the 200 minute sma. The price falls off the top of the move in what might be construed as a bull flag but with the high volume continuing into the down move it could not hold...sell. The next entry as price tests the 200 again on good volume for a more likely smaller trade...the 50sma would be the first target for stop setting and would have been the exit.

Basically, report or no report this should have been a no brainer trade.

Here is SDS, note the failed attempt at timing the report momentum in the wrong direction. Same applies here for momentum and target exits.

So, once again I see that the chart really does tell the story better than any attempt of mine to anticipate anything other than the possible moves following the setups as they occur. Volume was hard to read as it had dropped back to a more normal level but the 200sma switches from previous resistance on SDS to support nicely, that alone makes this a decent probability trade.

The worst of it was deciding to not trade anything after these only to see a nice setup for SDS in the last 30 minutes tying the 200, 50 and 30 into a nicely indicated move.

Here's the chart for that piece of cake. So, once again I need to just follow my rules as I have them set out and I will do much better.

One thing to note about playing the trades based on the 200sma for entry. It would appear to be a better trade to play the price as a reversion to the 200 then use the 200 as a stop as the price crosses. Some other time I will look at these trades and see what I need to see in order to call the move.

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.

April 27th, The Plan

Well, I don't know how many times I've said in the past that I am going to stick to the plan and failed to do so as move after move looks good so I deviate...often losing any previous gains in the process. If nothing else my deviations serve to teach me some very important lessons in money management, humility and just some hard knocks to keep me in line in the long run.

Today was different. I stuck to the plan.

The only downfall was my timing was not so great. The first trade was well timed but short lived as I accidentally closed the position based on my first target, I meant to set a stop and leave it some room to move as it moved into the money fast. Another lesson.

The rest of the day was nicely setup and I set a few limit orders but did not place them in time as I was waiting for that one more penny move in my favour first... I should know better. I try to keep my maximum loss allowance very small but arguing with myself over a 5 cent stop or a 6 cent stop is ridiculous when it makes me hesitate, the order gets placed and the price moves away.

Here is the entire day chart for SPY including Friday's post-market and today's pre-market activity.

I always like to have some plan going in as it gives me somewhere to start. If it is wrong I still have a reference. So here is a snippet from my journal just before the market opened:

"SPY gapped down to open level...within range (previous day Hi/Lo range)
**target trades - Pivot Point/ 200sma/ momentum"

Here is a zoom in of the first trade, a nice entry:

Entry was exactly as planned, test of the 200SMA and the previous day low price, nice setup. I was setting my stop and for what ever reason I placed a market order to close, likely doing too many thing at once here... 23 cent gain anyway, better than a mistaken losing exit.

I would have been using a combination of the 50 SMA and the various support/resistance lines along the way depending on how far advanced the price gets. Exit would have been near the light blue line, yesterday's closing price, $86.66. Considering my entry was a solid one this should have been a nice trade of the day...$85.75 open for a 91 cps gain.

I decided to wait out the trades for the rest of the day as they approached and crossed the 200 sma, according to plan. While these may not be the ideal trades they give me a certain guide to follow and a good place to start with some decent profits. I'll get back to the fancier stuff later.

Other trade ideas, some I missed due to not being there (travelling home for lunch when the first one happened) and just missing the entries on the others jockeying for those pennies.
That one was from $65.40 to $66.32 in SDS, 92 cents per share. Nice.

Small target trade...the rest of the day was just all over the place.

Jeff.

Moving averages and the pre-market activity

I have been using Stockcharts.com for quite some time so I got used to them only having 0930h to 1600h available for intraday history. This led to not having any reliable means of using moving averages for the first 30, 50 or 200 minutes depending on which average I may have wanted to use for primary trading on any given day. The great days were days were the open was very close to the close price to allow the averages to be valid very soon.

Now that I am used to using the Esignal.com charting I have seen the advantage of using the pre-market activity to judge earlier morning trading using the moving averages, along with some other information, sooner.

I use yesterday as an example.

My PP200 plan is to use the 200 period moving average as a launching pad for trades with the 30 and 50 as directional indicators... along with other information but these are my initial setup guides as they are historically very sound for short term trading...long term as well but I have yet to test that out.

Here is the chart for SDS as I annotated it yesterday. I used the 50 sma as a launching pad for the long trades based on my bias for the morning and the position of the 30 sma (somewhat as trade number two didn't use it at all). Note how the green 200sma does not get near the price until after 1215h.

The chart below contrasts with the first. It is a shorter timeframe as the 0930h start is 1/3 the way into the chart and it only goes to 1430h. Now, I can't put all the pretty arrows and nice annotations in that I can on Stockcharts but all the daily and monthly pivots, daily OHLC are automatically there. So I numbered the similar trades 1 and 2

The first trade would be in at $68 (I'll use nice even numbers that are terribly idealized for simplicity). Following the blue 50 sma has me stopped out at $68.75. 75 cps, not bad but the entry is a little out in the breeze even though the primary pivot point is at $67.80...that's a 20 cps loss allowance off the start. Trade 2 is in at $68.90 stopped out at $69.45. 55 cps. Still not too shabby. The entry was right in line with the 1/2 R1 pivot and the 22nd opening price, not bad for confirming information so a tighter stop of 10 cps could be managed.

Total theoretical gain of $1.30 per share with a possible loss allowance of 30cps. a nice 4.3:1 gain/loss ratio.

Chart two, while not as pretty, has far greater potential. The pre-market price is climbing and crosses the 200sma at the open...right away that makes the 200 valid immediately even though it does not technically catch up until 1020h. Trading is about the pivot, the 30 and 50 are at or above the 200 and trending up, the price did not establish a new lower low. The resolution is not great but the price drops a tad to within 10 cents of the 200 on the way past for a prime entry at $68.26. The stops could follow the 30 or 50 but I would pick the various pivots and previous day open, close etc once they were crossed. The stop would move three times, $68.50, $68.90 and $69.25..stopped out. 99 cps....ideally but possible.

Trade 2 starts out with a more defined test of the 200sma as the price again drops within 10 cents. $68.30ish. The 30 and fifty are closer so I would use them as stops along the way this time in addition to the various lines. Hard to tell without having really been paying attention to this at the time with the different total timeframe....I scrolled through this a bar at a time and found that I would have stopped out at $69.40 as I ended up picking the blue 50 sma once it crossed the previous day's high at $69.25. $1.10 per share.

Total theoretical gain of $1.99 per share with a possible loss allowance of 30 cps. a nice 6.6:1 gain/loss ratio. The Esignals timeframe allowed a better entry price for he second trade and a higher stop setting for the first trade. The ideas behind the trades are the same.

Jeff.

April 23rd, SPY, SDS and the easy trade setups

I made some trades today, the following chart has them shown as numbered arrows. Red indicates a short position (long in SDS) and green a long position in SPY. I was trying to work with the market strength and weaknesses in conjunction with a few support and resistance levels. I didn't really do all that well though. Had I followed my rules I may have come out ahead a bit.

SPY for today:


OK, so I plotted the ideal trades today that I could have made by ignoring all the chatter that I have started paying attention to. Blue circles indicate the entry zones and the blue arrows the best path of the moving stops (not VTSOs). I chose the 50 SMA but could have used the 30 sma with similar results.

It is worth noting that the one trade that I did make according to my old rules I was stopped out early due to having a too tight stop which I blame watching too much data on... that and I was looking for a profit so I got trapped into the "small profit is better than none" mentality. Not a good place when a larger move is expected and possible. I would have obviously faired better using a break even stop then following the 50 up, as noted in hindsight.

SDS for today, same annotations:

The major rules used for these trades center around using the 50sma for entry given a cross over to the upside followed by a test of the line, this is the entry point. Initially a tight stop below the line is best so getting a good low price close tot he line is crucial. There are two ways to do this, wait and hit buy for a market order to ensure a position is entered or place a limit order just above the line in hopes of getting the test close enough. I decided to only use trades above the 50 and 200 moving averages for now. This favours trading with the short term trend and can lead to catching the longer term trend moves in a swing trade style.

Market order entry can be prone to placing the order too late and trying to catch a possible runaway price then having it return to the 50 sma and be too far out of the money and ending up closing the position. That or letting it run farther into debt to where the stop should be in the first place...only to have it keep going and losing more than initially anticipated.

Limits are important to keep the maximum loss allowance manageable. No limit order hit, no trade made.

Using those ideal trades, allowing a 30% hedge, commissions, 100 share trades and a losing trade or two still leaves $100 or so on the table... USD so about $120 CDN.

Back to what I know while gauging the new information against my trade rules to see how pertinent it may be in helping make my trade no trade decisions. I will only use the extra stuff as confirmation now instead of trying to trade off of it for now.

Jeff.