Money Management Strategy and My “Vegas [Trading] Account”

1) As I fine-tune my technical analysis, I will add risk capital to my Forex trading account (50:1 leverage) every other month to increased the number of lots and diversification within the Forex.

2) By Spring, I aim to open another trading account of higher leverage called the “Vegas Account”.  High risk/high reward (leverage 200:1?).

2) My cash account will continue to bulk longer-term ETFs investments, commodities, and cash equivalents (zero leverage).

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Journal Entry (9/3)- “In Success, Lies Seed of Your Future Failure”

I took a nap ahead of US Non-Farm Payroll release w/o setting an alarm. Despite weak stops shaking me out of CAD/JPY and NZD/USD shorts, I woke up late to see my trading acct. slightly jumped. This led me to believe that ALL my positions are working. A trusted trader tweeted about adding to his CHF longs. The sum of which and greed led me to added to a few positions myself, including re-loading CAD/JPY and NZD/USD shorts WITHOUT LOOKING @ THE CHART (FEAR OF MISSING OUT). Rule: It’s okay to pyramid positions but do not add more than your initial lots.

#CHF reached an intra-day top during the frenzy news release of U.S. NFP and sold off since on profit-taking. The hourly chart then showed a Spring Reversal with an 81-pips tail, making up 65% of the entire candle. There was at least 2 candles with complete bodies closing outside the BB prior. RSI flashes oversold condition for 4+ hours.

There were a few times throughout the day in which I didn’t care if I had gave up 50% of my overnight gains. But this isn’t the way to trade. Rule: must keep an elite frame of mind in which one will do everything possible to not give up gains.

Bottom line: An elite trader does everything possible to not give up gains. Trade what I see, not what I think. A lot could’ve happened within an hour of not being at the computer that will show up on the charts first. Even if my PnL increased, it doesn’t mean that ALL my positions are profitable. Must still go by the charts before adding positions. Pyramid positions, NOT add more than your initial lots. Fight the greed!

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$EUR/USD: Backtest Notes, 20 d 1h (8/27)

CONCLUSION: 

At ST market tops and bottoms, DMI diverges on average 24.45, signalling that the market can no longer sustain the slope of the trend. A total of 10 flashes, with a low of 14 and a high of 35 and one false signal of 16. But the low 14 was confirmed with other signals. Four times, the DMI was the lone signal. More risk can be taken when confirmed with RSI and candlesticks/reversal patterns.

Hammers and inverted hammers should have wick length at least 75% of the candle.

Prices hugging along the upper or lower band, 2-3 candle bodies closing outside the Bollinger Band, with 1 complete body closing outside the BB are enough to cause a reversal.

EMAs: the 100-day was hit the most on the hourly for a total of 19, followed by the 20-day BB heartline for a total of 14, and then the 50-day at 11. At no time was the EMA a signal of ST market tops or bottoms. Final configuration should be the 180-day for LT, hearline at 20, and the 100-day.

RSI divergence occurs once and was very reliable. RSI double bottom and top each occurs once and are very reliable. RSI overbought/oversold condition for an hour without prices making new highs or lows is enough for a ST reversal.

NOTE: Zooming out the chart makes identifying patterns easier.

Posted in Backtest, Recommendations, Technical Analysis, Trading Plan | 10 Comments

#Silver Technical Analysis (8/23)

1-yr daily-chart

Expect continuation of uptrend once the correction is complete. Silver did bounced off prior support levels, also an area of confluence (see 1-hr chart comments below).

1-hr chart

That prior support level rests just above the 180-day EMA. The white metal finished the New York session strong, with fresh bids and formed a *long-tail* Doji, a reversal candle pattern. The long-tail was a failed attempt to close below critical levels.

OUTLOOK: Watch for the market to naturally correct (pull-back) within the trendline and Andrew’s pitchfork. Buy on the bottom end of those key trends and successful test of supports. Peel profits @ prior resistance 43.97.

Any break of the trend below critical levels should be sold into. But profit must be taken quickly if no volume is behind the sell-off. Prior support @ 40.615.

Watch for minor supports and resistances between those key levels.

Posted in Recommendations, Technical Analysis, Trading Plan | 22 Comments

What Elite Traders Read…

All got great reviews, from trading psychology to harmonic patterns/numbers [Updated 8/21/2011]. I plan to fetch a few as I’m not learning any advance follow-thru techniques thru the internet.

http://www.scribd.com/doc/4781458/Day-Trading-With-Short-Term-Price-Patterns-and-Opening-Range-Brekout [Free]

http://www.amazon.com/Technical-Analysis-Financial-Technicians-ebook/dp/B000P28W3A/ref=tmm_kin_title_0?ie=UTF8&m=AG56TWVU5XWC2

http://www.scribd.com/doc/60056302/Harmonic-Trading-Volume-Two-Adobe-Reader (understanding Harmonic Trading = $$$$)

http://www.amazon.com/Smarter-Trading-Improving-Performance-Changing/dp/0070340021/ref=sr_1_1?s=books&ie=UTF8&qid=1313640634&sr=1-1 (Smarter Trading… understanding risk and its effect on your psychology)

http://www.amazon.com/Science-Technical-Analysis-Wiley-Finance/dp/0471035483/ref=sr_1_1?s=books&ie=UTF8&qid=1313641688&sr=1-1 (e.g. Daily Range Projection and Waldo Patterns)

http://www.amazon.com/Trade-What-You-See-Recognition/dp/047010676X/ref=sr_1_1?s=books&ie=UTF8&qid=1313641884&sr=1-1 (Harmonic Patterns and Numbers)

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Journal Entry (8/19)- This is How You Win!

$USD/CAD (1-hr chart)

I mostly journal (and comment) about my misbehaved trades. Why else but to… ? But today, I want to document a strategy I developed Friday, a mechanical currencies spread that works in volatile range bound markets.

Firstly, I already identified that #crude, risk (high yielding) currencies ($CAD), and safe-haven currencies ($JPY, $USD) are volatile and range-bound for the day. One of the sign was the sell-off loss momentum for the day, Friday, which turned out to be an inside day.

Since $CAD/JPY follows #crude, which was rebounding, I bought $CAD/JPY. However, the pair doesn’t move as fast as crude and was misbehaving. Thus, I also bought an inverse pair $USD/CAD. $USD and $JPY are safe haven currencies and in times of crisis when liquidity is demand, they tend to move together. $USD being backed by the U.S. Treasuries market and $JPY being backed by Japan’s current-account surplus that reduces the country’s dependence on borrowing abroad.

So, now I have two pairs that move in opposite directions.

I peeled off some profits first on $CAD/JPY after the pair loss momentum and set a protective stop at Break Even on the rest.

I peeled off some profits secondly on $USD/CAD (see chart) on a failed test of the 78.6% Fibonacci level and set a protective stop at Break Even on the rest.

Even though this is a spread trade, one should always exercise great entry into the trade. That is, you must have a well-defined entry and exits. Identify the range and intermediate trend.

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8/21/2011 #Futures and #Forex Watchlist: Inside-Days, NR2, Shooting-Stars, 2-Bar ID, WS4, etc…

NR2 = narrowest daily range relative to the previous two days’ daily ranges compared individually. This is indicative of a loss of momentum on the inside day as the market take a breath, looking for a new direction the next day.

WS2 = widespread 4, a day with a daily range that is larger than any of the previous three day’s daily ranges.

2-Bar NR = the narrowest two day range relative to any two two day range within the previous twenty market days. In this

Fading price off the open after an expansion is a consideration (short the vertical) as the market tends to move against the previous day’s opening (news) move. Caution is necessary after expansion because this is when the most attention is given to the market by novice traders who invariably get caught in whipsaws and trendless markets.

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