08/05/2012 NASDAQ 100 – Once cancels out the other!

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