# Example of my conservative trading strategy



## lukeaye (29 September 2009)

Hi guys, thought i would share one of my strategies for the market at the moment. this is a conservative strategy i use, i will often pyramid with my positions, but i feel now is not the time to do it. This one of my low risk entries i took yesterday, i didnt want to hindsight, but i dont think im allowed to show it at the time of entry, as ASIC dont allow it? anyway this is more of a help thread for those who want to see what a strategy can look like. feel free to critic, im happy to hear anyones opinion. So as i said this is not a gloat look at me im making money thread, its only intended to show how a simple strategy may look.

TRADING DIARY

STOCK; AMP.asx		$6.11			28/9/09

REASON FOR TRADE; Stock has completed a-b-c correction in 4th wave, and is currently sitting on support. Rule of alternation complied with (EW). Banking and financial sector still looking strong with good momentum. Price oscillator confirms weak pull back. moving average confirms, volume confirms. Market conditions have pulled back, presents at this stage as low risk entry position. Although monitoring of broader market will need to be looked at for evidence of a reversal.

ENTRY STRATEGY; Bought at current levels of $6.11. Support has held and can therefore be safely bought off this level, with expectations of a 5th wave advance. Initial stop loss can be put at $6.02 cents. 

EXIT STRATEGY; Half the position will be closed at resistance of $6.60. The rest of position will be left to run to $6.98 with a trailing stop then moved to $6.56. 



DATE ENTERED; 28/9/09
ENTRY PRICE; $6.12
EXIT PRICE;
DAYS HELD;1
PROFIT/LOSS;
EVALUTAION OF TRADE;


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## lukeaye (29 September 2009)

Furthermore for those who wish to see the risk on this trade, i would risk 2% or $200 per $10 000. Because of the stop loss being as tight as it is, it allows me to have quite a good position size. My strategy oftens involves buying off support rather then buying a breakout, for this reason. but once again my strategy will adapt to the conditions of the stock.


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## lukeaye (29 September 2009)

Today AMP complied well with expectations, closing 5% up on higher then average volume. It closed near the high which is also another good sign. Tomorrow i will look for further upside movement to confirm break. If target 1 is hit half profit will be taken, and stop loss will be moved up to trail. 

If stock falls back, on lower volume at a lower range i will hold the position at the current stop loss, with the same expectaions. If it pulls back the same or similar range with high volume i will exit the trade as can be assumed to be a false break. At which point i will reasses, and look for another entry point down the track.


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## lukeaye (29 September 2009)

Progressive chart from todays action.

PS if im doing something illegal by posting my actions, please let me know


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## lukeaye (30 September 2009)

Very happy with todays price action, was close to triggering half the position close at 6.60. Volume continues to increase and the stock has closed at 6.52, 2 cents off the high. So a good close also. 

Tomorrow i am expecting the broader markets to move up, momentum is looking very good, despite obvious heavily overbought conditions. 

Many will be looking at this, and thinking "your mad, let it run". This is the mentality i used to have, and the exact type of emotion i try to remove from my trades. I have to trust my analysis, and the clear thought process i had before i entered the trade. Usually i wouldnt adopt a conservative approach but i am geniunely scared of the markets rolling over soon, and want to lock in profits a little earlier then usual. The other thing im trying to avoid is a possible double top formation.

So tomorrow if AMP breaches 6.60 i will sell, for a 5R profit, but im taking half so it becomes 2.5R still not bad for a few days work. And then of course i will move my stop to breakeven, a free trade! and then once two closed moves over 6.60, i will trail my stop to 2.56.


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## tech/a (30 September 2009)

No I actually agree with you.
Its very weak.
Strong possibility of hidden selling.
Tommorows price action will reveal.


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## lukeaye (30 September 2009)

im really still looking for an above 9860 close on the dow, which hasnt happened yet. i think we will have a positive night though, fingers crossed.


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## johnnyg (30 September 2009)

Nice start to the thread Luke, look forward to seeing more trades.


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## lukeaye (30 September 2009)

Thanks Johnny G
Im really just trying to show examples of strategys in action, rather then show what trades im recommending. Because i will prob get some wrong, but that is the most important part of managing a strategy, i hope i dont get one wrong to soon though lol. When i started i had nobody to show me strategys in action, or really any idea how to create a proper strategy. so i thought i would share mine!


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## Wysiwyg (30 September 2009)

Firstly, well done with the trade going in your favour. Secondly, the support/resistance, price oscillation, volume and general market overview were well perceived. Thirdly (pause) those numbers representing Ralph Elliots theory of wave patterns confirms to me that people use (EW) "theory" very very loosely. 1 is supposedly the pinnacle of the first wave. 2 is the retracement but not lower than the first.

That`s my ,  and I am a beginner.


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## lukeaye (1 October 2009)

Wysiwyg said:


> Firstly, well done with the trade going in your favour. Secondly, the support/resistance, price oscillation, volume and general market overview were well perceived. Thirdly (pause) those numbers representing Ralph Elliots theory of wave patterns confirms to me that people use (EW) "theory" very very loosely. 1 is supposedly the pinnacle of the first wave. 2 is the retracement but not lower than the first.
> 
> That`s my ,  and I am a beginner.




Sorry, i dont really understand what you are saying?

Ill explain how i got it, ive take a valid low, and counted the impulsive move from that as 1. We then had a complex a-b-c-X-a-b-c correction, which i have called 2. Then we have another impulsive move larger then the first, which i called 3. then using EW theory of alternation, a simple a-b-c correction in wave 4. and now a new impulsive move which i will label 5


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## johnnyg (1 October 2009)

lukeaye said:


> Thanks Johnny G
> Because i will prob get some wrong, but that is the most important part of managing a strategy, i hope i dont get one wrong to soon though lol.




As most know, its not about being right or wrong, its about how much you make when your right, and how much you lose when your wrong. Losing is apart of trading, and I think I'm well on my way to accepting that in my own personal trading, however like you, when it comes down to showing trades on a public forum you (and I) still have a need to get them right, to show that we were _right._

Very interesting the physiology of it all.


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## lukeaye (1 October 2009)

yeah i agree. Its the losing that really needs to be accepted, and MM is what stopped me from being profitable for quite a while. im the first to admit though, im prob only right 50% of the time. but im okay with that, because i still make good money on that sort or figure.


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## lukeaye (1 October 2009)

There is one word on my lips this morning. GOLD. 

ill be updating my earlier set up soon. entered at 1006.


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## Mr J (1 October 2009)

lukeaye said:


> im prob only right 50% of the time. but im okay with that, because i still make good money on that sort or figure.




It takes skill to hit 50% with an R:R better than 1:1, so don't worry about it.


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## tech/a (1 October 2009)

lukeaye said:


> Sorry, i dont really understand what you are saying?
> 
> Ill explain how i got it, ive take a valid low, and counted the impulsive move from that as 1. We then had a complex a-b-c-X-a-b-c correction, which i have called 2. Then we have another impulsive move larger then the first, which i called 3. then using EW theory of alternation, a simple a-b-c correction in wave 4. and now a new impulsive move which i will label 5




Oh my.

This maybe helpful.If you have an Elliott bent.

http://www.elliottwave.com/club/Elliott-Wave-Video-Crash-Course/default.aspx?code=27997

So your core risk strategy? How have you or do you skew your trading toward profit?
How many trades have you completed to prove this is a profitable method of trading (Your Gold Trade doesnt seem to "fit" with a method relative to your AMP trade--but maybe I just cant see it) or is all of this random trades with a "theory of what "should" work?


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## lukeaye (1 October 2009)

TRADING DIARY

STOCK; Spot Gold		1006.25		1/10/09

REASON FOR TRADE; Gold formed a large triangle, which broke out and has now retested and bounced off support of $991. Gold has never consolidated at such high levels, and it is my belief with the weak outlook for the US dollar, and inflationary concerns both technical and fundamental factors align. 

ENTRY STRATEGY; Unfortunately because of a little thing called sleep, I could not monitor the way I would have liked, which would have been an entry at 1002. So I placed my entry at 1006 last night to avoid any noise, which was triggered last night. My stop loss will be used at 998. 

EXIT STRATEGY; My target is the all time high of 1032. So I will exit just below this at 1031. It may go higher, but I am opting for a conservative approach on this one. Gold can sometimes be seemingly irrational with its moves, so I will monitor closely, although I believe a move to 1023 appears imminent, so once completed my stop will be moved to breakeven.



DATE ENTERED; 1/10/09
ENTRY PRICE; 1006.25
EXIT PRICE;
DAYS HELD;1
PROFIT/LOSS;
EVALUTAION OF TRADE;


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## lukeaye (1 October 2009)

No your right tech, AMP strategy is different to gold, gold was my breakout strategy. Ill post some more that i entered a few days ago, to show more of how i have used the strategies, as long as i dont cop any crap for hindsight, but the graphs are dated in accordance with my entries. these are just to show strategies, so i dont want anyone telling me prove it with statements, because that is not what this thread is about.

I am happy to listen any constructive critisim though.


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## lukeaye (1 October 2009)

TRADING DIARY

STOCK; MCR.ax   		$2.37   		28/9/09

REASON FOR TRADE; Stock appears to be in 4th wave correction. Flag looks nearly complete, with nice volume drop off towards the end of formation. Price oscillator showing weak pull back. Overall market is pulling back, could be low risk entry point or key reversal. At the moment will treat as weakness for a buy before more evidence of reversal confirmed.

ENTRY STRATEGY;
Given current market conditions, today presents as a low risk entry point. By entering now, increase in profit % but lower % of probability of success of confirmed breakout. Initial stop loss of $2.08


EXIT STRATEGY; Given EW rules, the 5th wave cannot be larger then 3rd wave. Half position will be closed at $2.72, in case of lower double top. Then remainder will be left to run until nearly maximum length allowed for wave in accordance with 3rd wave EW rule ($3.15). Trailing stop will also be used to 1% below 2nd last day open.



DATE ENTERED; 28/9/09
ENTRY PRICE; $2.37
EXIT PRICE;
DAYS HELD; 3
PROFIT/LOSS; 
EVALUTAION OF TRADE;


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## lukeaye (1 October 2009)

Progressive chart


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## lukeaye (1 October 2009)

TRADING DIARY

STOCK; BTA.asx	$2.55		29/8/09

REASON FOR TRADE; Stock has consolidated at a long term S/R point, and appears to have just about completed a fractal 4th wave and higher prices look achievable, I think a 5th wave is inevitable at this time. The last time the stock got to this level it was rejected the very next day, it has now consolidated at this level for 9 days. Momentum is now also favoring an upside move on the broader markets.

ENTRY STRATEGY; Entry will be on current market price of $2.55, I consider this a low risk trade so my stop can safely be put at $2.36. A G/S will be used as stock has shown history of gapping. No pyramiding will be used as the entry is not off a support point.

EXIT STRATEGY; My initial profit target will be $2.72, once this point is hit my stop will be trailed to $2.49, and at which point I will reassess momentum aspects. If the stock looks like continuing up, my stop will be trailed accordingly, if a pause is to occur I will take profits and look at reentering on a retracement. A pause would be 2 consecutive days of price being static. A trailing stop will be used with an 80 moving average. This will automatically indicate an exit.




DATE ENTERED; 29/8/09
ENTRY PRICE; $2.56
EXIT PRICE;
DAYS HELD; 3
PROFIT/LOSS;
EVALUTAION OF TRADE;


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## lukeaye (1 October 2009)

Progressive Chart


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## lukeaye (1 October 2009)

tech/a said:


> Oh my.
> 
> This maybe helpful.If you have an Elliott bent.
> 
> ...




Is my elliot count wrong?

Quite a few trades, i also backtested it on countless trades, thats how i came up with some of these strategies.

I skew my profit towards trading using simple methods i have devised and backtested. i then use my money management and risk management, to decide at what point i can enter a trade and have a positive expectancy. if i have to put a stop to far away from my entry, and the reward isnt balanced, i wont take the trade. there is a minimum Risk to reward i will allow, relative to the rate of failure for these methods.

My profit comes from profitiabilty of a trade, not probabilty of being right, if that makes sense.


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## lukeaye (1 October 2009)

As i said, if there is anything anyone can offer to help improve me strategies, please let me know


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## tech/a (1 October 2009)

luke.
Im attempting to ascertain wether you actually have a proven (to yourself) trading method or a bunch of ideas which you trade around.

Most trade around a bunch of ideas and wonder why they are forever altering what they are doing and reading a million books and following the next poster who seems to have a good idea or shows a few winning trades.

This statement says to me you dont have what you say you have.
I'm not tryng to trip you up but to have you look seriously at what your doing with your trading.



> Quite a few trades, i also backtested it on countless trades, thats how i came up with some of these strategies.
> 
> I skew my profit towards trading using simple methods i have devised and backtested. i then use my money management and risk management, to decide at what point i can enter a trade and have a positive expectancy. if i have to put a stop to far away from my entry, and the reward isnt balanced, i wont take the trade. there is a minimum Risk to reward i will allow, relative to the rate of failure for these methods.




If you had backtested you would be quoting all sorts of figures in support of the proven method.
You will have a blueprint which will show you if you are trading within the tested parameters.
The setups you are using I know cannot be coded so cannot be backtested.

You and anyone else who wants to trade seriously needs this information.

I seriously think we are seeing a discretionary trading idea at work---nothing more.

Thats how you will improve beyond your wildest dreams.

But hey if you post up your test results and Montecarlo analysis I'll apologise 1000 times and shut my mouth.
Id love to see code for Elliott Wave counts/rectangles/triangles and how you deal with Support and resistance plus your M/M skewing.


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## aramz (1 October 2009)

Luke,

First off thanks for posting your trading stategy. I am currently in the process of reading various books and getting together a sufficient amount of capital to trade systems like yourself so this thread in very interesting to me.

I am just wondering how you come about finding these breakouts and systematic trades if you don't mind me asking? Do you have customized scans you input into a software program such as metastock or bullcharts and get a list of potential stocks then evaluate them everynight and go with the best? 

Do you also look at charts of the sector that stock is in and analyse a chart of the DOW aswell? 

Do you generally analyse potential trades at night and then set buy limit orders before bedtime or do you trade fulltime and re-cap your potential trades in the morning and set buy orders then?

Finally is the only style of trading you generally do atm and how many trades do you deem as comfortable to run with at one time?

I know there are quite a few questions there sorry about that. You seem like someone keen to share your knowledge. I appreciate others input on this thread to and try to take in their rundowns of the trades Luke presents as best i can.

Cheers guys


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## lukeaye (1 October 2009)

No you are correct, they are not backtested in that manner, i backtest them manually, not by computer. If i was versed in that then i would provide that evidence, but basically my systems are proven by my couple of years of both paper trading and real life trading. i do have parameters which i set, but as you said, i have no real statistical evidence, backtested from programs, to prove what i am doing is right or wong, just results from what i have traded, and back traded. 

Hence why i am asking for constructive critisim, i thought if i posted my strategies and showed what i was doing (right or wrong), then others could also see how to develop one properly. I basically keep a manual diary of results, of what worked what happened, and an evaluation of what i could have done better, and how i could have done it better each time. With those results i continually work towards better strategies, if i could use these computer programs the results would be a lot better you are saying? and probably less time consuming by the sounds of it. that is definentley something i want to explore, im a bit old ashioned in that sense i guess.

But tech im in no way preaching that i am trading guru, im simply sharing some of my finidings right or wrong. i want to improve just like everyone else.


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## lukeaye (1 October 2009)

aramz said:


> Luke,
> 
> First off thanks for posting your trading stategy. I am currently in the process of reading various books and getting together a sufficient amount of capital to trade systems like yourself so this thread in very interesting to me.
> 
> ...




Hi Aramz,

Well i go about everything the old fashioned slow way. i know what set-ups im looking for, and so will watch certain stocks as they move the i want them to and put them in my watchlist. it takes hours every night, and i wish i knew how to do all the programing that others do, but i simply havent learnt it yet. that is def the way to go though, but i cant help you there sorry.

Yeah whatever stock im looking at, i also check against its indicie, as well as the major index it belongs to, its not always beneficial to look at the dow over the aussie SPI because i have noticed of late that we are starting to deviate from the dow does.  Also remember that our markets are predmoninetly resources and the US is financials, so really movements can differ greatly.

No i have a full time job, so i spend every spare second i have looking for set ups, and then placing orders, i have the luxury of looking at the stock market at work a bit as well, so i monitor it to some extent.

It depends on what you are prepared to risk i guess, i tend to risk 1-2 % per trade. But i will prob only ever have say 4 or 5 long open at one time if im bullish on particular stocks, otherwise if the broader markets turn on me, it can turn into a big drawdown. 

I usually will hold whatever im trading for as little as a few minutes, up to say a month or 2. and i trade options and cfds.


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## Sean K (1 October 2009)

Nice work lukeaye, good to see people putting their strategies out for analysis and genuinely interested in some (hopefully) constructive suggestions. 

Your trading does look more discretionary even tough you've 'backtested' etc. If you're going to go down the path of trading a mechanical system you'll need to invest in the software and learn how to use it.  

Personally, I've been descretionary investing and trading for 15 years (4 years full time) and still do charts on a free charting program, so each to their own I guess.


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## lukeaye (1 October 2009)

Hi Kennas,

When i get some more time i will write out all my rules, so you can see what i do mechanically. i spose looking at what ive posted it does look a bit unpracticed, but i do have strict mechanical rules, that i have written for each strategy. Yeah well ive basically put my pride on the line for the sake of others and myself to improve my trading.

What free software do you use kennas?


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## Sean K (1 October 2009)

tech is the one to set you on the mechanical path lukeaye, if that's where you want to go.

My 'free software' is just the Big Charts that I paste up here. I do use ETrade and IG charting sometimes, but find I don't really need any of the features. Simple works fine for me.


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## lukeaye (1 October 2009)

yeah i also just use IG atm, basically trading patterns, breakouts, triangles, EW so forth. There the only set ups i have trades for at the moment which turn me a profit. It is hard to test new thoeries manually, its the time factor that kills me.


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## johnnyg (1 October 2009)

tech/a said:


> luke.
> The setups you are using I know cannot be coded so cannot be backtested.
> 
> You and anyone else who wants to trade seriously needs this information.
> ...




For those of us are trading discretionary and using different technical methods (E/W,S+R/Congestion patterns/Volume patterns/ect)how do you check that your on the right path? Do you complete 50/100/200 paper trades and then analyze your results to see if you have an edge and then decide whether to trade live from there?

For me personally after I complete 50 paper trades I'll go over my results and see what areas need improving. 1 thing I'm going to use will be a simple trailing stop strategy, whether its a trailing M/A or bar count back, I want something that works well most of the time, and that I know exactly what it is before I enter the trade, instead of a discretionary stop.


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## lukeaye (1 October 2009)

I have set rules and parameters, so dont think what i do, can be called purely discretionary.

And kennas can i ask have you been very succesful with your discretionary techniques?


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## Mr J (1 October 2009)

johnnyg said:


> For those of us are trading discretionary and using different technical methods (E/W,S+R/Congestion patterns/Volume patterns/ect)how do you check that your on the right path? Do you complete 50/100/200 paper trades and then analyze your results to see if you have an edge and then decide whether to trade live from there?




I would do it by analysing the methodology, not the results. 50 is an insignificant sample if we're looking at results, but it's plenty for analysing methodology. Try to determine whether your trading philosophy is sound. It's hard to do without an experienced person looking over your shoulder, but you might get good feedback on a forum.


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## Wysiwyg (1 October 2009)

Just a question again about your Elliot wave numbering. BTA is another example that you place the wave count in the wrong place (as per basic Elliot wave rules) and no more obviously than placing the wave count on the side of the waves. It is crest and trough.


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## lukeaye (1 October 2009)

Wysiwyg said:


> Just a question again about your Elliot wave numbering. BTA is another example that you place the wave count in the wrong place (as per basic Elliot wave rules) and no more obviously than placing the wave count on the side of the waves. It is crest and trough.




Not having a go at you or anything but show me how you would number it please


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## tech/a (1 October 2009)

Luke.

As you can see there are people like Aramz who are working through that which you are and have been for sometime.
Ive seen this many times in the 15 yrs Ive been trading.

The point I continually make and seems to many as a personal attack(not from this thread but in the past) is the following.

(1) Unless you know why your theory makes $$s there is no hope in hell that you'll make a *CONSISTENT PROFIT*----a win here a few losses there---frustration and disillusion.

(2) If your going to use an analysis type in your trading make sure you have a sound grasp of it. Elliott Wave analysis is the whipping boy of 2009 on this site---from what I see those who have a go of it dont adhere to even the simplest of rules. Doing so will in any analysis ensure failure.

(3) A fully tested method will give the trader a blue print to follow.One that will tell him if his drawdowns,strings of loses,exits due to stops,Reward to Risk are all as they have been tested.
If you dont know if its normal a string of 5 loses normally have the trader looking at his method!---where as it may well be very normal.

Trader after trader posts ideas and theories which can be seen by some of us as flawed. So we say so.

Its NOT about the analysis (provided its sound).
Once youve traded and designed a few winning methods you'll know exactly where I'm coming from.


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## aramz (1 October 2009)

Tech A, thanks always for your input. I don't percieve anything you say as a beat down. Your posts come off as someone whose been there, done that and learnt alot and are offering wise words. Anyway i'm just trying to grasp a few things here. You mention discretionary trades and systematic trades. In order for Lukaye's trades to become systematic what guidelines should he follow?

Would he go about a similar method but focus on certain trades that have been successfull and input these certain indicators and search criteria which have made these trades successfull into a code for a custom scan? Would he then scan away and when the criteria is met he enters various trades and then meticulously records all aspects of the trade?

I am just trying to understand what you are saying about how to improve Lukaye's current trading approach by making his methods more systematic.

Would he need to use a trade manager type system aswell as software and then backtest? Would this in turn make his method faster more efficient and 'systematic'. Am i on the right path here in interpreting you analysis of his trading approach and how to better it?

Cheers


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## Wysiwyg (1 October 2009)

lukeaye said:


> Not having a go at you or anything but show me how you would number it please




Best ask an Elliot Wave practitioner to number beyond 1 but I will get you started. The first peak is number 1.


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## tech/a (1 October 2009)

Wysiwyg said:


> Best ask an Elliot Wave practitioner to number beyond 1 but I will get you started. The first peak is number 1.




Id respectfully suggest they not be lazy and read the link I posted over the next few weeks.Then have a go themselves.
Could possibly be any worse than the count suggested.


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## Wysiwyg (1 October 2009)

tech/a said:


> Id respectfully suggest they not be lazy and read the link I posted over the next few weeks.Then have a go themselves.
> Could possibly be any worse than the count suggested.




Thanks. Am always keen to learn and where possible help others.


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## Chris45 (1 October 2009)

This is a good thread lukeaye and an excellent example of how we can perhaps learn from each other. There should be more threads like this. I like the way you're giving the details of your analysis so we can follow your thinking. Great stuff!!!


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## lukeaye (1 October 2009)

Wysiwyg said:


> Best ask an Elliot Wave practitioner to number beyond 1 but I will get you started. The first peak is number 1.




Thats how it is labeled? maybe me writing the numbers to the sides of the waves, has mislead you, for the purposes of the graph i have labeled to the sides of the waves rather then at the peaks, it looks clearer to me.


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## kam75 (1 October 2009)

lukeaye said:


> Hi guys, thought i would share one of my strategies for the market at the moment. this is a conservative strategy i use, i will often pyramid with my positions, but i feel now is not the time to do it. This one of my low risk entries i took yesterday, i didnt want to hindsight, but i dont think im allowed to show it at the time of entry, as ASIC dont allow it? anyway this is more of a help thread for those who want to see what a strategy can look like. feel free to critic, im happy to hear anyones opinion. So as i said this is not a gloat look at me im making money thread, its only intended to show how a simple strategy may look.
> 
> TRADING DIARY
> 
> ...





Like your strategy and the thought you put into your planning of the trade.  Can i ask whether you use some form of guide or software to plan your trades?  

I mainly trade breakouts and patterns but lately in this market haven't been having much luck.  A lot of trades that just don't follow through and a lot of false breakouts.  Not much of a fan for buying on support though.


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## lukeaye (1 October 2009)

Would you prefer if i labeled like this? i only labeled the other way because the software on IG isnt that good and it gets to cluttered otherwise


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## tech/a (1 October 2009)

tech/a said:


> No I actually agree with you.
> Its very weak.
> Strong possibility of hidden selling.
> Tommorows price action will reveal.




What is the course of action now with AMP?

My count with some AGET help for MCR is shown here
https://www.aussiestockforums.com/forums/showthread.php?t=17069&page=9

Post 178.


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## lukeaye (1 October 2009)

Well neither my target, nor my stop have been triggered. Todays price action was what i expected, although i didnt think it would drop quite that much. very light volume confirms my belief. so i will hold the position, at this stage, along with all other positions.


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## lukeaye (1 October 2009)

I still favour upside in the broader markets at the moment though, i mean from a fundamental point of view, there are some bad reports comming out, but it is evident there is still a strong support of buyers lukring, this market still wants to go up. In my opioin, all technicals lead north still.

Another thing that is doing my head in, is Paladin. I havent posted that entry yet, but i prob should, ive been sitting on that for weeks now, and still no move. anyway covering this stock at all? its given me 2 false breaks down and up. its confusing the hell out of me.


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## johnnyg (1 October 2009)

Mr J said:


> I would do it by analysing the methodology, not the results. 50 is an insignificant sample if we're looking at results, but it's plenty for analysing methodology. Try to determine whether your trading philosophy is sound. It's hard to do without an experienced person looking over your shoulder, but you might get good feedback on a forum.




Tar Mr J. When I hit my 50 trades ill start a thread.


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## tech/a (1 October 2009)

*Paladin*
Support at $4.40
Price action looks like Distribultion.
Personally I would be looking for a breach of the most recient high.
Better opportunities else where.

But thats just a personal opinion.


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## lukeaye (1 October 2009)

Thats why i bought, with targets of 6.00 i still think it was a relatively good entry given where i could buy in and put my stop.
Although, im thinking i should prob be pulling out now, capital best put elsewhere as you said.

Murphys law will get me though, ill get out and it will shoot up.


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## aramz (1 October 2009)

Just posting this again in case it was missed at the bottom of the previous page:

'i'm just trying to grasp a few things here. You mention discretionary trades and systematic trades. In order for Lukaye's trades to become systematic what guidelines should he follow?

Would he go about a similar method but focus on certain trades that have been successfull and input these certain indicators and search criteria which have made these trades successfull into a code for a custom scan? Would he then scan away and when the criteria is met he enters various trades and then meticulously records all aspects of the trade?

I am just trying to understand what you are saying about how to improve Lukaye's current trading approach by making his methods more systematic.

Would he need to use a trade manager type system aswell as software and then backtest? Would this in turn make his method faster more efficient and 'systematic'. Am i on the right path here in interpreting you analysis of his trading approach and how to better it?'

Any reply from Tech A or someone else would be much appreciated as i've always wondered what is required to take discrentionary trades to the next level....

Cheers


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## tech/a (1 October 2009)

aramz said:


> Just posting this again in case it was missed at the bottom of the previous page:
> 
> 'i'm just trying to grasp a few things here. You mention discretionary trades and systematic trades. In order for Lukaye's trades to become systematic what guidelines should he follow?




Anyone trading systematically would have a sequence of trading rules from entry to stops to exit to trailing stops to Position sizing which when applied to each trade over an extended period of time would on completion of both winning and losing trades have a net profitable result.(That's the plan--and that's what most do for a few trades until either the pain gets to bad or their initial winners keep them a float until they notice that their profit has evaporated).



> Would he go about a similar method but focus on certain trades that have been successful and input these certain indicators and search criteria which have made these trades successful into a code for a custom scan? Would he then scan away and when the criteria is met he enters various trades and then meticulously records all aspects of the trade?




Yes if long hand.
The only records he need is win/loss,string of losses,draw down,Expectancy IE $ profit / dollar invested.



> I am just trying to understand what you are saying about how to improve Lukaye's current trading approach by making his methods more systematic.




No I'm not saying that but can see why you think I am.Lukaye has no idea if his ideas if traded time and again will be net profitable.He doesn't know if his method is a short or longer term method. whether he needs to skew his trading to more winners with less R/R or less winners with More R/R.(Return on Risk).See its just an idea (Lukayes trading method.). So he needs to *understand WHAT MAKES *a systematic approach---or set of trading principals--*profitable*. When you spend hrs testing it soon becomes pretty apparent what you need to do in your formulation.



> Would he need to use a trade manager type system as well as software and then back test? Would this in turn make his method faster more efficient and 'systematic'. Am i on the right path here in interpreting you analysis of his trading approach and how to better it?'




Sure that would be very beneficial.Its a long path one I have and still am involved with. My testing software is excellent and my skill level is very mediocre compared to other code experts (not that I'm anywhere near code expert status).But I can and do design excellent profitable methods. My software can test 50000 various portfolios with any given set of parameters on 10 yrs of data in 7 different bourses in around 5 mins. Something that you'd die trying to do by hand---*only to find out it wast profitable!!!*

Now once he comes out at the end of that and knows how to *STRUCTURE* a profitable trading methodology he will be well prepared to trade in a discretionary manner.

Its all well and good to be an expert in analysis but APPLYING it in a profitable trading method is far harder than the 2 minute experts would have you think. Even those with years experience in charting or Elliott or Gann or Fib or pattern trading or fundamental trading struggle to understand* HOW *to *APPLY* it.

Its normally a jumbled mass of ideas which have no chance of being profitable,because they are NOT being applied in a way which will skew the results in your favor.

That's about as clear as I can get!



> Any reply from Tech A or someone else would be much appreciated as I've always wondered what is required to take discretionary trades to the next level....
> 
> Cheers




Hopefully that now is crystal clear.


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## professor_frink (2 October 2009)

back on topic please folks.

Lets give this thread a chance to develop into something useful and leave the theory for other threads



> This one of my low risk entries i took yesterday, i didnt want to hindsight, but i dont think im allowed to show it at the time of entry, as ASIC dont allow it?




ASIC won't give a rats about your individual trades, feel free to post in real time from now on if that's what you want to do.

EDIT: I've gone and cleaned this thread up in the hope it will get back to what it should be


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## shortlist (2 October 2009)

professor_frink said:


> back on topic please folks.
> 
> Lets give this thread a chance to develop into something useful and leave the theory for other threads
> 
> ...




Great idea for a thread lukeaye - don't be discouraged. I'm enjoying following it - though last time I looked at AMP they weren't looking too amazing. Keep posting anyway - I'll do the same when I'm up and running for real because I think this is a great way to show how theory can be applied to practice, etc.


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## lukeaye (2 October 2009)

Hi guys,

I closed all of my positions this morning on open, profits accross the board apart from gold. I would keep posting, but now that i have downloaded amibroker, im trying to devote as much free time as possible, to learning how to use it. so i wont be able to keep this diary up as much as id like to at the moment.

Looking at the markets at the moment anyway, i am sitting out for now, as there is no real clear direction, volatility is high, and in my mind to hard to read at this stage. once the market shows me some more signs of clear direction, i will look at posting some more of my ideas.

Good luck trading everyone!


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## aramz (3 October 2009)

Thanks for the in depth reply TechA.


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## danno75 (3 October 2009)

Luke,
Thanks also from me with posting this thread, I have just downloaded Amibroker and am still trying to get to know the program. I am a long way behind you in terms of knowledge but threads like this show more of the basics and theory without being too complicated which is what I like to read. Hopefully I can post something similar eventually for some analysis.
Top the others who have commented and offered their opinions thanks also and keep it up its what newbies like me need to be reading, rather than in depth highly technical stuff that is often a bit much and blocks out the simpler areas.

Danno


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## tech/a (3 October 2009)

lukeaye said:


> Well neither my target, nor my stop have been triggered. Todays price action was what i expected, although i didnt think it would drop quite that much. very light volume confirms my belief. so i will hold the position, at this stage, along with all other positions.




Fair enough then not 12 hrs later---not even another days trading and this-------



lukeaye said:


> Hi guys,
> 
> *I closed all of my positions this morning on open*, profits accross the board apart from gold. I would keep posting, but now that i have downloaded amibroker, im trying to devote as much free time as possible, to learning how to use it. so i wont be able to keep this diary up as much as id like to at the moment.
> 
> ...




A trading method turns to panic and saving face---*NO METHOD*.
Point made.
Losses are common place----its how you deal with them.
*NOTHING* had changed from your post the night before only your mind set.

My posts are seen as harsh and confronting---when trading like this is seen people need stark reality not pussy footing rubbish.


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## lukeaye (3 October 2009)

I understand what you are saying tech, But from a discretionary point of view, not locking in my profits would have been suicide. The fact that my stop losses werent triggered, is a good thing at the moment, because i was allowed to lock in profits on all my positions bar 2, paladin and gold.

If in the case of mechanical system, none of the positions would have been closed and i would have now lost money instead of making money? i now know and understand the advantages and disadvantages of mechanical trading. but at some point you have to step in, in a discretionary manor, and say, enough is enough. i dont need a computer to tell me when im right or wrong, i can see it for my own eyes and analysis

And i will be keeping this diary up, whether the mechanical computer system tells me or not, i am turning a profit using my discretionary methods, with mechanical rules, and my diary shows me that. 

I will keep trying to understand the confusing lingo of programming amibroker.


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## tech/a (3 October 2009)

Luke
I know you have benifited from this thread.
I have been confronting for that very reason.



lukeaye said:


> I understand what you are saying tech, But from a discretionary point of view, not locking in my profits would have been suicide. The fact that my stop losses werent triggered, is a good thing at the moment, because i was allowed to lock in profits on all my positions bar 2, paladin and gold.




(1) Had the Dow not lost 200 pts but 50 pts would you have done the same.
Was this a rule in your discretionary trading?
(2) 12 hrs before you had a clear plan and stop was set--what happened to that plan? Is this a rule in your discretionary planing.
(3) What happens now if AMP now continues into profit?
(4) Is your idea of discretionary trading the ability to just do anything at anytime and for any reason you see fit?



> If in the case of mechanical system, none of the positions would have been closed and i would have now lost money instead of making money? i now know and understand the advantages and disadvantages of mechanical trading. but at some point you have to step in, in a discretionary manor, and say, enough is enough. i dont need a computer to tell me when im right or wrong, i can see it for my own eyes and analysis




Luke really think about this paragraph.
Trading mechanically means you have a set of rules which have been tested over many portfolio's(In a Stock trading method) which if applied over and over and over trade after trade after trade should produce results within the range of the deviation from the average produced in your trade testing. You let it run EVEN if in YOUR mind you are letting a trade fall into a loss. WHY ---because you know that the next and the next and the next trade will cumulatively return figures within your testing. Below is a Montecarlo chart of one of mine demonstrating this point.
*
Click to expand*




See you only know if your right at a point in time.You dont know if your decision will CONTINUE to be right for any length of time,what happens when the "Right" decision becomes incorrect still in the parameters of your "Plan"?
AMP still could!




> And i will be keeping this diary up, whether the mechanical computer system tells me or not, i am turning a profit using my discretionary methods, with mechanical rules, and my diary shows me that.
> 
> I will keep trying to understand the confusing lingo of programming amibroker.




Only you know if that is the case.

From your diary then.
What sort of R/R are you getting then.
What is you longest string of winners and losers?
*Why is your discretionary trading making $$s.*What is your average winning trade
What is your average losing trade.
What is your biggest winning trade?
What is your biggest losing trade?
Do you position size equally?
*EVERY *trader should be able to answer this (in black)---if he cant then he's gambling.


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## lukeaye (3 October 2009)

Of course i am tech. I appreciate your input greatly, and by all means if you feel strongly about something, im happy to hear your view.

I do agree with what you are saying, i would love to have the ability to check all the different techniques and find what produces the best results historically, but i cant, i dont know how use these softwares. So i basically have to rely on my own analysis, and experience and backtesting. i know what positions i can take, and what positions i cant take, based on what im prepared to risk in a certain set-up in relation to its possible rewards.

I also know, that certain position sizing techniques (pyramiding) will allow me to enter a certain trade which may have slightly more risk then another or a higher failure rate then another once again based on my experience and backtesting. I do agree that my expereince can be nothing compared to the historical data a system can scan through for the last 40 years. i just wish i knew how to do it.

As to setting rules with when to exit trades in situations like this, when markets pull back, if i can see from my analysis, that the markets are pulling back, then that is an "edge" i have over the machine. I can filter in my own analysis, the difference, between a simple down day, or a pause, and a market pullback. I have rules which allow me to sit in trades through such pauses. For example, with the AMP position, i think i stated that if the market pulls back or pauses, this will be allowed, so long as, it is on lower volume, at lower ranges, and the broader market is still showing upward momentum. 

None of these criteria or rules "mechanical" or "discretionary" were complied with, so this signaled an exit from AMP.

But as a whole, i agree it would be very adventageous, to have a system backtester that could show you the expectancy of your systems over longer historical timeframes.


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## tech/a (3 October 2009)

Have private mailed you.


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## clayton4115 (3 October 2009)

hi Kam

like to know how you went with your AMP trade, after fridays 3% drop, AMP its looking quite bearish.


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## nunthewiser (3 October 2009)

perhaps scroll back


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## clayton4115 (3 October 2009)

tech/a said:


> Fair enough then not 12 hrs later---not even another days trading and this-------
> 
> 
> 
> ...




hi Tech/a

i completely agree with what your saying, i'm sorry but luke DOES not have a trading plan, you decided to quit just because the market tanks 2%, a few posts back you were talking about how the fundamentals of the market will drive prices higher, yet a day later you say you quit all your positions and sitting on the sidelines.

Please do not take any offence but you need to re evalute your trading plan, Luke.


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## lukeaye (4 October 2009)

clayton4115 said:


> hi Tech/a
> 
> i completely agree with what your saying, i'm sorry but luke DOES not have a trading plan, you decided to quit just because the market tanks 2%, a few posts back you were talking about how the fundamentals of the market will drive prices higher, yet a day later you say you quit all your positions and sitting on the sidelines.
> 
> Please do not take any offence but you need to re evalute your trading plan, Luke.




I belive what i said was, the fundamentals should drive prices lower. and that i would evalute my positions, based on the broader market conditions, which was part of my plan? whether you agree with my plan or not, it was a plan.

Im not taking offence to anything, as i have said i am happy for everyones input.


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## lukeaye (4 October 2009)

clayton4115 said:


> hi Kam
> 
> like to know how you went with your AMP trade, after fridays 3% drop, AMP its looking quite bearish.




I exited the position for a profit of 2R i think it was. I dont know whether i stated it or not, but the reason i set that low first target was in case of a double top, which has occured, and my plan had considered that.


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## kam75 (4 October 2009)

lukeaye said:


> I exited the position for a profit of 2R i think it was. I dont know whether i stated it or not, but the reason i set that low first target was in case of a double top, which has occured, and my plan had considered that.




The last time I had a buy signal on AMP was on a break of 6.20 and pulled a quick CFD trade.  Haven't touched it since.  Like i said, I'm not fan of buying on support.  Actually would not say that AMP is looking too bearish.  The volume's still there.  Just pulling back to the 6.00 level.  So i reckon for all you support buyers, could be an opportunity next week.


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## johnnyg (7 October 2009)

Do you go back over your trades and reasons why you closed them out Luke?

Your Gold trade would be doing very well, and from your earlier posts, you closed it out for a loss, even though your original stop was not hit?


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## tech/a (7 October 2009)

AMP never hit stop either.

The urge to minimise loss is strong and not the worst habit Ive seen.
But to help off set this smaller position sizes normally do the trick.
Also a realisation that
(1) Stops are set t a point we KNOW our analysis is likely wrong.
(2) Stops being ht are inevitable.

I also noted that AMP made a double bottom further cementing that support level.
It is ranging however so the trade methodology---being discretionary maybe looked at.

Good though to work through these with Luke--takes a bit to cop it from the "critics".


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## lukeaye (8 October 2009)

Yeah, buy you know what, im really happy i put these trades up for crtisicm, because it will only make me better.

And looking back, i should have stuck to my guns, and trusted my analysis, and accepted a loss if it occured, because my analysis was right, but my emotions were wrong!

So i have leant a lot form this. thanks everyone


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## tech/a (8 October 2009)

You could also have bougt again on the double bottom which would have given a very low risk trade.
Your analysis hasnt proven correct yet as it may again resist at the highs.

I would prefer to see high volume wide range days BREAKING resistance than heading into it.

Anyway enjoy your trading.


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## Sean K (8 October 2009)

lukeaye said:


> Yeah, buy you know what, im really happy i put these trades up for crtisicm, because it will only make me better.
> 
> And looking back, i should have stuck to my guns, and trusted my analysis, and accepted a loss if it occured, because my analysis was right, but my emotions were wrong!
> 
> So i have leant a lot form this. thanks everyone



You should keep putting them up lukeaye. You may come up with something that works just right for you. Looking forward to seeing how it turns out. And 'yes', to your earlier question.


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## lukeaye (8 October 2009)

yeah will do. if i have the time. just doing some more study and backtesting on some mechanical systems.

read nick radges adaptive analysis, what a great book. You can really take heaps from it, very simple easy straight foward stuff. anyone who hasnt read it, make sure you have a read


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## chesl73 (10 October 2009)

Lukeaye - as a learning newbie I found your postings very interesting and quite brave for you to put yourself out there so thanks. It would be great if more people would do it.

Tech - I can see what you're getting at regards Lukeaye not following his plan and being 'discretionary' but can you please clear something up for me?

Are you saying that in order to consistently make profits from trading you need a completely mechanical trading system in which there is no 'human' input at all? If so, I don't see how anyone can mechanically come up with a system in different market conditions that is going to perfectly generate correct buy/sell signals? 
Or, are you saying that you should have a very definite trade plan, and you must stick to it and understand why you are doing it, but there's still going to be some element of 'discretion' in whether you actually enter the market on a particular signal because for example, maybe from a top-down approach there's some broader market news that is likely to scupper your chances with the trade?

I hope this makes some sense. Thanks


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## beerwm (10 October 2009)

Hi luke,

when and @ what level did you close out AMP. stopped out?

i ask, because the support level seemed quite significant on the longer timeframe, did u move your stop, or just close it manually?


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## tech/a (10 October 2009)

chesl73 said:


> Lukeaye - as a learning newbie I found your postings very interesting and quite brave for you to put yourself out there so thanks. It would be great if more people would do it.
> 
> Tech - I can see what you're getting at regards Lukeaye not following his plan and being 'discretionary' but can you please clear something up for me?
> 
> Are you saying that in order to consistently make profits from trading you need a completely mechanical trading system in which there is no 'human' input at all?




No I'm not. 

Simply a mechanical method will give a blueprint or set of rules that you know with a great deal of certainty (Due to your lengthy and exhaustive testing) will if followed trade after trade return a profit somewhere within the parameters of those profits found during testing.



> If so, I don't see how anyone can mechanically come up with a system in different market conditions that is going to perfectly generate correct buy/sell signals?




It can be done,but I would suggest there would be a number of systems.




> Or, are you saying that you should have a very definite trade plan, and you must stick to it and understand why you are doing it, but there's still going to be some element of 'discretion' in whether you actually enter the market on a particular signal because for example, maybe from a top-down approach there's some broader market news that is likely to scupper your chances with the trade?
> 
> I hope this makes some sense. Thanks




When you spend time testing ideas for a trading plan, it wont take long and you'll realise what WON'T improve your trading. You'll also find that short and longer term methods dance to different tunes. So when your trading a mechanical method you don't need to evaluate all these nuances when you take a trade--you take the trade and follow the rules regardless of how you feel OR what conflicting analysis to your system suggests you do.

So at some point a good discretionary trader will be able to read the market with a high degree of accuracy in various time frames.
He will know what makes a short term method profitable ( high win v loss rates) and will adjust his analysis accordingly.
He will know what makes a longer term trading method profitable (Lower win rate but much higher Return on Risk).
He will know when to continue a trade beyond short term and when to take his profit (unusually high return V normalised market expectation.).
He will be able to combine all forms of trading short/long/short and long term/he will be able to use dexterity in adding to positions taking away from positions, compounding profits,constantly working to eliminate risk all which skew the discretionary traders business into profit---often spectacular profit---which comes more from the use of his capital than from his trading plan.


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## Timmy (11 October 2009)

This is a great thread


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## lukeaye (16 January 2010)

Hi guys, thought i would update this thread, to see how my progress has tracked. 

Primarily my Trades are now based on volume spread analysis, support and retracement levels.

My positions are based on fixed risk of 2% per trade.

I'm using discretionary methods, as i simply don't have time or the desire to learn computer language for systems trading.

So here is a trade i took on thursday, David Jones.

Entry; $5.06
Stop loss; $4.91
Target; break of $6 then use trailing stop.

Since its lows, it has had an amazing run, and the christmas period and stimulus obviosuly really helped boost retail stocks. Since its high it has pulled back for the last 4 months, and briefly touched the high once more.

Now to why i have entered this stock. 

(1) Looking at support and resistance i can immediately identify one thing. Volume is high at support, and low at resistance. So we have more support, then resistance. Also i note that the rally has driven this stock up for some time, so it is a given that some time will be needed to remove any sellers before strong demand, and the rally can resume.

(2) The relative spread to volume of up downs to down days is much larger. What i mean is, there is less effort required to move the stock up (demand) the same spread, as there is to move it down (supply) on the same spread. 
I would label what im talking about but i couldnt be bothered at the moment, so sorry.

(3) The other thing, is it has found support near the high, it is currently consolidating near its all time high, instead of being sharply rejected. The last time price was at these levels, it spent half as much time there, and found no real area of support. this graph doesnt show it, but look at a weekly on a larger chart and you will see what im talking about.

So that concludes David Jones. I will share some of my others soon

Comments are appreciated, try to make them constructive, if you don't agree with some analysis, please give me a reason why, i don't want some idiot comenting and just saying "your wrong". Tell me why, so myself and others can learn. Thanks you!


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## lukeaye (16 January 2010)

Now everyones opinion on this trade should be interesting.

Are you ready for this. Fundamental analysists will love this.
I am long worleyparsons.

Entry $25.30
Stop $24.80
Exit $29.73

Its no secret that WOR's profit outlook, is not hot. Hence the large gap down on huge volume. 

Looking at the technicals i am long biased and here is why.

(1) $25.00 is a clear, and very very well defined level of support. It has had large volume confirmations on support, even in the last 3 days of trade.

(2) The low spread on these high levels of volume means that there is somebody (demand) more then happy to absorb these sellers (supply).

So the next few days really should provide guidance as to where this stock is heading, a close below $25.00 would indicate a poor outlook, a bounce would be viewed very positive.

So My analysis tells me long. In my eyes, the damage is already done, if you were going to go short you should have done it at $30. The evidence of a negative report was there on the charts. High volume down downs leading to the report. The smart money was already selling, and in my mind, is now rebuying.


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## motorway (16 January 2010)

Looks like a TOP  ( DJS chart )

There was plenty of activity at the higher prices
Price gave DEMAND every opportunity to BUY

You say back to SUPPORT
But should we not want to see a HIGHER POINT OF SUPPORT ?

To what extent is the recent action
a sign of POOR DEMAND ?

DO you ever look at comparative RELATIVE STRENGTH ?

Question on a RELATIVE BASIS
is there a SUPPORT ? ( not near my Software to look )

If it is a range NEED TO SEE MORE WORK for BULLISH CASE
IT COULD break LOWER



> Looking at support and resistance i can immediately identify one thing. Volume is high at support,




There are those who will buy DIPS on what they think are UP TRENDING STOCKS... BUT demand could not take this HIGHER and it made a DEEP retrace SO IS IT UP TRENDING ANYMORE  ?  







> and low at resistance.



 YES MADE A SECOND TOP . why ? 

Then it makes a LOWER POINT of RESISTANCE ( JUST UNDER YOUR AVERAGE )   WHY WAS NOT that *THE ENTRY*  But not for a LONG ?


Motorway


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## lukeaye (16 January 2010)

motorway said:


> Looks like a TOP  ( DJS chart )
> 
> There are those who will buy DIPS on what they think are UP TRENDING STOCKS... BUT demand could not take this HIGHER and it made a DEEP retrace SO IS IT UP TRENDING ANYMORE  ?   YES MADE A SECOND TOP . why ?
> 
> ...




Hi motorway,

Well the stock has trended up for a long time. Therefore there may be several months of sideways range bound trading, to remove sellers or buyers. I am more inclined to say accumulation rather then distribution for the reasons i mentioned. Stronger volume at support, lower volume at resistance, and the spread. 

When you say made a second top, are you talking about the old top from 2 years ago? Or the recent top from the one a couple of months ago?

When you say average are you talking about the moving average? If so i give no weighting to that for any kind of entry, i don't even know why its on the chart, i think its just defaulted.


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## motorway (16 January 2010)

lukeaye said:


> Hi motorway,
> 
> Well the stock has trended up for a long time. Therefore there may be several months of sideways range bound trading, to remove sellers or buyers. I am more inclined to say accumulation rather then distribution for the reasons i mentioned. Stronger volume at support, lower volume at resistance, and the spread.
> 
> ...




Yes there is the OLD  top
BUT referring to the recent one 

Yes the moving average .. Not giving it weight either
Just the action that happens to be UNDER it .
Not that it is UNDER the AVERAGE but that it is a lower point where SUPPLY overcame DEMAND ... 

Motorway


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## lukeaye (16 January 2010)

motorway said:


> Yes there is the OLD  top
> BUT referring to the recent one
> 
> Yes the moving average .. Not giving it weight either
> ...




I can see what your saying, the demand wasn't as strong of support this time, to move it higher towards resistance again? Is that correct?

So perhaps ideally, or perfectly, we would have liked to have seen that strong volume push prices much higher, instead they were overcome by supply at a lower price?


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## lukeaye (16 January 2010)

I see the point where you say supply overcame demand, but the length of time and effort it took to get it back down to support, still doesnt confirm enough to me to say its distributive. I still think its accumulation.

I agree though, it could break lower, failing any demand steps in, but im fairly happy with buying at that level as if it is to move up, it should do so from here.


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## skc (16 January 2010)

I don't see any fault with the entries, given that they are both fairly reasonable tight stops, clear support lines etc. Obviously many people will have different interpretation of the volume / supply / demand characteristics but that's why chart reading is an art and not a science.

Question regarding your exit targets...Personally I think $6 is achievable for DJS as long as the overall market holds up. $29.7 seems ambitious for WOR given the news and I would move my stop up move aggressively and most happy to take profit at 4R.

It would be great to hear more about your trade management plan on both. With DJS it looks like you are keeping to your stop where it is until it breaks $6. Do you care if the XJO starts heading down before that happens? Do you have a time-based stop? Same questions with WOR.

The other thing to look out for is the absolute position size... you do realise that the tight stop on WOR means you have a position size that's 100% of your capital? Stranger things have happened in the market and I think there is a layer of risk management to be observed there from this perspective.


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## lukeaye (16 January 2010)

skc said:


> It would be great to hear more about your trade management plan on both. With DJS it looks like you are keeping to your stop where it is until it breaks $6. Do you care if the XJO starts heading down before that happens? Do you have a time-based stop? Same questions with WOR.




Hi Skc,

Before i start talking fundamentals, i'm not overly experienced with so please excuse any ignorance. Ok well for DJS the broader market does not concern me so much. Retail sales are particulary strong at the moment, so the sector is performing very strongly. I'm happy to hold until either my stop is hit, or my $6 target is hit. If the stock doesnt break $6 with enough confirmation i would sell, and possibly re-position on another swing low given the opporunity.

Wor on the other hand is i think very dependent on the broader market. The only way the stock can, in my eyes, move back to its old levels is through the markets moving strongly up. If there is a little move back up from here, on low spread and not much volume, then i will revise my profit target. Then if the market reverses, it could very easily collapse, and switch from being a long to a short set up.

Time based stops im afraid i have to little knowledge of to apply effectively. I have studied it somewhat, and can't find a constructive use for it in my trading. Perhaps somebody else uses them effectively? But for me, my analysis is far from perfect, it will never be perfect, adding another variable such as a time based exit, gives me another element to be wrong about, lowering my probabilty of sucess. The only time i would exit based on time, would be if i needed the capital, which has only happened once or twice.

The bottom line is, i don't want to enter a position, give myself a 7 day period to hold the stock, then sell and have the stock rally in my favour. It has happened before. I have tried to work on a momentum time based exit. that is, picking a swing point, and have an expectation of a sharp quick reversal. The hard part is the entry, anticipating the exact swing point. Once it is identified correctly, then you can make an entry on time. usually 1 or 2 periods or an immediate exit. The trouble i have found with this method is the low probability of sucess, often R:R can be good, but im just wrong too frequnetly and it ****s the equity curve.

Perhaps somebody else can shed light?


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## peter2 (16 January 2010)

I am concerned by three aspects. 

1. Your MA in both charts has turned down. This does not confirm your view that price is trending up. This may or may not be a required confirmation filter for your setups but I think it worthy of consideration to identify "perfect" setups. (Motorway alluded to this possible change in trend.)

2. Position sizing: (Nicely picked by skc.) The low sized risk setup for WOR will have you using too much leverage for your capital. You should consider a 20% of capital maximum size limit. WOR has already gaped down by $3, it may do so again on further downgrades. This would give you a $3/.50 = -6R result which would be -12% of your account. 

3. Mismatch between size of trade risk (2%) and the setups shown. The low sized risk setups will have a much lower W% (IMO about 30%). This W% will have longer losing sequences than a higher W%. My estimate of an average losing sequence (1000 Trades) is 19. Can you handle losing 19 x 2% and still trade the same way? (The estimated losing seq. assumes that each trade is uncorrelated. We know that is not the case when trading top ASX200 stocks.) Are you prepared to tolerate even larger losing sequences using these types of setups?


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## lukeaye (16 January 2010)

Hi peter,



peter2 said:


> I am concerned by three aspects.
> 
> 1. Your MA in both charts has turned down. This does not confirm your view that price is trending up. This may or may not be a required confirmation filter for your setups but I think it worthy of consideration to identify "perfect" setups. (Motorway alluded to this possible change in trend.)




I refered to this earlier, i give no weighting to moving averages. The view of trending up or down is very subjective. One must know the period the moving average is set to, to establish in there definition an up or down trend. As you don't know what that is you cant really draw any conclusion from it. As i said, i haven't got it set up for anything, its just a default, so it neither confirms or denies the current trend. Often my swing trades will have slow period moving averages pointing down, means nothing IMO.

A moving average has never for me, given a set up anymore perfection. At times, i want the moving average to be pointing as far down as possible.



> 2. Position sizing: (Nicely picked by skc.) The low sized risk setup for WOR will have you using too much leverage for your capital. You should consider a 20% of capital maximum size limit. WOR has already gaped down by $3, it may do so again on further downgrades. This would give you a $3/.50 = -6R result which would be -12% of your account.




Yes, i have been asked this before, and there is no solution i found to the problem that i happy to accept. 

G-stop loss is the only solution. The only problem with this is there is a min stop distance, and it is often far to far away from where i want my stop, it makes the position not worth taking.

As you state the alternative is a lower position. Which is probably the most sensible solution. The drawdown has already been taken into account though.



> 3. Mismatch between size of trade risk (2%) and the setups shown. The low sized risk setups will have a much lower W% (IMO about 30%). This W% will have longer losing sequences than a higher W%. My estimate of an average losing sequence (1000 Trades) is 19. Can you handle losing 19 x 2% and still trade the same way? (The estimated losing seq. assumes that each trade is uncorrelated. We know that is not the case when trading top ASX200 stocks.) Are you prepared to tolerate even larger losing sequences using these types of setups?




I have very very high tolerance. I suffered a long string of loosers about a month ago, which drew about 30% of my account down. And i did not panic, it did no change my trading. The last 3 weeks i made it all back and then some.

Thanks for your genuine concern however!


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## Wysiwyg (16 January 2010)

skc said:


> I don't see any fault with the entries, given that they are both fairly reasonable tight stops, clear support lines etc. Obviously many people will have different interpretation of the volume / supply / demand characteristics but *that's why chart reading is an art and not a science*.




I remember reading that same line just recently. 



> As always in technical analysis, learning how to read indicators is more of an art than a science.




Good examples of your trades Lukeaye. Now they're out there. Win or lose, who knows.


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## motorway (16 January 2010)

skc said:


> Obviously many people will have different interpretation of the volume / supply / demand characteristics but that's why chart reading is an art and not a science.




Supply overcomes DEMAND PRICES FALL

DEMAND overcomes SUPPLY PRICES RISE

That is my interpretation of SUPPLY & DEMAND .

VOLUME arises when SUPPLY or DEMAND meets the other side
* The subsequent action is then important
* and always will be !

LUKE the volume on DJS YES is larger in the BARS you have circled as support.

But what about volume aggregated across the RESISITANCE vs across the
 SUPPORT

DISTRIBUTION IS BY DEFINITION something that unfolds and is seen ON BALANCE   ( not talking OBV  but the aggregation of many bars into the BUYING SELLING WAVES )


Here is RELATIVE CHART  ==> WHEN IS A HIGHER TOP NOT A HIGHER TOP ?
WHEN it is DISTRIBUTION !

and an ABSOLUTE CHART==>  note The different behaviour in the THRUSTS ( shortening -->top red lines )

and IF I zoomed the chart. ALL THE VOLUME IS  (ON BALANCE ) OFF and AT the TOP of the RANGE not the BOTTOM.


DOES NOT MATTER THAT THESE ARE P&F CHARTS ( WELL IT DOES but  )
IT IS THE ACTION of the WAVES not the type of chart.

The red lines are in the SAME places on BOTH CHARTS



> The view of trending up or down is very subjective




No IT is ( HAS TO BE ) OBJECTIVE....


SOME would call the BLUE line
THE IMMEDIATE TREND

OCT 09 strong reversal pattern 
But LOOK at the  RELATIVE CHART ! Also action at JAN this year !

Motorway


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## Mr J (16 January 2010)

skc said:


> Obviously many people will have different interpretation of the volume / supply / demand characteristics but that's why chart reading is an art and not a science.




It's both. It's still the same data.


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## lukeaye (16 January 2010)

motorway said:


> LUKE the volume on DJS YES is larger in the BARS you have circled as support.
> 
> But what about volume aggregated across the RESISITANCE vs across the
> SUPPORT
> ...




I didn't even look at the volume on price levels, I use it on my amibroker but i didn't think ig markets had it. Very Interesting observation. It appears that the volume is higher at that price level.

I should have really cross checked that.

The only problem i note with using that volume analysis though motorway is this.

Djs has spent more time at those high then at the lows, so more transactions have occured at higher prices then lower prices. Therefore your on price volume is somewhat biased towards distribution.

On my chart i note 33 periods at the top two of my price on volume, and 7 for the bottom two. The length of the Vol on price at the upper levels vs lower levels is not in proportion to this equation, so i therefore think it is inconclusive, if anything still pointing towards accumulation? Correct me if im wrong.


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## motorway (16 January 2010)

lukeaye said:


> Djs has spend more time at those high then at the lows, so more transactions have occured at higher prices then lower prices..




EXACTLY ---SO the fact we are below or if we were above that price level
becomes SIGNIFICANT..

For the very fact that so much activity occurred there.. ( demand had opportunity etc)

_And_ THAT VOLUME ACTIVITY COULD BE BELOW THE CURRENT PRICE ACTION COULD IT NOT ! IF PRICE HAD MOVED UP ?

WHEN BEHAVIOUR CHANGES... HOW Long the STATUS QUO was in PLACE
has a large bearing on SIGNIFICANCE

Think of any example in History

whatever was only ephemeral and transient the fact it changed meant NOTHING-- does not become even HISTORY
Just like a 1 box wide CONGESTION ZONE on a P&F CHART

But when an EMPIRE that endured for a aeon loses a WAR or STARTS to DECLINE.... (Just like a LARGE CONGESTION ZONE  on a P&F)

Then forces are in play that YOU DO NOT WANT TO BE IN THE WAY OFF.

And take careful note of the relative chart's WEAKNESS
For the WHOLE MOVE UP THE RELATIVE CHART was WEAKER  ( MADE LESS GROUND )

That is a sign of something important .i In this case bought about by a VERY OVERSOLD CONDITION IN  2009 ( We can see that FOR A fact )... SO DJS has got back to WHERE it SHOULD BE MAYBE .. Maybe OVERSHOT ?

Q HOW WAS IT PERFORMING JUST BEFORE THE GFC THEN ?


Motorway


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## motorway (16 January 2010)

lukeaye said:


> On my chart i note 33 periods at the top two of my price on volume, and 7 for the bottom two. The length of the Vol on price at the upper levels vs lower levels is not in proportion to this equation, so i therefore think it is inconclusive, if anything still pointing towards accumulation? Correct me if im wrong.




You need to break the phases up in more defined way
would not count the action on the Left OF YOUR CHART
START at SEPT

Motorway


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## lukeaye (16 January 2010)

motorway said:


> And take careful note of the relative chart's WEAKNESS
> For the WHOLE MOVE UP THE RELATIVE CHART was WEAKER  ( MADE LESS GROUND )
> 
> That is a sign of something important .i In this case bought about by a VERY OVERSOLD CONDITION IN  2009 ( We can see that FOR A fact )... SO DJS has got back to WHERE it SHOULD BE MAYBE .. Maybe OVERSHOT ?
> ...




Not sure what you mean by the whole move up was weaker? are you talking about the move pre GFC as appose to the current move?


Before the GFC, at the peak it was around these levels. But so was many other stocks, and they have continued to overshoot old marks, like JBH.

Are you saying the failures at 5.45 are significant in determining accumulation distribution?


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## motorway (16 January 2010)

lukeaye said:


> Not sure what you mean by the whole move up was weaker? are you talking about the move pre GFC as appose to the current move?
> 
> 
> Before the GFC, at the peak it was around these levels. But so was many other stocks, and they have continued to overshoot old marks, like JBH.
> ...




Both charts have same BOX size in %
RELATIVE CHART makes ~ 100 BOXES on the move
ABSOLUTE CHART makes only ~ 60 Boxes on the move

The Absolute chart overstates the strength of the MOVE =  So ? ( a BUBBLE MOVE )
But it was OVERSOLD...

so reactive move  not an active MOVE.. ( a GETTING BACK )



> Before the GFC, at the peak it was around these levels.




So the Q was .  Was it  a BUY THEN ? what was the TREND ACTION LIKE THEN ?

Motorway


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## lukeaye (16 January 2010)

Looking at the monthly chart, i would have to say this rally looks much stronger then the rally pre GFC. The volume is stronger, the spread on each bar is larger, and it took far less time to get there.

Unfortunetly im losing you with this P&F stuff


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## Trembling Hand (16 January 2010)

lukeaye said:


> Djs has spent more time at those high then at the lows, so more transactions have occured at higher prices then lower prices. Therefore your on price volume is somewhat biased towards distribution.
> 
> On my chart i note 33 periods at the top two of my price on volume, and 7 for the bottom two. The length of the Vol on price at the upper levels vs lower levels is not in proportion to this equation, so i therefore think it is inconclusive, if anything still pointing towards accumulation? Correct me if im wrong.



 accumulation? Yep its certainly is in the chart of DJs below its made a nice bottom and ready to run I reckon.




Hold on somethin' aint right!! Yep she's upside down. Howz it lookin' now?


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## So_Cynical (16 January 2010)

Hi lukeaye i reckon you will do all-right with those entry's given time and a little room to move for the stops....while a number of events could cause both to go a little lower, over time they will both go back near there last tops.

Keeping in mind i don't follow WOR or DJS


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## lukeaye (16 January 2010)

Trembling Hand said:


> accumulation? Yep its certainly is in the chart of DJs below its made a nice bottom and ready to run I reckon.
> 
> 
> 
> ...




Very interesting way of looking at it.

Even still could be a correction before further falling. I would still rather be long from support then short from resistance though (not on that graph)

With all the evidence now presented i must admit there is more likelyhood of it going down then up


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## skc (16 January 2010)

lukeaye said:


> Yes, i have been asked this before, and there is no solution i found to the problem that i happy to accept.
> 
> G-stop loss is the only solution. The only problem with this is there is a min stop distance, and it is often far to far away from where i want my stop, it makes the position not worth taking.
> 
> As you state the alternative is a lower position. Which is probably the most sensible solution. The drawdown has already been taken into account though.




There is a very simple solution. You use a guaranteed stop as a safety net, but still have a mental stop at your real stop. The trick is obviously to make sure you manually execute your mental stop when the price is hit. Alternately, with IG Market you can actually "force open" a sell stop order for the same stock. That way you hedge 100% when the real stop is reached - but you will have to pay twice the brokerage and spread.

And as soon as the price starts to move up you can move your g-stop position. So as long as the g-stop premium isn't a deterrent it's the best way to guard against black swan type risks. And if it only saves you once a year, it's a good year. Trade long enough and these things will bound to happen.

Or the other even simpler solution is to risk smaller percent on more positions. The diversification reduces the chance of you being taken out by a single black swan event... I only risk ~1% per trade, but I may have 20 trades at any one time. Overall market exposure is the same, but significantly reduced single name exposure.


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## Trembling Hand (17 January 2010)

lukeaye said:


> Primarily my Trades are now based on volume spread analysis, support and retracement levels.



Luke I don't know how much practise you have had at VSA and I know its been 'the' hot new method around recently but this is why I just don't rate it.



lukeaye said:


> (1) Looking at support and resistance i can immediately identify one thing. Volume is high at support, and low at resistance. So we have more support, then resistance.



 Thats just not true. Its spent far more *time *at resistance than support. therefore there is far more Volume at resistance. Yet it could not get through it.



lukeaye said:


> (2) The relative spread to volume of up downs to down days is much larger. What i mean is, there is less effort required to move the stock up (demand) the same spread, as there is to move it down (supply) on the same spread.



 The traderguide likes to talk about 'smart money' a lot. If I wanted to by into that conspiracy method, which I will, that push back up in my eyes given my VSA says 'manipulation'. Like "gee we better get the hope back into this stock or the punters are going to bail before we can" type of play.



lukeaye said:


> (3) The other thing, is it has found support near the high, it is currently consolidating near its all time high, instead of being sharply rejected.



 But ultimately it has been rejected which suggest distribution at highs until that high is broken.

As always T/A is not a prediction tool its a bias confirmation tool. When using it one must be very aware of their own bias. Whether this blows the top off its high or sinks into old territory its probably no better than a coin toss between yours or my guess. But I do think there's some work need to be done on your Technicals.


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## brty (17 January 2010)

I look at both support and resistance differently to most. In the cases presented here, neither would constitute a buy for me at support. Let me explain, there are several different criteria I use to see if support is going to be useful.

1. There is support and there is good support, and there is weakened support.

2. How did the market approach the support, did it meander or gallop.

3. How much time has it taken to get to the support relative to the previous upmove.

4. What is the action when it gets to support (should be relatively fast bounce or I get out if I have bought).

Looking at DJS to start with.

The $5 area is only support but not good support, therefore I'd pass. It did meander to this level, it did take enough time, but it has only gone sideways since reaching. The odds of a rally from this level is deteriorating rapidly (probably well less than 50%).

Looking at WOR

The $25.50 area was good support the first time it went down there, that support is now weakened especially because it did not make a new high. It took 2 months to go up to a lower high, then 5 days to get back to the support level, with a breakaway gap. Watch out below!! Would not surprise to see a runaway gap to the downside, blowing your stop by a dollar or more.

I agree with TH, you need to study more on your understanding of the technicals Luke.

brty


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## nomore4s (17 January 2010)

lukeaye said:


> I have very very high tolerance. I suffered a long string of loosers about a month ago, which drew about 30% of my account down. And i did not panic, it did no change my trading. The last 3 weeks i made it all back and then some.




This doesn't send any warning signals off for you?

While it is fine having a high tolerance if you suffer 30% drawdown so quickly maybe it is time to look at some of your risk practices? Because next time you might not be so lucky to make it all back so quickly.

This is the sort of thing I tried to touch on in the strategy thread. What was the market doing a month ago? And what was the market doing in the last 3 weeks when you made all your money back? What happens if next time the market breaks down and not up while your in the middle of drawdown and you end up with a 50%+ drawdown?

IMO the current method you use is fine while the market is strong and stocks rally off these support zones but you will suffer a high ratio of losers when the market is choppy or turns down. And with the amount of margin you use you could get burnt very quickly.

Using 2% risk per trade is fine but using the margin you do on your whole account you are taking on a lot more risk then 2%. Buying parcels bigger then your whole account (and then holding more then one at a time) on stocks that have a history of gapping around is a dangerous game imo. Also alot of your trades will tend to fail at the same time, ie both DJS & WOR could gap down on Monday and take you out of the trades at greater then your 2% per trade.



So_Cynical said:


> Hi lukeaye i reckon you will do all-right with those entry's given time and a little room to move for the stops....while a number of events could cause both to go a little lower, over time they will both go back near there last tops.




The problem with this is his stops are very tight and he is also playing with high margin. So time and room to move aren't really options for him. They will either move in his direction or stop him out pretty quick imo.
I actually don't mind his entries on either stock, if you are going to buy either where he has entered on both trades is ok, it's just that on both I favour a move to the downside more then the upside from here. Will be interesting to see how both react given the Dow on Friday.

The other thing to consider with DJS is that while the XAO has been moving up from support DJS has been moving down from resistance. I would rather be buying stocks that have broken out while the XAO moved up and are now retracing back to and finding support.



Trembling Hand said:


> Luke I don't know how much practise you have had at VSA and I know its been 'the' hot new method around recently but this is why I just don't rate it.
> 
> As always T/A is not a prediction tool its a bias confirmation tool. When using it one must be very aware of their own bias. Whether this blows the top off its high or sinks into old territory its probably no better than a coin toss between yours or my guess. But I do think there's some work need to be done on your Technicals.




Good post TH.

The problem with the way alot of people practice VSA is that they only look at one aspect of the chart (and VSA) and tend to read the signals backwards. Using VSA alone doesn't work imo, doesn't tell the full story.

If interested in VSA imo you are better of studying Wyckoff which will give a wider understanding of reading technicals as VSA is only a small part of Wyckoff.


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## Trembling Hand (18 January 2010)

Luke while I'm picking the Sh!! out of you DJS anaylisis. Two things caught my eye.

Firstly and very importantly for your original points of (1), (2) & (3) you have labeled the wrong volume bars to your support bars. Have a look at your chart below. the Vol bars are incorrect!! That chart seems to be offset by 1 bar 

Secondly the last two weeks volume has been nothing of significance, maybe even lower than when it was at $5,80ish. So there is LESS demand now although its cheaper. Thats not a good VSA signal?


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## skc (18 January 2010)

Trembling Hand said:


> Luke while I'm picking the Sh!! out of you DJS anaylisis. Two things caught my eye.
> 
> Firstly and very importantly for your original points of (1), (2) & (3) you have labeled the wrong volume bars to your support bars. Have a look at your chart below. the Vol bars are incorrect!! That chart seems to be offset by 1 bar
> 
> Secondly the last two weeks volume has been nothing of significance, maybe even lower than when it was at $5,80ish. So there is LESS demand now although its cheaper. Thats not a good VSA signal?




In IG market charts you can turn on the cross hair mode which lines up the price and the volume to avoid crooked reading. You can also easily put in a MA20 on the volume to see if the rises are significant.

As I pointed out before, IG Market charts does not plot the closing volume and price accurately. So if VSA is a big part of one's analysis a bit of paid charting may be warranted.


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## lukeaye (18 January 2010)

Thanks for everyones input, its greatly appreciated.

I think on review, i have been having less time for trading, and as a result maybe getting lazy with my analysis.

Trying to find things that aren't there, just as an excuse to take a trade. Taking mediocre set-ups instead of ones i have taken the time to look at properly.

I need to take some more time with my analysis and give each trade a bit more thought.

Skc, how do u bring up moving average volume on ig markets?


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## skc (18 January 2010)

lukeaye said:


> Skc, how do u bring up moving average volume on ig markets?




Hit the little spanner within the volume pan and choose moving adverage to add.


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## motorway (19 January 2010)

nomore4s said:


> If interested in VSA imo you are better of studying Wyckoff which will give a wider understanding of reading technicals as VSA is only a small part of Wyckoff.




  Here are Wyckoff's , _Five Steps-_--- 

1)  Determine the trend and position of the market being traded.  

2) *Determine the relative strength or weakness of the issue being considered. *  (  *THIS THE FIRST STOCK SPECIFIC CRITERIA*

3) Select issues that are presenting a cause that is likely to produce an acceptable effect. ( ACTIVITY IN THE RANGE THIS IS THE SECOND)

4)Determine the readiness of an issue being considered to respond to its cause. ( THIS IS THE NUMBER THREE STOCK SPECIFIC FACTOR, *THE LAST*. HERE is where what you call VSA  is to be found ) 

5)Time trades in individual issues to anticipated turns in the market in which they are traded.  

OK ANOTHER LOOK at the COMPARATIVE STRENGTH or WEAKNESS..


Different BEHAVIOUR NOW to that before OCT 2008 ?


Motorway


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## Trembling Hand (20 January 2010)

lukeaye said:


> Thanks for everyones input, its greatly appreciated.
> 
> I think on review, i have been having less time for trading, and as a result maybe getting lazy with my analysis.
> 
> ...




Does that mean you sold out on Monday? Or got the WOR stopped out today and close on the DJS?


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## lukeaye (29 January 2010)

Trembling Hand said:


> Does that mean you sold out on Monday? Or got the WOR stopped out today and close on the DJS?




Hi, i pulled out of DJS, because on review of everyone else analysis, i thought i was wrong. WOR i got stopped out of.

I am going to spend a bit more time studying then trading atm. Going to study some of wyckoff, and a few other books i have short listed, to refine my techniques a little more.

I did today buy RIO and FMG, seems to be some strong supported volume comming through today, and i anticipate a small bounce over the next couple of days. So i won't hold for long. 

The other position im still in is BTA. I entered at 2.06. I will post some charts and update soon.


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## lukeaye (4 February 2010)

Stock i am currently in.

When i entered i thought it looked accumulative.

Very strong volume at current levels. Is it demand or supply?

I am trying to figure this out on lesser timeframes. Anyone care to share their views?


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## lukeaye (4 February 2010)

Then, looking at the hourly, it still apears to have stornger volume at support.


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## johnnyg (4 February 2010)

Definitely looks like a good base building. For mine I'd say someones happy to pick up the stock around these levels, the XJO came off ~ 10% in the last 2 weeks? BTA has more of less traveled sideways with some good volume coming in. Offers a nice tight entry either way.


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## skyQuake (4 February 2010)

GlaxoSmithKline will give guidance on relenza sales tonite. Rumours that its been fairly good


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## lukeaye (4 February 2010)

skyQuake said:


> GlaxoSmithKline will give guidance on relenza sales tonite. Rumours that its been fairly good




O really, thats veyr interesting.

But usually with the information often leaked, woudlnt a rumor traditionally cause more upward movement? Or has that been negated because of the 10% drop in XJO?


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## brty (4 February 2010)

Personally, this could have been a trade I would have entered at ~$2.00, however because of the continued sideways movement I would have also exited. Too much time sideways for me.

I would prefer an entry at ~~$1.85-$1.90 if it meandered back to there.

brty


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## lukeaye (5 February 2010)

brty said:


> Personally, this could have been a trade I would have entered at ~$2.00, however because of the continued sideways movement I would have also exited. Too much time sideways for me.
> 
> I would prefer an entry at ~~$1.85-$1.90 if it meandered back to there.
> 
> brty




Well if i bought it at 2.00 then i wouldnt know whether prices are supported or not?

Its all well and fine to say i would have bought it at this, but it doesnt comply with the strategy.

You need to show me how the strategy you apply indicates a buy at 2.00.

I can go around telling everyone how i would have bought it lower then them as well.


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## brty (5 February 2010)

Luke, this is part of what I wrote at post 106, this thread




> 4. What is the action when it gets to support (should be relatively fast bounce or I get out if I have bought).






> You need to show me how




I don't need to do anything. 
re-read post 106.



> I can go around telling everyone how i would have bought it lower then them as well.



 ???

The lower price I mentioned has not happened, it would have been my preferred spot of entry if I was going to take the trade based on support. I didn't take this one at $2 because it did not meet my exacting criteria. If i was just buying on a lazy approach I could have entered this at $2. But if I had I would also be out by now because it went sideways, not up. If you think buying something the second, third or fourth time it hits support is a smart thing to do, may I suggest you research a little bit more.

brty


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## lukeaye (5 February 2010)

brty;530551
The lower price I mentioned has not happened said:
			
		

> A couple of things,
> 
> 1. The lower price you mentioned hasn't happened, so how can u call the price that hasn't happened a support entry point?
> 
> ...


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## Trembling Hand (5 February 2010)

lukeaye said:


> 3. Do you have any statistical evidence to support that after four times support has been hit, that a move up is less probable?
> 
> I am not disputing that it is or isn't im just interested to see if you have evidence of this, or is just your opinion?




It just makes sense. Surely you want to see a support level being touched and then moving away fast. Not continually returning to the same level. To me that sounds like a dead cat rather than a rocket.

Not to mention the time cost.


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## lukeaye (5 February 2010)

Trembling Hand said:


> It just makes sense. Surely you want to see a support level being touched and then moving away fast. Not continually returning to the same level. To me that sounds like a dead cat rather than a rocket.
> 
> Not to mention the time cost.




I would love to see the statistics behind the probabilities of a move up after X amount of tests of support. Also would like to see if there is a correlation between the distance that price will move relative to the amount of times S/R are hit. 

Depending on the context, i believe either scenarios could provide optimal results. 

And here is why, (right or wrong my opinion).

A stock is trading at $1.00. Support is established at .70 cents. A large investment firm is prepared to pay .70 and has 10 million dollars worth to purchase. If support is hit twice, only half the quota can been supplied due to available stock at this price. Demand does not increase, but rather supply moves to higher prices. It moves to 1.10 without any real strength, as there is still not enough demand at higher prices. The institution does not follow the higher prices. MUCH SUPPLY IS ABSORBED. There is still several sellers, but they will sell at higher prices.

The stock fails and returns to lower levels.

Second scenario. 

Stock is under exactly the same circumstances, this time however, the price returns to a support line 6 times. The Quota is completely filled, supply has been forced to sell at lower prices as demand is still not high enough near resistance. The majority of supply is now removed within this range, and price moves up quickly, with large spread and medium volume, everyone now jumps in, price goes much higher then 1.10 as demand continues at higher prices with little supply.

There are literally 10 different other scenarios where i could think of where more support tests would indicate a stronger potential up move. And conversly 10 scenarios where too many support tests would indicate a failure.

The scenarios may also differ in different contexts, ie low liquidity, high liquidity. Whether it occurs over an hourly period, a daily period, or monthly period. The time it takes to move back to support, etc

I could imagine it would be hard to gather statistics on this, but would be well worth while in my mind. Also identifying these different scenarios using price/time/volume.


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## skyQuake (5 February 2010)

lukeaye said:


> I would love to see the statistics behind the probabilities of a move up after X amount of tests of support. Also would like to see if there is a correlation between the distance that price will move relative to the amount of times S/R are hit.
> 
> Depending on the context, i believe either scenarios could provide optimal results.
> 
> ...




No the insto will get a crossing done at 70c, or if they really want, at 72c. Conversely if they like a stock and cant get a crossing they will be happy to bid up to $1. The algobot is smarter than a limit buy at 70 hurr durr.




> Second scenario.
> 
> Stock is under exactly the same circumstances, this time however, the price returns to a support line 6 times. The Quota is completely filled,




That means the seller is bigger than the buyer? Or do you mean the insto gets their fill exactly? By definition, if you're a big buyer/seller, and you get fully filled, _adverse selection_! ie. you probably didnt want to get filled there.




> supply has been forced to sell at lower prices as demand is still not high enough near resistance. The majority of supply is now removed within this range, and price moves up quickly, with large spread and medium volume, everyone now jumps in, price goes much higher then 1.10 as demand continues at higher prices with little supply.
> 
> There are literally 10 different other scenarios where i could think of where more support tests would indicate a stronger potential up move. And conversly 10 scenarios where too many support tests would indicate a failure.
> 
> ...




If a price tests a support level for a while (as opposed to sitting in a proper trading range), everyone will know about the support level. It will be well established and since everyone is ALREADY long from the support level, any moves higher will be met with those taking profits. The momentumn needed to drive up the prices from new/existing buyers simply wont be there. 

Theres a fair few books out there that say the same. The more a trendline gets tested the weaker it becomes.


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## lukeaye (5 February 2010)

skyQuake said:


> No the insto will get a crossing done at 70c, or if they really want, at 72c. Conversely if they like a stock and cant get a crossing they will be happy to bid up to $1. The algobot is smarter than a limit buy at 70 hurr durr.




"if" so it is a variable, which means either cold occur. So the context of the situation plays into it.





> That means the seller is bigger than the buyer? Or do you mean the insto gets their fill exactly? By definition, if you're a big buyer/seller, and you get fully filled, _adverse selection_! ie. you probably didnt want to get filled there. If a price tests a support level for a while (as opposed to sitting in a proper trading range), everyone will know about the support level. It will be well established and since everyone is ALREADY long from the support level, any moves higher will be met with those taking profits. The momentumn needed to drive up the prices from new/existing buyers simply wont be there.




No what i mean is, the quota has been completely filled, and price moves up quickly at the end of the fill, so the supply that would have sold higher is now removed, as it has been absorbed lower. The reasoning for the sellers supplying at lower prices could be numerous, a push lower at higher prices could have been a "trap" by the insto to force more sellers out in a panic, enabling prices to eventually drive higher, and them to get filled lower. This Quick drive up now, may pull in more then just "everyone" as you say. When you say everyone is in, there are always more looking to enter, once the stock starts rocketing up, people talk about it, more interest from others who arent in the stock yet start pouring in, there is always the potential for others who didn't know about it before to now know about it and hear about it and want a piece of the cake!

If you look at a very strong basing period, it can last years, several tests can be made of support, this accumulation over a period of years can translate to prices 1000's of percent of what the stock was trading at, at the accumulation phase. If you look at RIO, BHP, NCM they all displayed this in earlier trading days. One institution may have filled there quota on NCM when it was 1.00 and sold at 3.00, another insto may have then picked it up at 3.00, Then more get in at 7.00, 15.00 so on and so forth. Just because You think all the demand is in now, doesnt mean more demand cant step in, and supply is moving higher and higher as less people want to take profits because of this rapid growing stock.


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## brty (5 February 2010)

Lukeaye,



> 1. The lower price you mentioned hasn't happened, so how can u call the price that hasn't happened a support entry point?




Have you looked at a chart of this to see the support levels?? There were several minor lows of a trading range in July and August of last year at ~ $1.85, there was also the peak of the swine flu scare in April at $1.79.

I called it a place to enter because if it approached there in the right manner that is where I would buy, it's called planning ahead, if it didn't get to this level in the right manner, ie meandering, then I wouldn't bother with the trade. What is so difficult to understand about this??

brty


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## lukeaye (5 February 2010)

brty said:


> Lukeaye,
> 
> Have you looked at a chart of this to see the support levels?? There were several minor lows of a trading range in July and August of last year at ~ $1.85, there was also the peak of the swine flu scare in April at $1.79.
> 
> ...




brty,

WHAT is the right manor. How do you measure it. How do you measure a meander. Thats what i want to know. Your definition of meander and somebody else may differ greatly. I just want to know how this trade sets up for you.


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## brty (5 February 2010)

Lukeaye,



> If you look at a very strong basing period, it can last years




Why would you want your money tied up for years in something going nowhere?? You don't know it is a basing pattern until it breaks up in price, then holds the gains.



> WHAT is the right manor.




How about this one.

brty


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## lukeaye (5 February 2010)

brty said:


> Lukeaye,
> 
> 
> 
> ...




Hahaha good one. 

But seriously how would you approach it, what are you looking for, ie volume and price for your entry


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## brty (5 February 2010)

I look for a movement down to support that is running out of puff, especially something that has been doing so for an extended period. To say 6 days or 9 days in a row down movement would be a misnomer, every stock is different and every situation is different. I have deliberately designed my entries so that it cannot be programmed into a computer, as the variables change too often. I also look for volume increase relative to reduced rate of change of price, plus look into where a stock is trading (ie on the bid or ask). 

I bought AWC and WPL last Friday, but bailed on both today, because I have an overiding stop of general market risk.

brty


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## Trembling Hand (5 February 2010)

Luke the thing that maybe wrong with you 'bounce off support many times' theory is that it's biased.

If it bounced 3 or 4 time then its also fallen 4 or 5 times from a level not much higher. You are willing to give all the weight to your support but none to the equal yet opposite action. 

I could just as easy say, "yeah but your insto is getting smoked by whoever keeps knocking it back at resistance.

Just a thought.


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## lukeaye (5 February 2010)

Trembling Hand said:


> Luke the thing that maybe wrong with you 'bounce off support many times' theory is that it's biased.
> 
> If it bounced 3 or 4 time then its also fallen 4 or 5 times from a level not much higher. You are willing to give all the weight to your support but none to the equal yet opposite action.
> 
> ...




Yes well good point, that is the debate isn't it. When you have an equal opposing force the question must be asked, where is the weakness?

Then i guess you must look at the evidence on both sides. volume is lower at resitance then support. Spread is larger from the support then resistance, or is it hahaha, it acutally looks pretty equal in terms of spread. Volume is higher at lower levels though, indicating demand? Price, time, and volume then become relative don't they?

So you would have to say the key is identifying where the weakness is


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## ThingyMajiggy (5 February 2010)

You could always wait for the break and trade the re-test? 


...like I suck at doing lol.


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## lukeaye (5 February 2010)

ThingyMajiggy said:


> You could always wait for the break either way and trade the re-test?
> 
> 
> ...like I suck at doing lol.




Yes, BUT, Isnt the retest just support again? The exact place we trying to buy from right now? 

The retest could test once, or four times, and then become exactly the same.


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## ThingyMajiggy (5 February 2010)

lukeaye said:


> Yes, BUT, Isnt the retest just support again? The exact place we trying to buy from right now?
> 
> The retest could test once, or four times, and then become exactly the same.




Not sure what you mean? If it breaks up, out of that range its in, wait for it to come back and test the breakout, once you know its being supported there and holding, go long?? 

What does it matter if its "support again"? Better than going long on resistance


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## lukeaye (5 February 2010)

ThingyMajiggy said:


> Not sure what you mean? If it breaks up, out of that range its in, wait for it to come back and test the breakout, once you know its being supported there and holding, go long??
> 
> What does it matter if its "support again"? Better than going long on resistance




What i mean is, its just trading off support again, the same thing as we are doing now, expet we are at a lower level?  Is the pullback in biota a retest? or is it a trend change? is it a failure? 

So what im saying is, do you think this is a breakout trade anyway? On a larger timeframe it is a breakout already, on a lesser maybe not.

And im not going long on resistance, im going on support.


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## ThingyMajiggy (5 February 2010)

lukeaye said:


> What i mean is, its just trading off support again, the same thing as we are doing now, expet we are at a lower level?  Is the pullback in biota a retest? or is it a trend change? is it a failure?




I'm just going off that chart TH posted, from that chart, there looks to be resistance way up near the high there, it is currently down in the range, where TH has labelled about the acc/dist. So, if it breaks up OUT of that range that is labelled, then comes back to re-test the breakout, it holds, that is where I would go long, rather than NOW or at the bottom of the range because you have the obvious selling pushing it back down to support(the range it is IN NOW). But there may be more to it, as I said, I'm just going off that chart. 



lukeaye said:


> So what im saying is, do you think this is a breakout trade anyway? On a larger timeframe it is a breakout already, on a lesser maybe not.




How can I know if its a breakout trade if its still in the range? There isn't much point trading the range imo, I'd wait for it to break out, then the risk:reward is much better too, otherwise you could just get chopped to death inside a range. As far as time-frame goes, that all depends, so it might be a breakout on a larger timeframe, depends on how long you want to hold etc whether that comes into account.


Thats how I see it, but thats probably why I'm certainly no pro too


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## Wysiwyg (5 February 2010)

brty said:


> I bought AWC and WPL last Friday, but bailed on both today, because I have an overiding stop of general market risk.
> 
> brty




Hi brty,

I'm fairly sure you stated somewhere that you don't catch falling knives! WPL is a falling knife that you bought. Wondering why you did this? Thanks.


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## brty (6 February 2010)

Wysiwyg,



> I'm fairly sure you stated somewhere that you don't catch falling knives! WPL is a falling knife that you bought. Wondering why you did this? Thanks.




Your right, I did. Perhaps I should explain. A falling knife starts from a stationary position and accelerates according to the laws of physics. Something that is decelerating as it falls is hardly a falling knife.

I will probably have another go at WPL at ~$40, if it gets there by say next Friday (or later) by meandering there. If it gets there on Monday, I wont touch it because of the downward velocity, hence a falling knife.

brty


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## lukeaye (6 February 2010)

brty said:


> Wysiwyg,
> 
> I will probably have another go at WPL at ~$40, if it gets there by say next Friday (or later) by meandering there. If it gets there on Monday, I wont touch it because of the downward velocity, hence a falling knife.
> 
> brty




When you say you will buy it if it is meandering there, i thought you stated you would only buy on a sharp bounce? If support was well established? Surely if you wont catch smething with downward velocity, you would only enter long if there was upward velocity?

This is what i mean, what measurebale technqiue are you using?


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## nomore4s (6 February 2010)

lukeaye said:


> When you say you will buy it if it is meandering there, i thought you stated you would only buy on a sharp bounce? If support was well established? Surely if you wont catch smething with downward velocity, you would only enter long if there was upward velocity?
> 
> This is what i mean, what measurebale technqiue are you using?




lukeaye have you started looking into Wyckoff yet? Because some of this is answered in Wyckoff.

Here are a couple of links for you.
http://wyckoffstockmarketinstitute.com/corner.htm

And the Wyckoff thread on this forum
https://www.aussiestockforums.com/forums/showthread.php?t=10020&highlight=wyckoff

The problem I see with your analysis atm is it is very one sided, you probably need to understand the "character" of the stock/pattern a bit more. You are solely focused on the "support" areas because you are looking to confirm your bias to give you a reason to take a trade, but you are ignoring everything else - need to understand the bigger picture a bit more.


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## lukeaye (6 February 2010)

nomore4s said:


> lukeaye have you started looking into Wyckoff yet? Because some of this is answered in Wyckoff.
> 
> Here are a couple of links for you.
> http://wyckoffstockmarketinstitute.com/corner.htm
> ...




No i havent, im having trouble finding any of his books. I would really love to get a hold of them.


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## brty (6 February 2010)

Lukeaye,



> i thought you stated you would only buy on a sharp bounce?




I buy FOR the sharp bounce, I don't think I have ever stated the above, though if I have had a couple of reds who knows what drivel spouts forth.

brty


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## nomore4s (6 February 2010)

lukeaye said:


> No i havent, im having trouble finding any of his books. I would really love to get a hold of them.





lol, mate there isn't really any books, there is a course but I wouldn't recommend you do that at this stage as there is plenty of free info available - it's just hard to find.

The links I've given you contain a wealth of info on it. The other great source on Wyckoff is Motorway, maybe PM him and see if he can give you any more info.


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## lukeaye (3 March 2010)

Has anyone else noticed, that IG markets charts are completely wrong?

Im in SGM at the moment, entered 2 days ago, and its telling me yesterday went up by 5.20%? Same thing for crown, its telling me that it has dropped today, which is completely wrong. Ive noticed it on alot of charts.

Which is quite scary, because my analysis is based on these charts.


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## lukeaye (3 March 2010)

Then imagine my shock when i take another look at the price being up 5.20% then this.


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## So_Cynical (9 March 2010)

lukeaye 19-Jan 2010  said:


> *I'm using discretionary methods*, as i simply don't have time or the desire to learn computer language for systems trading.
> 
> So here is a trade i took on thursday, David Jones.
> 
> Entry; $5.06






So_Cynical said:


> Hi lukeaye i reckon you will do all-right with those entry's* given time and a little room to move for the stops.*
> 
> Keeping in mind i don't follow WOR or DJS




Noticed JDS got to 5.09 today..what 7 weeks later, now imagine if you had brought a few more after the SP had fallen 5% instead of taking the loss and selling.?


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## lukeaye (9 March 2010)

So_Cynical said:


> Noticed JDS got to 5.09 today..what 7 weeks later, now imagine if you had brought a few more after the SP had fallen 5% instead of taking the loss and selling.?




Hi cynical,

Its not part of my plan though, averaging down with cfd's its quite possibly the most dangerous thing you can do. Buying the pyhsical stock might be ok, but with the leverage i have, i cant do it.

I exited without loss anyway. And have used capital for other sucesful trades


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## So_Cynical (9 March 2010)

lukeaye said:


> Hi cynical,
> 
> Its not part of my plan though, averaging down with cfd's its quite possibly the most dangerous thing you can do. Buying the pyhsical stock might be ok, but with the leverage i have, i cant do it.
> 
> I exited without loss anyway. And have used capital for other successful trades




OK yes CFD's = very dangerous.


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## tech/a (9 March 2010)

lukeaye said:


> Hi cynical,
> 
> Its not part of my plan though, averaging down with cfd's its quite possibly the most dangerous thing you can do. Buying the pyhsical stock might be ok, but with the leverage i have, i cant do it.
> 
> I exited without loss anyway. And have used capital for other sucesful trades




Quite possibly you may need to learn how to trade on margin(Leverage)without risking your shirt.
There is a proper way you know.


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## lukeaye (10 March 2010)

tech/a said:


> Quite possibly you may need to learn how to trade on margin(Leverage)without risking your shirt.
> There is a proper way you know.




Well yes i realise there are ways.

For example i can pyramid into the position. Buy 1/4 of what i would usually risk intially, and then add to the position as it moves in my favour. That way i risk .25 R per trade.

But i will not averge down with a CFD, its just not something ive found is effective for me. 

If i buy a stock, i want to buy it at a place where i can set the stop as tight as possible, and have the greatest possible reward. So try and get the highest Risk:reward. The tighter im able to set my stop, the large the position i can have, and the large the potential profits may be. BUT, if the trade goes against me, that means there is no possibilty of averaging down, as i will lose farm if the stock continues against me.

Is there another way you would approach it techa?


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