ASX Momentum Trade Book - Part 2

[peter2]

Trading update: New trade, very much a reversal setup against the prevailing down trend. This trade is to take advantage of any EOY rally and grab a quick +1R or +2R.

TLS: Bought BO-NH (4.51) SL is 4.30 and this parcel was limited to 20% account.

(We may even hang around for the div. Just joking. I never buy for the div. The price action would have to be very favourable for us to hang on that long.)

 

[peter2]

Can't tell you about the other trade because of this . . .

 

[peter2]

Trading update: Whoa, my bank manager has told me that we've run out of cash in this account and we must fix it.

The TLS trade will be removed from this portfolio immediately to fix the overdrawn status. This will leave enough cash for the open order that has been partially filled. This sort of error can't happen in an ETrade acount, but it can happen in a Commsec account. TLS must be sold in the next two days and before their T+3 settling deadline.

EGH: Has triggered an exit, in the closing auction. We'll sell EGH on the next open and take the small loss. The lack of upward momentum this past week is our reason to exit this trade in this portfolio. Personally I will let this trade go as the weekly trend is so strong.

This will leave us with a little cash ($3.7K), enough for a trade in a small priced stock.

 

[peter2]

Trading update: (after yesterday's over indulgence)

EGH: Sold on open for -0.4R loss.
I remarked that our entry into EGH was a little late and it was this tardiness that contributed to this result. An earlier purchase at the better price/time would have allowed us to watch this price pull back and see how it resolves.

CGC: Bought 1 share yesterday and the rest on the open today (2.65). I hate getting stuck with 1 share. Our SL is set at 2.30.

GEG: Sold at a price limit of 1.25 today (+1.4R). I'm sorry for not mentioning this in an update, but the bid depth on this is low and I didn't want any possible interference. It's taken me a few days to sell part of my parcel at the limit price. The trend up remains strong, but the thin depth is a concern when the market sentiment is as skittish as it is right now.

BKL: I will mention it in here that I've placed a limit sell order in the market (199 - 200) in case of a price spike up.

Outlook: The market is very jumpy right now and any minor negative comments are getting hammered.
Another reason for a discretionary exit; "skittish market" or should that be "skittish trader".

Taking the profit also reduces our downside exposure (heat) and allows us to be a bit more patient while the market is stuck in this uncertain postion. I'll be looking at some of the lower priced stocks for our next trades. They should be less influenced by the general market sentiment.

 

[peter2]

EOW 40 update: ASX Momentum Portfolio +23.4% ( 74% invested in 5 stocks ) XAO -11.8% (past 40wk)

That was an up and down week (-1%). Our portfolio lost 3.9% due to today's huge sell off in the healthcare sector. Our trades in JHC and REG were thumped as the prices fell. Price closed below their exit triggers so we'll sell both on the next open.

It doesn't matter what type of trader you are, we will all get thumped one day.

This weeks sells: TGR, EGH, GEG
This weeks buys: CGC

OUTLOOK: Remains uncertain, so we will act cautiously and wait for the XAO to get above 5300 again.

 

[grah33]

not hard wiring trailing stop losses seems like a good idea. i might use that too (helps avoid drastic market fluctuations) . i take it the next day you just sell on the open at market? hopefully the open price isn't too different. but I don't think i'll be using it for the initial stop loss.which alters risk


(sniping seems more complicated for beginner traders. might just let the trades do their thing . )

 

[peter2]

Flexibility with the exits suits my temperament, but it's still very important that you have some guidelines to help keep you consistent and trading to your plan (momentum or trend).

Yes, I've mentioned that this type of short term trading (like tech/a 's) is not for beginners. The profits rely on cutting your losses quickly, something that beginners don't always do.

Trading the trend, stops under swing lows is an easier trading style that beginners can master, before attempting something that requires an additional skill set.

Sell stops should IMO be either tight or very loose. Anything in the middle will get picked off and that is very annoying.

 

[grah33]

i thought momentum trading was another word for trend following trading? it's a bit of a throwback that term. what is the difference? I'm just doing mainly breakouts within existing trends.

 

[sammy84]

I also got killed with JHC. I'm similar to you as I do not keep my stops sitting in the market. But I did sell JHC near the close on Friday, just had to reduce risk.

Question - what do you do if JHC bounces nicely on Monday. Will you still exit or do you reconsider?

 

[grah33]

while i'm waiting for my trades , wouldn't mind asking Peter another question. your intending to add a few forex trades into the portfolio, but what advantages could that bring you. there are just so many other share opportunites out there. could it be that by having some 4h and 1h forex trades thrown in, you will turn over some of the money in the portfolio faster? i mention 1h and 4h timeframes since these are regraded as being not too difficult to profit from (as well as the daily forex timeframe of course).

 

[Newt]

i thought momentum trading was another word for trend following trading? it's a bit of a throwback that term. what is the difference? I'm just doing mainly breakouts within existing trends.

You might find the posts by Peter in this thread helpful Graham? (posts #7-9)

https://www.aussiestockforums.com/forums/showthread.php?t=27976&p=811984#post811984

 

[grah33]

You might find the posts by Peter in this thread helpful Graham? (posts #7-9)

https://www.aussiestockforums.com/forums/showthread.php?t=27976&p=811984#post811984

yes, it's an eye opener for me today . i hope that i've got a feasible and normal enough strategy. i've put it together from reading parts of different books. LET ME KNOW IF I'M MISSING SOMETHING FUNDAMENTAL IN ALL THIS, PLZ. just need to get my foot into the door with this stuff. my approach is to get into trends on the daily time frame, following them as much as i can.

(daily time frame, end of day trading, find uptrends, get into them and let them run as much as i can)
- find trend continuation breakouts (aka new high) with volume to get into the trend.
-if successful trail about 3 atr as price advances.
- initial stop loss 3 atr or outside the low (like peter does).
- use the hul* indicator which tells me when the market is uptrending and therefore when i'm allowed to buy shares (when a 10 and 30 ema of xao and xso is crossed up.)
-when the hul* indicator is crossed down, i can't buy anymore shares. if this happens i don't exit positions but let the share stop losses take care of that.

and that's it. these are the rough details of what i'm attempting. i'm hoping it will work.

 

[peter2]

Trading update: I love to buy when I see demand and this one fits the brief today.

API: Bought BO-NH (2.12), iSL is 1.98. We only need 4370 shares.

I know it's a psycho market atm, but API has remained very strong over the past few weeks.

 

[peter2]

Sorry, Sammy didn't notice your question re JHC. For this thread I sold all.

Personally I sold half as I saw the late demand (daily pin bar). I did anticipate a quick bounce also on Mon. We didn't get it, so I'm very close to selling the rest. I do this knowing that I can always re-buy on a BO > 3.20 again. Saving the account always comes first, then I can wait for price to start rising again to re-buy.

Other markets: The main advantage in trading other markets (like forex) is diversification. Other markets are not highly correlated to the ASX market.

I consider the term momentum trading as a newer term for swing trading. However there is another trading style based on price momentum that is not swing trading. This is the rotational/replacement portfolio that selects stocks by ranking their momentum over a period (3mth, 6mth, 12mth) and buying into the top 10 (or 20) ranked each month/quarter. It's not new either and it recent popularity is due to recently published books and the growing popularity of ETFs.

grah33: That's the first time I've seen you post something that looks like a plan. Well done. Write it out and stick it next to you and get it into your head. Make minor adjustments as you get experience, but don't change the foundations.

 

[The Bear]

yes, it's an eye opener for me today . i hope that i've got a feasible and normal enough strategy. i've put it together from reading parts of different books. LET ME KNOW IF I'M MISSING SOMETHING FUNDAMENTAL IN ALL THIS, PLZ. just need to get my foot into the door with this stuff. my approach is to get into trends on the daily time frame, following them as much as i can.

(daily time frame, end of day trading, find uptrends, get into them and let them run as much as i can)
- find trend continuation breakouts (aka new high) with volume to get into the trend.
-if successful trail about 3 atr as price advances.
- initial stop loss 3 atr or outside the low (like peter does).
- use the hul* indicator which tells me when the market is uptrending and therefore when i'm allowed to buy shares (when a 10 and 30 ema of xao and xso is crossed up.)
-when the hul* indicator is crossed down, i can't buy anymore shares. if this happens i don't exit positions but let the share stop losses take care of that.

and that's it. these are the rough details of what i'm attempting. i'm hoping it will work.

Good work getting a rough trading plan together Grah33.

Now you have some basic entry & exit criteria, you'll have to set up the more important money management side of this (eg How much are you going to risk per trade, what is your portfolio heat etc)..

Once you have this written into a trading plan make sure it suits your personality. eg If your index filter is keeping you out of trades will you be tempted to place trades anyway as you're bored and don't like sitting on your hands?

You could also kerb this by trading different markets and instruments (FX, commodities, futures, ETFs etc) or trade the stocks in the ASX short when the filter allows it too. I wouldn't jump into this straight away get some experience with ASX stocks first.

What are you going to use to scan for trading opportunities? Some people like Amibroker, Metastock, Beyond Charts, Bullcharts use a website like ASXIQ (not sure if this site is still maintained), Finviz (US Stocks) or go through the charts manually.

Whatever you do I suggest you keep it simple at first and like Peter said try not to change the trading plan too much as you go as you will need a fair few trades as samples to test the plan properly.

I think Peter has said this already also but you should consider starting your own thread taking on trades and documenting it as per your plan in real time like Peter is doing. I think this would test your plan out and give you confidence and provide yourself and other ASF users some invaluable learning material while you save your $$$!

Good work on the thread too Peter, it's been tough conditions and you've done exceptionally well!!

 

[peter2]

The Bear: This thread tries to attract comments from newer members, thanks for yours. Have look at this. . .


REVIEW OF DISCRETIONARY EXITS USED IN THIS THREAD

As I'm a discretionary trader I think it's important that I review the effectiveness of my actual exits against some popular exit strategies every now and then. Are the reasons I exit my trades helping or hindering my performance?

I've spent the past four hours going through the 93 closed trades and calculating the P&L of every trade using three exit strategies that I was interested in looking at.

1. 3 x ATR(21). Exit on the next open after a close below this indicator.

2. Exit on the next open after the first red bar. My chart candles are coloured blue/red and are based on the supertrend indicator (2 x atr(21)). This is a slightly tighter exit trigger. Should I take more notice of them?

3. Waiting for price to trade at +2R target then exiting on the next open after the first red bar. Am I exiting too soon on the good trades?

RESULTS: Results based on history may not be applicable in the future.

 

[myrtie100]

Gee that third one looks interesting Peter.
I like the idea of a firm exit rule, to take the emotion out of it.

Your candle colours, are they similar to Jim Bergs overbought/oversold indicator?

 

[The Bear]

The Bear: This thread tries to attract comments from newer members, thanks for yours. Have look at this. . .


REVIEW OF DISCRETIONARY EXITS USED IN THIS THREAD

As I'm a discretionary trader I think it's important that I review the effectiveness of my actual exits against some popular exit strategies every now and then. Are the reasons I exit my trades helping or hindering my performance?

I've spent the past four hours going through the 93 closed trades and calculating the P&L of every trade using three exit strategies that I was interested in looking at.

1. 3 x ATR(21). Exit on the next open after a close below this indicator.

2. Exit on the next open after the first red bar. My chart candles are coloured blue/red and are based on the supertrend indicator (2 x atr(21)). This is a slightly tighter exit trigger. Should I take more notice of them?

3. Waiting for price to trade at +2R target then exiting on the next open after the first red bar. Am I exiting too soon on the good trades?

RESULTS: Results based on history may not be applicable in the future.

View attachment 65240

Very interesting as you can see the tighter stops are doing significantly better in this choppy market.....which you would expect.

Since the 3rd option has given you the best results and you might be worried about exiting the good trades too soon, have you tried say exiting 50% (or any value you come up with) of the trade at 2R and letting the rest run? This will increase commission cost but I find this can be effective sometimes when stocks to run.

Another method of exiting you could experiment with are count back bars which is what Radge and Guppy teach.

 

[peter2]

EOW 41 update: ASX Momentum Portfolio +25.4% ( 51% invested in 4 stocks ) XAO -13.9% (past 41wk)

The market continues its downward movement (-2%), while our portfolio held up well (+2%).

This weeks sells: JHC, REG
This weeks buys: API

A few exit triggers have been raised. This reduces our downside exposure a little and allows us to start more trades. However the market trend remains down and we'll remain cautious.

BKL: limit sell order (199) removed once price broke out (>191). We'll let it get to $250.

Outlook: Well I don't know. I'm just going through the motions (more selling than buying).

 

[The Bear]

EOW 41 update:

Outlook: Well I don't know. I'm just going through the motions (more selling than buying).

View attachment 65256

All you can do is trade your plan Peter.......stick to it it's done you well so far!

In regards to the market outlook we can't predict the future but if you have a plan that has positive expectancy stick with it.

Looks like the ASX200 is forming a Symmetrical Triangle who knows how it will unravel!