August Review

Following trading rules I learned this month:

• There a 6 phases of a trend:
  

1. The breakout, a quick move where its often wise to cash in the profits at the end of the day
2. Test of the breakout, people are trying to buy at a better price, this is the true swing entry point
3. The correction, after some days or if 1:1 risk/reward ratio has been reached, some trader make profits causing the prices to reverse
4. After the correction is over another move in the direction of the trend happens (this is why there are seldom V-Bottoms)
   
5. When 100% extension or minor swing high or low is hit prices reverse, this is the true swing exit point
   
6. If prices go through double bottom or top there is another chance for the 3rd move down.
   

What makes the right entry and exit challenging is combining all kinds of support and resistance level and trendlines to form a structure of the market and then enter where the lowest risk compared to the first target is. The market is seldom trending so lots of opportunities to day trade but very seldom trades last several days.

• The 2nd thing I learned is comparing instruments before taking the trade, as it makes no sense to go long AUDUSD, EURUSD, GBPUSD all at once, but better choose the instrument that is the strongest and/or has the best risk/reward ratio. What makes sense is comparing if all of the instruments reached there target before anticipating a reversal (for example USDJPY reached today its target, GBPYJPY and GBPUSD already last thursday)
  
  
• The 3rd important rule would be to exit once the Williams % R (10 period) goes over -25 and place a buy stop above the high in case next day the rally continues. Opposite for short trades.

• On a short period timeframe a good method to catch tops and bottoms would be to exit with a limit order on the low of the bar that broke the downtrend.
  

31th August

New Positions:

• Soybeans short
• Crude Oil short
  

28th August

Positions Closed:

• Silver Long 0.7 Points
  
• Soybeans Long 40 Points

Positions Opened:

• Natural Gas short
  

27th August

Positions Closed:

• USDCAD long 120 Pips
• EURCAD long Breakeven
• Natural Gas short 1.000 Point
  
• Crude Oil short 1.7 Points
• GBPJPY short 350 Pips
  
• GBPUSD short 260 Pips
  

26th August

Positions Closed:

• EURJPY long Breakeven
• AUDJPY long Breakeven
• CHFJPY long Breakeven
  
• CADJPY long Breakeven
• EURCAD short Breakeven
• AUDUSD long Breakeven
• USDCAD short 130 Pips
• Corn long Breakeven
  

New Positions:

• EURCAD long
• Crude Oil short
• USDCAD long
  

25th August

Closed Postions:

• Wheat short 63 Points Profit
• Crude Oil long Breakeven Stop
  

24th August

New Positions:

• 30 Year Bonds long (re-entry on low of yesterday after price bounce up)
  
• GBPUSD short
• GBPJPY short (re-entry on break of prior days low)

Closed Positions:

• Gold long 12 Points Profit
• EURUSD long 180 Pips Profit

21th August

Positions Closed:

• Silver Short 0.3 Points Profit
• 30 Year Bonds Long 2.2 Points Profit
  

New Positions:

• EURJPY long
  
• CADJPY long
• AUDJPY long
• Copper long
  
• Crude Oil long (re-entry on prior days low)
  

20th August

Closed Positions:

• Soybeans Short 50 Points
• EURCAD Long 120 Points
• AUDCAD Long 140 Points
  

New Positions:

• Soybeans Long
• Corn Long
• CHFJPY Long
• EURCAD short
  

19th August

New Positions:

• EURUSD long
• GOLD long
• USDCAD short
• E-Mini NASDAQ long
• E-Mini S&P long (using the long signal from S&P 500 index and E-Mini Nasdaq)
  

Closed Positions:

• E-Mini NASDAQ short 13 Points
• Crude Oil long 4,5 Points
• Copper long 0,45 $
  

18th August

New Positions:

• AUDJPY long
• AUDUSD long
  
• Crude Oil long October Contract but using entry signal from September Contract
  

There is one thing all instruments have in common: The optimal point to take profits is at the 100% extension. However I would not exit a swing trade after just one day so for the very volatile crude oil market it was not a 100% extension but even a 161,80% extension where I closed the trade and since the GBPUSD is similar to GBPJPY I also closed it at the 61,80% extension since it had already a pretty good run down.

Closed Positions:

• Crude Oil short 4,5 Points
  
• GBPJPY short 890 Pips
  
• CADJPY short 360 Pips
• GBPUSD short 610 Pips
  

Some Methods from Larry Williams

From a seminar of Larry Williams I learned to look at the premium of a commodity, to measure the strength of an instrument.

I found this page very helpful for comparing future contracts with current ones.

At the moment only soybeans is trading at a premium, meaning that buyers want it so badly they are willing to pay more for the current contract than for future ones.

I will take a look in the future at the premium spread every week to see which instrument is most bullish and which one most bearish.

Another concept is to simply buy or sell at the close of the friday before options expiration, as you can see on the screenshot a very trending week is often the case in the 3rd week of the month.

One other method is to trade the key reversal pattern, where the low of today has to be lower than yesterdays low but the close is higher than yesterdays close.

On the crude oil market screenshot I marked in the divergence on the accumulation and distrubution line (ADL) and the pullback to the -25% and -75% line of the Williams %R Indicator which offer the best entry opportunties on trending markets (identfied with rising or falling 10 SMA)

Inside Days with Negative Close are Bullish, whereas Inside Days with Positive Close are Bearish

Larry basically closes his swing trades on a 100% extension what he calls the target shooter, I will incooperate his methods into my daily swing trades, to enhance the performance of the ART and Elliot Wave System I am currently using.