ASX Momentum Trade Book - Part 2

[peter2]

Thanks @seans , hope your trading is progressing well also.

My market filter is determined by the short term trend of the weekly and daily charts of the XAO index. It can have four conditions. Two of them are caution indicators (WUDD, WDDU) while the other two are either bullish (WUDU) or bearish (WDDD). I include both time frames as I'm trading in both time frames. This filter is NOT a timing tool but a directional indicator that I use to manage the portfolio heat.

I will also pay attention to recent swing highs/lows to draw "lines in the sand" that tell me when the market is surprising people.

 

[peter2]

I'm posting this chart of HSN for personal amusement. We started a routine BO trade and took the loss. Upon review we decided that our iSL was placed too close to the price action. A better level was selected and this has worked out OK.

As I was monitoring the chart we could have bought this latest BO, but I didn't place the order due to thin MD.

This chart is a good example of why we shouldn't place our iSL too close (unless that is part of your TP) and the importance of patience. If the market does things to make us chuckle, well, that's better than crying. I hope price goes straight to target.

 

[peter2]

Trading update:

ALQ: Sold just now at 7.96 after good news spike. Result +3R for this thread.
Selling 1/2 for myself at the same price. I'm now able to let the price do whatever it does.
This result offsets 6 of the last 7 losing trades. This shows why keeping losers small is so important.

 

[peter2]

Special cheerio for @Kryzz for getting my focus back on the ASX with his timely post.
Both of his suggestions (ELD, FPH) have gone higher and the BO's that I took for this thread at the time were ALQ and ALU.

The "cheques in the mail" as we say Kryzz. Well, only half a cheque, as I've only sold half.

This shows that we shouldn't take our eyes off the market because good setups are happening all the time. Yes, I know we get frustrated and down hearted at times and it's hard to get motivated to do the scans after a few down days. Think about it. How strong is the demand that pushes price to new highs (BO) while the market is falling?

Here's a look at our recent losing run and how one good winner can offset so many of them (if you keep them small).

 

[Kryzz]

Special cheerio for @Kryzz for getting my focus back on the ASX with his timely post.
Both of his suggestions (ELD, FPH) have gone higher and the BO's that I took for this thread at the time were ALQ and ALU.

The "cheques in the mail" as we say Kryzz. Well, only half a cheque, as I've only sold half.

This shows that we shouldn't take our eyes off the market because good setups are happening all the time. Yes, I know we get frustrated and down hearted at times and it's hard to get motivated to do the scans after a few down days. Think about it. How strong is the demand that pushes price to new highs (BO) while the market is falling?

Here's a look at our recent losing run and how one good winner can offset so many of them (if you keep them small).

View attachment 71643

Looks like you're banking some nice cheques here Peter, following with interest still.

What would you say the approx hours you would spend per week with your daily trading timeframe if you don't mind me asking?

CTD is back on the watchlist for me, consolidating at the moment after another pop higher.

Cheers

 

[peter2]

I'm watching the markets full time Kryzz. I'll PM you a more detailed reply.

 

[Skate]

Trading update:

ALQ: Sold just now at 7.96 after good news spike. Result +3R for this thread.
Selling 1/2 for myself at the same price. I'm now able to let the price do whatever it does.
This result offsets 6 of the last 7 losing trades. This shows why keeping losers small is so important.

Hi peter2

You said at 3.22pm: "ALQ: Sold just now at 7.96 after good news spike"

The sale of ALQ was a discretionary sale - I would love to know what method you used in selling this holding and why you used this method. (Example: Sale by 'Price Limit' or 'At Market'

skate.

 

[Rypieee]

Hi peter2

You said at 3.22pm: "ALQ: Sold just now at 7.96 after good news spike"

The sale of ALQ was a discretionary sale - I would love to know what method you used in selling this holding and why you used this method. (Example: Sale by 'Price Limit' or 'At Market'

skate.

Probably because ALQ hit the price target and achieved a 3R return

 

[peter2]

Hello @Skate You're correct that this was a discretionary exit (DE) and it was no coincidence that it was at the T3 level (producing a +3R profit). When I first saw the spike and news I raised the trailing stop to below the day's low. This locked in +2R. Surprisingly, price kept going up and towards the EOD was nearing 8.00. I noticed that the T3 level was 7.96 and ALQ was trading 7.95 - 7.97 while I was watching. I sold 1/2 my parcel then and to be fair exited the thread trade at the same time.

It was just luck that I was watching at that time. If I'd looked later I'd have sold at 7.90 or just left the TS at +2R and waited for the next day.

In this volatile market I'm happy to be taking profits especially when they appear suddenly. +3R is well above the average win stat for the thread so exiting at T3 improves the results. In this thread and real life I tighten the TS when trades get above +1.5R knowing that these results are rare and above average.

I track the performance of my discretionary exits and compare the results to a few fully objective exit methods. My DE's perform very well against these other methods. Occasionally I'll miss out on a bigger profit (+5R, +8R) by selling early and not letting price movement take me out of the trade.

Selling 1/2 is another type of DE and is done to placate wild emotions experienced during an unexpected price spike in my favour. I'm more able to manage the trade properly knowing that I've taken some profit. I'm aware that there is a cost (loss of more profit) for this emotional calming and smoother equity curve.

 

[hallph]

Interesting to read your sell targets and stop tightening past +1.5R as this is what I always struggle with.
Does your win rate dictate the return you're looking for on each trade? i.e. if W=50% then you'd be profitable at anything greater than T1target (+1R).

Was a nice setup in TGA with the BO-HR 1.30 level, 10>30 day MA.

 

[peter2]

This is important. I don't care about my win%. I never exit a trade to improve the W%.
I care about improving the average win (AW) and try to do it whenever I can.

The AW for this thread (and it's trading style) is 1.4 (AL = -0.6). Once a trade gets above +1.5R I tighten the exit stop (TS) in order to ensure an above average win.

If we were in a bull market (XAO >6000) I'd be more comfortable trailing the exit stops and would use targets less. Until then anything better than +1.5R is gold.

Another trading style or method might have an AW of 2.5. Exiting trades below this figure would hurt it's performance.

TGA: Noticed that yesterday also and I like it as a reversal setup with an obvious target at 1.65.

 

[peter2]

Trading update: New turbo trade

REA-cfd: Bought at 66.10 today with the iSL at 63.5.
This trade size was reduced to get it nearer our max size. I will be applying a tighter exit stop (two down days) and a target near 70.

 

[peter2]

Trading update: New trade, a reversal break-out.

FBU: Bought today for this thread at 7.71, iSL at 7.20.
Most definitely a reversal setup. It's first task is to overcome resistance at 8.00 then it could "fly".

 

[peter2]

EOW 122 update: ASX Momentum Portfolio +64.3% ( 50% invested in 3 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +8.5% (past 122 wks)

This weeks sells: ALQ (+3R), ALU (-0.6R)
This weeks buys: REA-cfd, FBU

What a nasty thing to do to us on the last day of the fin year. We were getting close to another equity high but that disappeared quickly on Friday.

ALU: Sold slightly below TS as price continued to tumble below the recent BO level.

Outlook: WD DU. The ASX is becoming even more volatile lately but the week ended slightly up and changed our filter to cautiously bullish. My emphasis will be on the cautiously part of the filter.

We've got a new FY and 8 months left of this thread. I want to get to triple digits before then and I think we may have to do more 3 - 4 day "turbo" trades (and gap trades) to get there. This will require a bit more application and focus in order to get onto short term rallies asap. You'll see them we trade them.

 

[skc]

EOW 122 update: ASX Momentum Portfolio +64.3% ( 50% invested in 3 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +8.5% (past 122 wks)

We've got a new FY and 8 months left of this thread. I want to get to triple digits before then and I think we may have to do more 3 - 4 day "turbo" trades (and gap trades) to get there. This will require a bit more application and focus in order to get onto short term rallies asap. You'll see them we trade them.

Great work as usual peter2.

A quick explanation on the maths for the many followers ... this journal has returned 64.3%, so to reach triple digit it needs to return another 35.7%. However, this 35.7% is against the original starting capital of $50k, which is ~$17.85k. The current capital is $82k (being $50k starting + $32k profit), so the percentage return required against current size of account is just under 22%.

22% return in under 8 months is still no easy task but it certainly isn't beyond the capability of this trading strategy. One just never know if the next 8 month will be see the steep inclining part of the equity curve (like Sept-Dec 15, Jun-Sept 16 and Mar-Jun 17), or a relatively flat part.

 

[peter2]

@skc Thanks for that. No pressure hey?
I've a little table that shows we need 20R in 34 wks. It was 21R in 42wk when I created the table.

I'm not a fan of time based targets when dealing with the market and I really shouldn't have posted one. We make these crazy goals in ignorance (beginners, newbies) or when things are going really well (ego!).

The only way to remove the additional stress is to simply state that I'll stop at the end of three years regardless of the result or I keep going until I reach the triple figure value. We'll see what happens in 34 weeks time.

No pressure. One trade at a time.

 

[skc]

@skc Thanks for that. No pressure hey?
I've a little table that shows we need 20R in 34 wks. It was 21R in 42wk when I created the table.

I'm not a fan of time based targets when dealing with the market and I really shouldn't have posted one. We make these crazy goals in ignorance (beginners, newbies) or when things are going really well (ego!).

The only way to remove the additional stress is to simply state that I'll stop at the end of three years regardless of the result or I keep going until I reach the triple figure value. We'll see what happens in 34 weeks time.

No pressure. One trade at a time.

My experience tells me that, whenever I tried to extrapolate my P&L after a good period, the market will always smell it and show me mean reversion in action! It really is remarkably aware of my mental state.

 

[peter2]

Trading update: Lingering trade closed.

SBM: Closed today at 2.90 for a small loss (-0.4R).
This trade has been open for 47 days and price continues to trade sideways. When the POG couldn't hold 1250/oz I've been thinking about closing this trade. I'm a day or two too late, but I gave it every chance to go higher and it hasn't.

Most afternoons I'll look through a 10d BO scan for trading opportunities. Naturally I'll continue and I'm also going to do two other scans. A gap-up scan looking for those stocks that gap up with good news. We'll be trading the follow up price action if it's bullish. A 1st blue bar scan that will get me into a pull-back that has resumed the pre-existing up trend. I've mentioned this "blue bar" scan earlier in the thread.

I'm adding these extra opportunities to ensure we have plenty of work to do. These charts will show a few examples. The A2M chart shows a 1st blur bar that was also a 10d BO. A quick +2R missed here.

 

[peter2]

Trading update: New trades. I've been busy.

CAJ: Bought BO-NH at 0.27, iSL at 0.24.
This company has been whammed recently (WAM, WAA, WMI).

CPH: Bought at 0.56, iSL at 0.48.

GEM: Bought BO-NH at 3.75, iSL at 3.50.

 

[peter2]

EOW 123 update: ASX Momentum Portfolio +63.1% ( 45% invested in 4 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +8.7% (past 123 wks)

This weeks sells: SBM (-0.4R), REA (-0.5R)
This weeks buys: CAJ, CPH, GEM

The ASX continues it's wild ride. Day traders should be having a ball. Swing traders like us will be having a difficult time especially if you use tight stops. Longer term traders, well nothing fazes them.

REA: I mentioned at the entry that I wouldn't like the price to go below 65 and it did, triggering the close the next day at 65. EOW close is 63. [@triathlete here's your anticipated dip. ]

We started three trades this week but we've had no follow through. The falling prices have triggered a few exits in the weekly portfolio. That's new and shows the selling is becoming more wide spread throughout the market.

Outlook: WD DU just. The late buying today kept the daily filter up, but it I can see that it traded below. Overall I'm more bearish when weekly exits are being triggered as well.