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;

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.

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.

lukeaye · 29 September 2009

Progressive chart from todays action.

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

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.

tech/a · 30 September 2009

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

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.

johnnyg · 30 September 2009

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

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!

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 :2twocents

, and I am a beginner.

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

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.

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.

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.

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.

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?

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;

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.

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;

lukeaye · 1 October 2009

Progressive chart

Example of my conservative trading strategy

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