PositiveDev's trading journey

[Perishabull]

I am not really that into Facebook however I do follow Mr C (of the Shamen) and he posted this recently, so thought I would copy it here;

 

 

Mr C - "Aint nothing in the world gonna hold us back"

 

[Perishabull]

Here again showing the clear fake-out to the downside before the huge rally on 21st June;

 

Also, thinking back I recall the market was rallying from the open on 1st June whilst my indicator had double topped and was moving lower suggesting a sell-off so I'll need to be on the look out for these types of divergence in the future.

[Perishabull]

Sell signal on SPY at 14:35;

 

I missed getting filled at 2214.25, but left the order in, market sold off a couple of points then rallied back up setting of my order, then my stop order got taken out for a 3.25 point loss.

 

Another sell signal on SPY at 14:55;

 

Filled at 2222.50, stopped out at 2225.75, for a 3.25 point loss.

 

 

I took these trades whilst I was on lunch at work.

 

When I was back at work there was a buy signal on QQQ at 16:50;

 

This was whilst the NASDAQ was at 2240.50 and would have been a good trade (and would have yielded 16.25 points had I not been working and therefore unavailable to trade it). The market rallied up to 2256.75, at which point there were sell signals...

 

Sell signal on SPY (and DIA and E-Mini S&P futures) at 19;45:

 

SPY sell signal;

 

I was home for this one so went short at 2256.75, stopped out 4 minutes later for a 2 point loss (I opted for a tighter stop since it was high risk).

 

Entry and exit on first two trades and point buy signal was generated at 16:50;

 

 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

 

I am currently looking at switching over data sources for my indicator set, I'm currently using ETF data however I'm monitoring how the indicator performs when using futures data.

 

 

Buy signal on E-Mini S&P (ES) at 14:25;

 

This would have got me in long just before the open at a very choice price of 2210.

 

There were also buy signals on Dow Jones Industrial Average futures at 14:45 and 16:50;

 

There was also a buy signal on E-Mini NASDAQ at 18:05;

 

 

All told had I made the switch from the ETF based indicator to the futures based one before today's trade it would have given me the opportunity to buy at 2210 and sell at 2256.75, and I would have been looking at a stunning result for the day instead of an 8.5 point loss.

 

It's very very tempting to make the switch NOW.

[Perishabull]

A frustrating day today;

 

A buy signal on QQQ was partly developed by the close last night, such that I would know within 5 minutes of today's open whether it was a buy signal or not.

 

Buy signal was confirmed at 14:35 today;

 

As this is my working week, normally I go for lunch 10 minutes before the US market open however I got stuck on a call today...by the time I got away and got my laptop up and running it was 14:39, and the NASDAQ was 4 points away from the level the buy signal was generated at - too far away to take the trade. By 15:30 the market had rallied up 22.25 points from the initial low, frustrating. It has continued in a gradual ascent up to 2282, the current price. Had I been available to trade this I would have bailed out after the first 20 points (around 2274). Reason being - This month has not been good to me so far, 16 trades, 3 winners, 2 scratched at breakeven, the rest were all stopped out.

 

Potential entry point today;

 

There was also some divergence between E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD

 

AUD/JPY and EUR/USD diverged from the NASDAQ however AUD/USD didn't, so not a concrete fake-out but a suggestion of one, this would have meshed nicely with the buy signal.

 

 

There was also a sell signal on QQQ at 18:10;

 

This would have been stopped out for a 3.25 point loss, thankfully not traded since I was starting my journey home when this was generated.

 

Overall an opportunity loss of 18.75 points today.

 

 

For the futures based indicators, there was also a buy at 14:35 on the Dow Jones Industrial Average futures (YM) and a further buy at 16:25 on YM.

 

 

 

[Perishabull]

No standard signals or trades today.

 

There were however buy signals at 18:05 and 19:55 on my indicator for E-Mini S&P 500;

 

I am currently monitoring my indicator using futures data, to see how it performs. The first would have been stopped out for a 3.25 point loss. The second would have been good for 9 points today.

[Perishabull]

Sell signals at 14:40 and 15:15 on SPY;

 

 

 

First stopped out for a 1.75 point loss, the second stopped out for a 3.25 point loss.

 

Entry and exit;

 

Contrast to buy signal on futures based indicator at 14:30;

 

Market opened at 2298, and is currently at 2320.75, a few minutes before the close.

[Perishabull]

Anyone who has been following this can probably imagine how frustrating it's been trading the normal ETF based indicator whilst the futures based one has been coming up with many winning trades. Well today, I took a signal from my indicator working on Dow Jones Industrial Average futures at 14:45;

 

 

 

Filled at 2322.50, I was on my lunch break at work, after that I could only check what was happening now and again, once I saw it had gone up to 2349.50 I moved the stop to 2347.50 to lock in 25 points. The market came down as far as 2346.25, stopping me out in the process for a 25 point gain. I'd moved the stop a little too close as the market is now at 2354.25 but this is my working week, it's hard keeping tabs on things.

 

Entry and exit;

 

[Perishabull]

 

So far, this experiment of mine trading futures has been very interesting, with some shocking trading mixed in with some amazing trading. I have developed a very highly profitable system but, it's only very highly profitable if I can trade it full time. The system effectively produces lots of losing trades along with fewer trades that just make a few points and a smaller number of trades that make up a very large number of points. I haven't updated the figures for this week yet, but up to 24/06/11 there have been 119 signals generated, of which 20 have led to opportunities where between 15 and 50.5 points were available, however since I'm using an 8 point trailing stop only 14 of those opportunities were capable of producing a yield of 15 points or greater. 14 out of 119 signals. That fits with my initial impression, which is that there seems to be on average one really good trade available per week. What this effectively means is that if some of these are missed then the profitability of the system is dramatically reduced. And since I cannot trade full time (yet!) this means I inevitably miss some of these big trades that make the system highly profitable, and I'm left slightly profitable instead. Tomorrow I'm going to look into different methods of trading my signals. Perhaps I should also look at the performance of signals using my indicator with futures data, instead of ETF data. So far futures data seems to be better, but I have only looked at it for a number of days...

 

 

[Perishabull]

I want to try and quantify my edge, that way I should be better placed to play to the strength of my system.

 

For all the signals my system has generated I've kept stats showing whether the initial market move was 4 points in the direction of the signal, or not. Of the 119 signals, 69 went in the signal direction for at least 4 points. That's 58%.

 

54 of the signals led to opportunities where 6.5 points were available, so 45% of the signals led to at least 6.5 point availability. Another method to trade the system would be to have a fixed profit target of 6.5 points per trade, with perhaps a 2.5 point stop. By seeking to achieve an amount of points that are available close to 50% of the time, this would then mean if I miss a signal whilst at work, or whilst away from home, the impact on profitability would not be as significant as if I miss one of the home run type trades available using the 8 point trailing stop system.

 

If I opted for this new strategy, the account would grow at a slower pace compared to trading the 8 point trailing stop system to it's true potential, however the true potential is only available when trading it full time.

 

It's about getting the right balance.

[Perishabull]

No signals or trades yesterday.

 

It's time for a pause here I think. On 2nd July I wrote that 58% of the signals on my indicator were initially correct, with the market moving in my favour. 58% is not a particularly big edge, I think the main reason I've managed to make a profit is down to money management (3.25 point stop with 8 point trailing stop as an OCO order on trade entry), and as I mentioned before, the strategy I'm using is only fully effective if traded full time. I am reliant on the "day job" to pay the bills so can't trade full time right now. What I want to do is take a look at the approach I'm using and try and devise another approach where, ideally, I can identify higher probability set-ups to trade. Inter-market analysis is definitely something I want to take a closer look at, comparing stock indices to various currency markets is something that looks quite interesting.

 

The current strategy was averaging 100 points per month (for all signals) since I started in March, although for June, only 40.25 points could have been gained based on all the signals using the 8 point trailing stop. I believe that 25 points per week is achievable, I've proved this already during the first 3 months, and this is with an indicator that has only given me a slight edge. Since there are very many more straight 5 points moves than larger moves, I may look at trying to find higher probability setups, and aim to get 5 points per day.

[Thiarna]

No signals or trades yesterday.

 

It's time for a pause here I think. On 2nd July I wrote that 58% of the signals on my indicator were initially correct, with the market moving in my favour. 58% is not a particularly big edge, I think the main reason I've managed to make a profit is down to money management (3.25 point stop with 8 point trailing stop as an OCO order on trade entry), and as I mentioned before, the strategy I'm using is only fully effective if traded full time. I am reliant on the "day job" to pay the bills so can't trade full time right now. What I want to do is take a look at the approach I'm using and try and devise another approach where, ideally, I can identify higher probability set-ups to trade. Inter-market analysis is definitely something I want to take a closer look at, comparing stock indices to various currency markets is something that looks quite interesting.

 

The current strategy was averaging 100 points per month (for all signals) since I started in March, although for June, only 40.25 points could have been gained based on all the signals using the 8 point trailing stop. I believe that 25 points per week is achievable, I've proved this already during the first 3 months, and this is with an indicator that has only given me a slight edge. Since there are very many more straight 5 points moves than larger moves, I may look at trying to find higher probability setups, and aim to get 5 points per day.

Thanks for all your notes over the past year. I am only starting to review them now as I'm in the process if putting a toe back in the water trading again, and they look like a valuable resource. Like you I would be trading in spare time alongside a day job. One advantage of this is that you can trade as much or as little as you want, waiting for a clear signal before pulling the trigger. Trading full time you need to make a certain amount each week to get by, making money management that much harder. I will be doing it more for entertainment than profit at first anyway.

[Perishabull]

More thoughts on a new approach;

 

I'm currently thinking of taking a more dynamic approach to trading the market using several indicators I developed on a discretionary basis along with key levels from previous days together with fundamental and technical analysis. As regards money management my goal will be to gain 5 points per day however I will initiate each trade with an 8 point trailing stop and only keep that if the trade moves very strongly in my favour. If it moves strongly passed the 5 point mark I will move a fixed stop to the 5 point level to lock in that amount, if the rally or sell-off is not so convincing I will close the position at the 5 points mark. In terms of stops I will use a maximum stop of 3.25 points, a minimum of probably 2 points. I will also include purely discretionary trades, there have been times where I had thought the market was at a great point to go either long or short but didn't trade it as I didn't have a signal and it was not part of my plan. There was a buy signal on my indicator for E-Mini S&P 500 at 17:10 yesterday, a very clear buy signal, unfortunately this was whilst I was caught up listening to the News of The World Story and making a post about it here, so I missed it. I sometimes think watching the market must be a bit like looking after children, (the girlfriend and I haven't started a family yet), you take your eye off the ball for just a few minutes and something happens!

 

Buy signal at 17:10;

 

 

For this particular one, it would have been closed at a 5 point gain, since there was no strong rally.

 

The other benefit to this approach is that it means I don't have to necessarily be watching the market constantly, if I get a trade with 5 points I can continue, or just simply stop for the day.

 

 

Buy signal point on E-Mini NASDAQ;

[Perishabull]

A couple of signals today;

 

The first was whilst I was away from my desk, on my way home, a buy signal on E-Mini S&P futures at 14:10;

 

The market rallied 13 point following this. I was home by the open to see a buy signal on SPY at 14:45;

 

Filled at 2398.75, then stopped out a couple of minutes later for a 3.25 point loss.

 

I really should have known better on this one, the non-farm payrolls number came in at 18000 against consensus of 90000, following the number the market dropped sharply at 13:30 from 2420 down to 2382 by 14:05. It's not like the number was just missed, it was way off, and whilst the bounce came with the market rallying up to 2399 I really ought to have considered that the 17 point retrace of the 38 point drop was unlikely to go much further given that the number was so bad.

 

Entry and exit;

 

This evening I found a guy online called Sam Seiden, a trader of 15 years who started on the floor of the CME. He has some educational webinars on www.fxstreet.com, and has his own trader training business - http://www.onlinetradingacademy.com/. A lot of what this guy says makes sense regarding price action. Essentially if price moves down into an area, tries to rally but fails (see 1 on the chart) then moves sharply lower, the price range (see 1) can then be classed as an area where supply exists. Therefore if the price rallies back up to that range again and fails to clear it, supply is still present at that level in the market and therefore longs should be avoided. Now my buy signal was right at the upper part of that range (2396-2399), my long failed to get anywhere and the market then sold off again from that price range. Sam's method of trading would be to take a short right at the point where I went long as supply had already been seen in that range earlier on (again see 1), his modus operandi is that retail traders make two common mistakes, that is they buy after a rally, or sell after a sell off. They also buy into areas of supply or sell into areas of demand (support). So someone like Sam was on the other end of my trade today, the smarter end to be on given the context. He argues that using indicators can be a valid way to trade, however signals should be filtered through the demand/supply picture on the chart before they are considered. I've also marked up the chart with the initial range of demand seen at 2. Later during the session this range proved to be a level where supply and demand were matched, with a lot of back and fill before the price moved out of the range, initially lower, then back inside for a period before moving higher.

 

Further to this, looking back I see there was divergence between E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD;

 

Both AUD/JPY and AUD/USD diverged from the NASDAQ, failing to confirm the high. My current desk setup is a chart of the E-Mini NASDAQ on one screen, my indicator charts and order entry panel on a 2nd monitor, with a 3rd monitor showing prices for a range of futures, currencies, ETFs and bonds along with the Bid/Ask ladder and Time and Sales for the E-Mini S&P 500. Time and Sales can be useful as you can sometimes see very large numbers of contracts changing hands, suggesting professional activity in the market. Although I have the Bid/Ask ladder and Time and Sales currently on my third screen it's not something I pay a great deal of attention to unless I am in a trade, so from today I will substitute those so that I can constantly monitor my E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD divergence chart instead - it is much more immediately useful in terms of gauging whether a trade should be entered or not.

 

From now on I will also be marking up my E-Mini NASDAQ chart throughout the day to show areas of supply and demand. I can then use both the divergence chart and supply/demand levels to assess signals I get using my indicator and whether they should be traded, or not.

 

 

Free webinars from Sam Seiden -My link

[Perishabull]

This was posted on Zerohedge;

 

Guest Post: Comparing The 2007 Topping Pattern To Now

From Tony Pallotta of MacroStory

 

"Remember one simple truth, 91.8% of ES Futures daily volume is attributed to day traders and computer algorithms. And since not one single person within that group uses macro data for their intraday trades then it is safe to say the market in the short term has little to do with pricing in macro economic data. Remember how the SPX peaked two months before the great recession actually began. That is not forward looking.

 

Market participants are already analyzing today's afternoon rally as a sign that this market is resilient, that the economy is still headed for a soft patch and that the bull is alive and well.

 

I beg to differ but instead would rather highlight two important aspects of this market I suspect is dictating price.

Shorts are scared and longs are delusional. Bernanke not only taught investors to buy every single dip he even has them convinced the removal of the Bernanke put (i.e. QE) has no downside risk to the market. The move the past two weeks was foreseen by no one and hurt a lot of shorts while making longs feel smart yet again. Even a lot of macro bears were capitulating on the economic data the past two weeks. That is until today.

 

The next and probably most important aspect of this market I suspect is psychology. It's not technicals even in the face of some bearish patterns created today like island reversals. Nor is it macro data although the transitory weakness argument just got a whole lot more difficult to defend.

 

A number of times I have compared the current topping pattern to that of the 2007 pattern. The reason I suspect they are similar is for psychology during such times does not change. Longs don't want to surrender their money making machines. Shorts are eager to price in economic weakness and the argument about soft landing or recession grow louder.

 

................................................................................................................"

 

 

He's certainly right about intra-day trader's not paying proper attention to the macro picture. I am certainly guilty of this recently. For a long time I felt we would see a sharp rally on the back of the end of QE2 simply as that was the polar opposite of what everyone was expecting, and this is what happened, yet I only caught the latter part of the rally on one of the big up days as I didn't find decent entry points using my indicators.

 

Point E on each chart are remarkably similar.

 

$SPX 2007

 

 

 

$SPX 2011

 

 

Looking at the current situation through the lens of the currency markets is interesting - this is a daily chart of E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD;

 

Clear divergence suggesting this is a fake-out move to the upside for the NASDAQ.

 

 

The divergence is less obvious on the S&P 500 and Russell 2000 however much more apparent when looking at the Dow Jones Transportation Average;

 

Dow Jones Transporation Average, AUD/JPY, EUR/USD, AUD/USD;

 

 

 

Also, some say that Semiconductors lead the the market, here's the Semiconductor Index;

 

Semiconductor Index, AUD/JPY, EUR/USD, AUD/USD;

 

The semiconductor index topped on 17th February and has been breaking down ever since.

 

 

Here's E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD also with the Dollar Index;

 

The Dollar Index is making higher lows. After that huge rally up in equity markets most of the shorts will have been obliterated, markets often like to blindside the masses so a very sharp down move soon would not be a surprise at all.

 

 

30 year treasury bond futures;

 

An equity market sell off would certainly give the bond market quite an assist at this point, a point at which must be seen to be high risk for bonds given the end of QE2....

 

Thinking back to the sharp sell off yesterday on the non-farm payrolls number, the NASDAQ futures went down 39 points (1.6%) within 35 minutes, that may be evidence of jitters in the markets right now.

[Perishabull]

This is a chart of the SP 500 with a Fibonacci time ratio showing the start point as March 6th 2009, the 100% point is July 6th 2010, a major low, the 1.618 extension in time just happens to be the high on May 2nd this year. Quite stunning.

 

Even more so if that turns out to be a major high.

[jsr]

Hey, did u get any interesting signals today? Namely Gold SPX and GDX?

 

All mine say we're going lower (daily's).

[Perishabull]

Looking at the current situation through the lens of the currency markets is interesting - this is a daily chart of E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD;

 

Clear divergence suggesting this is a fake-out move to the upside for the NASDAQ.

 

 

Here's E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD also with the Dollar Index;

 

The Dollar Index is making higher lows. After that huge rally up in equity markets most of the shorts will have been obliterated, markets often like to blindside the masses so a very sharp down move soon would not be a surprise at all.

 

 

A very frustrating day today, my analysis was spot on but I wasn't able to take advantage due to the 9 - 5...

 

[Perishabull]

Hey, did u get any interesting signals today? Namely Gold SPX and GDX?

 

All mine say we're going lower (daily's).

 

Not today, but the divergence chart I posted suggests lower prices.

[Perishabull]

Sell signal on SPY today at 19:25;

 

also on my directional NDX indicator;

 

 

I missed it as I was working late, missed out on 20 points as a result...

[Perishabull]

Sell signal on E-Mini S&P at 17:30;

 

Missed whilst at work, again a good one like the one missed yesterday. Signal point was with the market at 2372.50, market sold off down to as low as 2342.25, before rallying back up to 2351 by the closing bell.

 

Signal point;

[Perishabull]

am my sense of furious anger.

 

This looks like a decent spot to get on board. I ended up getting back in a bit too soon after the drop ($37). It's looks like a double bottom is in the process of being completed and with the near $2 up move today I wouldn't be surprised if this is the start of a new rally.

 

Looking at the current situation through the lens of the currency markets is interesting - this is a daily chart of E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD;

 

Clear divergence suggesting this is a fake-out move to the upside for the NASDAQ.

 

Here's E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD also with the Dollar Index;

 

The Dollar Index is making higher lows. After that huge rally up in equity markets most of the shorts will have been obliterated, markets often like to blindside the masses so a very sharp down move soon would not be a surprise at all.

 

 

E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD;

 

Silver futures;

 

To analyse the market and not act on the conclusion is completely absurd.

 

[Perishabull]

1, 2, 3, 4 losing trades today. The gory details to come tomorrow.

[drbubb]

This is a chart of the SP 500 with a Fibonacci time ratio showing the start point as March 6th 2009, the 100% point is July 6th 2010, a major low, the 1.618 extension in time just happens to be the high on May 2nd this year. Quite stunning.

 

Even more so if that turns out to be a major high.

Interesting.

 

I BOT some calls today (small numbers) on : SPY, SSO, SMH

and also on some oil stocks. (shall I post the symbols?)

 

I think we may see a turn by Monday, and the various indices have held support (so far)

[Perishabull]

Interesting.

 

I BOT some calls today (small numbers) on : SPY, SSO, SMH

and also on some oil stocks. (shall I post the symbols?)

 

Sure, go ahead.

 

 

Signals from Friday's trading;

 

NASDAQ futures sell signal at 16:20;

 

E-Mini S&P futures sell signal at 17:10;

 

E-Mini S&P futures buy signal at 19:05;

 

A 2 point loss on friday on each of these, and a 1 point loss on a discretionary trade I took, so a 7 point loss overall, not too bad for a losing day.

[Perishabull]

Nice sell signal yesterday at 14:50, unfortunately missed during a break from the screen;

 

Very annoying.

 

Also divergence shown on E-Mini NASDAQ, AUD/JPY, EUR/USD, AUD/USD chart;

 

I should have pulled 13 points out of that one...