For those of you who missed it, here’s my first 2-part article that I was asked to write for Traders Magazine entitled “What Traders Can Learn From Battle Managers”:
Part 1 is here: TradersMagArticle29092011.
Part 2 can be found here: Trading Is War – Part 2
May 28, 2012
I’ve been saying for a while now that I was shorting Global Indices based upon my analysis of the charts and using various vehicles (CFDs, Spread-Betting, DMA & Binaries) to access the market and build positions in line with my view. I wrote about how at the start of the month I was stopped out of my short position on the Dow Jones when price poked its nose above my 13320 No Touch Barrier Trade (it hit a high of 13336 before sliding away). You can read the full details here.
That was a great example of picking the right direction…and still losing money! But it was my fault, no-one elses. I had my barrier too close to the recent action. That was my lesson learnt. I still felt that the overall trend was likely to be down and so I took another short No Touch Barrier Trade on the 4th May. The detail of which are below.
Point 4 on the chart was were my last No-Touch Barrier Trade had come unstuck. At position 5 you can see where price had really come off the top and was heading lower. (If memory serves me right this was NFP day and the US job numbers were woeful.)
This is where I took a no touch barrier trade on my BetOnMarkets account for the 13400 level (point 6 on the chart) with a time deadline of 25th May. The level was sufficiently enough the recent highs for me to feel safe (having learnt that lesson from the previous position. No real reason for the 25th May other than I was going to be occupied the last week in May and was able to get a good price of $550 for a $1000 payout. A good return for a 3 week trade.
As we now know the Dow Jones just collapsed over May and I was pretty confident that the trade would play out which it confirmed this morning. (The trade running out at 23:59 on Friday 25th May).
Overall a good trade. I’m much better at predicting where price is less likely to go and I’ve learnt the lesson of not having your barriers too close to recent highs or lows. I’ve a few other positions in play and will update you on them over the next few weeks.
Trade well,
Paul
May 28, 2012
Just a quick post on a Binary position that I took recently on the S&P. I had forgotten about it because I didn’t expect it to move so quickly to target!
I took the position back on the 4th May (position 1 on the chart) after price broke down strongly and broke a weekly trend line that I’d drawn that dated back to the start of Oct 2011.
I looked at talking a longer term position based on analysis that the Indices may trundle lower over the summer months. With that in mind I looked to take a touch barrier trade for the level 1305, which was based on a series of S&R levels seen across the charts. I also took the position to the end of September 2012 – giving it plenty of time to play out. I was able to get a good price with a 54% profit margin, almost a 2:1 R:R and was happy to take the trade.
One of the enjoyable elements of longer-term Binary positions is the low-maintenance requirement of your positions. Once they’re on, the risk is known and you can let positions just play out. I just take an occasional daily glance in between my other tasks.
Well the S&P (like most other Indices) sold off hard yet I was still surprised that price had hit my target of 1305 just less than 2 weeks after the position was opened.(Point 2 on the chart). I certainly had no inclination that prices would fall that fast or hard (the equivalent of 70+ S&P points).
Trade complete I’ll now go back to scouring the markets for more good trading opportunities.
Trade well!
May 13, 2012
I’ll take grey hair over algorithms any day
Courtesy of Tradingfloor.com a nice piece on risk management, algos, macro traders and how banks operate.
May 9, 2012
I had another 2 Binary positions close yesterday. Both on the NASDAQ. As always lets cut straight to the chart.
NASDAQ – WEEKLY
The NASDAQ has been on a bullish tear north for the first 13 weeks of 2012. It was simply unstoppable and trying to short it would have been futile (not that I had any desire or signal to do so).
However at the end of the first week of April we had our first bearish bar that also closed below the low of the previous weeks bar. Furthermore there was intense selling pressure across the whole board of Indices for that week ($DJIA), FTSE100, DAX, S&P etc) which was enough to make me decided that whilst I did not know if we’d made a top I certainly thought we’d have a few week of sideways movement at best. With that in mind I looked to buy a No-Touch Barrier trade for just above the recent high of 2793. I took a Barrier position at 2820 to complete on 8th May for a 35% profit. This is the line at point 1.
Price continued down for a couple of weeks and I was happy with the position. However the weekly candle that started on the 22nd April and completed on the 27th was a very strong bullish reversal candle (if you’d looked on the daily there was a nice quick swing long trade). When the candle completed I made a decision to stay with the original position because even though a bullish candle and with the weekly ATR at 103 points I felt that it was unlikely to put in the 80+ points required in the 7 trading days left for my position. Having looked at the daily chart I made a decision that price was at best likely to stay in a range or at worst to hammer north and take out my No-Touch at 2820. So I thought Id be smart (!) and but myself some insurance (or so I thought) 
with a No Touch Barrier for the level 2595 which was 33 points below the recent lows. (Level 2 on the charts.)
Everything was going fine for about 6 day until NFP last Friday when on the back of poor numbers the Indices started dropping. And boy did they drop! The NAS closed on its lows of 2628 on Friday. The Monday trading session was a bullish reaction to the Friday Sell-off and I thought that with one day to go I would perhaps get away with my position! All was going well yesterday on its last day until about 15:45 were price dropped below the 2600 handle and hit my level with about 6 hours to go for the position to complete! Grr.
So my 2820 No-Touch barrier completed for profit but my 2595 No-Touch Insurance(!) failed with 6 hours to go. Frustrating but thems the breaks. What did I learn?
As mentioned previously this is now the third position were I have been taken out on too tight stop / Touch levels. They have all been less than 50 points and have all been hit. 50 points is nothing on a weekly chart so going forward any no-touch levels will be taken at least 50 points above the line of Support & Resistance I’m trading against. FX Binaries are a relatively new addition to my FX & Indices arsenal so there will always be learning points and this is one of them.
Also it probably would have been smarter to have the position close the night before NFP. That way you escape any of the volatility that is brought on by those numbers.
Anyway frustrating to have the profits of one position eradicated by the losses of the so-called insurance but there you go. You live and learn! (And if you’re smart you’ll learn from my mistakes).
Trade well.
Paul
May 9, 2012
Readers who know me well will know that other than Trading & Financial Markets one of my many other interests is Military Aviation in particular Air-To-Air Combat with a special emphasis on the Battle of Britain. As 3rd generation Royal Air Force that shouldn’t come as much of a surprise.
On the 24th March of this year I spoke at the Traders Expo London about ‘How To Become A Great Trading General’ during which I spoke about how Fighter pilots have to maximise their combat persistancy by looking to take high-probability shots and how the Head-Up-Display in Fighter jets helped pilots a) maintain Situational Awareness (SA) during hi-work load engagements and b) work out the probability of success of their missile shots and gun attacks.
I talked about how as Traders we too need to look out for low-risk, high-reward trades and be able to determine the probability of our trading edge in order to maximise our persistency within markets.
With all that in mind reader please indulge me as I re-post this blog post from The Aviationist showing an F-16 fighter jet quite squarely in the middle of a Eurofighters gun sight during a Within Visual Range (WVR) Disimilar Air Combat Training (DACT) dogfight.
I’m sure it made for a rather lengthy and perhaps one-sided de-brief session afterwards!
May 8, 2012
Over the last couple of days I’ve had a few european centric Binary positions closing on me. Whilst not necessarily taken with the French elections in mind they certainly played a part in their outcome. One win and one loss. Lets cover the losing position first:
EURUSD
After a wild start to 2012 where the price dropped down towards the 1.26 handle EURUSD has been above 1.30 and had demonstrated stubborn support of the 1.30 level. With this in mind on the weekly chart after I saw a few bounces off the 1.30 level I decided to place a No-Touch Barrier trade at 1.2973 with a timeline of EOD Monday 7th May 2012. (Position 1 on the chart). Due to the nature of the Eurozone I halved my normal risk and only took a half position size. Furthermore I also took out a No-Touch Barrier trade on the other side of the price action at 1.3310 to offset any possible loss.
The trade was playing out fine despite the backdrop of the French & Greek elections and standard Eurozone shenanigans. Fridays NFP numbers did not help however when I looked at the position on Friday afternoon with a Trading Client the position was in a healthy state. Whilst we discussed me closing the position I decided to hold on to Monday. Of course we now know that was a poor call on my part.
The market closed on Friday evening at 1.3081 which was 100 points above my barrier at 1.2973. On Sunday evening I sat down to watch the markets and the news to see that Hollande had won the election and that the EURUSD was being called down approximately 70 points on the open. The EURUSD gapped opened lower and then dropped lower still past the 1.3000 level and then past my barrier at 1.2973 bottoming out at 1.2953 20 pips past my barrier.
What did I learn:
1. 1.2973 is too tight a stop for the barrier – it should be about 50 points above / below levels of S&R as a minimum (remembering being stopped on $DJIA trade as well)
2. Taking a position into an election weekend was much too risky. Foolhardy Id say. I would have been smarter to just close the position on Friday evening and take what the market offered me (It was in profit).
CAC = (Described as FRA40 by my broker)
This trade was quite simply a No-Touch barrier taken for the month of April into early May. Doing some simple TA meant I formed a view that price was unlikely to get above 3300 for the month and so I took a No-Touch Barrier at 3318 to finish on 7th May. Despite the strong reversal candle in the 3rd week of April the CAC just went sideways. Presumably now we have a conclusion for the French election it will choose a new trend.
So two positions, 1 loss, 1 in profit. The losing position on the EU was a half sized position and the CAC position was a full position. The offset EURUSD position is fully sized and is live until the 16th May – so we shall she how that position fares.There were plenty of learning points from the EURUSD trade which I’ll incorporate into positions going forward.
With Hollande in power, lets see what happens to the EURO and the CAC over the next few months!
Until next time, trade well.
Paul
May 7, 2012
Here’s an elegant piece from Brian Lunds blog on StockTwits. He describes some simple rule for trading a reversal hammer. Many of the rules fit my own style of trading this price action pattern.
http://bclund.com/2012/05/07/5-rules-for-trading-a-reversal-hammer/
Brian’s blog is a good read so you may want to sign-up to his posts.
Enjoy
Paul
May 7, 2012
Here’s an update on a Binary Option position that closed on Friday afternoon on the back of a week of good news for AUD short-sellers. You can read the first part about the initial H&S set-up here. The second part with an update on the first part of the trade being closed out is here.
Just a quick reminder. I traded a daily Head & Shoulders pattern on AUDJPY using Binary Options. I placed the trade at point 1 with a No-Touch barrier near the level of the right shoulder and I placed a Touch Barrier trade at 81.50 (point 2 on the chart) which was a target based on a standard chart pattern.
As mentioned previously the No-Touch barrier completed some time ago and I was pleased with the result. The Touch barrier had a far lengthier timeframe in place and I was still not convinced that it would make that target. Well thanks to the RBA, who cut interest rates early this week starting a sell-off in AUD, which only accelerated off the back of poor US NFP numbers on Friday. My 81.50 target was hit on Friday afternoon. And as I write this on Sunday evening the AUDJPY has already gone nearly another 100 pips past my target.
So overall a profitable position built up from two Binary Option trades. Hopefully you can see how combining my normal technical analysis of the markets, utilising simple chart patterns with Binary Option plays you can see how I can take a further low- maintenance positions in the market alongside my normal trading style and instruments.
Until next time, trade well!
May 4, 2012
This week has seen the failure of a Binary No Touch Trade on the Dow Jones and the re-attack of it based on todays poor NFP numbers. The chart will explain it all. As always there’s useful debrief points to learn from.
1. The Dow Jones has been in a nice up-trend since early December of last year. When it double-topped in late March 2012 aligned with a turn down in momentum on a weekly chart I decided to take out a No-Touch Barrier Option for the level 13320 with my broker Betonmarkets . The idea was to pretty much set and forget the trade. Because of the strength of the move north and because I was going counter-trend my position size was halved in size from normal.
2. After Double-Topping price rolled over and dropped approx 600 points from 13300 down to 12700 area in approx two weeks (nice move eh?) before moving back north and creating a (sort of) symmetrical triangle in a up-trend. Standard texts would say that such a pattern should break to the north which it duly did. I was monitoring, but comfortable with the situation. I figured price may likely test highs before heading south hence why my barrier level was a good 10 points north of the previous high. Safe. Or so I thought!
3. Last Friday price was still pushing north but I was comfortable due to the candle wicks telling me that there was selling pressure coming into the market. In fact if Id been at my desk I may well have added to my shorts due to the patterns that were being printed. Anyway I left the trade to run. When I did my weekend analysis on the Sunday there was a change of weekly momentum to bullish which did raise my concern.
4. Tuesday morning the trade was fine….by late afternoon on Tuesday it was all over! There was a strong move mid-afternoon which punched north. It broke through he last high, went about 16 points past my barrier level and then fell away. Trade over. Loss taken. Boo-frickin-hoo. I wasnt at my desk then, which is a shame as it provided a fantastic shorting opportunity. But there’s always another chance to enter a trade so I decided to wait for my chance.
5. Whilst there were other chances to take both a direct and binary entry short on the Dow I decided to wait till after the NFP numbers were released and see how the market reacted. Well their numbers were bad and the market reacted accordingly..SELL, SELL, SELL! Across the board there was major selling of all Indices and I was able to take advantage of that melee. I re-entered a Barrier Trade for 13400 and got a good price. After my first attack failed I was happy to re-attack and take another position.
Have I thrown good money after bad? Possibly. Have I just tried to average down on a loser? Nope, not by my definition. The first position was closed out. Am I fighting the market? Very possibly. Am I happy to back my judgement. Yes. Will this mean a big fall in the Dow after a triple top then bad jobs number? Who knows? Certainly not me. I just take the trade based on my view of the market.
This position has a time line of end of day, 25th May. I’ll keep you posted on its progress.
Until next time, trade well! (And enjoy the Bank Holiday those of you in the UK)
Paul
May 1, 2012
I’ve mentioned that I had a few longer-term Binary Positions that are running and I thought I’d update you on a position that closed out last night.
After many years in decline the USDJPY trend broke with a strong move north from the end of January. People far smarter than I can explain why it happened. All I know is that after 6 weeks of moving north it ran out of steam around early March. After a such a strong move on the weekly chart I expected there to be a reaction. I missed an opportunity for a normal short entry off the daily chart on the 21st March and had just put the currency on the back burner of my watch-list.
At the start of April I felt that the retrace / reverse would go much further and I used a Binary Option No Touch Barrier Trade as I believed that price was unlikely to get towards a level of 84.50 before the end of April. This is the line we can see at Point 1. I took it on April 9th with a close of April 30th.
Despite having a bullish reversal candle pattern (one of my own) on the week of 15th April I decided to stay with the trade and it played out in my favour. So you might say, nice work, well-done, profit in the bank. Alas, no.
So yes, I did make profit from this trade….but I’m not really happy with myself over the trade. I was late to the party (about 3 weeks to late!) and as such my reward to risk was woeful…in principle I look to achieve a minimum of 20% profit on my trades as this keeps my overall expectancy on the right side of the line. Whilst Binary Options on FX markets are a relatively new addition to my arsenal I should still know better than taking low reward trades.
As an aside I also have a quarter sized No Touch Barrier position on for 79.50 on USDJPY which expires on 15th May (the line you can see at point 2)…….I’m not expecting that to play out in my favour but I’ll keep you posted.
So profit from this trade….whilst the analysis was good….the execution was poor in terms of reward to risk achieved.
We live and learn.
October 12, 2011
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