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ASX Momentum Trade Book - Part 2

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peter2 said:
I may have closed A2M a bit quick, we'll see and we can re-buy it if it makes a new high (1.90).
Click to expand...

A2M: Bought 1.905, iSL is 1.75.

I made a mistake selling this when price dropped. Price was only retesting the break-out, which we must expect to happen occasionally. This mistake cost us $585.
 
peter2 said:
A2M: Bought 1.905, iSL is 1.75.

I made a mistake selling this when price dropped. Price was only retesting the break-out, which we must expect to happen occasionally. This mistake cost us $585.
Click to expand...

CCP is reporting tomorrow. They did have a market update 2 months ago which spurred the recent upleg so perhaps much is known.

What's your approach to reporting season?

P.s. I may have asked that question before but I can't remember!
 
skc said:
What's your approach to reporting season?
Click to expand...

I'm not a "pro" like you, so I use the foetal position and try to avoid getting hit in tender places. :

Thanks for the warning re CCP tomorrow. CCP is near our +1R level so I am willing to let it go and see what happens. I may even sneak a sell order in at our +2R level in case of a spike up. I'm inclined to risk open profit rather than capital when deciding to hold through news. I usually see more price rises than falls because I'm in strongly trending stocks (AHY recent exception).

I don't knowing start a trade in the days before a scheduled news release.

The last time you asked, I mentioned during reporting season, I feel like a long-tailed cat in a room full of rocking chairs. That hasn't changed.

Edit: CCP is just below all time highs. This would have to be bullish with good news.
 
Trading update: Excellent report by CCP

CCP Sold at 15.95 (+4R)
I've sold half mine and will leave the TS well back on the remaining half.
 
Trading update: New trade

MCR: Bought 0.405, iSL is 0.36

With a SL this close and above the last BO level (0.35), we are anticipating that price will continue higher immediately.


ps: Just noticed the rising three pattern with diminishing ranges. Probability of further rises <50%. Hmm.
 
LAU: Weekly chart looks better than daily. Weekly trend is up and price in huge consolidation pattern. The probability that price goes higher when it break out (>0.52) looks good. However the daily traded volume is too small for me to consider it a trading candidate.

This is one for the FA guys to consider as a longer term investment.
 

Hi Peter, thanks very much for your feedback as really appreciate it.

Cheers mate and best wishes with your trading.
 
EOW 75 update: ASX Momentum Portfolio +37.0% ( 80% invested in 6 trades ) SPAX2F15 index -0.1% (last 75 wk)

Another good week for the portfolio thanks to CCP's good report. We grabbed the +4R result on the day of the news. An above average win for our break-out entry. You may notice that compounding is kicking in. We risk 1% of current account, but it's equivalent to 1.3% of our starting capital. The +4R win in CCP was worth +4.8%. A 1R loss will be a loss of 1.3%. Another reminder to keep our losses contained to -1R.

This weeks sells: CCP (+4R)
This weeks buys: A2M, MCR

Our portfolio has four stocks that haven't moved much since purchase and with literally hundreds of stocks going up it's easy to think we're missing out in this mid cap rally. Don't worry about things we can't control. We don't chase prices. We buy break-outs. Stick to your trading plan.

 
There's one aspect of my portfolio management that I've probably not clearly explained. It deals with the figure I call capital risk. This shows the amount of our capital that we've put at risk with the trades that we've recently started. It's a part of portfolio heat that also includes any open profits that we're risking.

The aim of this portfolio is to grow without experiencing a 10% draw down. If we started 10 trades, risking 1% each and all lost. We would have the 10% DD that we wish to avoid. The question then is, how many trades are we comfortable starting to give us the best chance of success and avoid the 10% DD. The number I use is 5, that gives us the capital risk limit of 5%. This doesn't mean I must start 5 trades. When I'm bearish, I'll start less. When I'm bullish I want to start heaps, but the capital risk limits my number to 5. This limit stops me chasing a runaway market. It stops me buying heaps at what might be the wrong time (a market top).

For the past few weeks our portfolio showed a capital risk of 5% and we had cash available (~20%) to start more trades and I've been quite bullish lately. Four of our trades hadn't moved. They were risking 4% of our capital and not providing any growth. It would have been easy to succumb to the temptation to start a few more trades and increase our risk to 6% or 7%. No problem, this is just an educational forum thread. Go for it. Who cares. Well, I do. This limit works for me. If I can't find one stock that continues to go up out of five then I'm a lousy chartist or I'm very unlucky (btw I always think I'm unlucky. lol).

What I'm advocating here is, restraint, because we never know what is going to happen next.

Trading update: Those four slugs have finally started to move higher and we've been able to raise the TS's. This lowers the capital risk and this lower value allows us to start another trade.

BKL-cfd: We're anticipating a break-out soon and pre-empting it by buying today at 159.10, iSL 150.00.
Since this is a huge price and we would use all our remaining cash in this parcel. I've decided to use the leverage provided by cfds.

 
EOW 76 update: ASX Momentum Portfolio +41.0% (100% invested in 7 stocks) SPAX2F15 index +1.0% (past 76wk)

A good week for our portfolio as most of our trades moved higher with the general market.
Our aim is to collect winning trades, so it's good to see the portfolio all green when 100% invested.

This weeks sells: nil
This weeks buys: BKL as explained earlier today.
What happened here? The price was 159.3 when I posted. The close >160 confirms the break-out.
I posted the entry a bit earlier than usual as I had a pm appt. I hope it wasn't you buying.

Outlook: Well, you'd have to be bullish.

 
Nice to watch this process Peter, well done.
I hold one of these, MYX.
 
peter2 said:
There's one aspect of my portfolio management that I've probably not clearly explained. It deals with the figure I call capital risk.
Click to expand...

Thanks Peter. This post comes at an opportune time for me as I had taken this past week off work to focus on getting back into trading.

What is your view on the optimal number of open trades?

You started this account with $50,000, 1% risk, maximum 5 initial trades open to keep the capital risk at 5%. But if you had a larger account, would you risk say 0.5% and open 10 positions?

My limited system testing doesn't give a clear answer. More open trades doesn't mean greater profit. But it does seem to reduce result variance and max system draw down, probably from reducing impact of single outlier results (good and bad).
 
Lone Wolf, welcome back. Your question is a difficult one for a discretionary trader like myself. If your system is able to be back tested then of course you could find the right number for your risk tolerance with a little bit of computer work.

This 50K portfolio risking 1%/T will be fully invested with about 6 - 8 trades using my position sizing method. The optimum # of trades is not a concern. Are these numbers scalable? Ha, that is the question.

300K- 2M portfolio: I use a trade risk of 1% on the weekly charts (less likely to be hit) and only 0.5 - 0.7% on the daily charts. Risking less each trade means I'll have more open trades to manage. How many open trades can you manage properly, is an important question. I struggle with 16 open trades (based on daily charts) when the market turns down suddenly. It happened and I'll never forget that day. The current mixture of trades based on the two time frames lowers the risk of having too many to manage. Trades based on the weekly charts require less work than those based on the daily charts. Let me mention that if I used the monthly charts, there would be even less work required.

After managing my portfolio through the GFC and the years since, I better understand my risk tolerance. I manage my portfolio risks to suit my comfort level. Gary Stone (SWS) produced a white paper that looked at variable amounts of trade risk (which directly influences the number of open trades) on the performance stats of his system. I was nicely surprised to see that my numbers (based on gut feel over many years) matched his best estimates for reward to risk (draw down).

I know I haven't answered your question with a direct number, but no-one will know your number other than yourself. Managing my portfolio to reduce the normal DD that a medium trend following system gets was/is my main concern.
 
peter2 said:
This 50K portfolio risking 1%/T will be fully invested with about 6 - 8 trades using my position sizing method. The optimum # of trades is not a concern. Are these numbers scalable? Ha, that is the question.
Click to expand...

Thanks Peter,

You answered my question just fine. I wasn't looking for a specific number. I was just wondering if you might prefer to have more open trades but were being restricted by the account size.

You could be fully invested with only one stock. But it's not optimal due to high capital risk, as well as opportunity risk in that you're likely to miss many of the best trades while tied up in just one. So we open 5 trades, reduce the capital per stock while casting a wider net. But there seems to come a point were casting a wider net no longer gives better returns.

Good point on how many open trades you can personally manage. A system trader could manage more than a discretionary trader who needs to closely watch each chart.
 
Trading update: New trade included after realising that we won't exceed our cap risk limit by too much.

GXL-cfd: We can include this trade I placed for myself today, in this portfolio.
Chart posted in break-out thread. My entry was the break out at 7.26, iSL is 7.00.
This is a small stop size for this priced stock, meaning that we will be limited to our max parcel size of 20%. Our risk on this trade is only about $512 or 0.76% of current realised equity. We won't be blowing our cap risk limit too much by including this trade.

Both BKL and GXL will report next week. We will only hold them over their reports if they are profitable. We won't be holding losers when they report. We're trading price momentum, not gambling on what the reports may do to the prices.

Cap Risk is ~5% spread over 8 trades and we have invested 105% using the leverage of cfds. We've got 9% cash left for more trades, once we can safely reduce the cap risk by raising some exit stops or closing open trades.
 
Trading update: A quick exit due to a BO failure.

GXL: Sell on next open. Price has reversed quickly following the break-out and closed below our exit stop.
Normally I'd watch this stock and re-buy on a BO>7.25. However it's reporting next week, so we'll wait.

MCR: Traded below our exit stop but closed above. We'll sell if it trades below again.

Our portfolio has taken a hit today (-4%) with most of our trades falling. We've started defensive measures by raising a few exit stops to reduce heat and protect our portfolio value.
 
EOW 77 update: ASX Momentum Portfolio +41.5% ( 77% invested in 6 trades ) Max draw down -7.0%
SPAX2F15 index (includes dividends and franking credits) +0.8% Max draw down -15.8% (past 77wk)

Our portfolio held up better than it started this week. The market index continues sideways and masks the underlying strength in the mid caps.

This weeks sells: GXL, MCR
This weeks buys: nil

Note: Adjustments to many of our exit triggers.

GXL: The market challenged our iSL and triggered us out, before going back up. Placing our iSL at 7.00 was probably wrong. It should have been below the 7.00 level, say 6.95. We must respect the round number levels. We mark that decision as an error and learn from it. The best way to learn from this mistake is to write into our TP, "adjust all exit triggers below round numbers".

BOL: Traded at our price target of 0.12 today. We weren't taken out and we'll raise the limit sell order to 0.145. This trade has the potential to be a great result if we let it happen.

Outlook: We continue to be bullish and aim to be fully invested. This weeks sells provides capital risk for two new trades next week. If we can't find any break-outs we'll buy some pull-backs.

 
Trading update: New trade, enough cash leftover for cfds trades.

IMD: Bought on the close at 0.56, iSL is 0.49 (below 0.50).
I really liked the little ascending triangle pattern on the daily chart, but we had to wait for today's report and subsequent price action. The close was at the high after some initial selling that fell through quite a few levels (thin MD). Encouraged by the high close. we bought.

Other charts under consideration today: PRG (pull-back entry), IMF (Break-out entry), SVW (Missed BO)

Holders of APO, OML, BLA understand why short term traders must be careful in reporting season.
 
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