ASX Momentum Trade Book - Part 2

[peter2]

Trading update:

Our XAO index is looking bullish with the daily trend clearly up. The weekly trend remains down but it's close to changing. A strong close >5500 would satisfy me. I can also place a clear trigger line at 5350 that marks the bullish/bearish trigger.

This indicates that it's time for us to start more trades as we've only got a capital risk of 1% and total heat of 2.5%. We should start at least two trades soon.

Scanning the charts using the 10d BO scan, 1st blue bar scan and reviewing the watch lists that I maintain each weekend. I'll even check out tech/a charts to see if he has something we can use.



ps: I hope you can understand the process. Our portfolio heat has been low due to the uncertain conditions. Now the conditions look better (according to our market risk filter), we should start more trades.

 

[peter2]

Trading update: New trade.

GXY: Bought today's BO at 0.380, iSL placed at 0.33.
This chart is appearing more bullish with the higher lows and the moving averages turning green.
I also notice other Li stocks have bullish bars.

 

[peter2]

Trading update: New trade

CIM-cfd: Bid 30.90 at open, bought at 30.84. iSL placed at 29.50.
A similar chart to GXY, so I'm biased. Price looks like its busting to go higher and this pattern provides an acceptable RR.

I've used cfds in this trade hoping that it's a quickie (<10d) to conserve cash for other trades.

 

[peter2]

mea culpa: Didn't place a bid for ALC this morning as I bid for others and watched their opening auctions.

This is one of tech/a charts that I liked. Cheers to the duck.

I've another trade at the close (if I can get set).

 

[peter2]

Trading update: New trade

IBG: Bought earlier today at 0.096, iSL is 0.085.

If we don't buy the initial BO-HR, then our next best entry is after the first test of that BO level. This chart shows our preferred setup, the BO-HR. Then there is a small retest of that level and the additional demand has pushed the price back to a new high. This new setup is a BO-NH and we can place our initial SL below the higher low.

There are a number of charts showing this first consolidation pattern,which is a reasonable RR setup for us to use as an entry into the new trend.

 

[peter2]

EOW 91 update: ASX Momentum Portfolio +38.7% ( 91% invested in 6 trades )
Benchmark index: SPAX2F15 (Incl. divs and f credits) +2.0% (past 91wk)

A rather bullish week for the ASX, rising 2.6%. Our portfolio maintained it's value but did not rise with the market. The index went higher due to demand for the banks and the large cap BHP and RIO. We attempted to get into that demand for the large caps with our trade in CIM, but it appears we'll have to be patient. This bullish sentiment will flow through to the medium/small caps eventually.

This weeks sells: nil
This weeks buys: GXY, CIM, IBG

Outlook: The close >5500 (XAO) is bullish and I anticipate that the bullish sentiment will flow through to the medium/small caps and our portfolio soon. This portfolio has demonstrated a good defence when it was indicated, now we must show a quick offence when conditions turn bullish. Our capital risk is 3.6% (limit of 5%) and there is ample cash for a couple more trades.

 

[peter2]

About five weeks ago I posted five charts that showed bullish setups that were consistent with a previously posted weekly TP.
(Sorry, these posts were placed on a customer only forum and won't be reproduced here.)

These five trades that I used for demo purposes have progressed in such a way that they now perfectly represent the fact that trading/investing is an exercise in probability. The current position of these five trades show an average distribution of expected results. Overall these five trades show a profit (+0.8R). Individually they're a mixed bag. We see a couple of winning trades, a couple of break-even trades and one losing trade.



It's hard developing a mindset that accepts and allows us to act in a probabilistic environment like the financial markets. We spend too much time trying to find the next winning trade, rather than an opportunity where the probability seems to be in our favour.

IMO equity traders don't do enough trades to create the correct probabilistic mindset. Even in this thread we're only doing three trades per fortnight. That's not enough to stop us obsessing over each buying opportunity. Medium and longer term traders/investors do much less.

I need to constantly remind myself and you that;
1. Anything can happen after we buy.
2. We don't need to know what is going to happen next in order to make money.

[Classic reference: Mark Douglas - Trading in the Zone]

That's why we've started three trades this week and will start another two next week. I know that we'll pick a loser, a couple of break-evens and maybe a couple of winners that will help our portfolio grow.

 

[lindsayf]

Good stuff P
So very the case

 

[Trendnomics]

IMO equity traders don't do enough trades to create the correct probabilistic mindset. Even in this thread we're only doing three trades per fortnight. That's not enough to stop us obsessing over each buying opportunity. Medium and longer term traders/investors do much less.

I need to constantly remind myself and you that;
1. Anything can happen after we buy.
2. We don't need to know what is going to happen next in order to make money.

I fully agree. Hence, the reason why I don't apply an index filter to my trading and why my primary objective is to remain fully invested (as permitted by the available trends).

 

[peter2]

Trading update: New trade.

DTL: Bought today's BO-NH at 1.72, iSL 1.60.
I like the latest BO of the small consolidation so soon after the BO-HR.
Caution: Low volume and thin MD.

 

[peter2]

Portfolio risk management:

After starting the latest trade (DTL) our portfolio capital risk is 4.7% (limit 5%).

This risk limit is to prevent us from starting too many trades at the same time. The reason is that we don't know what's going to happen next and we're trying to prevent a large draw down. We have enough cash for another trade and our market filter is bullish so how can we start another when we're close to our limit.

The answer is simple, reduce the open risk by raising some exit stops. If none of our open trades have improved then of course we won't be able to reduce the risk.

WBA: Today's price spike up is bullish so we can raise our TS to 1.18. (reduces cap risk by 0.5%)
GXY: Price went higher today and we can raise our exit stop to 0.35. (reduces cap risk by 0.3%)

These minor adjustments lower the cap risk number to 3.9% and allow us to start another trade.

Just to be clear. We're not raising the exit stops to start another trade. We're raising these TS's as prices rise to lower the initial risk of each trade. Good risk management of each trade allows us to safely establish our portfolio.

 

[jjbinks]

Portfolio risk management:


Just to be clear. We're not raising the exit stops to start another trade. We're raising these TS's as prices rise to lower the initial risk of each trade. Good risk management of each trade allows us to safely establish our portfolio.

But by lowering the initial risk you total capital risk goes down so you coud make an additional trade if desired right?

 

[peter2]

Yes if we altered our initial risk per trade to 0.5%, then we could start two, instead of 1 x 1%.

Varying the trade risk is not a good idea. It assumes that we know which trade will work out well from those that don't.

A medium/longer term trader may divide an amount to be risked across a sector or commodity to increase probability of getting into the better/best trade in that sector.

Remember that these sorts of variations in risk management are designed to reduce DD when the normal DD for the strategy is too much to handle. If you can tolerate 20-25% DD then manage the trend trading strategy with weekly charts or wider exit stops (like trendnomics does in his thread) to get most of the medium term moves.

 

[debtfree]

Hi Peter,

Were you tempted to lock in profits of 4R on WBA when it hit 1.415 or was there not enough volume?

Sorry about being missing of late but still following for sure.

Cheers ... Debtfree

 

[peter2]

Trading update: a few trades need to be managed.

WBA: Our +4R target is a little higher to account for brokerage ($30rt). Price came close until a little supply hit the market forcing prices to fall back to our +3R price. This trade in WBA was closed with an average price of 1.37 (+3R).

Note: WBA was one of the few reversal setups that we have traded. We bought as price moved off a higher low on the weekly chart. This was not a BO setup even though we found it with a 10d BO scan, but rather a buy off support. We had to be patient and wait a month for further significant demand to appear.

The main reason for buying into possible reversals is the opportunity to get a better than average winning trade. When WBA closed at 1.35 yesterday this was higher than our +2R target and a little higher than the July16 high. A +2R result is above average, but we waited one more day (today) to see what happened. Getting +3R for this trade meets our aim for a better than average result from this reversal setup.

[I've not sold closed my medium term trade in WBA as the latest demand is an indicator that higher prices are probable. This maybe sooner or much later. Who knows.]

Steel and it's related commodity prices fell overnight. This created a little panic selling from the short term momentum traders today.

NSL: We'll sell at tomorrow's open which should be close to our entry price.
IBG: Looked like we were going to hit +2R quickly, but not to be. We'll sell at tomorrow's open which should be close to our entry price.

BSE: Moving our exit trigger up to 0.19. If 0.20 isn't support, we'll sell.
CIM-cfd: Our exit trigger remains below the bar before the gap (30.50).
DTL: Looks like this BO has failed immediately. Give this another day for demand to reappear as price is above our iSL and the last BO-HR. This always gets tricky when the MD is as low as it is in DTL now.

These trade managements are due to the individual price movements rather than any concerns about the market. Our market filter remains bullish, WU DU.

[Now I must collate the EOM yearly comp details. Only one month left. ]

 

[kid hustlr]

I find the comparisons between this thread the VOC thread very interesting. I honestly think both side will make money in the end and I really respect the (good) fundamental guys on this site but boy oh boy the risk management in this thread is really highlighted.

 

[tech/a]

I find the comparisons between this thread the VOC thread very interesting. I honestly think both side will make money in the end and I really respect the (good) fundamental guys on this site but boy oh boy the risk management in this thread is really highlighted.

As with any business/financial opportunity.

I've never seen risk management in any business areana explained and implemented in
As much detail as here.
A great deal can be taken from Peters lead --- in many areas.

 

[Boggo]

Trading update: a few trades need to be managed.

And there is the clue, trade management.

I find the comparisons between this thread the VOC thread very interesting. I honestly think both side will make money in the end and I really respect the (good) fundamental guys on this site but boy oh boy the risk management in this thread is really highlighted.

As with any business/financial opportunity.

I've never seen risk management in any business areana explained and implemented in
As much detail as here.
A great deal can be taken from Peters lead --- in many areas.

Excellent thread and excellent results as a result of dealing directly with and managing reality rather than pages of theory.

Hat off to you Peter2.

 

[tech/a]

And there is the clue, trade management.





Excellent thread and excellent results as a result of dealing directly with and managing reality rather than pages of theory.

Hat off to you Peter2.

Even so you can't manage your way out of a flawed trading plan.

 

[peter2]

EOW 92 update: ASX Momentum Portfolio +43.3% ( 59% invested in 4 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +0.8% (past 92wk)

The index lost 1% this week while our portfolio increased by 4.6% and hit a new EOW equity high. :dance:
If you're wondering how that happened. It even surprised me. It seems our trade and portfolio management is having a good period at the moment. WBA bounced off it lows and we grabbed the 3R profit. Ka-ching. We closed our trades in NSL and IBG for small profits as their prices dropped. GXY rose faster than DTL fell while our other trades held on. The portfolio had more winners than losers this week.

This weeks sells: WBA (+3R), NSL (+0.3R), IBG (+0.1R)
This weeks buys: DTL

New equity highs are worth celebrating as all portfolios spend most of their time in a draw down. This last DD has taken 10 weeks to overcome. Our longest DD lasted 33 weeks.

Outlook: Our market filter remains bullish. Our cap risk is low (only 1.2%) and indicates that we should start a few more trades next week.