Simple not easy

[atters88]

This diary is intended to be a record of my trades and of my musings on trading. Why? Well, no doubt I'll explore all that in future posts but for now I will say that I am an experienced and profitable trader looking to see if can take my trading to the next level.

As important as having done a lot of trading, I have also thought a lot about trading: how trading sucks in suckers, how for most people the biggest barrier to success is themselves, not really in the way that so many people write about needing the right psychology but just that people seem to abandon common sense and judgement when it comes to trading. In the quest for the holy grail, most people forget to pick up the dimes scattered by the side of the road.

Why dimes? I'm not American after all. But one of the good books I have read is "When Genius Failed" which introduced me to the striking concept coined (pun intended) by a Long Term Capital fund manager of collecting dimes in front of a steam roller. That can be risky of course but it can also be safe. You've just got to use a bit of common sense.

If you stick with this diary, you will see that I keep my trading SIMPLE. VERY SIMPLE. If you're into MACD histograms and (god help us) Elliott waves and Elder rays, then read something else or be prepared to change your ways.

What do I trade?

Mainly Dow 30 stocks. But also just about anything else that catches my eye. but one of my key beliefs is that technical analysis/price action analysis only works on single products that are traded in and of themselves and not for indices. I may buy a FSTE call but I do so if I simply want some broad market upside exposure and not because I kid myself that TA is of any relevance.

Time frame? A few hours to a few weeks. But if I have a spare hour I sometimes just see if I can scalp a few pips on EURUSD.

Biggest weakness? Cashing in too early

Opinionated? Definitely

Most recent trade: Long Exxon: Bought on Friday at 103.60. Have I correctly attached the chart? Well, I suppose I'll have to wait and see when I submit this post.

Why Exxon? Friday saw a lovely punch through resistance on good volume. The uptrend is reasonably consistent and not over stretched. Oil stocks may be volatile given geo-politcal tensions over the coming seesions, so I'm not going to hang around with this trade.

That's all for now

Atters88

 

[atters88]

Thoughts for Monday

Quite a few Dow 30 stocks are looking strong and I'll be looking to add a couple of positions at or soon after the open.

3M has shown a nice uptrend with gentle well spaced pull backs since February.It looks to be ready for another leg up. Question is, do I buy it now or wait for a close above the 9 June high? I'll chew on that overnight.

Caterpillar also looks like its ready for a leg up but, when you look at the weekly chart, upside feels more limited at least in the short term. It feels a lot to ask of this stock to break through to new post recession highs. If I do take this as a long, I'd sell at least half of the position if the stock reached 113.

Microsoft may be emerging from an extended ranging pattern. I already hold a long position in Microsoft but will look to add to it if it clears 42.

But Du Pont looks more ready to trade. There's stacks of support between 66 and 68 and scope for the stock to run on to 80, so I'll place a market order for the open.

If I also end up taking a long position in 3M, Caterpillar or Microsoft, I'll look to balance things with a short. Visa looks like it MAY be forming a massive top. Even though I feel that the safer trade would be to sell on a break of 200, shorting now or at 206 is quite low risk as there would be an obvious stop at around 217.

Also IBM seems weak. A close below 181 would be a sign to go short.

Charts attached. I'll let you know how these pan out.

 

[atters88]

today's trades

Long Dupont
Long Caterpillar
Short Visa

More details and charts will be posted later.

 

[atters88]

Sold Exxon 104.22

Dow looks weak at the open, so I'm taking my small profit in Exxon.

 

[atters88]

First the good news

My sale of Exxon at 104.22 a few minutes after the open today was well timed. With Asian and Europe down the morning, there simply didin't seem to be fuel in the tank for Exxon to advance on Fridays upwards move.

My short position in Visa (209.49) is also in the money, just. I feel I entered this trade prematurely because I wanted some short exposure. A break below 205 or 207 would have made this trade more compelling. I'll hold overnight and decide what to do in the morning.

But other 2 trades made at the open have gone against me.

With Dupont, I was filled at 68.19, so the loss is very small and the position retains its rationale. The long term uptrend is intact. Following a decent period of consolidation in the Spring, the stock broke out and has retraced to the break out point at around 68.00. where will it go now? I don't know but, if the stock goes down, I should find that out cheaply and quickly.

My long in Caterpillar also is still viable in my view (just) despite being out of the money. The open today was above Friday's close which persuaded me to go long but it soon reversed. My stop is currently at 105.50. Looking again at the chart, Caterpillar's uptrend has gotten a bit untidy over the past 2 months and the poke above the range this morning was not emphatic. Perhaps not the brightest trade.

I can't see any prospects for tomorrow apart from possibly shorting the Hang Seng futures (it's hard to see that there won't be any follow through of today's downward dynamic.

 

[atters88]

Some short candidates

Perturbed that I am heavily long in stocks and not being able to find any short candidates in my usual hunting ground (Dow 30), I have just browsed the CAC 40 stocks. Stocks on the CAC40 are often in a different trending phase to the US indices, so I sometimes look there when I want to balance my risk profile.

Anyway, I came up with the following shorts;

Bouygues has had 7 lower closes on gradually increasing volume. Nearest support is about a 3% away, but that's enough for me given how nice this setup looks. I'll be short at the open.

Legrand seems to be putting in a top. Volume on today's downward dynamic is good. I suspect there will be a number of longs who are close to pulling the sell trigger. Not as compelling as Bouygues but may be worth a pop on the short side.

 

[atters88]

Profit and loss

My short in Bouygues (a CAC40 stock) played out as planned and I took my profit after just a hour. I just wish I could find set ups this good more often and that I trade them more aggressively when I do.

My short in Visa is now in the money.

But my other positions (all long) are underwater following the general sell off that later ensued (Microsoft (grrr, I've let that one slip from profit to a loss), Du Pont and Caterpillar.

Each of those trade still makes technical sense but it looks like we're entering a reaction phase so I need to add some short exposure. Almost bought a July CAC 40 put earlier and now wish I had.

Tomorrow, I'll look to short IBM and Proctor and Gamble. Ideally, I like to take a short position where both the downside range and downside volume are greater than the previous day. Neither stock quite satisfies these requirements however.

 

[atters88]

Swings and roundabouts

I've had a crazy busy day, so this is just a quick update.

As stated yesterday, I shorted Procter & Gamble at 79.08. Initially the trade went in my direction but then reversed so I got out with a tiny loss.

Also, I bought a CAC 40 Put (4450), which I sold for a 4.5 pip profit before the close.

I have held onto my other positions, which have been uneventful. Microsoft has drifted back into the money. Any strength tomorrow and I will add to this position. Caterpillar and Du Pont are still underwater but are looking healthier.

I've not had much time today to look for possible positions. BNP Parisbas is the best I have found and looks like a good short. I like the increased range, increased volume behaviour of the past 2 days; the fact that the stock is in a clear downtrend and that it is making fresh lows. Also European banks are taking a battering at the moment. Compared with other banking stocks, the downtrend is not overstretched.

 

[WklyOptions]

I've had a crazy busy day, so this is just a quick update.

As stated yesterday, I shorted Procter & Gamble at 79.08. Initially the trade went in my direction but then reversed so I got out with a tiny loss.

Also, I bought a CAC 40 Put (4450), which I sold for a 4.5 pip profit before the close.

I have held onto my other positions, which have been uneventful. Microsoft has drifted back into the money. Any strength tomorrow and I will add to this position. Caterpillar and Du Pont are still underwater but are looking healthier.

I've not had much time today to look for possible positions. BNP Parisbas is the best I have found and looks like a good short. I like the increased range, increased volume behaviour of the past 2 days; the fact that the stock is in a clear downtrend and that it is making fresh lows. Also European banks are taking a battering at the moment. Compared with other banking stocks, the downtrend is not overstretched.

Hi, Atters88,

Thx for posting your trading journey and observations.

In reading thru your trades and results, , may I suggest a few additional items of interest that you might want to include in your existing open trades and new trades/entries?

1. What is the trading EDGE that you are trying to exploit on the trade?
2. What is the precise Entry price and why there (technical? fundamental? feeling?)?
3. Where is your "proven wrong" price level to exit in adversity? Why specifically there? Technical? Fundamental? Feeling?
4. Where is your Target(s) level(s)? Why?
5. What is your trade mgmt. bias and idea(s)? To exit all lots at once? To scale out (and how)? To scale in and add more lots?
6. What is the size of your bet vs bankroll?
7. Will you fire a 2nd or 3rd trade into the same setup if the 1st trade is a loss?

Atters88 - the above items are just some trading metrics that may be of interest to T2W traders. More importantly these items hopefully have clear and precise (and consistently applied) answers that you are willing to risk your hard earned $$$ per trade!

In addition the tracking and measuring and debriefings from the above trading metrics may be helpful for you to learn to identify specific areas of trading that you may be able to measurably improve your outcomes/performance.

I really enjoy reading and thinking thru many of the T2W traders experiences and journeys in these forums. We all know trading is a very "lonely" and individual journey. However, the more that you (and I and others) are willing to open and share, the greater the benefit for all to gain!

Keep up with your posts and sharing of trades/experiences/observations. Hopefully also at least add 1 or more of the above metrics for us.

Thx again for sharing your trades and time/observations!

WklyOptions

 

[atters88]

First, it's good to see some feedback being posted on my journal. Thank you WklyOptions.

Yes, I do need to expand more on how I trade, what I see my edge as being and when I know I am wrong. I will post a fuller response over the weekend but I will say now that most of my trades are based on one of three sets ups, that I have a number of rules and guidelines that I try to apply and, no, I NEVER double up on a losing position.

I highlighted yesterday BNP Parisbas as a short (see chart attached to my last post). That played out very nicely today, compensating for adverse moves in a couple of my long positions (Du Pont and Microsoft).

Annoyingly, I shorted Procter & Gamble yesterday but got out at break even as an initial move in direction reversed. That would have been a very nice trade today had I held onto it.

 

[atters88]

Friday: Trades for today

I'm looking at Walmart and Procter & Gamble as possible shorts today. Nike is a possible long.

 

[atters88]

Greater range, greater volume

Time to introduce one of my set ups which I will call Greater Range, Greater Volume.

I trade stocks with this set up but I don't see why it can't be used for any asset where volume information is available. So, allow me to introduce the rules:

Use the daily chart
The price action needs to have a general sense of direction. What is the gravity of the chart? Let's assume it is up.

Yesterday's candle needs to be green.
If today's candle is:
1. Green
2. Has a greater range than yesterday
3. And volume is higher and above average
4 And the candle closes near the high

Then you buy at the open tomorrow. Your stop is just below today's low.
I tend to close my trade at the end of the day. Don't trade if you're just going to be banging into heavy resistance.

When I have the time, I will see if I can do some testing based on keeping the position open 2 days, 3 days etc or having profit targets.

Walt Disney (DIS) meets my criteria and I will open a long position for Monday's open.

I've also posted the chart of Chevron as there were several successful trades over the past couple of months.

I'm conscious that this set up will benefit from being developed and tested more than I have been able to. I just need the time and, to be honest, the skills to script some back tests. Any thoughts on how it can be improved?

 

[atters88]

Every little counts

The trade I announced over the weekend night (Walt Disney) played out as planned and I have taken my modest but welcome profit.

Ready for a second strategy? Again, this is work in progress but the bare bones are there. It's as simple as my last strategy.

After a decline, a series of 4 daily higher lows is a pretty reliable sign that a bottom has been reached. The obvious thing is to enter long, but I'm not good at holding on to a winning position to really let them run. So I have started selling puts. The strike I use is the nearest to the low, whether it is above or below the low. The put I buy needs to expire ideally in 2 to 3 weeks. Perhaps not the greatest strategy at the moment with option premium being so low but its time may come.

I've attached an IBM chart which shows a few of opportunities to do this trade (including one which would probably have resulted in a loss) - see the arrows I have noted onto the chart. And one more trade may be coming up. Tonight's close looks like giving us a third higher low, so I'll be watching IBM's close tomorrow.

 

[atters88]

Associated British Foods is set to breakout

I've had little time to devote to trading over the past couple of days. I'll aim to post a more meaningful update over the weekend but in the meantime there are a few things to report:

First, IBM has continued to advance as anticipated in my last post. The move has been so strong that there was no prospect of securing any decent premium by selling a put option at the low (180). Instead I have bought a long position and sold an 18 July call at 190.

My purchase of Caterpillar is finally working out. I don't usually hold trades this long but I was encouraged by the stock's higher lows.

Finally, tomorrow's stand out buy for me looks like being Associated British Foods (listed in London). If it opens strong, I will buy.

 

[atters88]

Buying Associated British Foods (ABF)

Buying Associated British Foods (ABF) @ 3099p

 

[atters88]

Lying low

My long trade in Associate British Foods is flat. I'm holding it overnight as the dynamics in the chart still suggest upside momentum.

My Caterpillar trade has come right but I failed to close it tonight and will need to hold the position over the long US weekend. Meanwhile, my profit in Microsoft has slipped away. Drat.

 

[atters88]

Profitable ABF trade closed

I've just taken my profit in Associated British Foods (ABF) All done for the week. Have a good weekend.

 

[atters88]

Stepping up to the plate

A few months back, when it was cold and wet, I attended a seminar hosted by the Market Technicians Association in London at which an analyst from Bloomberg talked about developing trading systems.

It was a useful talk and reinforced how developing a consistent system is not easy and how most technical analysis lacks any sort of evidential base.

After the talk, I chatted to a young man who develops trading systems and we talked about the challenges of making a living form trading. I said that that was a medium term goal for me.

"Are you profitable?" he asked
"Yes, I've not had a negative 3 month rolling period since 2010".
"Well what's stopping you?"
"I'd need to increase my profits 10 fold to replace my salary"
"Well just increase your leverage"

I've been thinking back to that conversation and realise that, if I am really to develop, I need to have more skin in the game. Leverage is not the only answer, of course. I need to squeeze more from my winning trades, but I have also been hopelessly cautious in terms of my size of position.

So, from tomorrow, I am doubling my standard position size.

I had a fair week last week with profits from Disney, Associated British Foods and Caterpillar helping to counter a bad hit on Du Pont and my Microsoft trade which seems now to be going nowhere.

With Asia and Europe mostly weak on Friday, I'm going to seek to be market neutral in my US stock trading over the next few days but at the moment I just don't see any short candidates. I'll browse Nasdaq and CAC shares later to see if anything tempts me.

 

[atters88]

CAC stocks looking vulnerable

Today Cisco is the best long trade I can find. If Europe is steady this morning, I will enter long and take a position that is double my usual/former size. Reasons for this trade:

• Technology seems to be showing strength as a sector
• Recent higher highs and higher lows
• seems successfully to have broken/drifted out of the 24-25 trading range

With stock markets weakening, I want overall for my positions to be at least neutral. Lots of CAC40 stocks look weak or vulnerable. I've posted a couple (Essilor and St Gobain), or I may just repeat my tactic of balancing my US longs with a CAC 40 put.

 

[atters88]

Well I did say the CAC looked vulnerable

If anyone followed my advice yesterday, they would have had 2 and possibly 3 winning trades out of 3 today, including St Gobain which was the biggest faller on the CAC.

But I didn't join in the fun Because of travel and meetings, I wasn't able to keep an eye of the European markets opening this morning, so never entered my orders. Frustrating, but also reassuring because I feel more confident that, in aiming to be a serious trader, I am not chasing my tail, that my analysis is sound and that I have an edge that could be better exploited given the necessary time and discipline.

I don't know what to think of the next few days. Down moves this year have been swiftly countered (in the US at least) but this latest move has been brewing a while (look at France and Italy) and also Asia hasn't really joined in the party this year, meaning the US markets were becoming increasingly detached from others.

A potential short for tomorrow is Chevron. Look at how volume increased as the price was driven up recently. Now that prices have pulled back, there seem to be fewer people wanting to buy. Today, with the price teasing 130, volume ticked up again. I reckon there will plenty of anxious traders hitting sell if there is further weakness. If the price reaches 129, I think it will be like pushing on an open door.