Practice Account

This is a recent screen shot of my practice trading account, some of you can probably tell which site it is from ... not bad performance eh?

Financials

One we hit the daily 2)EMA, we will prepare for another downturn.

Financials had a nice run today, I am waiting to short it ... I was about to get FAZ puts but was too slow, o well.

Energy Bull Trap

I mentioned that I have entered a small position in Energy and Health care on the 13th, I have exited both positions on 14th due to reversal.  Let's review if we could have prevent the trap.

We see that although the 15min charts showed bullishness on the 13th, however in the longer term chart, the 60min ones, it is actually still showing bearishness.

Sectors Leading the Markets Up:  Energy, Health Care, Utilities

Sectors Leading the Markets Down:  Financials, Consumer Staples, Industrials, Real Estate

Positions

Right now I have 7 positions opened:

Long:  EUR/USD

Short:  Real Estate, Financials, Energy, Material, Far East Region, Small Cap Index

Real Estate & Financials are the two that are strongly bearish .. 

Bullish Run

Fake-Outs & "Kiss of Death" ...

All of the cases are bearish, and in most cases the 5-min MACD is either sloping negatively or it is below zero.  Often it is after a "Fake-Out", so should we have a wider stop-loss so that the "Fake-Out" does not fake us out?  It is probably not the best way, because it is not really predictable to know how far should the stop-loss be placed in ordered not to be a victim of the "Fake-Out".  What I might do is, let the regular stop-loss trigger if hit.  Then pay attention to see if the next move is back to the original direction and enter back if it is reversing down.

Which would you rather trade?

For your interest, I have computed the 1-min Green/Red bars transition matrices for NDX & RUT.  The result is:

RUT

R G

R 67% 33%

G 26% 74%

NDX

R     G

R 48% 52%

G 44% 56%

For RUT, if the current bar is red, it is about 2/3 of the chance the next bar will be red as well, green to green about 3/4.  The trend is much stronger than NDX where the transition matrix has entries basically random.

Oh that was the bottom! ... maybe not ...

Worst Trade of the Day

Introducing "Worst Trade of the Day", I will post up my biggest trading mistakes if it happens daily so others who read this will not make the same mistake.

Here it is, the two blue arrows denote the trades I took today which were punished.

Block Trades & Smart Money Accumulations???

Beside focusing on NDX related instruments, I also spend time on the XIU.TO, which is the S&P/TSX 60 ETF for the Canadian market.  We can clearly see in the Friday session there were a lot of up volume surge bars in the 5-min chart.  Are those mass accumulations?

NDX uptrend or counter-trend retracement?

There is really nothing we can draw a line between the two, one thing I find it helpful is looking at time-independent charts.  MACD is one of the most used technical indicators and often traders rely on its crossovers to determine reversals and some wait for the crossing of centre line.  However crossevers tend to produce much false signals and here is why.  MACD line belongs to the class of first order derivative of the price action, its histogram describes the second order.  The first derivative of price with respect of time is the velocity, note that I use the word velocity not speed since we have directions here.  When MACD crosses up above the signal line in the negative region, it is experiencing acceleration to the opposite site.  It is changing its velocity, however it does not necessarily mean it is reversing.  A car with its speed decreasing does not mean it is going in reverse directino.  It is simply slowing down.  Therefore more often than not, when there is sideway action in the market, the MACD tend to be very close to the zero line.

To get more insight from its actually rate of change, we can look at non-time-depedent charts such as Renko charts or even tick charts if you hare the expense in subscribing to those.  Below is an example of a Renko Chart on daily NDX.

Note the quicker MACD did cross up above the zero line so it looks like it might be supporting the short-term bullishness suggestion with other indicators also pointing up.  Also note that we have a higher high.

NDX November 4th, 2008

Today I want to show a very interesting finding on the NDX intraday chart.  First note that the longer MACD has crossed up and became bullish just after 3:30 on Nov 3rd and note that its low prior to the MACD cross was 1322.43.  First thing this morning was a gap up to 1363.31 and then it retraced down towards the blue 5-min 20EMA and reversed at 1342.30.  Using the Fibonacci retracement tool (can be found anywhere online, I use 

http://www.fxtsp.com/fibonacci_retracement_calculator.htm?value1=1363.31&value2=1322.43&Submit=Calculate+Retracements+!

I entered the high and low as (1363.31,1322.43), then it gives 3 retracement amounts, the 50% retracement is 1342.87!  How close can it get?  It seems to be a good tool to determind if it is a correction or a reversal!  I was banging my head to my desk after it surged another 3%, that is 6% on the leveraged ultra QLD!

Swing vs Day Trading

Is swing trading safer and more profitable than day trading?

What I used to think are advantages as day trading:

1.  No over night risks

2.  Can set smaller stop-loss cushion

3.  Intraday swing is my friend

What I tend to think after a year of observation:

1.  Over night risk is not against you as long as you are trading with the trend.

2.  Avoid emotion and can place multiple orders at multiple times.

3.  Signals are smoother when swing trading, intraday signals seem to induce much noise.  So not every swing comes signaled entry.

A few sites I often read:

www.afraidtotrade.com

www.stocktock.com

A couple of sites that can be useful:

www.stockcharts.com (Many indicators to choose from)

www.marketclub.com (Not many charting sites offer web-based futures charts, also their tradetriagle technology is also worth mentioning)