ASX Momentum Trade Book - Part 2

[Lone Wolf]

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.

I disagree that the biggest thing is figuring out which stock to pick.

This thread demonstrates how to treat trading like a business rather than simply taking a punt on some stocks. The construction of a trading plan in great detail. Following that trading plan with discipline, identifying when you’ve made mistakes or taken trades outside of that plan. How to managing trade risk and portfolio heat depending on market sentiment to reduce total drawdown. Breaking down results to identify areas for improvement. It was seeing how he approached the business that was more valuable to me, and that’s something that retains its value regardless of when you read it.

Which stock to pick is important and I suspect that if a new trader had followed the exact same trading plan as Pete they’d be less successful. Years of experience help Pete pick the right trade out of the multiple valid candidates. It’s just sad to see this thread value being diminished the moment it ended. If I were Pete I’d find it a bit demoralising.

 

[VSntchr]

Agree Lone Wolf.
I actually typed up a response last night but decided against posting it...
But essentially, it's not about following the exact stocks.
It's about understanding the process and watching it play out over a variety of market conditions.
I got into trading after discovering the Pair Trading thread, and I spent hours reading through the 40 odd pages that already existed. To look back and realise that a forum thread perhaps spurred the start of a trading career is quite astounding really...
Whilst already a profitable trader by the time these momentum threads were in full gear, I have learnt alot by following along (and partipating when appropriate) and my trading business has certainly taken a few things to bolt on which improve it's resilience through all markets.

 

[fiftyeight]

Look forward to what ever you do next Pete, but I hope it is something that does challenge you. Will be great to see how you work through the different problems you come across. It is not often you get to see the thought process of an experienced trader tackling new problems

 

[mikeroxoz]

Don't go Peter!...Perhaps just change to a weekly time frame or I don't know, find another mission... Maybe the Duck v Peter...Thriller in Manila....thunderdome style?...I recall reading that you once wrote that posting assisted your own trading from being disciplined...so please continue to help yourself and benefit the world of Aussie stock forums by continuing....no pressure

 

[HelloU]

Let me try to restore some respect to the thread following my last post.

Even in places that are full of garbage you can stumble across a diamond. That is how I see this thread, it is GOLD amongst some non-gold. For anyone interested in swing or general trading you could do a lot worse than read all this thread.

The personal part:
It was never my intention to devalue the massive quantity of work done here. The value I was extracting from this thread was much more tailored. BO NH 385 breaks, 960 breaks, stop levels and even lots of R discussion was looked at but not what I wanted (which may sound strange given that establishing a trading discipline surrounding these was the whole point of the thread).

What I wanted were the table scraps that Peter occasionally left. Eg, the flippant one line comment about why he may see a little upcoming sector sadness even though current was bullish - that was the type of remark that would prompt me to have a real good look at the possibilities and implications for my own buylist. So I have to be in the market at the same time as the post is done for this to work.

Most importantly, the reason that I would seek out Peters scraps (so this thread) was that in my first few forum days I quickly recognized that here was a bloke that I considered to be well worth some of my time.

 

[peter2]

Did you know that three years ago when I asked for expressions of interest in continuing Pavilion103's work, the first people to respond were experienced traders/investors (tech/a, craft and skc). I'd only posted occasionally before starting this project but they knew it would work out (somehow).

March 11, 2015
I hope Joe sticky’s this thread – it’s bound to become a classic.

I also hope you have got interest from some of the FA investors. Because if they have never been exposed to a well risk managed trading portfolio, there will be a lot to learn here (with a much faster feedback loop than available through FA investing) that will be useful to their own endeavours – we are all in the business of managing risk and rewards.

 

[peter2]

The latest concept for the next thread (Part 3) is to expand on what we accomplished in Part 2. Trading ASX long only left us vulnerable to dips in the market and taught us patience when the market conditions were unsuitable. We managed to preserve our capital and keep our draw downs within comfortable levels.

Do you realise how important that experience is? If you can manage your downside exposure within comfortable levels, you should have the confidence to trade any market. I hope that many of you reading this thread for the past three years have increased confidence to trade the ASX. You must be confident that you'll do the correct thing at the correct time 95% of the time.

I'm planning to include three additional trading activities into our trading business.

1. Trading short term daily swings in ASX equities both long and short (equities, cfds)
(i) Current BO TP
(ii) New ASX equity/cfd Shorting TP and a daily scan to find the opportunities.

2. Trading the 4H trend in forex currencies (fx pairs)
(iii) New FX 4H Swing TP

3. Trading daily swings in commodities and indices (futs, cfds)
(iv) New TP

Three new TP's need to be written and printed. Capital and downside exposure needs to be allocated across the three activities. Monitoring of performance and overall risk (heat) needs to be set up. Most importantly a daily procedure needs to be setup to ensure efficient analysis and application of the TPs. This last item is the one providing the greatest challenge for me.

Well, you wanted me to challenge myself. Further details will be posted in the new thread when it's started. This new thread belongs in the Diaries and Journal section of the forum, however I'd like to post it in the Member's section so that readers can show their respect/courtesy by logging in to read it.

 

[Moose_]

Cant wait Peter, will be reading every post

 

[willy1111]

Hi @peter2,

Your consistency to keep posting in your thread over many years is one of the reasons I keep coming back to the forum, to check in on your thread and follow along.

Your weekly updates of cumulative performance shows tremendous transparency and reveals so much info.

I'm curious to know how you live off your trading, if you wouldn't mind sharing?

Clearly you're profitable. But how do you set your income?

Do you anticipate to spend x% of your portfolio each year. Ie expecting long term average above/around 20% per annum, do you say pull out 5% in July each year plus enough to pay your tax. You spend this 5% throughout the year plus say another 5 odd percent to pay tax and leave the rest to compound.

Or do you take out a certain amount each month to cover your bills.

or do you keep a few months/years worth of cash and top up every so often after a good run.

Just curious to know the mechanics of how you do it if you wouldn't mind sharing?

 

[InsvestoBoy]

Review of year two.
This chart shows a different aspect to that second year as the performance is reset to zero.
View attachment 85825

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.

Hey peter2,

Can you please elaborate a bit on how you handle tax in the above chart?

For the kind of market activity that I'm reading about in this thread, wouldn't you be classed as a trading business by the ATO and would need to lodge quarterly PAYG style tax and pay a 30% tax on profits each quarter?

Wouldn't the chart you show look quite different if you have to cut 30% of the profits out each quarter? I mean, not just a reduction in returns from that quarter, but also the capital available to compound returns in the next quarter(s)?

 

[lindsayf]

Brilliant - looking fwd to it.

The latest concept for the next thread (Part 3) is to expand on what we accomplished in Part 2. Trading ASX long only left us vulnerable to dips in the market and taught us patience when the market conditions were unsuitable. We managed to preserve our capital and keep our draw downs within comfortable levels.

Do you realise how important that experience is? If you can manage your downside exposure within comfortable levels, you should have the confidence to trade any market. I hope that many of you reading this thread for the past three years have increased confidence to trade the ASX. You must be confident that you'll do the correct thing at the correct time 95% of the time.

I'm planning to include three additional trading activities into our trading business.

1. Trading short term daily swings in ASX equities both long and short (equities, cfds)
(i) Current BO TP
(ii) New ASX equity/cfd Shorting TP and a daily scan to find the opportunities.

2. Trading the 4H trend in forex currencies (fx pairs)
(iii) New FX 4H Swing TP

3. Trading daily swings in commodities and indices (futs, cfds)
(iv) New TP

Three new TP's need to be written and printed. Capital and downside exposure needs to be allocated across the three activities. Monitoring of performance and overall risk (heat) needs to be set up. Most importantly a daily procedure needs to be setup to ensure efficient analysis and application of the TPs. This last item is the one providing the greatest challenge for me.

Well, you wanted me to challenge myself. Further details will be posted in the new thread when it's started. This new thread belongs in the Diaries and Journal section of the forum, however I'd like to post it in the Member's section so that readers can show their respect/courtesy by logging in to read it.

 

[peter2]

TAX: The main aim of this thread was educational and to demonstrate the application of a simple discretionary trading plan. I agree that once a person becomes profitable tax must be paid. The amount of tax owed depends on many factors and there are several ways to minimise the tax due.

As far as I know the ATO doesn't classify individuals as traders. The individual classifies himself/herself as a trader/investor or any other occupation if they're working fulltime. It would be difficult to justify yourself as an investor with the trading record shown in this thread. If one earns more in their FT job, trading profits are added to the income and tax is paid on the total yearly income. The trading profits may increase the amount of tax to be paid if they put the payee into higher tax brackets. If the trading profits exceed other amounts earned then one may classify themselves as a trader and pay what is due.

If this trading was done through a business then the applicable tax rate would be 30% (I think).
If this trading was done through a SF that was paying a pension to it's member(s) then there is no tax payable.
If this trading was done while a resident of Vanuatu (and many other countries) there is no tax paid.
If this trading was done through a trust, then it gets complicated (see trust deed).

Yes the charts would look different if any capital was withdrawn at any time and for any reason (tax included).

 

[peter2]

I'm thinking about leaving this thread open so that anyone can post a question regarding their plans for trading ASX stocks.

Myself and many other experienced traders/investors at ASF are willing to provide suggestions to help you create/modify your ASX trading plans. You make the decisions, but sometimes it helps to discuss the options first.

Trading profitably is a skill that everyone can learn if they're willing to do what it takes.

 

[peter2]

Update: Notice to remind all short term traders that the reporting season has started again.
Here's a current example. CCP chart shows a great looking BO, buy it at 23.5, iSL at 22.5. Easy.



Earnings are scheduled to be announced tomorrow 30/1. Do you want to take on the risk? The earnings might be poor and the price dumps, the earnings may be good but the insto's take the opportunity to sell to the retail buyers (opens high, ends low). Who knows what will happen.

 

[peter2]

We avoided that break-out trap.

 

[debtfree]

Peter: I noticed FBU had a large engulfing candle today.

In post #1190 you noted re-entry @ 7.05-7.10
You also mentioned in post #1203 FBU: Worth another post to discuss this one.

Was it the support that is now our resistance that you thought to discuss?

 

[kid hustlr]

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.
View attachment 85556

Pete,

Can I ask how you have managed MND - do you still have it?

Pete,

As an aside - really want to thank you again for your efforts. I can't stress how much your threads have helped me, I could talk for hours about the hidden gems I feel you've given me

 

[debtfree]

@kid hustlr
See post #1220 EOW Report - Sold @ 17.98 TS

Cheers ... debtfree

 

[peter2]

FBU: After the initial aggressive reversal trade ended successfully, I was going to outline what I'd need to see for the next trade in FBU. There were two scenarios, a shallow pull-back or a deeper pull-back and I marked a chart showing both possibilities. I didn't post the chart as the thread was ending. The weekly chart shows a very bullish bar. One of many I've noticed this week.

MND: This trade was closed for small loss when price came back to 18.00. The PB turned into a very deep abc corrective pattern. The PB was too deep for me to consider a re-entry. Price has boomed off support over the past three days making a bullish outside reversal bar on the weekly chart.

I'm pleased that you've found a few good bits. My trading beliefs and therefore trading plans are created with ideas that I accumulated from a variety of sources. It took time and a lot of ongoing modification to end up with something simple and robust that works for me.

If your passion is genuine then you'll keep going until you have something that you can use consistently.

 

[kid hustlr]

It's surreal seeing all these bullish set ups knowing the mini was down 2% yesterday.