JillyB's Blog

[JillyB]

Jilly's Journal

I thought I would start this journal as a way of concentrating my thoughts on trading and in particular my method of trading the Dow.

I ususally add posts to the "Where is the Dow & others heading...." But I tought this was a better way of keeping my posts together and adding more information and charts to them.

It's also a way for me to keep track of what I've said and how correct (or not) I was on my analysis. I also plan to add charts by way of explanation.

I will try to add a post per day - after the close of the US market to try and review the days action and where I see the next days market heading.

For those that know me, you will be aware that I trade use CMC, so any values I post will be relative to their charting package. Which is usually quite accurate, but may be 1 -2 points adrift - so please make allowances for this.

For today - 4th August - I posted last night on the Dow thread, that I see more upward movement happening. After a drop at the start of trading yesterday, the index dragged itself back up and managed to add 13 points by the close of trading. In other words the bears tried their best to get it to fall but didn't succeed. Today I think we may see a bit more of the same and would not be surprised if we did not see the day close with another gain of around the same amount. The RSI is trading within a narrow upper range, but within this it still has room for some more upward movement. The Stochastic, after dropping over the last week has now turned to show an upward bias. I do not use these indicators to formulate my analysis, only as a confirmation of what I see.

Possible lows for the day 10,650 -10,652.
Possible highs for the day 10,722 - 10,740

The system I have developed still has not given me any signal for the start of sell off and at the moment it still looks several days maybe a week or more before this happens, but when it does I will post it on my journal.

That's all for now. I will post again after the close of the market tonight.

 

[JillyB]

Bad Day at Black Rock

It was a bad day yesterday, not just because the market didn't perform as I expected, but on a personal basis as well. That was why I didn't add the entry last night - I was too upset.

My partner Paul, is in legal wranglings with his business partner over the company. Paul wants to leave the partnership and things have all turned very nasty. The person he thought was his friend - his business partner - has now turned out to be not so friendly. Yesterday they had 'legal mediation' in order to try and resolve the situation - the mediation failed at 3.45pm yesterday when his business partner walked out. So the next stage is court action, but the court date may not be until the end of the year. Until then we are stuck - unable to do anything. The stress over the last year has been almost unbearable and to know we have to carry on with this until the end of the year is somewhat depressing.

Now I've said all that, I will get around to the real point of the journal which is the Dow.

Yesterday say a massive fall in the index, which I wasn't expecting. However I still do not believe this is the start of the big sell off. The Dow found support at 10,610 which on a 4 hour chart is in an upward line from the lows of 27th July.

From here we need to see a bounce back upward - which is truly what I believe we will see today. Hence I have exited my shorts from 10,700 this morning at 10,605 for a nice little profit.

The system I use still hasn't given a sell signal on the daily chart and as I am trying to trade the system and go by the signals it gives then I have to stick with it. The system generated a buy signal early on 27th July at 10,580, which then went up to 10,700. It was a nervous trade as everyone was saying the index was going to fall, but I traded the system and it proved correct. I realise this is after the point now, and it's all very well to say what I did after it has happened. This is the main reason for the journal - so I can tell you what I am doing exactly at the time it is happening.

So for today no trades. The main system is based on end of day data, so it makes it pretty relaxed to trade with. The trades can last anything from 1-2 days to 2 weeks. On backtesting for the last 5 years it has just over 75% success rate (independently checked by Chump), so it's now time for the real thing!

I have also been looking at the 4 hour charts on the Dow as the system appears to give good signals on these too. However as the last one was at 4am yesterday morning, I'm not so sure this is a good idea!

The only thing I can say is that the index didn't move much between 4am and 8am so it would have been possible to place the trade early in morning and catch quite a significant part of yesterdays movement. The trades on the 4 hour charts tend to last 16 - 20 hours, so that would have made the close at 8pm to midnight, which isn't too drastic.

 

[JillyB]

Oops!!!!

It seems that I have missed my entry point. I couldn't understand that Dow is heading south and I haven't got a trade in place - did the system fail me. So I looked at my charts and found that the system hadn't failed - I had. A signal was given on Thursday 28th July to enter the trade. I actually did place a trade here at 10,700 to go down, but got out the same day when the index bottomed out and started to rise again.

The signal was there ok, and at the time I did trade it, I got out though, waiting for more upside and it didn't come. The second signal on the 4 hour charts yesterday morning should have told me to re-enter, but I didn't.

This is one of the reasons for keeping this journal - to focus my mind and my trading. So that I should trade what I see and what my system tells me. Grrr......feeling cross with myself now!!

All I can say is, that it's been a bad week. Still at least I didn't lose any money trading - now that would have been bad!

 

[JillyB]

Live to trade another day!

I don't mind admitting that I got this one wrong.

Perhaps I wasn't as concentrated on the trading as I should have been this week - I have had so much else on my mind. Perhaps trading wasn't really a good idea considering this - I could have acted emotionally and lost - but I didn't. Still it was a profitable week, with no losing trades, so that's not too bad. What I am kicking myself over is the money that was left on the table.

But I live to trade another day.

When I started trading I used to berate myself over days like this, but now I have learnt that the next big trade is only just around the corner. There will always be another day like today - I just have to stick to the system and wait for the signals. The good thing with the system is that it has taken a lot of the emotion out of the trade, if the signal isn't there then I don't trade - that's all there is to it.

I'm signing off now for the weekend. A glass of wine is at my side and I intend to enjoy it. Have a good weekend everyone.

 

[JillyB]

The Exit Point

Ok, so the trade on the 4 hour charts would have started on Thursday at 4am (8am to make it more civilised). So if you were in this trade, when would you get out?

The theory I have backtested shows that 24 hours is the optimum time - except when the close of the days trading is at or near the high/low of that day - then the trade is held open for another 24 hours. If the same happens the following day, then the trade is held open for another 24 hours (discounting weekends of course) to make a maximum of 3 days - after that the trade is closed at the same time it was opened. Simple.

In the majority of cases the trades are only held for 24 hours - but sometimes, like this trade, it is held open. The time frame for this trade then would be to close on Tuesday morning at 4am (8am for civilised traders). As I mentioned in the first journal entry I trade using Deal4Free (CMC) so this is why the time frames are given outside normal trading hours.

I like simple strategies and this one is fairly simple and with a trailing stop to lock in profits, performs very well.

So where do I see the Dow heading? At the moment we've stuck around the 10,550 area and from here to 10,500 is a major level of support. On Friday afternoon the index rested quite lazily on this level with not much in the way of bounces, suggesting that it had no upward movement left. If we see some more downward movement on Monday then this could take us down lower to 10,380 - 10,400, but this is the lowest I think we will see for the moment. I would fully expect a bounce to take place at this level - just how high that bounce is will have to be looked at.

 

[JillyB]

Trade Closed

So the trade would be closed this morning at 8.00am at 10,564/69.

The open was at 10,687/71, which would give 118 points in 3 days, based on a 4 hour chart and no need to sit in front of the screen all day.

Now I'm looking for the next setup and I will post it here as soon as I get a signal.

 

[JillyB]

New Trade

A signal has been generated by the system I use. It is now 11.05pm and the trade is to continue to hold the BUY trade from earlier.

Today strade - if placed at 8pm yesterday as stated (sorry I posted this on the 'Where is the Dow and Others heading' - thread) not on the journal as well - was BUY at 10538/42 and hold until 8pm tonight when it was at 10608/12 = 56 points after the spread. I shall now move my stop up to 10,600 to lock in the profits and let this run until 12 midnight tomorrow to see how it does.

 

[JillyB]

Closed the trade

I took a liberty this afternoon and closed the trade at 10,705/09, deciding to take the profits. This was done on the open of the candle at 4pm. It seemed that the Dow had resistance again at 10,710 and fallen back from it - interesting also that the R2 level on CMC was at 10,704. These were the two factors that made me close it.

The total trade was 10538/42 to 10,705/09 = 163 points after the spread.

 

[JillyB]

GBPUSD

No trades open on the Dow, but I have just been looking at the GBPUSD and the system has given a SELL signal on this - it seems to like 4 hour time frames on volatile stocks/indices.

So I'm entering a trade now - It's 8.07am and the GBPUSD is at 1.7986/89. My stop is at 1.8051.

 

[JillyB]

1 point from Stop!

I'm hanging in there with the trade - it's currently 1 point away from triggering my stop - will it turn around? Or will I be closed out? Nail biting stuff this!

 

[ChowClown]

...phew that was close, looking strong but running out of time, long - Gann devotees eyeing 7750 during the next few days....fingers crossed for you

 

[JillyB]

Thanks ChowClown. I don't usually touch the GBPUSD, so this is a first. I switched on the computer this morning and was messing with various things when I spotted the settings giving me the same signal - so I thought what the hell - give it a go.

If I follow the same theory as for the Dow, then I will leave it for 24 hours before assessing it. If it closes down significantly (bearish engulfing on a daily chart) or at/near lows of day then I will hold it for another 24 hours.

 

[ChowClown]

ah well, onto the next. Been looking at the latest lab article applying it to cable. A useful 40 pips (long) between 12:10 and 14:50 from a spinner off the 50MA (5min chart). Goofed the entry a bit but the stochs are useful crutches and kept the trade on. Exit from just below the 14:47 5min spinner (8076).

Keep up the journal, one of the better reads

 

[JillyB]

Stop hit

Ah well that's me out of the trade. The stop was hit at 2.20pm.

 

[Pat494]

I hope it's back to the drawing board rather than time to quit !!
Might see you on "Where is the Dow ...." ??

 

[JillyB]

Monday, Monday!

Morning everyone,

Thanks for the comments, Pat and ChowClown. My thoughts on the system I'm looking at, is that it isn't suited to the FX markets and perhaps I ought to keep it just for the Dow.

So for the moment I'm going to do just that. When I get some time (yeah right!) I may start looking at FX market and see if I can develop something to suit this market.

So for today. I looked at the charts last night for the Dow and there was a signal for a BUY trade last night. CMC didn't open until 9.15pm, so I left it until this morning and got in at 7.50am at 10,584/89 to go up. The target is 10,640/644. Stop is at 10,558

My back-up for the trade is to look at the Stochastic on the 3 hr chart - which is below 25, so this gives a range for possible upward movement.

I would be expecting the index to bounce up to that during today.

For anyone interested, I read the Colin Twiggs Trading Diary for the Dow yesterday. This is basically saying that the Dow is in a broad range consolidation between 10,550 and 10,700, with the likely breakout being on the upside. At the moment this is what I would be favouring too, but I will take it a day at a time and revise my outlook as time goes on.

 

[JillyB]

Stopped out.

So todays trade got stopped out and made a loss.

This is work in progress - so I'm going to be tweaking the system to get the best set of rules to make it as consistent as I can.

When I started looking at this, I used the outer bollinger (see previous post) on the chart as the level of my stop - this would have been at 10,528 - meaning I wouldn't have got stopped out, but the risk ratio wouldn't have been acceptable.

In addition when I started this I was also looking at leaving the trade on for 24 hours - therefore todays trade placed at 7.50am this morning would be exited at 7.50am tomorrow morning. There would be no target set for the trade - just a simple entry/exit point.

So, let's see what happens further along today with the trading. If I had used the outer bollinger as the stop and let the trade run, would it have hit my exit point?

Or if I had let the trade run for 24 hours would it have turned in a profit? - this was giving me a 79 -80% win rate when I backtested it. But I only had enough data with 3 and 4 hour candles to do this for the last six months, giving a total of 39 trades - 31 winning and 8 losing, which isn't really enough.

I have been working on the theory that it is good to have an exit point as there are certain levels of support and resistance that you know the index will stall at - so perhaps setting them as a target would be advantageous so as to maximise the profits on it.

 

[JillyB]

Follow on comments

So the target of 10,641 was achieved at 18.45 (BST). This now reinforces the earlier post with regard to the stop being hit - it was too close.

Placing the stop on the lower bollinger line at 10,528, as I mentioned earlier, would have kept the trade open, but would also have meant a risk/reward ratio of less than 1 (0.89 to be precise), so could I live with that? I suppose if the system was highly successful and there were only a few losing trades, then I could do. The stop used would only have been 57 points away and for an index that moves as much as the Dow that isn't a lot.

My next view would be to see what value the Dow is at 7.50am in the morning and if it is at a higher level then than 10,641. In other words does leaving it on for a straight 24 hours make a more profitable trade?

My strategy says that I would close the trade at 7.50am, unless the Dow closed at/or near its high of the day - then I would keep it open for another day, but move the stop up to lock in the profits.

You can see that what I am trying to do here and that is to set rules for a system that you don't have to sit in front of for every minute of the trading day. If you want to spend some days trading the breakouts as they happen, or trading the swings in the market then you can do - but as a back up there would be an easy trading system that doesn't need to be watched over - for the days when you have better things to do with your life - such as lazing on the beach!

Next update at, or around 7.50am tomorrow. See you then.

 

[JillyB]

24 hours

It's 7.52am and the Dow is standing at 10,645/50 after 24 hours. This is 4 points higher than the target I set - so my initial rules of holding the trade for 24 hours are the more profitable. In total there would have been a 51 point profit for hitting the target yesterday and a 55 point profit for taking at 7.50am this morning. I'm not saying that this will happen all the time and it would be possible to use major lines of support and resistance or the Pivot points - with S1, S2 etc, to try and maximise profits, but these would need to be significant areas - such as the current resistance at 10,700.

I said in my last entry that I would look at whether it was worth holding the trade for another 24 hours and to be honest this is a difficult one. The total range of the day was 98 points and the index finished 21 points off the top, which is not quite close enough for my liking to say that I would hold it for another day.

If I still had a trade on this, then I would probably have halved it and taken 50% now and left 50% on with a tighter stop. If I did this then I would set an exit point for today of 10,700 and then leave it for another 24 hours.

It looks as if it is going to be another good day for the beach today. I don't think I mentioned it, but I handed in my notice at work last Tuesday - I finish on 8th September and I can't wait. My initial thoughts are to start up my own practice (architectural and surveying practice) and to spend a bit more time trading too. At the moment I only get down the beach at lunchtimes and after work at about 6pm, so I am looking forward to next summer and having more free time.

 

[JillyB]

Nothing Yet

At 3.30pm it was looking as if a signal would be generated this evening. At best guess I would have said somewhere between 4.30pm and 6pm.

I reviewed the charts at 6pm, but nothing was showing. It is now 8.35pm and, with the exception of a late rally on the Dow - which seems very unlikely - it would appear that the Dow will close tonight at or near its low of the day.

This has not now generated an entry signal for me, so I intend to sit tight and review the situation in the morning. As they say, no signal no trade.

In my humble opinion it looks as if we could be heading down to support at 10,380 and a possible bounce from there - I will let you know once I see what the charts look like in the morning. But for tonight - no trade. I may have missed the big fall everyone was predicting, but better that than a losing trade.