Example of my conservative trading strategy

lukeaye said:

Djs has spent more time at those high then at the lows, so more transactions have occured at higher prices then lower prices. Therefore your on price volume is somewhat biased towards distribution.

On my chart i note 33 periods at the top two of my price on volume, and 7 for the bottom two. The length of the Vol on price at the upper levels vs lower levels is not in proportion to this equation, so i therefore think it is inconclusive, if anything still pointing towards accumulation? Correct me if im wrong.

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accumulation? Yep its certainly is in the chart of DJs below its made a nice bottom and ready to run I reckon.



Hold on somethin' aint right!! Yep she's upside down. Howz it lookin' now?

Hi lukeaye i reckon you will do all-right with those entry's given time and a little room to move for the stops....while a number of events could cause both to go a little lower, over time they will both go back near there last tops.

Keeping in mind i don't follow WOR or DJS

Trembling Hand said:

accumulation? Yep its certainly is in the chart of DJs below its made a nice bottom and ready to run I reckon.



Hold on somethin' aint right!! Yep she's upside down. Howz it lookin' now?

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Very interesting way of looking at it.

Even still could be a correction before further falling. I would still rather be long from support then short from resistance though (not on that graph)

With all the evidence now presented i must admit there is more likelyhood of it going down then up

lukeaye said:

Yes, i have been asked this before, and there is no solution i found to the problem that i happy to accept.

G-stop loss is the only solution. The only problem with this is there is a min stop distance, and it is often far to far away from where i want my stop, it makes the position not worth taking.

As you state the alternative is a lower position. Which is probably the most sensible solution. The drawdown has already been taken into account though.

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There is a very simple solution. You use a guaranteed stop as a safety net, but still have a mental stop at your real stop. The trick is obviously to make sure you manually execute your mental stop when the price is hit. Alternately, with IG Market you can actually "force open" a sell stop order for the same stock. That way you hedge 100% when the real stop is reached - but you will have to pay twice the brokerage and spread.

And as soon as the price starts to move up you can move your g-stop position. So as long as the g-stop premium isn't a deterrent it's the best way to guard against black swan type risks. And if it only saves you once a year, it's a good year. Trade long enough and these things will bound to happen.

Or the other even simpler solution is to risk smaller percent on more positions. The diversification reduces the chance of you being taken out by a single black swan event... I only risk ~1% per trade, but I may have 20 trades at any one time. Overall market exposure is the same, but significantly reduced single name exposure.

lukeaye said:

Primarily my Trades are now based on volume spread analysis, support and retracement levels.

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Luke I don't know how much practise you have had at VSA and I know its been 'the' hot new method around recently but this is why I just don't rate it.

lukeaye said:

(1) Looking at support and resistance i can immediately identify one thing. Volume is high at support, and low at resistance. So we have more support, then resistance.

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Thats just not true. Its spent far more time at resistance than support. therefore there is far more Volume at resistance. Yet it could not get through it.

lukeaye said:

(2) The relative spread to volume of up downs to down days is much larger. What i mean is, there is less effort required to move the stock up (demand) the same spread, as there is to move it down (supply) on the same spread.

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The traderguide likes to talk about 'smart money' a lot. If I wanted to by into that conspiracy method, which I will, that push back up in my eyes given my VSA says 'manipulation'. Like "gee we better get the hope back into this stock or the punters are going to bail before we can" type of play.

lukeaye said:

(3) The other thing, is it has found support near the high, it is currently consolidating near its all time high, instead of being sharply rejected.

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But ultimately it has been rejected which suggest distribution at highs until that high is broken.

As always T/A is not a prediction tool its a bias confirmation tool. When using it one must be very aware of their own bias. Whether this blows the top off its high or sinks into old territory its probably no better than a coin toss between yours or my guess. But I do think there's some work need to be done on your Technicals.

I look at both support and resistance differently to most. In the cases presented here, neither would constitute a buy for me at support. Let me explain, there are several different criteria I use to see if support is going to be useful.

1. There is support and there is good support, and there is weakened support.

2. How did the market approach the support, did it meander or gallop.

3. How much time has it taken to get to the support relative to the previous upmove.

4. What is the action when it gets to support (should be relatively fast bounce or I get out if I have bought).

Looking at DJS to start with.

The $5 area is only support but not good support, therefore I'd pass. It did meander to this level, it did take enough time, but it has only gone sideways since reaching. The odds of a rally from this level is deteriorating rapidly (probably well less than 50%).

Looking at WOR

The $25.50 area was good support the first time it went down there, that support is now weakened especially because it did not make a new high. It took 2 months to go up to a lower high, then 5 days to get back to the support level, with a breakaway gap. Watch out below!! Would not surprise to see a runaway gap to the downside, blowing your stop by a dollar or more.

I agree with TH, you need to study more on your understanding of the technicals Luke.

brty

lukeaye said:

I have very very high tolerance. I suffered a long string of loosers about a month ago, which drew about 30% of my account down. And i did not panic, it did no change my trading. The last 3 weeks i made it all back and then some.

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This doesn't send any warning signals off for you?

While it is fine having a high tolerance if you suffer 30% drawdown so quickly maybe it is time to look at some of your risk practices? Because next time you might not be so lucky to make it all back so quickly.

This is the sort of thing I tried to touch on in the strategy thread. What was the market doing a month ago? And what was the market doing in the last 3 weeks when you made all your money back? What happens if next time the market breaks down and not up while your in the middle of drawdown and you end up with a 50%+ drawdown?

IMO the current method you use is fine while the market is strong and stocks rally off these support zones but you will suffer a high ratio of losers when the market is choppy or turns down. And with the amount of margin you use you could get burnt very quickly.

Using 2% risk per trade is fine but using the margin you do on your whole account you are taking on a lot more risk then 2%. Buying parcels bigger then your whole account (and then holding more then one at a time) on stocks that have a history of gapping around is a dangerous game imo. Also alot of your trades will tend to fail at the same time, ie both DJS & WOR could gap down on Monday and take you out of the trades at greater then your 2% per trade.

So_Cynical said:

Hi lukeaye i reckon you will do all-right with those entry's given time and a little room to move for the stops....while a number of events could cause both to go a little lower, over time they will both go back near there last tops.

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The problem with this is his stops are very tight and he is also playing with high margin. So time and room to move aren't really options for him. They will either move in his direction or stop him out pretty quick imo.
I actually don't mind his entries on either stock, if you are going to buy either where he has entered on both trades is ok, it's just that on both I favour a move to the downside more then the upside from here. Will be interesting to see how both react given the Dow on Friday.

The other thing to consider with DJS is that while the XAO has been moving up from support DJS has been moving down from resistance. I would rather be buying stocks that have broken out while the XAO moved up and are now retracing back to and finding support.

Trembling Hand said:

Luke I don't know how much practise you have had at VSA and I know its been 'the' hot new method around recently but this is why I just don't rate it.

As always T/A is not a prediction tool its a bias confirmation tool. When using it one must be very aware of their own bias. Whether this blows the top off its high or sinks into old territory its probably no better than a coin toss between yours or my guess. But I do think there's some work need to be done on your Technicals.

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Good post TH.

The problem with the way alot of people practice VSA is that they only look at one aspect of the chart (and VSA) and tend to read the signals backwards. Using VSA alone doesn't work imo, doesn't tell the full story.

If interested in VSA imo you are better of studying Wyckoff which will give a wider understanding of reading technicals as VSA is only a small part of Wyckoff.

Luke while I'm picking the Sh!! out of you DJS anaylisis. Two things caught my eye.

Firstly and very importantly for your original points of (1), (2) & (3) you have labeled the wrong volume bars to your support bars. Have a look at your chart below. the Vol bars are incorrect!! That chart seems to be offset by 1 bar

Secondly the last two weeks volume has been nothing of significance, maybe even lower than when it was at $5,80ish. So there is LESS demand now although its cheaper. Thats not a good VSA signal?

Trembling Hand said:

Luke while I'm picking the Sh!! out of you DJS anaylisis. Two things caught my eye.

Firstly and very importantly for your original points of (1), (2) & (3) you have labeled the wrong volume bars to your support bars. Have a look at your chart below. the Vol bars are incorrect!! That chart seems to be offset by 1 bar

Secondly the last two weeks volume has been nothing of significance, maybe even lower than when it was at $5,80ish. So there is LESS demand now although its cheaper. Thats not a good VSA signal?

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In IG market charts you can turn on the cross hair mode which lines up the price and the volume to avoid crooked reading. You can also easily put in a MA20 on the volume to see if the rises are significant.

As I pointed out before, IG Market charts does not plot the closing volume and price accurately. So if VSA is a big part of one's analysis a bit of paid charting may be warranted.

Thanks for everyones input, its greatly appreciated.

I think on review, i have been having less time for trading, and as a result maybe getting lazy with my analysis.

Trying to find things that aren't there, just as an excuse to take a trade. Taking mediocre set-ups instead of ones i have taken the time to look at properly.

I need to take some more time with my analysis and give each trade a bit more thought.

Skc, how do u bring up moving average volume on ig markets?

lukeaye said:

Skc, how do u bring up moving average volume on ig markets?

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Hit the little spanner within the volume pan and choose moving adverage to add.

nomore4s said:

If interested in VSA imo you are better of studying Wyckoff which will give a wider understanding of reading technicals as VSA is only a small part of Wyckoff.

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Here are Wyckoff's , Five Steps----

1) Determine the trend and position of the market being traded.

2) Determine the relative strength or weakness of the issue being considered. ( THIS THE FIRST STOCK SPECIFIC CRITERIA

3) Select issues that are presenting a cause that is likely to produce an acceptable effect. ( ACTIVITY IN THE RANGE THIS IS THE SECOND)

4)Determine the readiness of an issue being considered to respond to its cause. ( THIS IS THE NUMBER THREE STOCK SPECIFIC FACTOR, THE LAST. HERE is where what you call VSA is to be found )

5)Time trades in individual issues to anticipated turns in the market in which they are traded.

OK ANOTHER LOOK at the COMPARATIVE STRENGTH or WEAKNESS..


Different BEHAVIOUR NOW to that before OCT 2008 ?


Motorway

lukeaye said:

Thanks for everyones input, its greatly appreciated.

I think on review, i have been having less time for trading, and as a result maybe getting lazy with my analysis.

Trying to find things that aren't there, just as an excuse to take a trade. Taking mediocre set-ups instead of ones i have taken the time to look at properly.

I need to take some more time with my analysis and give each trade a bit more thought.

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Does that mean you sold out on Monday? Or got the WOR stopped out today and close on the DJS?

Trembling Hand said:

Does that mean you sold out on Monday? Or got the WOR stopped out today and close on the DJS?

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Hi, i pulled out of DJS, because on review of everyone else analysis, i thought i was wrong. WOR i got stopped out of.

I am going to spend a bit more time studying then trading atm. Going to study some of wyckoff, and a few other books i have short listed, to refine my techniques a little more.

I did today buy RIO and FMG, seems to be some strong supported volume comming through today, and i anticipate a small bounce over the next couple of days. So i won't hold for long.

The other position im still in is BTA. I entered at 2.06. I will post some charts and update soon.

Stock i am currently in.

When i entered i thought it looked accumulative.

Very strong volume at current levels. Is it demand or supply?

I am trying to figure this out on lesser timeframes. Anyone care to share their views?

Then, looking at the hourly, it still apears to have stornger volume at support.

Definitely looks like a good base building. For mine I'd say someones happy to pick up the stock around these levels, the XJO came off ~ 10% in the last 2 weeks? BTA has more of less traveled sideways with some good volume coming in. Offers a nice tight entry either way.

GlaxoSmithKline will give guidance on relenza sales tonite. Rumours that its been fairly good

skyQuake said:

GlaxoSmithKline will give guidance on relenza sales tonite. Rumours that its been fairly good

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O really, thats veyr interesting.

But usually with the information often leaked, woudlnt a rumor traditionally cause more upward movement? Or has that been negated because of the 10% drop in XJO?

Personally, this could have been a trade I would have entered at ~$2.00, however because of the continued sideways movement I would have also exited. Too much time sideways for me.

I would prefer an entry at ~~$1.85-$1.90 if it meandered back to there.

brty