ASX Momentum Trade Book - Part 2

[Joules MM1]

Peter, kudos to you

great thread, you are generous

plenty of good nuggets for analogue reference

look forward to your next endeavour

 

[Joe Blow]

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

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.

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.

Peter, this thread has become one of the most valuable trading related resources on ASF and, dare I say it, perhaps any stock forum on the internet. I know I'm not alone in being very appreciative to you for starting it and persisting with it over the last three years. The trading journey you have documented here will be something that people can continue to learn from years from now.

I am sure that many of those who have followed this thread and benefited from it will have suggestions about what you might consider turning your hand to next. While this chapter will soon be at an end, it's great to know that you are interested in starting another.

 

[fiftyeight]

Massive thanks Pete. Awesome effort!!! Even though my focus has shifted a lot recently some of the gems in here are applicable to all styles of trading and investing.

Thanks again

 

[peter2]

Thanks for the compliments but it's not over yet.

One of the aspects that I'd like to demonstrate in my next project is consistent monthly gains. So I thought I'd better chart our monthly results over the last three years first.

Each R multiple is equivalent to 1% of the capital at the time of the trade.



Not as bad as I thought. However there are several periods of losses (largest is 6 months).

 

[peter2]

I know that it's my decision as to what I contribute. Right now I feel as though I'm posting something like the former magazine, "Womens Weekly". You know what I mean. Something that's regular (comes out weekly), has pictures (charts) and is current (live market). While I've no plans to change the content to something like another former popular magazine (Australasian Post) with a double D-cup and handle pattern on the cover. It's time the trading evolved to include other activities.

Trading ASX stocks will still be important as I've got to manage my own portfolios. However I think it's about time I included other trading activities to boost the performance. This may be important if the ASX continues going sideways. These new activities should not only add to the current positive performance but they should also provide consistent gains. I'd like to see the trading business generate consistent monthly gains.

The initial idea is to use the major portion of the capital generating gains from trading price swings in ASX stocks in both directions. Going long using our current BO techniques and shorting using cfds. I know what you're thinking "whoa, this is new". This is going to be a challenge for me and will require a change to my procedures (ie. I don't look at charts going down).

I want to push my own boundaries a little in the next project. Shorting will surely test my brain circuits. If I do this well then I think the losing months will disappear.

The cfd account we will use to short ASX stocks will also provide access to other markets. When the ASX is stalling and other markets are moving we will trade these other markets. I hope that the inclusion of these other trading activities will eventually eliminate losing months.

These are my initial thoughts about my future contribution. There are a lot of details that I need to work through as I plan on taking every trade I post.

 

[Parse]

Just want to say thanks for posts peter2, I enjoy reading them and hope I have learnt something from then. I certainly look forward to Part 3 (maybe even 4, 5 and 6 as well!).
Thanks for all your hard work with this.

 

[lindsayf]

I know that it's my decision as to what I contribute. Right now I feel as though I'm posting something like the former magazine, "Womens Weekly". You know what I mean. Something that's regular (comes out weekly), has pictures (charts) and is current (live market). While I've no plans to change the content to something like another former popular magazine (Australasian Post) with a double D-cup and handle pattern on the cover. It's time the trading evolved to include other activities.

Trading ASX stocks will still be important as I've got to manage my own portfolios. However I think it's about time I included other trading activities to boost the performance. This may be important if the ASX continues going sideways. These new activities should not only add to the current positive performance but they should also provide consistent gains. I'd like to see the trading business generate consistent monthly gains.

The initial idea is to use the major portion of the capital generating gains from trading price swings in ASX stocks in both directions. Going long using our current BO techniques and shorting using cfds. I know what you're thinking "whoa, this is new". This is going to be a challenge for me and will require a change to my procedures (ie. I don't look at charts going down).

I want to push my own boundaries a little in the next project. Shorting will surely test my brain circuits. If I do this well then I think the losing months will disappear.

The cfd account we will use to short ASX stocks will also provide access to other markets. When the ASX is stalling and other markets are moving we will trade these other markets. I hope that the inclusion of these other trading activities will eventually eliminate losing months.

These are my initial thoughts about my future contribution. There are a lot of details that I need to work through as I plan on taking every trade I post.

I look forward to seeing how you diversify into other markets long and short!
Thanks Peter.

 

[jjbinks]

Hi pete,

Another thanks. I think i've commented occasionally when I have questions but have been following along. Going back through this and your other thread is on my list of things to do.

 

[peter2]

Reviewing this thread I must apologise for not including any ASX200 index trades after posting I might.
Post #56: Mentioned that I was going to stick with ASX stocks only. It was easier to apply only one TP rather than several.

I'm pleased that this thread kept it's focus on trading ASX stocks long only. It's probably what most people try to do when they start trading. I hope you've seen that you can be profitable doing just this. I've used a market filter to manage the portfolio heat in order to keep the draw-downs comfortable.

Without a market filter or a TP to go short, the draw downs for any momentum/trend following strategy will be much larger (-15% - -25%) when the market falls. If you're comfortable with the size of these DDs then you should stick to your TP especially when you're in one of these DD periods.

Post #51: I posted about the market scans I do. These haven't changed much.
Daily (before close).
1. Look through watch lists that have been filled on the week-ends. Each list < 20.
(a) BO soon
(b) Reversals
(c) Spec Stks
(d) KeepAnEyeOn

2. PM Scan for Break-Outs:


This will show ~200 - 300 codes but they're ranked and I only need to look at the top 30 - 40. If the numbers get too high, I increase the daily value traded parameter to 120K.

This scan will show me almost every stock that has started to move up in the last two days. I now apply my daily setup checklist to help me select the best ones to trade. The checklist includes a fundamental filter, is the sector hot or the underlying commodity going up?, a reminder to check to scheduled news events, check market depth, assess R/R of the trade. I'll end up with only a few and then I'll allocate the trades across my portfolios and if one of the portfolios is this one I'll post the trade here.

I'd like to point out that this thread doesn't include all the trades I've done over the past three years and in some cases I've not personally traded some that I've posted here. Over the past three years there's been many rallies in various commodities (graphite, Li, gold, Li again, gold again, Li again, cobalt, anode chemicals (scandium, zinc), etc. ) This thread has missed a lot of these mini-rallies and I've done this on purpose.

The main aim of this thread has been educational. So long as the thread was making progress there was no need to push the pedal to the floor. It wasn't about results. You (the readers) were too polite to point out that I'd totally missed out on many of these hot sectors. I was hoping that a few of you would realise that the potential for this trading style was much greater than what I was presenting.

 

[peter2]

Review of year one (post #337) and what I posted then.

2015 was a great year to learn how to trade ASX stocks. The markets presented all sorts of conditions. Our trading plans were stress tested and we came out on top. 2016 will be another great year to learn. This year we have the benefit of a stress tested trading plan. We're prepared, so bring it on.

The market drifted down all year with a few mini rallies in gold. We had four losing months and two DD > 5% while the benchmark went down -15% (incl 4% divs).

 

[peter2]

Review of year two.
This chart shows a different aspect to that second year as the performance is reset to zero.


In contrast to 2015 the market rose most of 2016. The portfolio was in a draw-down that started at the end of the previous year. As the chart shows, the portfolio struggled in the first 5 months of the year. Would it be of any value to know why we struggled at that time? We've got the trade records and the posts during that period, so it's very likely that we would find the reason. That's a benefit of keeping both trade records and a journal of your thoughts at the time.

Every trader will have periods where life gets in the way. Forgive yourself quickly and get on with the job when you're able.

 

[peter2]

Woops, realised that I've made a mistake with those pesky percentages. The second year started at +19.5 not 0. This is the adjusted performance which shows that the portfolio matched the benchmark rather than beating it. ROI = +26%


This would be a disappointing result for an active trader. I think it makes it more important to find out what happened in the first five months.

 

[peter2]

In year one we went from 0 to 119.5 = +19.5%,
in year two we went from 119.5 to 150.6 = +26%
in year three we went from 150.6 to 232 = +54%


Wow, while I was aware of the numbers I didn't think the curve looked like this. We nailed the early part of the rally and I was complaining about not getting the last two weeks of that rally (materials sector).

I mentioned earlier that I hadn't pushed the results, but I did when I thought we weren't going to get to the +100% before the three years ended. I pushed at exactly the same time the market rallied from a six month trading range.

I suppose now we've got a glimpse of what can happen when everything goes well. I should disclose that my own results were less than half of this over the same period. I don't push my trading as it's more trend trading rather than momentum(swing) trading and I don't use margin (cfds) when fully invested.

 

[peter2]

More results: The last 40 results were well above average, but this can happen in a bull market.

It's good to see the edge improving throughout the three year period. The improving market conditions certainly helped. Never overlook the importance of the market for your results. Every edge in the market can disappear very quickly.

 

[peter2]

Over the past three years we've traded in a falling market, a sideways market and experienced a small rally. That's just about every condition without noting the corresponding volatility.

The EOW 151 update will be the last one. There's no point going the extra five weeks.

We've completed 260 trades since Pavilion103 started his thread and we've discussed two things above all else. Risk management and trade management. Everything is important, but it's these two aspects that we have to get right to be profitable. Knowing the correct action to take is one thing. Doing it is another.

We can sell for the correct reasons or we can sell for the wrong reasons. Every time we sell for the wrong reasons it erodes a little of our edge that we're attempting to earn.

Risk is a word I've used instead of down-side exposure (thanks craft, I miss you). Every trade has a chance of losing and every group of trades has a chance of losing. We must be good at managing the downside exposure.

You've watched me trade 50K to 116K over the past 3yrs (2yr 11mths).
Is there really a need for a Part 3?

 

[kid hustlr]

Seeing the Edge/Expectancy numbers in the above examples is a great thing to see Pete. thanks for this and all your time and effot.

With regards to the need for part 3 - You've given enough and probably not, not sure what else people could ask for.

 

[Lone Wolf]

You've watched me trade 50K to 116K over the past 3yrs (2yr 11mths).
Is there really a need for a Part 3?

Hi Pete,

I walked away from active trading for six months to remove a mental block I have. I wasn't going to post as my input isn't worth anything until I can demonstrate a commitment to this business. But I wanted to say thank you, and so here I am.

Is part 3 needed? From what you suggested, it would demonstrate an experienced trader stepping outside his comfort zone and dealing with the challenges that come with that. We would see you apply your craft to short selling and markets outside of stocks, these behave differently to stocks (don't they?) and it would be interesting to see what changes need to be made to the trading plan to allow for those differences. Then there's the challenge of eliminating losing months. Maintaining a consistent income when the market it unfavourable for long only portfolios is a valuable skill that may be required more often in future times.

So I do think there is much to be gained from the proposed part 3 that hasn't already been presented. Having said that - You have already given so much, you don't need to do any more than you feel like doing. I can only say thank you, and I'm sorry I wasn't able to engage with you along the way. The archive of this thread will remain and continue to help me as well as the many others who stumble upon it for years to come.

 

[debtfree]

Congratulations Peter on your results, it was an absolute Masterclass and I appreciated the time, effort and help you gave out so freely to me and everyone else here at ASF during the last 3 years.
I still can't believe 3 years have passed. As mentioned earlier what a great thread you have left here for all to research, study and learn from for years to come.

I would also like to thank the many others that have contributed to this thread. Without you all, there would have been many questions that I was not aware of to even ask ... so, without you knowing, you've also helped me in my trading journey.

Once again a tremendous effort Peter, showing us how to trade profitable and in a safe and controlled manner. You certainly have the knack to convey your message across to others so if you feel you have more to give, I only have one thing to say .... I'm standing in front of my computer clapping and yelling Encore, Encore, Encore (Part 3)

I know I'll be following the next thread if you choose to do one. A few things have been mentioned already that sounds promising. My god you could even run a thread on excel.

Thanks Peter.

Cheers ... debtfree

 

[HelloU]

Bugger, I arrived too late to join this party. Cannot (probably will not) look back and work it all out cos feels like looking at old family photos from someone elses family - no skin in that game so no interest. I need to ride along at the time to understand - and feel the market mood and worlds thoughts that somewhat influence the trades.
Heres hoping for a next something to get a seat on the bus........

 

[Parse]

I kind of agree with you HelloU. It is difficult reading old posts, or information of any kind which relates to the market feel and direction at that time. Makes it difficult to fully comprehend how things are/were going. The biggest thing is always figuring out which stock to pick from your watchlist and following threads like this one shows how others are choosing in the current climate.