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The week that was:
The long awaited breakout is here! So where to next? With the S&P finally breaking its range we see the possibility of several markets being uncorked, ranging from resources to the currently congested FX markets.

With the possibility of several trending markets or instruments at the same time we can push our risk and heat allocations out to maximum as the opportunities present themselves and hit any strong moves as hard as we can, these are the times during the market cycle that we switch on and engage each opportunity knowing the odds have now moved in our favor.

If the move sustains, we can adjust our risk as our stops move up and continue the engagement. If the move stalls, our risk management will ensure it is nothing more than another experience from which to take feedback and evolve our system.

If your trading plan is in place then no excuses are left, step up and play ball!

FX:
Just the two live trades taken during the week, both winners. The rules for this system are fairly solid for the two time frames I’m currently trading so picking opportunities is becoming easier, and even signals passed on caution at this early phase are performing well which is what I like to see. I only have one week of trading left before the trading base moves countries again for a stint based out of Melbourne, Australia, so I’m moving the risk to a minimal % allocation to fine tune position size calculations on the fly as the trades confirm. Once settled in the new base I can then focus on an uninterrupted trading stint few months.

Equities:
No stops hit, no actions during the week. Several positions will be taken during the week ahead though due to the S&P500 achieving this breakout.

Equity Sectors:
Providing this breakout settles into a trend I’ll be looking for any opportunities to take some sector based trades again.

Commodities:
No new action, just the one positions still running.

Results:
FX : +4.0R
Equities : R
Equity Sectors : R
Commodities : R

Housekeeping:
Still working on that FX backtesting workload.

The week ahead:
Not much on the radar. A few news announcements but just business as usual for end of month.

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The week that was:
The search for the trading holy grail seems never ending for some traders. I remember when I first started trading I’d recently seen a documentary on the collapse of L.T.C.M, an event all traders should research. My question to my mentor was did the formula they utilized work, and with the correct risk management is it a valid strategy. His eyes glazed over and he sort of let the question pass. Having now been in the markets for many years I can now appreciate his response. With a multitude of trading programs, systems and secret indicators you can spend a lifetime evaluating them all searching for the perfect indicator that pumps out the winning trades day in, day out.

Of course it doesn’t exist. Every system, regardless of if it’s programmed, an expert or your own eyeballing of the chart, will fail at one point or another. Deciding when to act on the signals our system generates is the difference. I’m not talking about cherry picking, I’m talking about hard fast rules as to when you can trade, and when you can’t. Markets change and evolve over time, so there is no one indicator to suit all conditions. Sitting in front of a chart and watching price action will bring you closer to being a successful trader than chasing the latest whiz bang, multicolored, proprietary indicator on a never ending search for perfection. Manage your risk, and the wins will follow.

So a good week for the S&P and markets in general if you were still bullish. A strong break of the weekly down trend gives us a good foundation to break out of this sideways congestion.

FX:
Although we’re still grinding out this congestion there were some good signals. Monday was the busiest day for the second week in a row and gave the bulk of the trading for the week for a +1.5R return for the week. The system is performing well and picking trades out of the price action is coming easier. I’m annoyed that the result wasn’t better though as several distractions led to missed trading opportunities during the week. With the system holding up well focusing on execution is the next step before moving to the first level of post testing risk.

Equities:
Still sitting in four long positions, no new actions for the week. A good break from this range will switch on the next round of buying for me.

Equity Sectors:
Waiting for the break of this congestion still on the index.

Commodities:
Still holding the one position that has responded well to the current surge.

Results:
FX : +1.5R
Equities : R
Equity Sectors : R
Commodities : R

Housekeeping:
No stops to move, just more of the same – FX backtesting and looking for opportunities in the market to capitalize on with the right instrument for the trade.
Install alarm software to counter missed trades from getting distracted while waiting for the confirmation.

The week ahead:
Some good news could be enough to push us through this range, with Thursday the most likely candidate for that. Time will tell though.

The video wrap is up – Week ending 2009-07-10

The week that was:
So a big congratulations goes out to Mark Webber for winning his first Formula 1 Grand Prix from his first ever Pole Position, and what style he did it in. But his formula one journey was anything but smooth. This victory is the result of seven and a half years of hard work involving uncompetitive cars, mechanical failures, and the odd driver error. Against huge odds he found the money required to move half way around the globe from Australia to Europe, and through hard work and talent worked his way through the ranks while less talented drivers with more money behind them waltzed into big name teams. At any stage he could have decided it was all too difficult. The odds of all things lining up at once, car, team, form, are against most people who step into the cockpit of a formula one car.

With sheer persistence and determination to be the best you can be at your chosen pursuit, anything is possible. Maybe your trading account isn’t as big as some of the other players trading exotic markets and instruments, or your schedule doesn’t allow you to trade at the times you would like to. If you stick at the game long enough, all these things will come to you in time, along with the rewards they offer.

With the short term trend of the S&P to the downside towards the bottom of our channel and forming the head and shoulders pattern it was bound to be an interesting week. Oil did indeed break out of it’s double top on the daily chart, but the S&P failed on a few attempts to break out to the downside holding onto support.

The move on the JPY was the big news on the FX markets as a breakout from the range saw a sharp move as many trading systems were triggered. A nice trend on the JPY here should give some good trading opportunities.

E-mini’s:
So I’m officially shelving the E-mini system for a while. There are a few reasons for this. Trading conditions were very good when the daily range and intraday volatility were much higher than they are now. Combined with a strong trend this allowed good trading opportunities for the system I like to trade. The change in conditions also mean the better trading is near the open and close of the market, which is about the time the FX markets are winding down, or long done for the day. So from an effort perspective the better trading zone for me is the FX European session at the moment. The nature of the FX markets also allow for better risk reward ratios, and a more casual approach with longer time frames and many pairs to pick the best trades on any given day. The current congestion compared to the great trends we had earlier in the year are another factor as signals are now few and far between. Once the FX system is settled I will come back to the E-mini’s and also investigate the Euro Stoxx E-mini contract which has been on my to-do list for a long while now and offers the same trading time as the FX markets.

FX:
Signal wise it was a great week, trade wise just the one breakout that fell back into the range for -1.0R loss. The breakout signals are quite common in the current market conditions and the new system seems to sort out the better signals which the previous breakout system was unable to do. I’m still trading this at minimum risk while the system is refined and due to the continued congestion giving less long running directional trades.

Equities:
Two new trades were taken for the week on the HK listed China shares. Both survived the week but are under performing. Ideally being able to trade the Shanhai Composite constituents directly would be best, but until I find a CFD provider offering this product the HK listings are the best option. Four positions running now but no great strength anywhere, a run back up to the top of this range is needed to keep them from hitting stops at this point.

Equity Sectors:
No trades while we’re in congestion.

Commodities:
No new trades, one trade running still and somehow it continues to hold on after having another tough week.

Results:
E-mini’s Cash : R
E-mini’s Pre Market : R
FX : -1.0R
Equities : R
Equity Sectors : R
Commodities : R

Housekeeping:
FX backtesting continues! It is painful but necessary.

The week ahead:
CPI and Retail Sales numbers here and there and JPY commentary on interest rates which might spur some more trades on the JPY crosses. With a long bias on all the trades maintaining this support level on the S&P or some positive action would be good!

The video wrap is up – Week ending 2009-07-03

The week that was:
So I’m in the mood for a poker analogy. After a month of congestion a few people are beginning to sweat a little. Few signals, stunted moves, the brokers are the only people guaranteed to make money in these conditions. In playing poker we sit back while a series of starting hands are dealt. If the odds are low we fold our hand and pass while we wait for a better opportunity, this could go on for hours. We win a little, we lose a little, then things start to go in our favor. A few good hands and we build to a strong position from which we feel we can control the situation. Things seem to come to us easily now because we have built a position of strength by waiting for the best odds with the highest probability outcomes. You don’t expect to win money with every hand, you expect to lose a little, frequently, then load up when the winning cards are dealt.

Trading is no different, it’s like a never ending slow game of poker. Sometimes the odds will be against a particular system, market or instrument for days, weeks, months, perhaps years in some cases. Then everything lines up and we can play the game the way we want. Everything seems easy because we have waited for the odds to be in our favor, and the correct risk management during the tough times when the odds moved against us ensured our capital was in place to make the most of the opportunity.

E-mini’s:
Although there were a few moves on the S&P during the week I’m still waiting to see a firm move out of the range to suite the system I’m trading, so just observing price action for now.

FX:
Given we are still congesting into the range on most of the FX pairs there weren’t a huge amount of great opportunities. The longer time frame of the two that I’ve completed testing on had some nice setups but I’m still getting a feel for how these signals play out. Just the one trade for the week which washed out the stop before heading where I wanted it to go which seems to be the theme lately. Still a mountain of testing data to get through which remains at the top o the work list.

Equities :
No trades, no stops, just moving around in this congestion. I’ve started exploring trading some Hong Kong listed China shares as I can do it via one of my CFD brokers which is far more convenient than trading the real shares given the pain of opening accounts in another country, splitting up trading funds etc. CFD’s also allow me to control the risk far better.

Equity Sectors :
Congestion so no moves.

Commodities :
For the most part some range bound movement, and nothing that fitted within my rules. Oil has consolidated a little now forming a possible double top on the daily chart that might signal a down move here if the USD strengthens.

Results :
E-mini’s Cash : R E-mini’s Pre Market : R FX : -1.0R Equities : R Equity Sectors : R Commodities : R

Housekeeping :
FX Backtesting & looking at data feeds for HK listed China shares.

The week ahead :
Interest rates due out for the GBP & AUD, a few trade balance numbers and some employment numbers. It should be an interesting week. Seeing if the S&P can hold it’s support level of break to the downside is what will be occupying the attention of most traders.