ASX Momentum Trade Book - Part 2

[peter2]

Here's another one that got away. Price opened above my limit order and it's off and gone.
It didn't appear in yesterday's 10d BO scan because of the down day and price was below prior day's close. Noticed it last night and placed limit order that was treated with contempt by the other buyers.

There are always enough opportunities around to not worry about the ones that get away.


I won't fill the thread with the ones that got away. I only mention it as we recently discussed that this will happen when we use limit orders to enter our trades. Chasing price that opens 0.30 above our limit order changes the RR too much for me.

 

[debtfree]

One that might be of interest ready for BO-HR is MTR and a couple that just BO are SLC & TCH

 

[peter2]

MTR is in my BO soon watch list. I'm waiting for a close >3.10 as there's a box pattern forming.
SLC looks good. There's not enough volume for me.
TCH is undergoing a merger/takeover of AFY. I'll wait until things are settled before trading them.

 

[peter2]

Trading update: New trade

TPM: Bought today's BO-HR at 6.13, iSL 5.80.
This is a reversal with an acceptable target, even thought the target requires price to fill the gap first.

 

[peter2]

@hallph Thanks for the compliments. The most important skill to master is keeping losses small. It's easy to recover from small losses and keeps us in the game longer allowing us to gain experience and confidence.

You asked a question that I'm happy to post and reply to in the thread for others to read.

How do I know trading BO-HR and BO-NH is a profitable method?

I've always been a chart watcher rather than a company fundamentalist (my science background). Almost all charts show large movements in price that we call trends. The rewards are obvious if I could buy into them early and hold on to them. The task was to identify an event that happens near the start of all trends that I could scan for and use consistently.

Every trend has a moving average crossover near the start. I initially used the 10ema>30ema as an indicator. However the EMA XOR gives lots of useless signals when price is going sideways. It became an early warning indicator and I waited to buy the BO-HR or BO-NH.

When I finally accepted the responsibility for my trading decisions, I focused on buying BO-HR and BO-NH using Darvas box patterns (2007 bull market). Over the years I've realised that these setups work in all market conditions. Obviously they work best in markets that are going up, OK but frustrating in sideways markets and keep me out of falling markets as the number of opportunities fall as well.

The key was assembling a set of rules that I would use to take advantage of those trends. What you see in this thread is the real-time application of those rules/guidlines to create an overall profit in a manner that suits my tolerance for risk.

 

[peter2]

EOW 117 update: ASX Momentum Portfolio +61.4% ( 63% invested in 4 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +8.8% (past 117 wks)

This weeks sells: FLT(-0.9R)
This weeks buys: TPM

Our portfolio lost a little again this week as we closed another loser (FLT) and our open trades lost a little as well. It's time to be patient once more and wait for perfect setups.

Outlook: WD DD. Our market filter remains bearish in both the daily and weekly charts. It hasn't prevented us from starting a few trades hoping that our market will bounce from here. In stark contrast to our market the US markets are making record highs again.

[Meanwhile, the weekly portfolio is making us eat dust. ]

 

[grah33]

congrats on more great results peter. i didn't do too well. came in while things started ranging these last few months (trend following). lost about 8R (maybe even 9R max drawdown). i think i also aggressively launched my positions one after another to make the 5% up quickly , all at the wrong time. better do it gradually next time i guess (unless it's a bull market). don't know if this kind of drawdown is too big or not

 

[grah33]

it's recovered about 2R since, so that's good...later when i get more data, i might try opening up the trailing stop more using spacious swing points, then narrow in after say 2R or 3R profits are achieved. would be great to capture trends fully on the daily timeframe.
(hope i don't sound annoying to people out there...)

 

[peter2]

EOW 118 update: ASX Momentum Portfolio +61.2% ( 23% invested in 2 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +9.5% (past 118 wks)

This weeks sells: MMS (-0.4R), TPM (-0.6R)
This weeks buys: nil

The index has bounced off the recent 5730 level which is now strong resistance as it's been hit three times. Our portfolio takes another hit as two trades where closed for losses. This makes five consecutive losses as the market has fallen.

When times get tough, we become frustrated by our lack of progress and when we take few losses it's easy to postpone the weekend review. We'll do it later. This is a same inaction as not closing a trade that should be closed. This EOW review is an important part of our business. Ignoring it, is taking our eyes off the business. Would you leave your business unattended? This EOW review forces us to look at what's happened and make sure we're looking for the next opportunities.

Our recent losing trades:
HSN: We've already reviewed the incorrect iSL. A minor mistake that was exposed by a bearish market.
BAL: A volatile stock we're our re-entry failed. A normal loss.
FLT: Another stock with a iSL was placed too close in this bearish market. Do we re-enter on this 2nd BO-HR?
MMS: Another re-entry BO with a strong trend up, that has reversed.
TPM: A reversal BO-HR that has immediately failed to go higher.

The bearish market with it's normal increase in volatility has created this current losing sequence. Past losing sequences 7L, 9L, 5L, 5L, 6L, 6L, 10/11L, now another 5L.

Outlook: WD DD. Our market filter remains down, but the latest rally could change the daily trend if it continues next week. It's important that we trade perfect setups in stocks that have been showing strength, relative to the index.

 

[peter2]

I didn't want to increase the length of the EOW review, so I'll add a few more comments here.

The recent exits in MMS and TPM were closed before price hit the exit triggers. I do this when market conditions become bearish. I see no point in making the losses bigger while waiting for price to hit the exit triggers. I can always re-enter when prices rally.

MMS: Chart shows two down bars with the second one larger than normal. Clear rejection of the recent highs and our BO level. I use this exit strategy in the turbo TP and when protecting above average profits.

TPM: Exited after three down bars. Price immediately rejected the BO level (and our entry). It's important for a BO trader to be prepared for an immediate rejection of the BO. If after three bars price is not above the BO level, that's enough for an exit. A BO can fail in any market type.

SBM: The recent price volatility confirms why I don't trade gold stocks, preferring to trade the POG directly. The POG jumped after the US unemployment numbers were released so we'll see what happens to the price of SBM on Monday. There's no room to defend our entry in this trade. It'll be a full loss or a winner.

If you're having a frustrating time in the market you shouldn't ignore it. It's easy to take a rest, but if we do we'll miss the next rally and the opportunities it'll produce. The next rally might be the big one that takes the XAO through 6000. I'm not holding my breath waiting for this to happen btw.

Our last five losses were caused by the bearish market rather than too many mistakes. If you're trading poorly and making too many mistakes, then definitely take a rest and review what you've done.

 

[grah33]

thanks Peter. it's encouraging for me to see the losing streaks peter. it obviously happens.

 

[peter2]

EOW 119 update: ASX Momentum Portfolio +61.9% ( 23% invested in 2 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +7.4% (past 119 wks)

This weeks sells: nil
This weeks buys: nil

The market closed below 5730 last week keeping our market filter fully bearish. Our portfolio held it's value due to the low number of open trades. This short term long only system must get out of a bearish market to avoid losing more than we're comfortable losing. Our current DD is only -3% which is completely normal. If your risk tolerance is larger then you'll have had more trades during the last month and your results may be quite different (either better or worse). It's important to know your own risk tolerance and have a process (TP) to stay within your limits.

Outlook: WD DD. We're waiting for evidence of a rally in order to start more trades. I assume you're getting anxious to trade and the inactivity is wearing your patience thin. I've spent my time looking at other markets and researching ideas (*). I continue building watch lists that I monitor each day. I've also been doing non-market related activities as a mini break from the day to day work.

* - been learning more about volume by price charts to see if they could help my trading. I've a very good edge trading intraday nick reversals. It so happens that many of these setups occur at low volume levels. Could my edge be improved by including observations from VbP charts? I need to do the research to find out.

 

[Kryzz]

Does today's big up day change the outlook on your market filter at all Peter?

I've got ELD & FPH on the watchlist after some nice runs up of late:

 

[peter2]

@Kryzz Since you asked.
Today's up bar did close above 2 x ATR(21) from the prior low and turned the daily bar to blue. This changes the filter from WD DD to WD DU which is an indication to consider starting more trades. I'd like to see some follow through and continued demand for the banks. One up day doesn't change the recent down trend.

Yes I'm looking for perfect setups (BO-HR, bounces off support in a weekly up trend).

 

[peter2]

Trading update: New trade

ALU: Bought at open (8.84), iSL at 8.50.
Nice ascending triangle and possible BO-HR. Target just below 10.00 makes an acceptable RR.



Thanks to Kryzz for making me look through my charts.

 

[peter2]

Trading update: What is going on? I'm pleased to have only a small number of open trades in this market.

ORE: Sold this morning for break-even after two down days and a gap erased our profits that had taken one month to build. Our weekly trade will be closed if there's no late buying this afternoon. The weekly bar looks ugly.

SBM: Price is flipping around like a fish out of water.

ALQ: Placed buy limit (6.95) yesterday but the open traded above and we missed out or so I thought. Price opened much lower today (not XD) and we bought cheaper than yesterday. The iSL stays in it's place, making the trade risk a lot less.

 

[traderxxx]

Hi peter2
whats going on could be partly due to conract expiry
for spi today, market down 150 pts since late yesterday.

 

[peter2]

EOW 120 update: ASX Momentum Portfolio +61.3% ( 52% invested in 3 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +9.3% (past 120 wks)

This weeks sells: ORE (BE)
This weeks buys: ALU, ALQ

Our benchmark index rose 2% this week as the market bounced strongly early in the week. The bounce didn't help our two open trades (ORE, SBM).

Outlook: WD DU. The market rally has turned the daily trend UP. The weekly trend remains down and indicates some caution is required. We started two trades this week as the market filter indicated we should start investing more. There may be a little EOFY selling starting soon, but this won't effect us as we don't hang on to losers. We'll start a few more trades while the XAO stays above 5733.

 

[peter2]

EOW 121 update: ASX Momentum Portfolio +63.9% ( 52% invested in 3 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +8.2% (past 121 wks)

This weeks sells: nil
This weeks buys: nil

The index ended down on the week after a mid-week selloff. The banks and materials sectors continue to be sold. Our portfolio held up well with the two new trades gaining during the week.

Outlook: WD DD. The mid week selloff closed below 5730 flipping our filter fully bearish once again. We didn't have to do anything as our portfolio has only a few trades open and they're OK. The banks won't recover for a while now thanks to SA wanting to levy them as well as the federal gov't.

The only positive sectors we've got are mid-caps (XMD) and industrials (XNJ). They won't be able to lift the index on their own. The property sector (XPJ) was looking OK until this week.

You're wondering why we're not in more winning trades. Well, in order to get into more winners we would have had to start more trades. More trades mean risking more and if things didn't work out we would have lost more. If you want to keep your losses small you must trade lightly in unfavourable market conditions.

 

[seans]

I really enjoy reading this thread Peter. It's the only one I continually follow. Great work and very much appreciated.

You talk about market filters being turned on and off. Are you using support and resistance lines as your filter or is it something else? I am using a 10wk XMA as my market filter.

thanks