ASX Momentum Trade Book - Part 2

[Lone Wolf]

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.

I know some who would consider today's action a pattern fail of the little ascending triangle and remove it from their watch list. It's interesting to see you consider the action today as a sign that buying demand still exists, rather than focus on the break of pattern.

Would you feel any different about the price action if wasn't due to reporting day volatility?

 

[peter2]

Yes, today's price action did invalidate the ascending triangle pattern. However we knew this might happen due to the scheduled report. I bought some on the close after seeing today's price action. Today's pin-bar setup was the second bullish sign after the bullish AT pattern. I've pre-empted the BO (if it happens) but feel comfortable with the risk/reward. It's a non routine entry on a chart being monitored for a routine BO buy. I'd like to see the BO in the next few days when I pre-empt a BO.

There was been a lot of trading activity between 0.50 - 0.80, three years ago. This may be a level of some resistance and price stagnation. We'll see.

ps: Ignoring the news aspect, but I wouldn't, we can now draw a box pattern around the price data and treat it like any other break-out opportunity.

 

[Lone Wolf]

Thank you for the detailed reply Peter, it's very much appreciated.

 

[peter2]

Trading update: I mentioned yesterday that IMF was being considered for a trade opportunity.

IMF-cfd: Bought at 1.70, iSL at 1.60.

The main purpose of these cfd trades is to use the leverage available. This allows us to open more trades when the market conditions are favourable. I don't expect to hang onto these cfd trades for very long, just long enough to grab +1R - +2R.

BKL may be reporting tomorrow. It will be a quick gain or a quick loss. We'll see.

Note: I also considered CPU today as price made a new high. With 8 open trades, it might be best to wait a while for more of our trades to prove themselves worthy of remaining in our portfolio. BOL, APE and MYX haven't moved for a while.

 

[peter2]

Trading update: Busy morning

APE: Closed yesterday below our raised exit trigger (11.80) and had to be closed today. This was made difficult due to the thin market depth. I'd noticed this yesterday as the price fell on low volume. We sold all eventually when price climbed off the floor. Ave price 11.70.
Edit: APE reported today also. This didn't help our exit.

BKL: Reported today, what I thought were acceptable results, but the market thought otherwise and sold off quickly. Our average selling price was $145 (incl cfd interest), below our iSL.

While all this was happening I noticed the market lopped 10% off A2M. MYX, IMF have fallen also. We'll wait to see what happens this afternoon and decide if we sell them tomorrow.

 

[Lone Wolf]

While all this was happening I noticed the market lopped 10% off A2M. MYX, IMF have fallen also. We'll wait to see what happens this afternoon and decide if we sell them tomorrow.

I'll be interested to hear what you decided on these. For me:


A2M - A substantial gap down, the only positive being that it closed near the high for the day. So I guess you hold for now? Today's bar doesn't look too inspiring to me though. Sell if you need the cash for a better looking prospect, or move the stop up and let it play out?


MYX - This has been weak for a few days and under performing the index. I'd be looking to close, except that it's already so close to the initial stop that I would have just left it yesterday. I would've been stopped out today as I tend to have my stops active in the market. (I should check if this works for or against me). If looking for a positive, depending on how you like to draw your support lines, it could now be sitting on support.


IMF - Wide spread down bar yesterday, but closed strongly. I'd have held. Another down bar today, but closed near it's high again. Not so bad considering the index was down today. I would still hold. The decision would be harder for me if I was an intraday trader, as it started the day above our entry and proceeded to move lower.

 

[peter2]

All decisions must be made in the best interests of the portfolio as a whole and must comply with your trading rules/guidelines. Applying these rules/guidelines consistently produces our profitable edge.

1. Keep our losses small is our most important rule. MYX is close to triggering it's sell for this portfolio. It may have been sold earlier after price closed below the 2.00 level. This portfolio will sell at 1.90.
2. Let winning trades get bigger than average. Both A2M(current TS at BE) and IMF (current stop is iSL) are winning trades, so, we'll let them go.

Moving our exit triggers too early and too close when there is no significant open profit to protect is a newbie mistake.

I agree of your comments related to those charts. My stops are always out of the market unless there's heaps of depth.

If the portfolio had needed the cash, the best time to cash in would have been the day before the news and take the news out of play. If we had applied this action to A2M, APE and BKL we would have saved heaps. It's an action worth researching over many reporting seasons.

 

[peter2]

EOW 78 update: ASX Momentum Portfolio +36.9% ( 91% invested in 6 trades )
Benchmark index SPAX2F15 (includes divs and franking credits) +0.8% (past 78wk)

78 weeks that's 18 months! This week the market slaps our hands just as we were thinking "gimmee, gimmee". The fall in our portfolio was entirely due to price "swoons" after scheduled news. No wonder I get wary during reporting season. The portfolio heat is our buffer. This week we lost a bit of that buffer. The market remains up, so no additional defence is required.

This weeks sells: APE, BKL (our biggest loss -1.5R)
This weeks buys: IMD, IMF-cfd

Outlook: We remain bullish but wary at this time of the year. The US election campaigning may provide a distraction to the familiar Sept/Oct dip.

 

[peter2]

Wow, eighteen months has gone by so fast. I hope this thread has helped a few of you in your trading journey.

I've been thinking about my reasons for continuing this thread? I've taken ~90% of the trades shown in this thread in my own accounts and banked the profits. I know I can trade ASX stocks profitably over a reasonable period. I knew that when I took over from Pavilion103, 18mths ago. So, why continue?

Well, it's profitable, but more importantly posting the weekly updates and the setup charts are now part of a profitable routine and this routine keeps me in touch with what's happening within the ASX market. If I stopped posting, would I be as diligent or as focussed? I'm not so sure. I'm like most people and become distracted by other aspects of trading (auto systems, US markets, options, futures, fx ...). Even living gets in the way of my trading sometimes. Missing rallies like I did in the gold sector earlier in the year (along with graphite, lithium and iron ore) are lost opportunities. I think the ASX market will remain challenging for quite some time (years) and it's important to get something from every small sector rally.

The profitable routine is a plus for continuing, but it's not enough. Maybe I should use this thread to challenge myself and push my comfort zones (risk tolerances). No, I don't mean trade low priced, low volume crap!

Well that's settled then, I'll continue but with a few personal challenges.

The first change is to state the end goal and that will be growing the starting balance of $50K to $100K.
Currently it's $68K, so another 50% has to be earned. At the current rate (135 trades in 18mths with an expectancy of 0.25) that's going to take another 200 trades over 27mths. Yikes, I'll be an old man unless we increase the trade frequency and improve the expectancy.

I think we can do both with a few modifications to our TP and BP.

 

[Lone Wolf]

Wow, eighteen months has gone by so fast. I hope this thread has helped a few of you in your trading journey.

I admit that my heart sank when I started reading this as I thought it was a game over post. My disappointment was soon replaced with a sense of excitement. I look forward to seeing the changes you make. And also what trade offs, if any, need to be made to portfolio heat and max draw down tolerance in order to chase the higher returns.

37% over 18 months, in challenging market conditions while keeping draw down in single digits. I think you've proven well enough what you can achieve playing safely.

 

[Newt]

Also overjoyed to hear you're not only continuing, but accepting more personal challenges Peter.
Inspiring and incredibly helpful stuff for those finding their way through the trading wilderness!

 

[Wysiwyg]

At the current rate (135 trades in 18mths with an expectancy of 0.25) that's going to take another 200 trades over 27mths. Yikes, I'll be an old man unless we increase the trade frequency and improve the expectancy.

Peter, what is your estimated average hold time per trade? Those lulls after a break out consume time. Time being the cost of holding to hit a winner.

 

[Wyatt]

Also overjoyed to hear you're continuing

Indeed we are incredibly fortunate to have someone of your skill sharing their art with any and all who are interested.

There are plenty of story tellers around the traps who speak of successful trading, but few, if any, take the time to not only openly show their method, but explain the finer details of trading and pitfalls to watch out for as it is happening without the benefit of hindsight, and without obvious personal gain. (We hope it helps your trading)

Especially considering your practical method which does not required sitting in front of a computer all day everyday, so it is realistic for the average punter to follow. No doubt a life of trading experience for all to see and enjoy.

They say to be successful in this game one must be open with little ego and Peter you are truly a giver, at the pointy end of the 5% of traders who apparently succeed. Life on ASF would be poorer without you, so do feel the following audience but without any pressure.

 

[peter2]

Wysiwyg: Average hold time = 22 calendar days, median = 14 days
10 trades > 50 days, 2 trades >100 days

Lone Wolf: I won't be increasing the cap risk or portfolio heat limits as our existing position sizing method uses the capital efficiently. I'll be a little more aggressive using the available risk.

For example: Recently we closed two trades and raised the TS higher on TPP. This reduces the cap risk to 2.2%, so rather than waiting around for another BO, find another setup and use the 3% risk that is available now. There are opportunities every day and our market risk filter low (= XAO trend UP). I could have started two or three trades this arvo, but they wouldn't have been BO's and would not have complied with our current TP.

There's no rush. I'll outline the TP and then we'll be right into it.

Have thought what the initials BP stands for? Knowing that should get you excited. I know I am.

 

[Wysiwyg]

Indeed we are incredibly fortunate to have someone of your skill sharing their art with any and all who are interested.

There are plenty of story tellers around the traps who speak of successful trading, but few, if any, take the time to not only openly show their method, but explain the finer details of trading and pitfalls to watch out for as it is happening without the benefit of hindsight, and without obvious personal gain. (We hope it helps your trading)

Especially considering your practical method which does not required sitting in front of a computer all day everyday, so it is realistic for the average punter to follow. No doubt a life of trading experience for all to see and enjoy.

They say to be successful in this game one must be open with little ego and Peter you are truly a giver, at the pointy end of the 5% of traders who apparently succeed. Life on ASF would be poorer without you, so do feel the following audience but without any pressure.

I can't find anywhere here the initial stop loss, raised stop loss and take profit plan. Can you point me in the right direction so I can turn a price breakout into a successful strategy?

 

[Boggo]

I can't find anywhere here the initial stop loss, raised stop loss and take profit plan. Can you point me in the right direction so I can turn a price breakout into a successful strategy?

Starting here may help you
https://www.aussiestockforums.com/f...=29971&page=19&p=899858&viewfull=1#post899858

 

[peter2]

Wysiwyg: I stated at the beginning that the trading style to be used in this thread is discretionary. The TP is structured, rule based but still allows some discretionary application of these rules/guidelines.

The iSL is always placed below the last higher swing low (daily chart).
The trailing exit trigger is only moved higher once profits get above +1R. The exit stops are not in the market.
Taking profits is the most discretionary aspect of all. Our main aim is to allow price to go higher, but there are occasions when taking what we've got is appropriate (eg. when the XAO falls). As well as rules/guidelines for the individual trades we have guidelines for the portfolio has a whole, mainly defense when the general market falls.

 

[peter2]

The following modifications to our TP are designed to increase the frequency of our trades and to improve our edge (expectancy). The biggest modification will be to our entry technique. I love break-outs, as you know, but I want to get in earlier and in many charts there are earlier opportunities before the obvious BO level is hit.

If you've followed the thread then you'll be aware that chart break-outs happen in batches. At times there will be plenty (too many to use) and at other times we have to wait for them to form. When the obviously trending stocks pause (go sideways) money is flowing into other sectors lifting them off support levels. We're missing out on those that are moving up while waiting for our preferred setup. [Note: Inexperienced traders should wait for their preferred setups and only trade perfect examples. Trading too many types of setups means they won't master any one type. eg. If you haven't traded BO's only for a reasonable period then you wouldn't know that they form in batches.]

I'm pushing my boundaries a little with these new modifications to the setups and because there are always plenty of opportunities all the time our portfolio should always be near the capital risk limit (5 trades at 1% each). Many of our new entries can be described as pull-back setups, channel setups or reversals. We'll still trade break-outs though.

Plenty of opportunities won't mean more trades unless the trade duration is shorter. Pull-back and channel setups have obvious targets (prior highs). We are going to sell at these targets provided the RR is big enough. We'll let the trending stocks go higher and grab more frequent profits from the pull-back and channel setups.

 

[skc]

Wow, eighteen months has gone by so fast. I hope this thread has helped a few of you in your trading journey.

Well that's settled then, I'll continue but with a few personal challenges.

Good on you Peter. Well done.

The first change is to state the end goal and that will be growing the starting balance of $50K to $100K.
Currently it's $68K, so another 50% has to be earned. At the current rate (135 trades in 18mths with an expectancy of 0.25) that's going to take another 200 trades over 27mths. Yikes, I'll be an old man unless we increase the trade frequency and improve the expectancy.

I think we can do both with a few modifications to our TP and BP.

May I offer you some suggestions as well to juice up the returns.

1. Look for short set ups. You can have a set of positions such that you are close to 130% long / 30% short. You get to put on more trades with some hedge against market beta.

2. Increase your risk per trade. Your drawdown is really well controlled so you can afford to loosen that a bit.

3. Avoid scheduled reports, but buy price jumps after reporting. You'd dodge some bullets while ride some fundamentally backed trends.

 

[peter2]

skc: Thank-you once again. This makes me feel good about the community when experienced traders take the time to post suggestions. Another recent example is Captain Black's posts in Modest's thread.

1. Include shorts and hedge market beta. Yes, this would be a personal challenge to implement and well worth pursuing as we'll be using cfds for leverage.

2. Increase risk per trade. Dangerous for a newbie, but once you've established a reliable record you can push a little. Our AL is only 0.6R in this thread. That's as good as it gets (imo) without wrecking the W%.

3. Good advice for reporting seasons.