JillyB's Blog

[JillyB]

More downward movement

Morning everyone,

So on the 4 hour charts there wasn't a signal given last night, which would signify more downward movement today. This concurs with my own view looking at the strength of yesterdays move and the fact that the Dow finished at or near its low of the day - which if I was in the trade would have been a signal for me to keep it open for another 24 hours.

So did I miss yesterdays downward move? Well yes and no. The chart below does indicate that there was a signal given at midnight yesterday morning (16th August) signalling a potential for downward movement. However the rules I attach to the 'system' are that only one trade must be running at a time. Therefore with the previous days trade still running until 7.50am yesterday, I wouldn't have placed this trade.

You may say that you would have done and perhaps with hindsight I could say the same, but I didn't have hindsight at the time and I have to trade the system and the rules I have set for it. There is a good reason for this and that is, from the backtesting I can see that, although this scenario happens occasionally, more often than not it doesn't and getting into a trade like this could potentially end in a losing trade, which what I don't want.

The system may have a high risk to reward, but from what I've seen so far it has a high percentage win rate - if I stick to the rules. So this is my reason for not trading yesterday.

However looking at the daily chart below, it would seem that there is a potential for a trade emerging here. The line is starting to pass outside the bottom inner bollinger line, which is the first stage of the set-up. It is possible that by the end of the week a new upward trade will emerge.

I realise that a lot of people on this website are waiting for the big fall down to 10,000, but I like to be a bit contradictory at times and I really don't think we will see this level just yet. In the short term I would like to see where the support line around 10,450 will hold - this was the underside of the consolidation from the end of May/beginning June. If it does then we could see a bounce upward from here, which could tie in with the signal potentially forming on the daily chart.

Well that's about all for today. If anything transpires through the day I will add another entry.

 

[ChowClown]

...yes, there seems to be a lot of work to do southbound. As you say 10450 is a biggie and on the weekly chart 10250 will probably hold things back for a while.

 

[JillyB]

...yes, there seems to be a lot of work to do southbound. As you say 10450 is a biggie and on the weekly chart 10250 will probably hold things back for a while.

I think 10,450 may be our resistance level for the moment, though after that I would see 10,380 being the next line of support. At the moment I would not expect anything lower than this. It is a strong level of support and also the line of the continuing upward trend - this connects the lows of 6 July 2005, 28 April 2005, 20 April 2005 and back to 11/12 March 2003.

If it does breach this - i.e. low of 10250 - then I would take this as the start of a bearish trend.

 

[JillyB]

30 minute chart

I've been watching smaller time frames today and in particular the 30 minute chart.

At 2pm the chart gave a signal when the previous candle closed outside the lower line of the inner bollinger and had a substantial lower shadow on it. The candle at 2pm then opened totally below the bottom line of the inner bollinger at 10,495/99 (and actually nearer the outer bollinger) - see below

The line between the candles at this point was totally below the inner lower bollinger line. The 2pm candle then went on to be bullish and to take the line between the candles back inside the lower line of the inner bollinger.

It seems that this formation - the opening of candle totally outside the bottom bollinger, following a candle with a substantial shadow - gives a signal for a trade. I want to test it more to see if it's right.

So to exit the trade - look for another candle closing outside the upper bollinger? I'm still waiting for that to check it. Dow currently at 10,570/74 - stop moved to 10,533 (current 20MA).

 

[JillyB]

Exit point & New trade

On the 30 minute chart, todays prime exit point would have been at the start of the 10th candle (including the one in which the trade was opened) which would have been 10,582. Sometimes this just works - I don't know why - 10 candles seems quite good. But a bit more scientific would be the opening of the 3 hour candle outside the top bollinger line at 10,574. This also correlates to a line of support/resistance - see below - so applying this supports the theory.

This has also given a main sell signal for the Dow at 10,572/76 (I missed the opening). So we will leave this on untl 6pm tomorrow and see where we are.

 

[JillyB]

10,500 to hold strong?

So yesterday I said it would go down and what happens? - it goes up! You can't win them all.

If part of Tuesday trade had been left on with a tighter stop then this would obviously have been closed out on - but it was still profitable - 55 points off the main part of the trade.

Yesterday the trade on the 30 minute chart worked well - I'm not sure how many set-ups this will throw up but I will let you know when it does.

So for today we have a SELL trade going from 6pm last night at 10,573/77 and I'm going to see how it goes until 6pm tonight.

Today I really do expect a retest of 10,500. It has held exceptional strong so far with the index not closing below this level, but bouncing of it. If we see a drop today and close around this level, then the daily chart will be moving more towards generating a signal - possibly Friday or Monday - for a BUY trade.

"Gasp!" I hear you cry! "Everyone else is piling on the short trades!"

I know, I know - but I can only tell you what the system generates; and as this is supposed to be a way of my testing it, then I have to go with it.

Next update 6pm - unless something interesting happens with the 30 min chart.

 

[JillyB]

Trade closed

6pm and the trade closed at 10550/54 which is 19 points profit after the spread. Not as much profit as could have been made if you had set a sell order at say 10510, but profitable nevertheless - and I spent the afternoon down on the beach and not in front of the computer - now that is worth something!

At the moment there are no trades imminent, but I will look in again at midnight to see if anything has transpired.

 

[JillyB]

Just to give you an Idea

I've just walked back into the office following a meeting and looked at the 30 minute chart.

Although this is somewhat after the event - I think it does demonstrate what I'm trying to say about the entry point for the trade.

The entry point would be 10587/91 and the exit point taken as the bottom line of the inner bollinger would be 10568/72. The exit point for the trade could be set as soon as the trade was entered - thus securing this - and as far as the entry point went - even if you missed it by a 2 - 3 points you could still take a profit of 12 - 13 points quickly and without too much grief.

 

[JillyB]

3.30pm - same scenario (Edited)

The same scenario has happened with the start of the 3.30pm candle on the 30 min chart.

Entry point would be 10,616/20.
Projected exit point will be 10,584/88 - I'm taking the MA as the exit point for this as the bollingers have widened.

Possible profit 28 points.

UPDATE 4.05pm Stop moved to 10,609/13 - to lock in a little profit.

UPDATE 4.27pm Stop hit - so took 3 points profits. Wonder if I had just left it to do it's own thing if it would have dropped? I'll let you know.

UPDATE 6.17pm Exit point would have been hit at 10,584/88 - again it is a case of setting the stop too close - as happened on Monday of this week. The learning curve continues - outer bollinger line for stop!!!! MUST REMEMBER THIS!!!!!

 

[RUDEBOY]

Hello, Jilly. I sincerely hope you all the success in the future, but, don't get sucked into your timeframe. You seem to have quite an eye for the shorter timeframes, don't get too drawn in though. Keep on and keep an open mind! All the best! RUDEBOY.

 

[JillyB]

Hi Rudeboy, thanks for the comments.
I admit my timeframes are getting smaller - don't know what that says about me? The system started off on end of day data and works quite well, except that sometimes - like at the moment - you can go several weeks without a signal being generated.

I then started looking at shorter timeframes - 3 and4 hour candles, and found that the same system worked on these, but with exiting the trade after 1 - 3 days.

The 30 minute candle charts has only started this week - I was bored at work or something - and is currently work in progress to see how it goes.

I'm trying to post the trades as close to taking them as I can, but with work commitments as well, I can sometimes place the trade, but not get round to adding it to the journal till a little later. Hopefully I'll try to get them nearer to the time, so they are more realistic.

Jilly

 

[JillyB]

6pm New trade

Whoops! Nearly missed this one.
6pm signal for SELL trade at 10,588/92

Entry 10,579/83 at 6.21pm
Stop (outer bollinger - see I have learnt) 10,611/15

Exit 10,510/14
Or 24 hours (exit 6pm Monday) which ever happens soonest.

That's all for this week - have a good weekend everyone.

 

[RUDEBOY]

Jill. I'm probably what you would call a position trader.....that's cicumstance! You, as a day trader and your method only getting signals in that kind of frequency doesn't seem right to me. I'm not a day trader, so my gut feeling may be wrong! Nevertheless, you seem quite disciplined. That's good. Look, i don't know anything more than you do, it's all about timeframe application. Good trading, Jilly. RUDEBOY.

 

[Minder]

Hi Jill, are you using any particular software that generates your trading signals, or is it just your own analysis of the charts ?

Regards

 

[JillyB]

Hi Jill, are you using any particular software that generates your trading signals, or is it just your own analysis of the charts ?

Regards

Hi Minder,
No I don't have any software that generates the signals for me, other than my trading software MarketMaker from Deal4Free (CMC). The signals are generated by the candlesticks and a price line in relation to two settings of the Bollinger bands.

I use this solely, but have a Stochastic on the charts as well, just for confirmation.

Hope this helps

Jill

 

[JillyB]

Thanks for that - this is certainly work in progress for me - and the great thing about the journal is that, knowing others are going to be reading it, makes me stick to the rules I have. If I don't then it is obvious to those reading it.

Patience is difficult, I admit. Not so much in waiting for the trade to come, but once I'm in and in profit, to let these profits accumulate and wait for the index to hit my target.

 

[JillyB]

Todays Trades

3 hour chart
Signal given at 12 noon
SELL 10603/608
Stop 10626/630
Exit 10,584/588

Target hit at 14.27 = 15 points

30 min chart
Signal given at 3.30pm
SELL 10624/628
Stop 10636/640
Exit 10,603/607

Target hit at 16.51 = 17 points

4 hour chart
Signal given at 4pm
SELL 10623/627
Stop 10652/656
Exit 10,591/595

Target hit at 16.54 = 28 points

Total for day = 50 points

 

[Pat494]

WELL done. You certainly got those right !!

 

[JillyB]

Amendment to trading plan

Yesterday was a good day for trading, but there were a lot of points left on the table, particularly with regard to the signal from the 4 hour chart.

This was due to the fact that - as my current trading rules dictate - I set the MA on the chart as my target. This works quite well for trades placed out of trading hours e.g. a signal given at midnight or 8am on a 4 hour chart and also very well for signals given on the 30 min chart. However having reviewed the last 6 months of trades on 4 hour charts where the signal came within trading hours and checked the figures I have decided to revise this.

AMENDMENT
When the signal on a 4 hour chart occurs during trading hours, and particularly on the 4pm candle, then set the target as the opposite bollinger line. Leave this trade on for at least one candle - do not close the trade before the end of the candle - unless it hits the lower bollinger.

On yesterdays trade this would have meant that instead of 10594/98 as the target, it would have been 10562/66. Thus increasing the profits from 28 points to 60 points.

 

[JillyB]

Another Thought

The other thing I've been wondering about is the stop on the trades.

I was lucky on Friday in that, although I stated a stop level, I didn't actually set the stop loss on the trade with Deal4Free. I just let the trade run - which is against my better judgement (and I admit it was just an oversight on my part), but proved to be successful. If I had set the stop at the level given, the trade would have been closed out - as it was it turned in a small profit of 29 points after the spread.

I was lucky on this occasion, and it probably the only time that not sticking with my trading plan has actually paid off. But would I recommend it?

Hmm, this is going to take some time to sort out, as I will need to look at a bit of backtesting, to see whether or not a stop actually does pay off or not. I have a feeling that the initial stop is actually irrelevant for this type of trading system, but I need to look at this further.

Setting the stop once the trade is in progress to lock in profit, may be more advantageous - but to set this at what level? It needs to be something easily seen - such as the low/high of the previous candle. I can see I will need to look at this further.

This is what my journal is about - ironing out the kinks in the system I trade. I have/had some basic rules for the system to start with and now as I'm trading it, I am adding to these and refining them.

Let's see how today goes.