ASX Momentum Trade Book - Part 2

[peter2]

The ASX charts that I like atm are a few banks, CSL and WES. All higher priced stocks that require more outlay to get a reasonable reward.

I posted the quoted comment after noticing quite a few attractive trend continuation setups in the higher priced stocks (MQG, ANZ, NAB, WBC, WES, PPT, CSL). I like it when a lot of them form simultaneously as it shows the demand for the market leaders is strong. However we need more capital to trade these high priced stocks unless we use cfds. We're cleared to use cfds in this thread and we've done so before. The problem for us with all these setups is that the position size that we would have to buy to risk 1% would be well above our self imposed limit of 20%.

eg The position size for the WES setup would have been 40% of our current capital. The size limit is there for a reason and we must not ignore it even though the setups look good.

I posted the WES chart to see if anyone would ask about it (no), as evidence of my quoted statement and as I took it for myself. (Another movie quote: "You keep what you kill", Chronicles of Riddick.)

 

[grah33]

Hi Peter
i've noticed you report better results with the weekly trading system. is that really true, or maybe you mean better R/Trade, but not more money? if it's more money or similar money, than i should have done it as well, but for now i'll just stick to daily (can't jump around everywhere)

been following along from time to time. find it interesting that you don't seem to pick setups which are backed up by a higher weekly timeframe (as they say, trade with the higher timeframe aligned) , so that's interesting to me. you're very flexible in your choices, but if it makes money than it's gotta be right.

cheers
grah

 

[peter2]

EOW 106 update: ASX Momentum Portfolio +45.9% ( 65% invested in 5 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +8.0*% (past 106 wks)

* The SPAX2F15 website hasn't published the index data for a few days. Very slack.

This weeks sells: GNG (-1R), HZN (-0.6R)
This weeks buys: SFI, DCC, FPH, AMP

Our portfolio continues to drift lower as we close out recent trades for losses. I wrote that last week.
We're definitely "out of sync with the market index. Let's see if the recent trades help us. It's too late to turn to "pot" as that sector went for a dash last week. Taking BOs will get us going again soon.

Outlook: We remain bullish as the index pauses. The banks(XFJ) are near new highs and that is promising for the market.

 

[Boggo]

I was a bit slower than you on exiting HZN, in at .056 on the weekly and out at .058 on the daily.
Not how I normally do it but with the eviction from the All Ords selling pressure took over.

 

[peter2]

If we follow our rules it's a good trade regardless of the result. (We know that).

No follow through after the break-out was a big red-flag. I closed the daily HZN trade the next day after price touched our exit trigger (although it didn't close below it). I also saw the big overnight fall in the oil price.

I hate sideways markets. They tempt me to keep having a go, but then disappoint.

 

[peter2]

EOW 107 update: ASX Momentum Portfolio +46.2% ( 65% invested in 5 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +8.5*% (past 107 wks)

* An estimate, as the SPAX2F15 website hasn't published the index data for more than a week. I mentioned it to them but their auto reply bot said it doesn't care.

This weeks sells: nil
This weeks buys: nil

Our portfolio continues to drift with the market. We've been able to raise a few exit stops, thus reducing the portfolio heat. We've got enough cash (10K) to start one or two new trades if the opportunities are perfect.

Outlook: The market risk remains bullish.

 

[Hocky27]

Hi Peter,

I'm still half way through this thread but just wanted to say thanks for your contribution in this and Pavs old thread. Trying to learn how to trade is not straight forward and you can spend hours reading to realise you haven't learnt much.

You're willingness to be open and transparent in all of this has been incredibly educational and rewarding.

Thank you.

 

[peter2]

Trading update: New trade and an exit triggered on another.

CDA: Exit triggered with the close <2.15. We'll try to sell this at 2.15.

CDD: Bought today's BO at 1.20, iSL at 1.10.
We may get some resistance/supply at the recent highs (1.25). I was swayed by the huge volume traded over the past two days and the low sized risk.

 

[peter2]

Trading update: Our market risk indicator has gone from Wkly UP, Daily UP (bullish) to WU Daily DOWN (cautiously bullish). There is only another 100pts before the indicator changes to bearish (WD DD) due to the index going sideways over the past 3 months.



With this change, our TP states that we reduce portfolio heat.
1. Close losing trades (unless they're new)
2. Raise exit stops to BE and above to protect profits.
3. Take profits (or sell 1/2) if they're substantial (>+1.5R).

Our current portfolio does have a few losers and unfortunately no big winners.

SFI: Closed for -0.6R, AMP closed for -0.9R and FPH closed at BE.

This leaves us with DCC, a small cap that won't be influenced by the general market conditions and CDD which is a new trade.

 

[peter2]

Comment: I hope this doesn't seem like it's a panic response to a large down day. It isn't. We're responding to a change in our market risk filter that governs our portfolio heat. This action in turn reduces our draw downs and hopefully keeps them with in our risk tolerances.

This change will reduce the number of daily trades in my portfolio. It's really quite enlightening to get rid of those losers that have been hanging around for a while. There's no action required in our weekly portfolio as it's not the EOW.

Should we be considering shorts? I ran my short scan and 17 possibilities appeared. There are a few nice looking opportunities (BLD, JHX) but I'm not comfortable taking shorts on individual stocks. I'll be monitoring the indicies (SPI, ES) for a low sized risk short setup.

I should mention that since we're in a bullish market (especially the US markets) that this dip might be a good time to consider adding to existing positions. I keep a watch list of charts to consider buying when the market dips. I've been able to buy dips and take profits a few times on strongly trending stocks like ALL, CGF and the ETF GEAR.

It's this bullish bias to consider buying the dips that makes it harder for me to consider shorting stocks.

 

[skc]

Should we be considering shorts? I ran my short scan and 17 possibilities appeared. There are a few nice looking opportunities (BLD, JHX) but I'm not comfortable taking shorts on individual stocks. I'll be monitoring the indicies (SPI, ES) for a low sized risk short setup.

It's this bullish bias to consider buying the dips that makes it harder for me to consider shorting stocks.

Peter, you are very close to the market so I think you can sense the themes (or context) out there like a seasoned trader could. Perhaps taking trades (and in particularly short trades given you find it harder to pull the trigger) that align with your feel with a chart that you would trade anyway... it might give you more conviction to take such trades?

With one bad night and we are talking about potential unwind of the Trump trade (at least partially)... JHX might be one that fits the bill. You try to sail with the wind but you are still trading the chart and manage your risk prudently. BSL might be another one on the break of $12...

 

[peter2]

I think you can sense the themes (or context) out there like a seasoned trader could. Perhaps taking trades (and in particularly short trades given you find it harder to pull the trigger) that align with your feel with a chart

Are you suggesting that I start a few shorts in order to become more comfortable with the action? Then after a while I'd be more comfortable handling the mix of long/shorts that I'd intuitively create a portfolio of both long and shorts that would be aligned with my view of the short term market direction.

This would provide more trades and reduce my requirement for long only trades and a rising market.

 

[debtfree]

I keep a watch list of charts to consider buying when the market dips.

Are you talking about potential pullback trades here Peter?

 

[peter2]

Yes debtfree, that's right. We have to watch the market fall, pause and then start to rise before buying pull-backs.

skc has suggested once more, to consider including some shorts to increase the number trades and to profit from both rises and falls in the market. I know he's right and I recognise the potential if it's done properly. I'm also aware that it's probable that we won't reach our end goal without a bull market or unless we make significant changes to our trading plans to profit when the market goes down as well as up.

Theoretically, the increased number of trades should also improve the month to month consistency and reduce the draw-downs provided the short system is profitable.

So, , that leaves me with some creative thinking, reorganising, planning, back-testing then writing another TP. I love it when a good plan comes together.

 

[peter2]

EOW 108 update: ASX Momentum Portfolio +43.8% ( 17% invested in 2 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +8.1% (past 108 wks)

This weeks sells: CDA (BE), SFI (-0.6R), AMP(-0.8R), FPH (BE)
This weeks buys: CDD

The mid week dip had us closing the losers and even though the fall in prices didn't continue we're glad to be out of losing trades. We could discuss the current losing sequence and draw down but we've managed this portfolio consistently so there's not a lot to discuss. Losing sequences will happen. Draw downs will happen. We've only two trades open (17% invested) so if the market does go down next week it won't bother us. If it goes up then hopefully we'll buy a BO that continues higher.

Outlook: The market risk remains cautiously bullish. We're still on the look out for perfect setups.

We'll find a few trades in the P2TB while we're waiting for the ASX to go either up or down. Our trading style is not suited to this sideways movement of the market.

 

[peter2]

Trading update: New trades in case our market continues higher.

ALL: Bought today's BO at 17.72. iSL 17.20.
This is a nice trend continuation setup although I know I'm very late into this strong weekly trend.

ILU: Bought today's BO at 7.25, iSL 6.85.
A typical trend continuation setup but it's location makes it more of a reversal setup. There's an acceptable RR target near 8.00.

Both of these trades will be managed with a minimum risk strategy. If price doesn't continues higher in the next two bars we'll look to exit.


.

 

[peter2]

Trading update: Another trade (our fourth) in AMP. Knowing the US market were UP overnight.

AMP-cfd: Bought on the open at 5.06, iSL 4.90.
This is another attempt at the BO-HR. We've previously had two wins and a loss (+1.5R, +0.2R, -0.8R)
Why AMP again? I like the rising OBV and TMF volume indicators. They indicate accumulation and I've been anticipating a sharp rally, at least to the prior highs.

 

[peter2]

EOW 109 update: ASX Momentum Portfolio +46.9% ( 95% invested in 5 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +10.2% (past 109 wks)

This weeks sells: nil
This weeks buys: ALL, ILU, AMP-cfd

The market quickly reversed after that 1% down day two weeks ago. That's volatility. It has us thinking about shorts* and goes up. We quickly bought a few break-outs and joined in the rally. I'm not a stock picker, that's why we bought three break-outs hoping that a couple of them would go higher with the market.

DCC: We've got stuck in this one as the bids dried up at our exit price. The exit has been triggered and we'll attempt to sell next week near our SL.

Outlook: Mildly bullish. (*) Our Short(ing) TP is a work in progress.

 

[peter2]

Mid-week update: This might be a little premature as the week hasn't ended. You're getting it as I'm feeling it.

As you know the portfolio has been going through a rough patch. Sorry, scratch that. The portfolio doesn't have feelings.

The portfolio manager has been feeling frustrated by the current rough patch. Our last equity high was back in the middle of Feb and since then we've had 10/11 losing trades for a total of -5.7R. We've kept our losers small (average -0.5R) but lots of small losses add up. Imagine how much worse we'd feel if we'd allowed the losses to get bigger by refusing to take the smaller ones.

Our response was to slow the frequency of trades and to quickly exit our losers when the market fell. The fall turned out to be only one day, but how could we have known that. The market immediately rallied higher and we quickly started trades in ALL, ILU and AMP hoping to catch the rally in the larger cap stocks that was fueling the rally.

This mid-week update is because the portfolio manager is feeling better (winning trades help a lot).

DCC: Managed to sell at our iSL (0.039) for a full loss (-1R). Our timing was a little early and I'll watch this one for another opportunity (maybe on a close >0.05).

Our current turbo trades were done to grab quick profits from the market rally and sell limts at T1 levels were placed in the market.
ALL: Opened above our sell limit and was filled yesterday at the open for a +1.1R result.
I'm happy to take that as I know we were late into this rally. Now that we've banked 1R we can raise the sell limits on the other trades (ILU, AMP) allowing them to get bigger. Grabbing the first 1R is like taking partial profits on a trade and letting the remainder get higher. The upward momentum in ILU has paused and AMP is still acting sluggish. We'll see if we can get +1.5R each on these. Exit triggers have been raised to BE on both.

CDD: Sold as price traded at our +2R price (1.42) today. No need to close my weekly trade in this one.

The outcome after this little bit of activity is that we've got heaps of cash, low portfolio heat and a bullish market. The astute among you will realise why I'm feeling better all of a sudden. We've cashed +3.1R and have our two open trades nearing +1R each (+5.1R total). How much did we lose in our "rough" patch? Hmm.

 

[peter2]

Lessons for those of you who are having difficulty making profits, keeping profits or just generally not doing it correctly.

1. We're all going to have rough patches. Get ready for them and don't let them take you out of the game, financially and psychologically (emotionally). Plan to trade less, risk less on each trade, but keep trading your plan.

2. Don't give up or start trading another strategy. Our strategy is to buy break-outs. We're not going to start trading reversals or use the "top secret skc" prop trading plan. We know that break-outs get us into those charts that are moving up. Just because our favourite sector (mid-caps) has stopped moving higher we don't abandon the strategy. If the break-outs are happening in the small caps or the large caps then we should be trading where the action is while the market is rising.

3. This portfolio is still in a draw-down. We're not out of our rough patch yet. Once we do get out (new equity high) we'll accept the high fives, but more importantly we'll enhance our experience and strengthen our confidence in ourselves and the TP.

If you abandon your TP in the rough patches then you won't experience the joy when you trade through them.

btw: The Top Secret SKC TP is available. For details click on @skc 's signature link.