ASX Momentum Trade Book - Part 2

[peter2]

Trading update: New trade triggered using a conditional order.

MND-cfd: Bought today's BO at 18.05, iSL at 17.30.
I classify this as a pull-back setup in a strong weekly up trend. I've used the ledge as the trigger and iSL placement.

 

[peter2]

Trading update: New trades and heaps of opportunities.

A2M-cfd: Bought today's BO at 7.67, iSL at 7.35.
A little late but a tight exit stop will protect us.


Something different ...

CHC-cfd: Bought today at 6.16, iSL 5.95.
Noticed a few REITS with bullish bars, so we'll start a trade in this one.
Strong weekly up-trend, but we're buying a PB hoping that the up-trend is resuming.
We'll exit if there's no immediate follow through to our 6.50 target.

 

[peter2]

Notes:
CHC position size was reduced by our 25% limit.
AGY: Forgot to place re-entry conditional order on this one and we've missed it.
The order would have been if 0.36 trades buy with a limit of 0.37. I've looked at the course of sales and a fill would have been determined by how fast the conditional order would have been placed. No guarantee that we would have been filled. Not placing the re-entry order though is a trading mistake.

Capital at risk is now 5.1%, which is near our limit for an improving bullish market.
With the leverage of cfds we've invested 141%.

FBU: Worth another post to discuss this one.

 

[Roller_1]

Peter, how much commission/interest do you end up paying on a round trip with your CFD trades such as the A2M?

 

[peter2]

This is from the Saxo Webtrader.

 

[Roller_1]

Thanks Peter, Cfds are not cheap!

 

[peter2]

Trading update: Looks like there's a bit of selling today throughout the market.

NWH: Sold today as price went below our exit trigger. Result +2.4R
Closed off it's low so we'll keep an eye on this for a re-entry >1.70.

LLC-cfd: Sold at 15.90. Result -0.9R.
Down for 3 days and a bigger drop today. A reversal that didn't have enough demand (or there was too much supply) to continue higher. This one is now worth watching for a Wyckoff spring reversal at 15.50

A2M-cfd: Sold at 7.39. Result -0.9R.
Two down days (BO failure) with today's a little larger.

CHC-cfd: Sold at 6.02. Result -0.7R
Today's down bar negates the bullish bar that got me interested.

That seems pretty bad doesn't it. We only started A2M and CHC 2 days ago. We risked a little more at a time when things were looking more bullish. We had a go but it didn't work out for us, so we reduced our exposure quickly.

Sure, I don't like seeing three losses and perhaps I should have chosen better. I'm pretty pleased with these exits because it was the right thing to do. Doing the right thing makes it easier to forget the losses and we look forward to the next trades that we start.

 

[kid hustlr]

Great sell in A2M (in fact all 3) Pete.

I always get nervous selling just above my stop as if price turns I have completely blown my R:R out of the water.

However in this case you've shown what else can happen. If you are trading end of day you actually end up exiting far lower than your ISL (also happens to me a bit!!)

 

[tech/a]

Great work Moose.
I think keeping analytics and charting them as you have is one of the most constructive things a trader can do to stay on the 'improvement train'.

Can only Echo V/S on your efforts.

I'm sure Pete would be very satisfied that someone has benefited as you have.
That's what these exercises are all about!

You don't get that on HOT COPPER!

 

[peter2]

Trading update: Two new trades

AUZ: Bought today at 0.135, iSL at 0.115

EHL: Bought at 0.275, iSL at 0.24.

 

[peter2]

EOW 150 update: ASX Momentum Portfolio +134% (82% invested in 5 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +18.3% (past 150 wks)

This weeks sells: NWH (+2.4R), LLC (-0.9R), A2M (-0.9R), CHC (-0.7R)
This weeks buys: AUZ, EHL

Finally we see a little profit taking in our over-extended market. The portfolio lost 2.4% as our newer cfd trades didn't work out as anticipated. I was pleased to see so many "likes" after posting these losers. These posters know the importance of keeping the losses small. Mastering this is important to keep us in the business. Whenever I look at trading another market, instrument or strategy I focus on keeping the losses small while I gain experience.

Notice: The current open trades will be the last ones managed in this thread as we're coming to the end of my three year commitment (Feb18). In the remaining six seeks I'll post some thoughts, opinions, observations and what I've learned from this work. When these open trades are completed I'll post all the stats and data we've recorded over the past three years.

 

[barmix]

hi Peter
thanks for your efforts on this subject. I have one question and it may have answered already.
how long do you hold onto non performers?

 

[peter2]

@barmix Great question. I've got a short and long reply for you.

I'll be more patient with all trades provided the market sentiment remains bullish, and the market and sector are still going up.
---
Let me define these non-performers into two groups. Group A are slightly positive but their exit triggers may or may not be at break-even but their open profits are not big enough yet to consider grabbing some. Group B is slightly negative but still trading above their exit triggers. I may manage each group slightly differently and this depends on the underlying market conditions at the time.

If the market conditions turn bearish then I'll exit group B quickly because I know that these are weaker than the market. These will most likely fall faster if the market continues down. I'll raise the exit triggers on many in group A to reduce loss of open profit and to prevent small winners becoming losses.

If market conditions turn bullish or remain bullish then I'll give group A more time because a price consolidation is a neutral pattern. A BO is bullish and a break-down is bearish and I'll sell asap. I may be patient with group B in bullish conditions but I'll still be aware that I'm in weaker trades. It may be better use of my capital to exit these and buy newer break-outs.

Before I start any trade I know what type of price movement I'm trading (trend or momentum(swing)). A trend trader must let price go sideways and even let price fall a little to see if a higher low will be formed. A trend trader must be very patient and use wide exit triggers. A swing or momentum trader should exit quickly once price stops moving upwards or the price swing looks likely to reverse. A swing trader is likely to be very active in the market and will cull non-performers of any type quickly.

Joe Ross defines a price pause of 4 - 10 bars as a ledge and anticipates the trend to continue before the 10th bar. Any longer, the consolidation becomes a trading range or may even weaken to become a non-trending congestion of bars. You may decide to let a ledge develop but exit after the 10th bar if there's no BO.

As usual it's always up to us to work out the correct decision for our trading strategies.

ps: Now do you want the long reply?

 

[peter2]

We've discussed the importance of a market filter before. I've used one in this thread (the XAO) to adjust the amount of portfolio heat according to the current market conditions. We've done this to ensure that the potential equity draw downs are reduced to comfortable levels. Throughout the past three years we've managed to keep the DD <10%. The largest EOW DD in this portfolio has been -7% (benchmark -16%).

I've also mentioned that the XAO sometimes doesn't represent the market properly. Now is another one of those occasions. The recent rally has been entirely due to rising commodity prices (lower USD) and the rising prices of the materials sector. There have also been a stack of small caps with rising prices but they aren't going to raise the index.

The other big sectors (banks, industrials, REITs) are not participating at all. If you're not buying small caps or not holding BHP, RIO then you may have missed out on this latest rally.

Even though your market filter is bullish we have to buy stocks in sectors that are going up. I haven't bought many industrial companies lately because I've not seen good setups. We got lucky with the WFD takeover offer and nobody wants the banks.

Looking back at my recent history I've not bought many material stocks for this portfolio and that's why this portfolio is going sideways instead of up. Clearly I've become a bit slack with my weekend reviews.

 

[kid hustlr]

LLC-cfd:
Down for 3 days and a bigger drop today. A reversal that didn't have enough demand (or there was too much supply) to continue higher. This one is now worth watching for a Wyckoff spring reversal at 15.50

Nudge Nudge tickle tickle

 

[peter2]

Nudge, nudge, wink, wink say no more... however this is an educational thread so I'd better elaborate.

Kid hustlr reminds us that I made a few comments about what I'd need to see before considering another trade in LLC. It's not quite the EOW but the weekly bar looks like a reversal doji that found some support at 15.00. The last three daily bars are up with long tails (+ higher volume) indicating some demand at the lower prices.

An important aspect to consider with this setup is this;
Is there enough bullish sentiment (=demand) to offset the six down days?
Volume was very low on the last two down days and the volume is larger on the three recent up days.
The charts of XPJ and some other REITs show doji's also, so there might be some demand returning to this sector. That would help our trade in LLC. The potential R:R is acceptable.

I consider this an aggressive reversal setup. A more conservative setup would be to wait for a HL to form. Interesting, thanks Kid hustlr.

 

[kid hustlr]

Thanks for expanding Pete.

You actually read my mind - my playbook doesn't have a reversal set up of this nature in it and says I must wait for a HL. As such I'm on the side lines however I think this trade is justified and I'll
Monitor from the sideline closely.

 

[peter2]

Not a trading update as there will be no new trades posted in this thread.
However the A2M chart looks promising for a re-entry. I'd be comfortable with a iSL at 7.40.
It's tight, but price looks likely to go higher quickly. The current bearish market may curb enthusiasm.

 

[peter2]

This thread is going to end at the end of Feb18.

Yeah I know you're disappointed, but surely three years of consistent content is long enough. People earn degrees in three years and then they get a real job. Well, we've earned our degree in trading break-outs on the ASX. Now it's time we started a real trading job.

I'm willing to continue providing content to ASF, but I'm unsure what content you want to read. I would like more interaction with other members but you're reluctant to engage. I understand your reluctance. Trading profitably is hard because we have to do things that go against our ingrained psychological biases. If I suggest you try something different. You'll want to avoid it and you'll disengage.

Take break-out trading for example. How many people have you read saying that you can't make money buying break-outs. Buying BO's is a suckers play. Buying new highs is very difficult for most people. We're conditioned to buy bargains. Only suckers pay the high prices. Buying new yearly highs is a profitable trading strategy, but most people can't buy those new yearly highs. I hope you realise now that you can trade BO's profitably in most market conditions.

Another example, using myself as the reluctant one. Eighteen months ago, skc, suggested I include shorts. I knew then he was right, but could not bring myself to do it. It was outside my comfortable long only trading skills (even though I short commodities and fx markets regularly).

Our ASX has to be one of the worst performing markets in the world (maybe Venezuela's is worse). A combined long/short portfolio may have doubled our results. (Note: This thread has never been about results, but it may have been entertaining seeing me in uncomfortable shorts. )

Whenever you read someone saying you can't be profitable trading FA, Elliot waves, Gann, VSA, MA xors or any other strategy. Translate that to they can't use the strategy to make money. They're spruiking their own lack of trading skills.

Sorry. back on the topic of what do you want to read from me. I thought about a poll, but designing an effective poll is an art form that I lack.

 

[peter2]

EOW 151 update: ASX Momentum Portfolio +132% (57% invested in 4 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +17.0% (past 151 wks)

This weeks sells: MND-cfd (-0.1R)
This weeks buys: nil

The rally in the materials sector seems to have run out causing the index to fall for the second consecutive week. The index has to fall as there's no demand for the other major sectors at the moment.

Outlook: WU DD Our market filter has been downgraded a notch as the daily trend reverses. This is our indicator to tighten our trailing stops and reduce portfolio heat. We closed all our cfd trades and have raised a few exit triggers.

If all our trades are closed before the end of Feb. We'll start Part 3 (what ever that is) earlier.