ASX Momentum Trade Book - Part 2

[peter2]

APO: This portfolio sold on the 30/10 when the price gapped higher and the close ended below the mid point. Today was definitely another BO buy signal, but I had already started trades in TGR and JHC.

I find it hard to remember that the XAO is still in a weekly and daily down trend. There are so many stocks breaking out each week.

It is tough to buy after a substantial move up, but that's a bias we must overcome as break-out traders. OR, we can avoid this bias by making sure we buy on the first buy signal.

 

[grah33]

nortorious, peter, other: thanks Nor. That is informative and helpful to me. i was wondering as one of my share trading books suggests using a filter to get stocks priced from 20c to 5$, but it turns out that the sp500 has mainly higher priced stocks. book reckons your capital can be over exposed with higher priced shares. although i did some tests and with a 1% risk often the capital required is still less than 20% of our total capital (for heavy priced shares e.g. cba). but if you use a 2% risk than much of your capital gets used up on expensive shares (your over exposed to 1 share). also, many shares in the asx200 happen to be cheap , which is convenient. still not exactly sure though why we don't buy e.g. CBA on a day frame though since our risk is 1% here. can't remember if peter had a filter for looking for cheaply priced stocks and why. anyways, thanks again everybody. and enough of me rambling on.

 

[peter2]

We're using fixed fractional position sizing in this thread. The fraction that we are risking per trade is 1% of starting capital plus profits. This means the % gain of a stock is not what's important. The important aspect is the reward/risk ratio. We're risking 1% on each trade regardless of the price of the stock. If we can get a +2R result it doesn't matter if the stock price is 0.05 or $50.

If you use a small initial SL on a higher priced stock, then yes the parcel size becomes too big relative to your account size. In this thread we apply a 20% limit.

 

[Nortorious]

We're using fixed fractional position sizing in this thread. The fraction that we are risking per trade is 1% of starting capital plus profits. This means the % gain of a stock is not what's important. The important aspect is the reward/risk ratio. We're risking 1% on each trade regardless of the price of the stock. If we can get a +2R result it doesn't matter if the stock price is 0.05 or $50.

If you use a small initial SL on a higher priced stock, then yes the parcel size becomes too big relative to your account size. In this thread we apply a 20% limit.

grah, I use a similar method for position sizing. Basically I define my risk on each trade (individual basis), and it might be say 20% upon entry. I then look at my total portfolio value at that point in time and use an excel spreadsheet (I have my own template set up) to work out how much capital to apportion to the trade to stay within my overall portfolio risk parameter (I have a limit of a 3% risk to my total portfolio on any one trade).

My capital allocation on any one stock does not exceed 25% of total trading capital but it is unlikely that I would purchase a stock with 25% of my capital in the one purchase. I would be more likely to scale in and average up along the way....

Continue to follow Peter2's thread as the information and approach is pretty sound and you will learn a lot if you read, listen, reflect and apply yourself. The best way to learn is through your own experience but all of us here at ASF can provide some pointers to help minimise the chances you'll make big mistakes that might wipe you out of the game.

 

[peter2]

Trading update: and having a bit of fun while demonstrating the fixed fractional position sizing calculations on a high priced stock.

BKL: Placed order to buy 29 shares at 175.00 before open. Done at 174.95. SL is 155.00 (risk = 20.00)

1% risk = $618, less $30 brokerage = $588 / 20 = 29 shares

Comments: Strong trend and clear trend continuation BO level with an acceptable risk.

 

[PeterJ]

BKL: Placed order to buy 29 shares at 175.00 before open. Done at 174.95. SL is 155.00 (risk = 20.00)

1% risk = $618, less $30 brokerage = $588 / 20 = 29 shares

Love it Peter !
nb
Bal close above $ 10.00 is another candidate

Peter

 

[peter2]

Phew, for a moment there I thought my avatar had been hijacked and I'd moved to Perth.

BAL: Yes, how high can this go?
HUB: is another I'm too scared to buy.
EML: Setting another TC pattern

 

[peter2]

EOW 38 update: ASX Momentum Portfolio +26.0% ( 78% invested in 6 trades ) XAO -10.1% (past 38wk)

Nice up week for the market and our long only portfolio. Our portfolio profited from the quick +2R result in SMA and the price rise of JHC. The effect of compounding is very noticable now. We'll notice it on the losses also, don't forget.

This weeks sells: SMA (+2R)
This weeks buys: JHC, TGR, BKL

Outlook: There are so many BO opportunities I have to remind myself that the index remains in a weekly down trend. The daily trend is unclear even though a HH and HL have been formed the index is in a range between 5000 - 5400. It's great to see the banks finally moving off their lows and this forces the index up (which improves sentiment).

Apologies for not doing anything with the leveraged account.

 

[grah33]

thanks Peter for the example and Nort. too. I have to ask though Peter, how come you never bought any expensive priced shares b4?

 

[peter2]

Trading update: Oops, REG hit our re-buy entry trigger (5.95) last week.

I've had to pay a little extra this morning (5.96) SL is 5.66.

This portfolio is now fully invested and for other opportunities we'll have to use a little leverage in the second account.

grah33: We've used cfds on the larger priced stocks to lower the upfront outlay. Over the past few months the larger priced stocks have been going down (ie banks) and the mid cap sector has been on fire. We've been trading the section of the market that is moving up. Now that the banks have moved off their lows they are certainly on the radar (BEN was a classic shallow sideways pattern, ideal for a BO trader).

 

[grah33]

Trading update: Oops, REG hit our re-buy entry trigger (5.95) last week.

I've had to pay a little extra this morning (5.96) SL is 5.66.
.

thanks for explaining . i get it.

I've noticed you catch some of your breakouts really early. in this example u entered right on the BO level. why is that? shouldn't you wait till it breaks out past the BO level ? and shouldn't you go in near the end of the day, to ensure that it really is a break out and not a false break out?

 

[peter2]

There's an exact time and price for every BO. My job as a BO trader is to buy them at that exact time and price It's impossible to do that all the time (slippage) and I often buy them late or buy them early (pre-empt the BO).

REG: The portfolio bought the BO in REG much earlier at 5.51 and this trade would still be open if we hadn't sold out to realise the profits for our second account. A re-buy trigger for REG was selected at 5.95 which was traded two days ago. I noticed this over the weekend and bought the open. My own portfolios did not sell REG and I'm adding at this level.

You seem to be sweating on the small stuff, long or short, ASX or US, price range of setups, exact entries.

We're buying stocks that are going up (recent momentum) and then managing each trade to earn an overall profit. At the same time we're keeping our total risk (downside exposure) within our comfort level. This is not rocket science. It's a simple and robust trading methodology.

 

[kid hustlr]

Pete, tremendous thread.

Whilst on the discussion of breakouts and slippage:

I find most break out trades I take receive slippage (lower caps, buying on open usually) and revert back below my entry. As such my trades are often in the red from the outset and may take some time for the underlying momentum to take hold.

It irks me because I often think 'I should just be patient and set a limit' rather than enduring the slippage cost.

I wonder if my views are warped given my knowledge only expands back say 3-4 years and I haven't witnessed a surging bull? In your experience during heavy bull markets do stocks 'gap and go' more often or is it non-influential.

 

[grah33]

thanks peter. and yeah, i probably am sweating a bit aren't I. it's one of my weaknesses. glad to know though why those trades were taken so early.

 

[peter2]

grah33: We've all got inherent biases and weaknesses. Recognise yours and minimise their impact in your trading business. If you want to trade then you have to make some decisions about how you're going to go about it. Are you going to trade ASX or US? Long only or short as well? What type of trader are you? etc, etc. I can't help you with those decisions, but I know they must be made and then you start your trading journey.


kid hustlr: Thanks for the compliment and glad you're enjoying the journey. Before the GFC it was possible to buy most BOs at the best price and at the right time. The depth was thick enough to get set with little slippage. Since the GFC the ASX market depth has thinned considerably. Conditional orders don't work as effectively as they did. I've stopped using them and they should be free. I prefer to buy the BOs on the day of the BO even if it's late in the day and price has moved up a liitle more.

If you're buying them on the second day, the best BOs just zoom higher, some hang aroung the close and a few drop quickly. Limit orders may miss the best BOs. We can't afford to miss these and I'll pay the few extra ticks and adjust my SL after the close. The best BOs never threaten the initial SL.

I've noticed a lot of BOs are "jumping the creek". Check out that Wycoff term if you don't know it. If you recognise these, most of them are real deal. Buy them asap.

 

[peter2]

Trading update: Comments on trade management as the portfolio goes sideways.

The prices of most of our trades have been dipping and going sideways. Hey, we can't win every week. I've raised most of the exit triggers today to reduce some downside exposure. Every % we save goes into the bank. You'll see the current exits at the EOW review tomorrow. There is no need to have our exit triggers too tight while the market consolidates at this level.

While this portfolio is fully invested, of course there are other stocks charging higher (SMA, LYC, TNE ... ). We can't get into all of them. Don't worry about them. There will be others when we have cash available. We've had a run of good luck and now we wait for our next period of good luck.

 

[peter2]

EOW 39 update: ASX Momentum Portfolio +27.3% ( 100% invested in 7 trades ) XAO -11.0% (past 39wk)

The market drifted lower this week (-1%) while our portfolio increased a little (+1%).

No buy or sells this week. Exit triggers have been raised to lower downside exposure.

Outlook: Remains uncertain as the index is stuck between the last high (5400) and the last low(5150). Without ongoing demand for the banks our index will most likely stay in this range (5000 - 5400). This will make trading interesting and we may have to adapt our tactics to those of a sniper and grab the easy (profit) targets.

 

[Nortorious]

EOW 39 update: ASX Momentum Portfolio +27.3% ( 100% invested in 7 trades ) XAO -11.0% (past 39wk)

The market drifted lower this week (-1%) while our portfolio increased a little (+1%).

No buy or sells this week. Exit triggers have been raised to lower downside exposure.

Outlook: Remains uncertain as the index is stuck between the last high (5400) and the last low(5150). Without ongoing demand for the banks our index will most likely stay in this range (5000 - 5400). This will make trading interesting and we may have to adapt our tactics to those of a sniper and grab the easy (profit) targets.

View attachment 65126

Your performance with this portfolio has been fantastic peter2. Keep up the great work and hopefully you can close out the year strongly despite the sideways trending market.

 

[peter2]

Trading update: The market continues to drift lower along with our trades. It's time to take some defensive action. Not too much, just a little in case the fall accelerates. We don't want to be caught off guard.

TGR: Back at our entry price. Clearly there is no current upward momentum. Sell on open. Re-buy order at 4.60 for three days only.

EGH: Demand showed up once price dropped to 0.60. We'll sell if 0.60 trades again (in market).

 

[VSntchr]

A few BO-PB contenders I like at the moment:
SPK


SRF


And on the "S" stocks, a BO-NH for good measure.
SRV



Others of note: APE, TNE, ORL, FPH, DMP, CCP.
Conditions remain suited to sniper like traders with certain BO's going well before retracing rapidly (UGL, TGR etc), Peter still doing an excellent job of showcasing trade management skills. I'm learning lots!