China's Equity EOD/EOW Breakout Extravaganza

[China Diapers]

Howzit,

In my journal I will be paper trading a method based loosely on ideas from Stan Weinstein's book "Secrets For Profiting in Bull and Bear Markets" using some techniques from Trader Dante's "Making Money Trading" thread for fine-tuning entries as well as a few other things I have picked up.

I will mainly trade (well....paper trade) equities EOD and EOW, but may occasionally trade anything else (FX pair, commodity, whatev's) if I notice a setup. The setups aren't very frequent, and depending on the timeframe I could be in a position from months to over a year so this is not likely to be the most lively of journals.

I have come to a stage where I need input from others whether I am on the right track or not, I don't want to spend the next year playing around with trading methods that don't have a hope in hell of succeeding, so any feedback welcome, be harsh as you like.

Here goes.

 

[China Diapers]

Here is my P/L. This is the first time I have calculated a P/L based on actual shares rather than spreadbetting so I hope it's accurate, I wouldn't really know as I have never placed a live trade. After looking into the spreads I would paying at IG Index holding trades this long I realised it would not be viable, so I have assumed £7,000 opening balance as this is the requirement at Interactive Brokers, and also assumed £20 commissions. And I suppose I am also assuming I would have some margin.

My make-believe account is £7,000, and I am willing to risk 2% on any trade so that's £140 per trade.

So results since beginning of February two losses, and two trades in small profit of which NVTL is a free trade, nothing to get excited about. I know we are in a bull market right now, and NVTL is a short position which Weinstein and pretty much everyone else advises against, but as NVTL is my best performing trade so far I am going to take trades counter the market direction until my experience proves that this is a bad idea.

http://spreadsheets.google.com/ccc?key=0AhMRPlIi_VeecFZ3TVZNQ0d1ajF5WUZ0ekYtWU1mRFE&hl=en_GB

 

[China Diapers]

Long WYNN

NYSE stock, weekly chart. Price has broken out of a range in the direction of the trend so this is a continuation pattern, also in the direction of the general market. 30 period MA is up after briefly flattening following a decline, Weinstein would describe this as a stage 2 breakout.

Previous bar is a bullish bar. I was describing this method to a mate over a few beers and he said the bar is a marubozu, I don't know if it qualifies so I will call it a bullish bar. I look for these bars at breakout points as I read Tom Williams say that this represents an concerted effort by the bulls to break past resistance. Price then forms an inside bar, which can indicate indecision, and potentially lead to a strong move. This is my entry point, buy at high of IB + 1, stop at low of IB -1. I think that covers everything.

Entry: 7,794
Stop: 7,524

 

[China Diapers]

Oh yes, I am learning about volume, I know breakouts are meant to happen on high volume, but for now I won't be disregarding a breakout if it is on low volume, trial and error.

There was a good head and shoulders pattern last year on the WYNN chart, if I had seen it I would have entered on the retest of the neckline.

 

[China Diapers]

Trading plan

Work in progress:

Trading plan

 

[China Diapers]

Update

Had to rejig the P/L spreadsheet, I somehow forgot that US and Euro stocks are traded in different currencies. Also realized that the IB idea is not going to happen as they only offer margin to big players, so the way I see it CFD's are the way forward, if the overnight funding doesn't kill me, working on a formula to put that on the spreadsheet.

NVTL: Don't really like this one anymore, didn't so much break out as stumbled out, but still going despite the recent market rally. Maybe the range wasn't tight enough.

AC: Going strong. People who pay attention to volume probably would be concerned by this one.

WYNN: Now that's a breakout!

 

[China Diapers]

Update #2

P/L took a bit of a beating this week.

NVTL was stopped out for a small profit, I might of been a bit hasty in moving my stop on this one but that is what this is all about, learning from my mistakes (without losing my money).

WYNN and AC both got hammered, hopefully this is a healthy reaction and not the start of something more serious. I don't like that word, hopefully.

 

[China Diapers]

Update #3

"If you find trading exciting you are probably losing money". No danger of that round here on the old weekly's, it's about as exciting as librarians.

I reckon WYNN is going to bounce off that overhead resistance, it already has if you look at the daily TF. I don't know if I should move my stop to breakeven or not. Being stopped out after being in profit will not feel very nice, but then this strategy is all about the home runs so I need to give trades space to move and I have already accepted that 2% of my account is what I will risk.

I am going to leave it as is. What I might do is start selling half the position when trades get to breakeven, maybe.

 

[China Diapers]

Eur/gbp

I wonder if an inside bar will form on the weekly EUR/GBP

 

[China Diapers]

Anyone know an easy way of making money trading?

 

[China Diapers]

Loss aversion

 

[China Diapers]

Update #4

I realise everybody is too busy making money day-trading the EUR/USD to care about me paper position trading weekly stocks, but I am learning just talking to myself.

So stopped out in the recent debt crisis/algorithm trading fiasco. Luckily I moved my stops to break-even after much deliberation (special circumstances) so now flat with a small loss and looking for more breakouts.

I re-read Reminiscence of a Stock Operator, changed my view on counter-trend trades 100%. I just wonder how these breakouts will work in a bear market, I have no idea, a market top may be a very different animal from a market bottom. I don't think my NVTL trade was a good setup at all. Then again the setups aren't that important, at the very least they are just a way of entering the trend with a high potential R:R and then it's a question of sticking with trend as long as possible......in theory.

Also got some books on market timing, swing trading and options, final IAQ is bottom of the pile.

I came to a realisation and I take back what I said about the inside bars representing indecision, in this case I think they are in fact retests of the breakout level, don't I feel naive. What did I say.....learning.

 

[China Diapers]

Quote

"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon." - Jesse Livermore

 

[China Diapers]

I’m back, I know you all missed me. After losing interest in my dismal failure of a journal back in May I have done a lot of reading, a lot of experimenting with various markets, time frames and techniques, and then realised my original idea was a sound one, so I’ve come full circle, a little bit older and a little bit wiser....well older anyway.

The only difference is one of the books I read was Technical Analysis of Stock Trends, and as a result, Weinstein is out, McGee is in, and if anybody wants to buy a 2nd hand copy of Secrets to Profiting in Bull and Bear Markets let me know.

A realisation I had recently was that part of my problem is expectation management. When I first got interested in trading I had visions of clocking up monthly 20% return no problem, then I readjusted my expectations to around 100% a year. The problem with this kind of thinking is every time it dawns on you your system is not going to make your inflated expected return you give up and go looking elsewhere, system hopping, and as a result don’t stick to anything long enough to learn how to follow a system with discipline.

I have no expectations anymore. And I can’t promise I won’t post weekly charts.

 

[China Diapers]

Here's a little something from Toby Crabel's Day Trading With Short Term Price Patterns and Opening Range Breakouts which I bought on Ebay for $1,400 (did I ****):"The principle of Contraction/Expansion is defined as the market phenomenon of change from a period of rest to a period of movement back to a period of rest. This interaction between the phases of motion and rest are constantly taking place, with one phase directly responsible of the others existence."

 

[China Diapers]

Started with a clean slate on the old P/L. The position that kicked everything off is BT, weekly chart, up about 10% so far so looking good, but that could all change very quickly.

 

[China Diapers]

Continues at http://this-ones-for-axle.blogspot.com