17 April 2014

GBP/USD : Long @ 1.6803

  • New trade here. Cable cleared weekly and daily overhead resistances above 1.6800. Fresh long initiated at 1.6803, stop  close below 1.6750. For now, go with strength and see where it takes us.
  • Size : 0.5 risk unit only.

16 April 2014

Copper : Same Same Still

  • First attempt to re-sell Copper (at 304.10) unsuccessful, thrown off by dovish Mar FOMC minutes. Rally high of 308. Cut at 305.70 when it pulled back.
  • 11-Apr : Try again, sold HGK4 @ 305.
  • Today : Added on. Sold HGN4 @ 298.35 (equivalent to HGK4 at around 298.80). Total short now back to 2RU (risk units).
  • Monthly : Big SHS top still valid. Neckline is broken. (Last month was first close below).
  • Weekly + Daily : Price action since mid-Mar is a bear flag consolidation of the steep decline. Bear trend resumption anytime if not already under way now.

04 April 2014

Position Update for NFP

  • Long USD/CAD (2 Risk Units) @ 1.1007
  • Short May Copper (2RU) @ 304.10 
  • Short Dec16 EuroDollar futures (1RU) @ 97.69 [Will add into weak market if we get a strong NFP tonight]
  • Overall risk level : Medium

26 March 2014

USD/CAD : Classic Pullback

  • Triangle upside breakout on weekly and daily charts. This current pullback to 1.1150 now is the classic pullback to the breakout point which is the theoretical 1st pyramiding entry. Bullish outlook on monthly chart is intact.
  • For someone without any outside agenda, this is the best entry point to put on a long position. Abort on failure to hold above the triangle. Good risk/reward for 1.1455 objective.

25 March 2014

Review 1Q2014 : Made Budget

  • As per "Style Shift" post, have made the locking in of P&L (to ensure a regular monthly salary (S)) a matter of utmost priority over the aesthetics of riding a trade trend all the way until a reversal is indicated. Enforced pragmatism over technical elegance given that I am now fighting for financial survival.
  • P&L by month as follows : Jan = +0.6S; Feb = +0.2S; Mar = +2.3S, final 1Q14 P&L = +3.1S ie just made target for 1Q14. Squared everything now, P&L all locked in, no more trading for this month/quarter.
  • Peak Mar P&L was +3.1S, at which point 1Q P&L was +3.9S. I promised myself then to make sure it (1Q P&L) does not fall back below +3S no matter how incomplete the trends looked. Thus, given the pullback today, have closed all risks.
  • Where I always fell short in the past was to allow open P to drop back whilst waiting for the reversal signals from the longer term charts to get out. In this case, charts all still look good, but all I care about now is to keep my +3.1S and collect my salary. [Making money was never the problem for me; it's keeping it where I let myself down].
  • My money was made in short Copper and long USD/CAD this quarter. Lots of other attempts elsewhere which did not work, but small loss percentages indicate that strict trade discipline was maintained. (see table).
  • Will be back in Apr. Only 1 outstanding GTC order - limit sell EDZ6 some way higher up. Everything else can wait. Am not even going to turn on my screens.

EUR/USD : Roller-coaster, Close Shave

Where now? No clue.

In the end, thankful for getting stopped out (16:00 1st spike) after France PMI data came out stronger than expected. If not, I would not have pulled my sell stop (pyramid) at 1.3783 and would therefore have been caught with an even larger short into the 1:00 am squeeze to 1.3875 (2nd spike).

23 March 2014

An Evening with Mark Knopfler

One of my Guitar Gods. (Link for iOS viewing)
[Brothers in Arms at 49:28]

22 March 2014

ED Futures : Changed My Mind

  • Sometimes I just talk nonsense eg here (ED range trading). This is exactly the kind of thinking that can kill an interest rate trader. FF at 0% for the 6th year running with nowhere to go but up, QE in the process of being unwound, "considerable period" being defined, etc. Wtf was I thinking, trying to go long EDZ6? Silly boy!
  • Revert to my natural bearish stance. Make the assumption that current price action is the right shoulder (of SHS top) with RS highs already in place, and formulate new trade plan based on this.
  • Back to selling rallies. Kill that range trade thought (cause one get royally fuxxed should it start trending instead). Pulled my buy orders (wonderful Saxo platform, can place/change orders anytime, even when markets are closed)
  • Completely agree with these guys - Credit Agricole and Citi.

21 March 2014

Style Shift : Trend Trading with "Working" Characteristics

  • Last 3 years' trading here has been trying to say the least. Serious capital erosion, negative income, inflating expenses, personal finances dire. No longer can afford big swings in trading P&L. Major revamp called for, survival at stake. Fighting!
  • Weakness : Allowing open profits to disappear (and then some) whilst waiting for trending trades to perform. Applies especially to "stale" trades ie those that show promise in the early stages, suck me in, stall and eventually reverse sharply. Tendency to build up large risk position whilst market is in process of stalling, followed by inertia when sharp reversals inevitably occur and watching positive turns negative, is THE fatal mistake for me. [In my defence, I am always very disciplined in taking losses on "new" trades that fail]. 
  • Solution (step 1) : Abandon the "Run Your Profits" maxim. Conventional wisdom that one should squeeze as much as possible from the few trends each year is wrong for me. I did very well in 2007 & 2008 following this but those were exceptional crises years in which trends kept going on and on. Most other (normal) times, trends do not last for months on end. Kill this mentality of T4L by sitting on trend trades.
  • Solution (step 2) : Approach T4L as a job, to earn a fixed monthly salary. Trade entry criteria still as before, ie based on chart patterns of trend continuations and reversals. Difference is, once profits on open trades hit monthly salary level now, either close all trades or lock in at least 80% (non-negotiable). Then restart from zero (or continue with the 20% balance open positions). This forces periodic risk resets to (near) zero (= level at which I am most disciplined), eliminates inertia when things go wrong, and also necessarily mean that there are no "stale" trades for me to bury myself over.
  • Trade off is extra-normal large profits (and big losses) vs consistent smaller profits with almost negligible risk of self implosion. After my experience of the last 3 years, consistency profitability, however small, is much welcomed.
  • Trading volumes and associated costs are naturally higher with the new (churn) approach. Also very hard work (almost like having a job again), because when monthly salary target levels are reached, I am now having to watch hourly charts for reversal patterns to lock in profits at optimal levels. Once out (in the midst of a trending market), there is much anxiety in re-entry (fear of missing trend). I now spend a lot more time watching very short term charts for both getting out and going back in. The autopilot approach is no more. It's like interbank days all over again - hard work.
  • So far, so good. Much reduced P&L volatility, and positive performances YTD. Today I was able to make a cash withdrawal for my 1st quarter salary out of profits in my futures margin account. Best piece of news to share here for ages, a cause for celebration. Periodic withdrawals reduce risk of overtrading too.
  • [Note that this new approach does not mean my monthly profit potential is limited to the salary level. Eg this month, I had 3 resets towards zero = made 3X salary].
  • Progress will be driven by increasing trading size as and when account equity is increased. This clearly will be dependant on making enough to have retained earnings left over after salary is paid out. 

20 March 2014

EUR/USD : Crossroads Part 2

  • FX markets interpretation of FOMC changes = hawkish = firmer USD.
  • Monthly : Traded back to below the upside breakout line.
  • Weekly : Possible evening star being formed = reversal to downside.
  • Daily : Yesterday's FOMC driven price action = strong reversal. Today, an uptrend line is being tested.
  • Trade : Initiated fresh small short position at 1.3799. Go with the downside reversal for now. [Neglected to look at the chart this morning, or else would have put on at a better entry level]. Gotta keep at it till it works.

ED Futures : Range Trade

  • Switching coverage from EDZ5 to EDZ6 (last traded 97-73).
  • After digesting all that was said overnight post FOMC, my take is that it's not time to get overly bearish of Rates markets yet.
  • Chart readings reflect this. Monthly chart has been in a large trading range [98-06, 97-63] for the past 6 months (which  happens to correspond nicely with the 32% and 68% Fibonacci levels of the big down move from 98-74 to 96-95). Last night's trading after the FOMC changes have merely driven us down towards the lower end of this large trading band. I cannot find reasons (chart patterns) to get involved from the daily and weekly charts.
  • Given I am already invested heavily on the Fed tightening side (long USD/CAD and short Copper), will try to buy EDZ6 and ZNM4 on dips to go the other way. Both are steep positive carry trades.
  • Big picture : Possibly in the right shoulder formation phase of large SHS top. If so, then the real bear trade is probably not until we get a break of 97-20 or thereabouts.

19 March 2014

USD/CAD : Breaking Out of Triangle Consolidation

  • Monthly : Periscope breakout.
  • Weekly + Daily : Triangle consolidation since Feb. Upside boundary is at 1.1166, being tested now (last traded 1.1171). If upside break confirmed, target is 1.1455. (The periscope objective is of course much higher).
  • Trade : Has not been the easiest of trades given the choppy action within the triangle. But patience and sitting tight on properly sized long position about to pay off, I think. Now that we have a new scenario with a clear exit plan, the long trade should be easier - exit (or at least temporarily reduce) if breakout fails. 
  • Long standing buy stop-in at 1.1166 filled earlier. [+3x1.1100 & +1x1.1135 & +1x1.1166 = +5x1.1120 average].

16 March 2014

Manchester United

Clueless. Useless. Hopeless. Loser. Destroyer of Dreams. 


15 March 2014

USD/JPY : Into Storm Seas

  • Monthly : 5-wave upmove from 75.30 to 105.44 looks likely complete (although a further new high cannot be definitively ruled out yet).
  • Weekly and Daily : Bear flag consolidation looks almost over and ready to crash. Break point on daily chart is 101.40 (closed below last night, albeit only just - not penetrated deep enough to be convincing yet).
  • Compare the USD/JPY daily with the Copper weekly. If the former follows the path of the latter, expect to see a powerful downmove soon.
  • Various downside targets possible. eg 93.77 previous 4th, measured bear flag objective around 96.63.
  • Don't be fooled into thinking USD/JPY looks cheap. Don't go long!
  • Copper, S&P500, USD/JPY all telling a consistent message. Going forward, would be a buyer of bonds on dips.

S&P500 : Spring Bear

  • Weekly : Close last week = dark cloud cover. Should see follow through next week to around 1780 where we shall see if the uptrend line holds.
  • Daily : Since the shooting star last Friday + evening star thereafter, market has been soft (as per candlesticks theory). Last night's close at 1839.50 is below a significant previous high at 1846.50. Expect the coming days' trading to either 1. be choppy while we try to form the right shoulder of a SHS top, or 2. we go straight down with some force. In any case, being short is right.
  • Trade : -1859 / + 1839 / -1844. So worked into a small starting short position at -1864 average. Planning to build on this patiently. Will not lose money on existing position with protective stop below entry. It's the new positions where the play is.

14 March 2014

S&P500 : This Little Sucker Got Lucky

  • Shorting US equities. Many have tried, many have died trying. True sucker's trade. Even so, after a long period of absence, yours truly put on a new short 2 nights ago, -ESM4 @ 1859.
  • Trade decision based not so much on SP500 technicals but justified on divergence between  Dr Copper (bellwether says serious growth slowdown) and SP500 chart (everything hunky dory).
  • Now we have a reversal on SP500 daily chart. Original stop loss set based on cash new high above 1887.50 brought down to at worst a small profit on original trade entry. Watch weekly closing as well - possible reversal to downside.
  • [Was a toss up between selling ES and buying USTs. Given my natural inclination to be short bonds, decided on ES. Copper chart has tempered my bond bear disposition].

11 March 2014

Copper : Finally ...

  • Much excitement in the Copper market right now. Looks like neckline of massive 6 year SHS top is finally being put to the test.
  • If one believes in Dr Copper, then a serious examination of the message from this chart is called for (eg implications for health of equity and bond markets, do I really want to be short bonds?, etc).
  • Short Copper is by far the biggest risk I am running now. Overwhelms everything else so perhaps I should just square up the others and focus on managing this one big pot of a single ingredient.

08 March 2014