Pavilion103's LIVE ASX Momentum Setup Trading Thread

[peter2]

Trading update: Trades closed at open: QBE, JHC, API

Yes, API had a nice up day. This indication of demand means that API goes onto a watchlist for a BO >1.90. Along with a few others.

The portfolio has now closed 14 trades since our equity high. The current draw down is now $2051 (4%). This is an opportune time to show you another chart that I use to monitor my portfolios.

The chart shows all the draw downs that the portfolio has experienced. I've shown the %DD as the balance compounds. My aim stated in one of my earlier posts is to try an avoid a 10% DD.



Note: If the portfolio heat limit was higher eg. 15% then we would have been able to start more trades and run with more open risk. Don't assume then that the portfolio would be experiencing a bigger DD. Yes, its possible, but its also possible that by starting more trades we might have grabbed more profits and been in different trades. We would have had a different equity curve and DD profile.

Important: Start with a risk profile that you are very comfortable with. Start low. You may decide to increase your risk limits as you gain experience (at least a year or two IMO). You need to experience both good and bad periods and watch the numbers (total open risk, draw down%) before you decide what are your limits.

OK so we have a DD of 4%, that's comfortable, right? We expect to have these DDs all the time. Portfolios spend most of their time in a draw down. If the DD% is comfortable then you won't go chasing stupid trades (overtrade) or panic and decide to ignore perfect setups when you see them. Of course if you stop looking for them because of recent losses then you must acknowledge that you are emotionally compromised and your trading business is stuffed until you get over it.

 

[tech/a]

I'm confused
Why would portfolios spend most of their time
In drawdown if they are profitable

 

[debtfree]

Hi Tech/a,

I think Peter is referring to a decline in account equity from peak to a trough. It spends most of the time away from the equity peaks even though the account equity is rising over time. Hope this makes sense and along the line of what Peter meant.

Cheers ... Debtfree

 

[tech/a]

Hi Tech/a,

I think Peter is referring to a decline in account equity from peak to a trough. It spends most of the time away from the equity peaks even though the account equity is rising over time. Hope this makes sense and along the line of what Peter meant.

Cheers ... Debtfree

Ok
My apologies

 

[peter2]

New Trade: I know it's a bit cheeky in this market, but I like this chart.

FLN: Bought at AT resistance level (1.20, iSL 1.10)

 

[peter2]

EOW14 update: Pav Momentum Portfolio +4.7% ( 43% invested in 4 trades ) XAO -6.6% (14wks)

What a week! Five down days in a row. All my medium term ASX portfolios lost 3-5% this week. The Pav Portfolio also lost 3% as the selling flowed through the market.

This weeks sells: QBE JHC API
This weeks buys: FLN

Price did hit our exit triggers on CMP and SIQ during the day, but when I looked at them later in the day the prices were above the exit triggers so I'm holding on. Thin market depth makes it hard to exit at the prices we want.

SIQ: Sell (limit 1.85) on next open (Tues) to close position. I still like this chart, but the market depth is getting very thin and exiting now might prevent some costly slippage if price goes lower.

Comment: I've talked about handling the draw down last week and I'm informed that Brett Steenbarger has similar thoughts about draw downs on his blog. It's definitely worth a look and a bookmark.

I'm going to take time over the long weekend to review my performance and make any modifications to my trading plans if they are required. I think I suffered a few "rabbit in the spotlight" moments and it cost me.

 

[tech/a]

Peter

If a stops hit it should be exited.
That's what it's for. You place it in the market and if
It triggers then it's sold out at the price you can get.

If your going to have a stop where price needs to close
Below the level chosen then that should be a rule.

You've been rigid on rules yet on stops --- not?

 

[peter2]

Fair comment, tech/a.
I started this thread stating that when a price trades at our exit stop we would exit at the next open. This was an attempt to avoid price spikes we see when the market depth gets thin and there would be no disagreements on the exit price as the open is known.

I wasn't consistent with this and started selected exit stop levels at round numbers where there would be sufficient volume to exit during the day. A few trades were closed using this method as the daily volumes were sufficient. I wasn't happy with this either as these levels were being spiked through (closing higher) on the stocks with thin MD. Stocks with good depth one day showed thin depth the next. Arrgh.

Currently, I am using the exit stop as a guideline and when I see a large down bar or two down bars or price trades at/near the exit trigger, I'll post an exit for the next open. This makes the exit price known in advance and avoids the spikes. This makes all the exits seem discretionary and some are, but most will be after price trades at the exit trigger.

Yes I must be consistent and it's extremely important to be consistent. I'll continue using the third method of announcing the trade exit on the next open after I've seen price action that concerns me. Price may or may not trade at the exit. I also prefer to use an EOD exit trigger (sell next open) as most people reading this thread won't be able to look at the market during the day. It also avoids using contingent orders (which cost too much). My exits won't be the best, but they'll be known before the next day opens.

It would be more educational if people use their own exit strategies if they are following the charts we trade.

Thanks, tech/a for asking me to clarify this important aspect.

ps: This is another example of how a respectful forum community can assist people to think about aspects of their trading. If tech/a hadn't asked the question, then he and many others would be wondering about my application of the exits. If sinner hadn't asked about OZL I would have continued to treat it as a gold stock (it's copper). craft had me thinking about my categorisation of risk. debtfree has been actively engaged and I hope his trading plans are becoming awesome.

Knowledgeable and experienced people like these can't help if you don't post.

 

[debtfree]

Peter: Just a very quick one, I noticed that AMA has been strong of late while the market has been bearish. I thought a breakout of the highs of the last few day of .595 cent would be ok for a .60 cent entry with a iSL at .56 cents would be an ideal trade. Just had a look and it hit .60 and is still there at the moment.
I don't know if we have spare money there or not for a trade.
Catch up soon ...Debtfree

 

[peter2]

I agree with you that AMA has been stronger than the market for a while now. We can buy some at 0.60 and place our iSL at 0.55. We need to buy 10421 shares for our position. There is enough on offer for us. Thanks for the idea.

 

[debtfree]

Thanks Peter and I can see why you put the iSL at .55 so thanks for the Market Depth.

Big volume today like a few months ago, would be interesting to see what Tech/a thinks about this large volume on the breakout.

 

[peter2]

The AMA chart shows the recent BO-HR (at 0.55), the trend is up and price has consolidated for a few days (TC pattern) just under 0.60. The price of AMA has been going up while the XAO has been falling. It's a perfect setup for our trading plan and that's why we bought. The iSL could have been closer (0.56,0.57) but I placed it under the large buy order in the MD. In the old days that order would probably stay there. These days it might be gone at any moment. Coincidentally the selected iSL matches the 3xATR(14) trailing stop on the chart.

 

[debtfree]

Thanks Peter, very good indeed and makes perfect sense.

VSntchr will be happy to see you still using that 3xATR(14)

 

[VSntchr]

Thanks Peter, very good indeed and makes perfect sense.

VSntchr will be happy to see you still using that 3xATR(14)

LOL! I don't actually use the ATR myself, but my previous questioning was moreso to figure out how it was implemented

Friday's profit upgrade by BAL allowed it to break out, todays action confirmed it for me with the high being taken out. Personally, I'd say buy at $3.80 with a stop at $3.55 (used the 1 hour chart to find the most recent low after profit upgrade).
Chart shows some nice consolidation/churn since late April.

 

[peter2]

Tech/a: I thought your post was a beauty and worth reposting here.

My opinion is that all books and opinions are worth investigating.
While I'm reading/watching or listening, I ask myself.


(1) Is this for me?
(Does this fit in with my personality/timeframe
comprehension)

(2) What do I need to know?
(What is the crux of that being presented)

(3) How do I apply it?
(Everything appears to have merit in theory but can I apply it?)

(4) How do I evaluate?
(How can I quantify the results--much presented just cant be
coded and tested---)

People reading threads like this one and others like it should most definitely be asking these questions.

 

[peter2]

Trading update:

We sold SIQ on Tuesday's open as posted. Prices in our four open trades are trying to be positive, but remain safely above our exit triggers.

VLA is a chart worth using as an educational one to test your trade management guidelines. It's got gap opens and large bars going up and down. Your rules won't get the most out of every chart but they should ensure you earn a reasonable profit after many trades.

 

[debtfree]

VSntchr: BAL Nice choice mate.

Peter: VLA I remember a chart posted by Tech/a a few years ago which would help big time in this area. I thought it was a ripper bit of info and saved it only the other day, then what do you know, the question comes. I know you would have to be at the screen and ready to act. Anyway I'm sure Tech/a wouldn't mind me putting it back up for our viewing.

 

[grah33]

peter , debtfree: not sure if ama was a great pick (i went in too ). don't like the fact that there were a few little peak breakouts b4 this "new high" (aka breakout trade i think). may be a little overbought cause of that, would have been nicer if it was the first "new high" after the main peak b4 (16th march), as in bal. but it did have extra volume on the trade day (9 june). i take it you are trading even though market was trending down then. for long trades when is that advisable? i take it that the initial stop loss strategy is to go a little under the breakout trendline (about 7% all up)


value snatcher: wish i took that trade just wondering, what is your exit strategy. it rose up really high quickly, and i'm thinking is it good for you to get out EOD (11 june ), since it may be overbought and may go back down alot (then to reenter soon enough). or is it better to stay in (let it run rather than take profit) in case it is going to keep going up aggressively? if i went in when you did, i may have taken profit since i think it will come down significantly (went up too fast).

 

[peter2]

grah33: It was a perfect pick for this thread. Just because price hasn't gone higher immediately after you/we bought it doesn't matter. Price is now testing the BO at 0.60. We must wait to see what happens next. I would only be concerned if price goes back below that little ledge (0.57).

Yes I know the index is down, but we had some risk capital available and the AMA setup looked good. You may decide to avoid trading when the index is down. You would have noticed that there was no follow through in many of Daffy's trades. In our case we reduced risk and kept the number of trades small while the index dropped. If the market rallies then we will trade more perfect setups.

The BO on BAL has gone straight up. We won't win them all.

If I may make a suggestion, would you please try to ignore those thoughts that a price is "overbought". You mentioned this word twice. If you look at the chart of BAL you may notice that it was "overbought" for months on end when price went from 1.80 to 2.80. Do you want to get three up days or 60 up days? The BAL price may pullback and test the BO level. I don't know.

Don't worry about VSntchr's exit strategy. He's waiting for every Chinese baby to be fed Bellamy's and the stock price to hit $100. That doesn't help you.

I can sense your confusion, we all feel it sometimes when things happen that surprise us. You should have created a set of trade management guidelines and these will tell you what to do in every situation. When you see price doing something unexpected learn from it and make a rule for the next time it happens.

Remind yourself why you started the trade. Was it to get a few % or to get more. If your target has been hit, then exit and look for the next opportunity.

 

[debtfree]

Yes as I see it, we are looking for that 1st consolidation after we have broken a resistance level.
AMA as Peter said fitted that bill whereas BAL has just broken through the resistance level and now it's on my Watch list, waiting for that 1st consolidation above that level. Yep it was a great jump out of the gate if you were looking for just for a breakout trade.

I'm working overtime on writing my plans for the defence of my iSL and TS's at the moment and I have found there is a fair bit to think about in regards to all the different outcomes a trade will find itself in once activated.

Now, I don't know if VSntchr took that trade on BAL or not and it doesn't matter but it's great to have a written plan on what to do if I did. Let's say he did!

VSntchr had a buy at 3.80 and a iSL at 3.55, so a risk of .25
The trade jumped out of the blocks and hit 4.55 (intraday) .75 above his buy in price or 3 times his initial risk.
Has he plans to do anything with his iSL? Does he reduce his iSL risk a little or does he move his iSL to BE or higher. Did he have targets of 3x Risk (Peter2) to sell?

Does he have a plan for this in writing and if he has and it's just to wait for $100 fantastic, that's what Peter is on about, get it into a written plan for yourself and when it happens it's no guessing or stress. It makes it a lot clearer for me now so once again Peter thanks for the push, it's been a pain in the butt for sure. I now realise if I need a different style of trading I have a written plan already that only needs a few changes to suit the new system.

That's enough from me and it's breakfast time.