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ASX Momentum Trade Book - Part 2

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peter2 said:
ACX: Price is dancing around our +1R level and I'm tempted to grab it, but I won't as the sell trigger is slightly above BE and under the 5.00 number.
Click to expand...
At first glance it appears ACX survived the $4.40 (initial stop loss) low on 8th December?
 
APD: Thanks, it appeared in my 10 day BO scan this afternoon. Now at yearly highs, OBV, TMF indicating increasing demand. The chart is all good in a crappy market.

ACX: Yes the trade survived because we don't have the sell stops in the market. Price did trade at the exit trigger but closed above it and continued higher the next day. There was no EOD sell triggered.

Other charts that are interesting: DTL, MOY, NST, UGL, VLA
 
peter2 said:
Other charts that are interesting: DTL, MOY, NST, UGL, VLA
Click to expand...
DTL poking its head above the consolidation range today. Volume isn't great but that might be a good sign while it's heading north.

NST heading for the moon...! I'll consider a PB around 2.90 if it becomes available...its moved a bit too fast for me to get onboard.
 
Hi peter2 and others contributing,
Great thread. I'm an absolute novice, but trying to follow along. If I could ask a dumb ques , can you explain a bit more about 'TR' and '+1R'.
I found in a previous post "TR is trade risk and in this thread we are risking 1% of our account on each trade using the fixed fractional method to calculate the number of shares to buy"
What is this fractional method? What would be the TR for an account with e.g. $50K?
Also haven't yet got my head around this +1R, +2R etc.
 
Welcome stock84,

You might know this already but I thought I would bring it to your attention in case you don't know.

Part 1: Pavilion103's LIVE ASX Momentum Setup Trading Thread. You can find this by using this link https://www.aussiestockforums.com/forums/showthread.php?t=29536

Part 2: ASX Momentum Trade Book - Part 2. You can find this by using this link
https://www.aussiestockforums.com/forums/showthread.php?t=29971

Peter2 took over Part 1 and continued into Part 2 and you will find a lot more questions than you have here already asked and answered within these 2 threads. It's great reading and also an eye opener, make sure you read them both for a better understanding and your answers. Don't read it once, read it lots of times, take notes, create your plan.

All the best, hope it helps.

Cheers ... Debtfree
 
stock84: Welcome, I love newbies, because once upon a time I was a newbie myself.

debtfree: Thanks.

TR is the initial trade risk that every trade starts with and is clearly defined before the trade is started.

The fixed fractional method is the preferred position sizing model that we use in this thread. This portfolio risks 1% of capital in every trade we start and it doesn't matter what the stock price is. An example of this model is given in in post #245. Higher priced stocks use more capital than lower priced stocks and no trade is to use more than 20% of our capital.

In that trade the TR was 20.00 and the result of the trade was +27.00. This means that the result is 27/20 = +1.35R. The actual result is less (+1.2R) because we should the costs of brokerage. eg +40.00 would have been a +2R result, +60.00 would be a +3R result.
 
Peter2

peter2 said:
Higher priced stocks use more capital than lower priced stocks
Click to expand...

I've seen this said before and it sent me digging into my notes. My thoughts are if a higher priced stock has the same iS/L % as a lower priced stock, it makes no difference. The amount of our bank used is the same. The % of our bank being used is totally depended on how far our stop loss is away from our buy in price. This is correct isn't it or am I missing something?

I have attached a spreadsheet from my notes and any correction would be appreciated.

Prints out on 1 page if wanted.

Cheers ... debtfree
 

Attachments

  • SAME % STOP LOSS BETWEEN 2 STOCKS.xlsx
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debtfree: Yes, you're right if you consider iSL amount as a % of stock price.

You mentioned the "d" word. We prefer to buy prices going up, not down. Our best pattern is a break-out to a new high, however I have mentioned a pull-back setup. We haven't traded many of them in this thread as there have been plenty of BO setups to use. However now that the index is down there will be plenty of pull-back setups forming and we may use a few when the market starts to rally.

EPD: The daily chart is too ugly. The weekly chart looks better. You may notice the huge morning star reversal pattern back in early Sept15. That was a big buy signal and I'd need to see something like that again before buying EPD.
 
OK I think you might have meant to say APD not EPD. I just noticed that price has been sold off significantly today and is below the BO-level. I removed my 0.43 buy order yesterday. So do we buy it now?

Good question.

Today's early price action is unexpectedly down and our basic strategy is to buy prices when they are going up. So to be consistent with this strategy we could buy it if price trades back up to 0.43.
 
Oh my god, now it makes sense. Yes I did mean APD, sorry about that Peter.

Thanks for your thoughts and replies and a breakout of 0.43 makes sense to me.
 
Thanks debtfree, you raised an interesting problem that is caused by missing or ignoring the original signal. Do we take the second opportunity? Who wouldn't like to buy something that is cheaper now than a few days ago.

Let me mention that we should take the original buy signal everytime, afterall we know it's a great time/price to buy. The best trades take off and don't provide a second chance. Miss them and we miss out on above average wins.

Second chances: Let's describe them as failed BO's as price has reversed and closed well below the original BO level. Recent examples are HFR and BPF, both have traded below their original BO levels (APD, too early yet as price hasn't closed below the BO level). I'm willing to trade these when price trades back above the original BO level, provided that price has formed a HL before the second BO.


 
Break-out trading gets an undeserved bad reputation because it's a strategy that is very easy to understand and attracts newbies who think it's a fast way to trading riches, until they try it and lose money. They then blame the strategy not understanding that it was them that failed. The strategy had nothing to do with their failure. They failed because they haven't applied the trading skills required to earn the profits.

Break-out trading in a bull market works great. Our few mistakes are easily offset by the general rise in the market. Make these same mistakes trading a break-out strategy in a volatile sideways or down market and you're going to pay heavily for them. If you haven't noticed, current market conditions are highly volatile. Expect more break-outs failures in these conditions. It's your decision to cut the losses quicker, or trade fewer break-outs until conditions improve for your BO strategy. In this thread we've opted for trading fewer BO's while the market falls. Personally I've opted to place my iSL's below weekly lows. This gets my stops out of the daily noise.

The market is a great teacher if you take notice of your results and what's happening.
 

Many thanks for the above Peter, I'll look into this but on first view I really think this is a great approach in regards to second chances. It will more than likely be added to the trading plan. Excellent!!
 
Thanks @debtfree and @peter2 both for your replies and suggestions.
@debtfree I did find those two threads, a lot to take in initially, but as you said, need to read few times to understand better.
@peter2, thanks for referring to post#245. I think I understand now how to work out the trade size.
TR is something that we get from the chart (support-resistance level), right?
How do you get the trade result (+27 in your example). Is it something that is dictated by the chart or just arbitrary (based on trader's appetite for desired reward/risk ratio)
 
The trading style in this thread can be described as a rule based discretionary style. The BKL trade was followed with a wide trailing sell stop that was tightened once BKL hit the +2R level and the index started to fall. The sell stop locked in the +1.2R result. BKL went lower and is now higher.

Trading update: New trade DTL

DTL: Bought BO-NH after two months of sideways price movement.
Average buy price 1.12, market depth very thin. iSL is 1.05. Initial target is the old high at 1.25.
Warning: Daily traded volume is LOW, probably too low and I'll most likely use a limit sell order near one of my targets.

 
Thanks for the update Peter.

One good one we missed yesterday was MCT, which I dare say Tech/a would have been all over it.
 
Thanks Peter

Amazing how they jump out at you now. Our very first trade from PAV, we have traded this 3 times with good results.
 

Attachments

  • SEN - Daily.png
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I've got my eyes on SEN also, but not here. I won't buy 0.195 as it's just below 0.20 which is a significant round number. I anticipate that there would be some resistance at 0.20. Price could "jump the creek" and stop at the old high at 0.22. Just something to consider.

The number of BO opportunities are rising as the market pauses and I'm tempted to start a few more in my own account provided they're not highly correlated to the index.

New Trade: LPE - newly listed NSW electricity retailer growing it's business

LPE: Bought BO-NH (0.036), iSL is 0.030.
 
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