ASX Momentum Trade Book - Part 2

[sammy84]

It's been a while since I've posted on here, but have been lurking for ages.

Today I tried something you alluded to earlier Peter which is entering a trade at the close of the session. The market has been too erratic lately, so I was cautious about entering. Hopefully entering at the close is a good alternative to get some more confirmation from the market.

 

[peter2]

Thanks sammy84. There seems to be more liquidity at/near the close. This helps me get the price I'm happy with and get it all done rather than waiting for the bots to pick at my order. We can also see the volume that has gone through before us and that might provide some confirmation.

I don't like to see that word hopefully. Keep your downside exposure under control and you'll be OK.

 

[bonkerrs]

(1) I'm looking for charts with clearly market horizontal resistance in a weekly or monthly up trend. They're for my SMSF. (Weekly Darvas scans)
(2) Next I'm looking for charts near their yearly highs with shallow consolidations (in weekly charts). (Daily Darvas scans)
(3) Then I'm looking for 10d BO with volume (thrust bars) You can see these in all three of tech/a charts HSN, SIQ, YOW. (Daily pm scans)
(4) Then I'm looking for small consolidations in strong trends (hope this rings a bell, Pav response)

Every weekend I find all the stocks that are stronger than the index (XAO) over the past 13 weeks (RSC(XAO,13) > 0). I throw them all in a watch list and sort through them. Charts with clear resistance levels go into a pending BO list. Charts showing corrective pullbacks go into a pullback list. Charts that are going sideways after a down trend go into a reversal list. Every PM I review those watch lists and wait for perfect low sized risk setups to buy them. There are approx 20 charts in each list. I don't let them get too big. When the chart looks poor and the anticipated opportunity isn't progressing as I'd like I ditch it.

I only mention this as it might help some of you organise your thoughts and procedures.

Brilliant! Is there any way to bookmark posts in threads? I would like to bookmark the above.

Which charting software and data provider does everyone use? I'm using Incredible Charts which was/is OK but am looking to get something with more features, price sensitive.

Here is a chart screenshot, my first post of one.

 

[tech/a]

Brilliant! Is there any way to bookmark posts in threads? I would like to bookmark the above.

Which charting software and data provider does everyone use? I'm using Incredible Charts which was/is OK but am looking to get something with more features, price sensitive.

Here is a chart screenshot, my first post of one.

Short answer is NO

There is so much technically here that needs to be
Pointed out and placed in context.
It actually reads like a small book.
And is easily followed bar by bar which is how you
Should read a chart which is being held.

I don't have the time right now but will give a complete run down tonight.
Pete I don't want to clutter your thread with this stuff

As you can seedy bonkers query perhaps the suggestion I made via PM may be
Worth considering so your message remains clear and not lost.
I'm sure Joe would oblige.

 

[bonkerrs]

There is so much technically here that needs to be
Pointed out and placed in context.
It actually reads like a small book.
And is easily followed bar by bar which is how you
Should read a chart which is being held.

That would be awesome, I will sponge it all up. Tech - Will you PM me?

 

[captain black]

Brilliant! Is there any way to bookmark posts in threads? I would like to bookmark the above.

At the top right of each post is a hashtag with a number. The post you want to bookmark is #14 (post number 14 in the thread). If you click on the #14 it links to that post.

ie.

https://www.aussiestockforums.com/forums/showthread.php?p=873428#post873428

You can then bookmark that link and it will take you straight to that post.

 

[tech/a]

That would be awesome, I will sponge it all up. Tech - Will you PM me?

Ill post it here.

CB
I didn't know that!
Thnx

 

[bonkerrs]

At the top right of each post is a hashtag with a number. The post you want to bookmark is #14 (post number 14 in the thread). If you click on the #14 it links to that post.

ie.

https://www.aussiestockforums.com/forums/showthread.php?p=873428#post873428

You can then bookmark that link and it will take you straight to that post.

Thank you for the handy hint

 

[grah33]

thank you Peter for doing this. i hope to pick up a few things here and there. i understand most of your abbreviations, but it was a little rattling at the start. maybe some kind of attachment or link to a previous post where you have the abbreviations laid out would be good (part of your slogan or somehow on every post you do). not for me, but for all the newbs that are going to be viewing this. just an idea.


regards scanning stocks, for newbies: another method is to just eyeball them one by one. this is a viable method as well, according to Wilson (author). it's easier i think for newbies to first do that and learn to trade, then later add scanning to their repertoire. and look for cheaper stocks, say from 20c to 5$, as these are the ones that are for short term trading.


someone asked about charting software: amibroker is highly sophisticated and cheaper than the other big names.
i got that recently. from memory, IC is good but you just can't flip through lots of stocks quickly enough which is what you will need to be doing.

 

[captain black]

someone asked about charting software: amibroker is highly sophisticated and cheaper than the other big names.
i got that recently. from memory, IC is good but you just can't flip through lots of stocks quickly enough which is what you will need to be doing.

+1 for Amibroker, I've been using it for over 10 years.

There's a great Amibroker FAQ thread on ASF if any help is needed:

https://www.aussiestockforums.com/forums/showthread.php?t=1679

 

[bonkerrs]

The universe is anything with enough volume for me to trade myself. There are about 300 - 500 stocks with enough volume.

Index: Weekly, I look for HH and HL. Daily is similar but I'll place a line on my chart as an indicator.

So trading the ASX200 index is the new part of this thread (as previously stated) and not used to find BO setups. You use volume to identify the 300-500 stocks that show BO potential. Do you do this on the ASX500?

In regards to eyeing off the index to see the general trend direction. Can you please explain using daily, weekly and monthly charts? Why you use each and what you're looking for.

 

[peter2]

I mentioned the possibility of using the ASX200 cfd when the market looks like going down. This is to offset our long only portfolio. This system is completely separate to our long only system. Trades in the ASX200 will only appear occasionally, unless there is more interest.

I use daily volume or more accurately average value traded per day to look for our long only setups. I use two value filters across the whole ASX, >$40K/day and >$600K/d because I have portfolios of different sizes. There are always plenty of short term moves in stocks outside the XAO500.

 

[peter2]

tech/a was referring to his suggestion (via PM) that we lock this thread to keep it on track and open another thread for all questions and discussions that arise from our posts. There is some merit in that but I don't want the extra work I also don't want to make this thread about me. I'm willing to share some aspects of my trading and this means sharing my beliefs about market behaviour, but I don't want to see a solid thread of my posts. I don't want to feel like I'm talking to myself or that I'm telling you what to do.

Real life trading is about focussing on your business inspite of all the distractions that are out there. That's why it helps to have everything written down, so when we get distracted and then return to the job we don't miss something.

I want the forum interaction. I want to see posts by other experienced traders. I want them to question my opinions and point out my mistakes. I love seeing others become excited by the prospects as they grasp an idea.

The thread will stay on track as I'll always post a trading update when I do something in the portfolio and there will always be an EOW report. Trading is a serious business but I do it because I love it.

 

[VSntchr]

The thread will stay on track as I'll always post a trading update when I do something in the portfolio and there will always be an EOW report. Trading is a serious business

Yes trading is a serious business...and it is informative to see how you are showing the development of a full business. Some people may find success with a 'one strategy business' but I think that the best trading businesses will have a number of strategies and plans to deal with a variety of market conditions and situations. I think that the idea of a "play-book" is a great idea, along with the approach to business development that you have taken in this addendum to the momentum thread.

I find that business analysis is important for looking at listed ASX business when value investing, just as it is when assessing your own trading business. I like to ask myself questions like: how variable are my returns over daily, weekly, monthly periods? How many strategies do I have? How correlated are these strategies and how do they perform in bull/bear periods? How efficient is each strategy in terms of $ and time employed?

but I do it because I love it.

A necessary component for success in this business I feel.

 

[Triathlete]

In regards to eyeing off the index to see the general trend direction. Can you please explain using daily, weekly and monthly charts? Why you use each and what you're looking for.

Monthly chart

If you are a medium to long term trader/investor you should always start with the monthly chart as it provides us with valuable information, which is often missed by traders who rely on only the weekly or daily charts, as it provides a view of the stocks movements. Always start your analysis of any stock or index by looking at a monthly chart to understand the longer term direction. The benefits are below:

A complete history of the stock.
Major trends in price and support and resistance levels are easily recognized
Able to recognize major lows and what stock cycles are present.


The weekly chart

Which is the most important chart in technical analysis,provides us with some valuable information that is not evident in the daily chart.This is the chart you should rely on the most in your analysis. The benefits are below:

Major support and resistance levels of previous highs and lows.
Recognizable patterns eg continuation, accumulation, reversals, head and shoulders, double tops , bottoms etc
Easy to recognize major moves and long term trends.


Daily chart

The daily chart is fast moving and at times quite deceiving, which for the inexperienced trader can lead to inconsistent trading results. A lot of traders find they become too reactive to the emotions in the market if they use daily charts to carry out their analysis, which can lead to very costly mistakes.The daily chart is used primarily to fine tune entry or exit points in the market.
Typically medium to long term traders rarely need to refer to the daily chart.

 

[grah33]

peter: i noticed you limit your exposure/heat to 6%, why is that? Hull uses portfolio risk (aka. heat) limited to 20% .
6% means going through less trades over time, as opposed to going through more trades and profiting more, so i'm unclear on why u limit to 6% in uptrending market conditions

also, i'm just wondering, if we offset the long positions by shorting the asx200 cfd, doesn't that mean we get zero profit. what is happening here? the long trades yield profit, while the shorted cfd yields negative profit (ie loss), so that makes zero profit. ??

(if i ask too many qs and you don't have time, that's ok. and others can feel free to jump in if you have the answer. )

 

[tech/a]

API

Analysis as promised

Long term outlook is that this resistance is going to be tested again.
Supply needs to with draw or be absorbed before price can make new highs.
Good setups have failed at resistance.

Click to expand

 

[peter2]

Hello grah33,

re: Portfolio heat. I'd be surprised if Mr Hull advocates a portfolio heat of 20%. That's worth checking. It doesn't matter to me what others use. I know that it's best for me to limit the capital risk to 6%. If I can't get into one good trade in 6 attempts then starting more won't help me. Once my portfolio starts collecting winning trades and the market trend is up, I'll let the total downside exposure sneak out to 10% (most of it open profit), but never more than this. The aim of these limits is to reduce the chances of a 10% draw down. If I was comfortable losing 20% then yes, I could start twice as many trades.

The important point here is to know your own risk tolerances before you feel that queasy knot in the stomach feeling.

re: ASX200 shorts: Let's assume our downside exposure (heat) is 8% comprising 4% profit and 4% capital exposure. When the market turns down, we'll give up some of that profit (eg -2%, heat = 6%). If the market looks like it might go down some more, we'll reduce that exposure by raising our exit triggers or even closing the worst trades (saves 3%, heat now 3%). It's at this stage that we start an ASX200 short (risk 1%, total heat is 4%, but net long 2%). The market continues down and we lose another 2%, save 1% from the remaining 3% heat. Our index short will be in profit. If the index continues down we will add to that trade and our short trade profits will rise and offset our earlier loss of capital and open profit.

During this change in trend we lose ~50% of our downside exposure (heat), by implementing our portfolio safeguards. Hopefully our index short will repay some of that lost value. If the market doesn't go down then we lose 1% in that short trade but our surviving open long positions will start to rise again with the market.

We are discussing hypotheticals here. When the time comes for an ASX200 short we'll discuss it again then. I mentioned this strategy at the start to provide more flexibility.

 

[grah33]

peter: i'm getting it, not all, but i'm getting it. nifty stuff

 

[debtfree]

Tech/a: Thanks for your chart and analysis on API, lots of info packed into a little chart, very good indeed. Appreciate the time you put into others.

Cheers ... Debtfree