ASX Momentum Trade Book - Part 2

[myrtie100]

Hi Peter

It looks like DMP might be a good contender.
It has gapped above horizontal resistance and above MA200, after a couple of weeks trading in a tight range.
It also had a good run up to this resting point.
The RR looks decent.
I know this stock is well shorted, which could help with the momentum - up or down!
What do you reckon?

 

[peter2]

I agree with all your observations. There was a low sized risk setup there.

 

[peter2]

Update: The closure of the JHC* trade today at our profit target (2.26, +1.1R) marks the fact that we've completed 200 trades in this thread. Two hundred trades from entry to exit on a public forum, that's got to be rare.

Another profitable batch of 20 trades (our 2nd best). We haven't had a losing batch yet. You can compare the results from each batch in the table. The best value to use for the comparision is the total R units as compounding is increasing the dollar values.

I post this table to show that the results are up and down. Our edge is 0.268, so over 20T we should win 5.36R. There's no month within 1R of this average**. The results are either under or well over. You might say that we're either lucky or not, but I prefer to think of it as "in sync" with the market or not. Whenever we're not in sync we must do something to get in sync. Trade diversification also helps us avoid losing too much when we're out of sync.

Being in and out of sync with the market probably applies more to short term traders as we chase what's moving at the time. It's important that we're not too late to the swing up. I've noticed that my weekly portfolios can remain sideways for several months then suddenly increase in value as the demand returns to them. I remember that craft's portfolio (longer term investor) remained in a sideways band for years before going higher and higher. The longer you plan on holding your trades the more patience you must have (know yourself).

After every good batch it seems that we have a poor batch. Hmm. Well, we're warned.



* JHC probably closed prematurely just to complete the 200.
** Averages are so misleading yet they're commonly used to spruik performances.

 

[debtfree]

Two hundred trades from entry to exit on a public forum, that's got to be rare.

An outstanding effort Peter, congratulations and a BIG Thank You.

Cheers ... Debtfree

 

[willy1111]

Update: The closure of the JHC* trade today at our profit target (2.26, +1.1R) marks the fact that we've completed 200 trades in this thread. Two hundred trades from entry to exit on a public forum, that's got to be rare.

Another profitable batch of 20 trades (our 2nd best). We haven't had a losing batch yet. You can compare the results from each batch in the table. The best value to use for the comparision is the total R units as compounding is increasing the dollar values.

I post this table to show that the results are up and down. Our edge is 0.268, so over 20T we should win 5.36R. There's no month within 1R of this average**. The results are either under or well over. You might say that we're either lucky or not, but I prefer to think of it as "in sync" with the market or not. Whenever we're not in sync we must do something to get in sync. Trade diversification also helps us avoid losing too much when we're out of sync.

Being in and out of sync with the market probably applies more to short term traders as we chase what's moving at the time. It's important that we're not too late to the swing up. I've noticed that my weekly portfolios can remain sideways for several months then suddenly increase in value as the demand returns to them. I remember that craft's portfolio (longer term investor) remained in a sideways band for years before going higher and higher. The longer you plan on holding your trades the more patience you must have (know yourself).

After every good batch it seems that we have a poor batch. Hmm. Well, we're warned.

View attachment 71064

* JHC probably closed prematurely just to complete the 200.
** Averages are so misleading yet they're commonly used to spruik performances.

Well done Peter, especially on your willingness and consistency to share.

I enjoy following your journey.

 

[peter2]

Trading update: Closing our two cfd trades as the market seems very weak today. Prices on our trades rose initially then sold off to go below their opening prices.

CIM-cfd: Closed at 40.04 for a +2.3R result. I'd raised the TS to 39.90, but may as we'll exit now.

MMS-cfd: Closed at 13.65 for a tiny loss (BE). Traded above 14.00, but couldn't stay above.
14.00 is the logical re-entry level. Perhaps next week.

HSN: May have placed the iSL too close on this one. Two down days and price is close to it.
We may exit this one later this afternoon if price trades below 3.50.

 

[peter2]

Don't you just love it when this happens at the end of the day.


Of course I've paid full brokerage as well.

 

[debtfree]

Those 3.59pm orders don't always come off Peter

 

[Triathlete]

I feel your pain Peter...Happens to the best of us...

 

[peter2]

EOW 115 update: ASX Momentum Portfolio +66.7% ( 45% invested in 3 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +9.9% (past 115 wks)

This weeks sells: JBH(-0.9R), CDD (+1R), JHC (+1R), CIM-cfd (+2.3R), MMS-cfd (BE)
This weeks buys: ORE, BAL, HSN

The closures of JHC (just lucky), CIM and MMS were defensive as the market fell at the EOW.

The market ended up about the same as it started this week. The budget bank blues where offset by rises in healthcare and the soaring XNJ (industrials). Our good recent run looks to be at an end with the close of the CIM trade. It's been a good three weeks for this portfolio (and the weekly one, although I'm still sucking lemons after the CSR price plunge). We cashed +11.5R over the last three weeks and ended on another equity high.

The lesson after our good run is to keep going no matter what the results are or how we're feeling. In March we had 10/11 losing trades (total -5.7R). We kept on going, putting aside our frustrations and now we've completed 13/15 winning trades. (total +16R).

Outlook: WU DD. There's not much room before our weekly turns down also. If the XAO closes <5800 that would do it for me. Once again we're prepared for any downturn, should it happen. We have a small amount at risk (2.6%).

 

[peter2]

I've received a few likes in this thread recently from new members. Thank-you for that. I appreciate being "liked" and get a warm fuzzy feeling seeing them pop up when I log in. This post is for those newer members. (Although I think you should still read the 22 pages from the first thread and the 46 pages of this one. )

Summary of the trading activities started in Pavilion103's LIVE thread and continued here.

Aim: To demonstrate the real-time application of a trading plan (TP) in the ASX market. The reason was primarily educational for you and therapeutic for me.

Goal: To grow an account starting with $50K AUD by trading short term price swings (price momentum). There was no initial performance target set other than a strong desire to avoid a 10% draw down (DD) of capital at any time for the duration of the thread. After two years (+50%, CAR 22%, max DD -7%), a target of +100% was announced to mark the end of this contribution.

Trading style: A rule based discretionary trading style was outlined to try to take advantage of potential upward price swings. The TP was based primarily on the formation of patterns seen in a price chart. The main discretionary aspects were the selection of the stocks to trade, the amount of portfolio heat (total downside exposure) and occasionally some trade closures.

Trading Activities:

TP1: Long ASX equities and ASX equity cfds (trading both trend and momentum swings)

TP1 (turbo): Long ASX equities and ASX equity cfds. (Trading price swings only)
Similar to TP1, but with smaller initial risk sizes, quicker exits and profit targets.

TP2: Short ASX equities. In the planning stage and may be implemented if required (in a falling market) to help reach the final target.

TP3: Trading other world markets using leveraged products (futures, forex, cfds).
Trading activity is journalled in another thread. Results from this activity is shown on the ASX chart but will not be included towards the final target.

 

[peter2]

The basics of TP1

This TP primarily trades price break-outs anticipating a continuation of the move higher.

Setups:
Break-out of horizontal resistance (BO-HR). Our best setup especially if there's a higher low (HL) before the break-out (BO).
Break-out to a new High (BO-NH). Second best setup and our opportunity to join an established trend.
Pull-backs: Anticipates the end of a corrective price fall and resumption of an established larger time-frame (weekly) trend up.
Reversals: Found at the end of a down trend and generally entered using either of the two BO setups mentioned first.

Position Sizing: Fixed Fractional Percentage method used. The number of shares to buy is calculated by dividing 1% of the starting capital +/- realised profits/losses by the size of the initial risk. (TR = 1%)

Portfolio Heat (total downside exposure of the portfolio if all trades were closed at their current exit triggers) :
This amount is limited to 10% (desired max DD) and is controlled by a discretionary evaluation of a market risk filter (which is based on the weekly/daily trend of the XAO index).

Trade Management:
Initial Stop Loss (iSL): Mandatory exit and compulsory for all trades.
Trailing Stop (TS) or Trailing exit trigger:
Used to protect above average profits (> 1.5R) or to reduce heat (downside exposure) in response to a downgrade of the market risk filter.
Profit Target: Exit at logical and acceptable Reward/Risk (RR) chart based targets.
Discretionary Exit: Exit used after atypical price spikes (both up and down).

Portfolio Management:
The market risk filter changes to bearish (close losing trades, reduce heat level, protect profits)
The market risk filter changes to bullish (start more trades, increase heat level, don't tighten TSs too soon)

These are educational items to help you create and organise your own TPs. Please ask if you have any questions or want additional suggestions. If I don't have any, other members will.

 

[Wyatt]

Goal: After two years (+50%, CAR 22%, max DD -7%), a target of +100% was announced to mark the end of this contribution.

Peter, you continue to deliver uncommon logic in your momentum thread. In your trading, you are an emotionless, totally disciplined machine, yet philanthropic in your view towards other wannabe traders/temporarily interested passerbys.

One can listen to the many podcast on successful traders and get basic overall concepts to pursue, but there is a disconnect from theory to practice. We are very privileged here to get the granularity in the many aspects of what it actually takes to be profitable in the real world of trading. You too Tech/a.

Thank You

 

[myrtie100]

Wyatt, I second that!
I have learnt so much from these two selfless guys.
They are both invaluable to this forum and anyone wanting to improve their trading.
Thank you both from the bottom of my heart x

 

[SuperGlue]

Hi Peter,
Appreciate all that you have done.

With your approval of course.

May I suggest that Joe make a copy of post #911 and #912 and add to the start of this thread.
Else info will just disappear in the thick jungle of postings.

It took me quite a while to find what some of the abbreviations mean and will be very helpful to the newbies too.

 

[peter2]

Trading update: New trade, actually a re-entry.

MMS: Bought at 14.10 when price traded there for the second time late today (iSL 13.50).
Yesterday's price bar was bullish, but I wanted to see if 14.00 held and placed the "hoop" at 14.10. This is not a turbo or cfd trade so we can place the iSL below recent daily support.

 

[peter2]

Review of HSN trade that was closed soon after it was started.

Context: Price had bounced off weekly support level (3.10), has made a HL, gone higher and closed >3.50. I thought the setup and entry are OK.
BUT looking at a larger chart NOW I notice a resistance line at 3.60, very close to our entry. Not good Peter.

I was concerned that the recent move could be a corrective one after the impulsive move down to support. That would be confirmed by price going below the rising support line (pink dashed line).

The selected iSL level was 3.50. I think this level is more suited to a trade that is expected to go higher immediately. It didn't leave any room for price to test the prior BO level of 3.50. It didn't leave any room for price to test the rising support level.

This setup should have been categorised as a reversal setup and given more room (iSL at 3.40 - 3.45).

Summary: The iSL was too close to recent price action and I failed to notice overhead resistance before the entry. Cost of these errors (-1R).

 

[peter2]

Trading update: New trade.

About time for a trade in a gold stock given the unstable political environment atm. Gold has been going up for a few days already, so we're a bit late. I rarely trade gold stocks as it's much easier/quicker/practical to trade the gold price. I'm not familiar with the FA details about the ASX gold companies (costs, hedging) so I'm relying on the charts to indicate the best opportunity.

SBM: Bought today's BO-NH at 3.00, iSL at 2.75.

 

[peter2]

EOW 116 update: ASX Momentum Portfolio +62.9% ( 45% invested in 3 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +8.3% (past 116 wks)

Note: If the divs and franking credits account for 4% pa, then the benchmark index is at the same value it was over two years ago. That's a flat market.

This weeks sells: HSN(-0.9R), BAL (-1R)
This weeks buys: MMS, SBM

The market fell 1.4% this week due to the banks. Our portfolio closed two losers and our open trades are also losing. Break-out opportunities are not forming during this selloff. We have to wait for the market to start rising again.

Outlook: WD DD. The falling market turned our market filter fully down (both daily and weekly trends are down). This is our signal to close losing trades, reduce heat and protect our portfolio. We're ahead of the market and we can be patient now.

US politics and our budget bank levy has spooked the flighty insto traders. I look for pull-back and reversal opportunities during these dips as I expect the market to rally back to the old highs near 6000. I'm not interested in charts with new lows. I prefer charts where price has fallen to the prior BO level. There was demand at that level before and I anticipate demand to appear there again when sentiment turns more bullish. We want to ride any rally back to the recent highs when it resumes.

 

[peter2]

Trading update: New trade

FLT-cfd: Noticed micro-pattern (ascending triangle) last night. FLT has been moving higher while the index moved lower. So, there's plenty of demand for FLT.
Bought today's open (limit order 37.10) at 37.00. iSL placed at 35.9.
We're late into this swing up and we'll treat it as a turbo trade with a tight iSL (<36.00). We want price to continue higher immediately and we'll place a limit sell order above our +1.5R level. We've used a cfd as this trade won't last long and it uses less cash.

I find taking these trades (knowing I'm late into the swing) hard, but the market can always surprise me.