Slow Trader

Tag: charts

  • We take some profit from gold, crude oil and USD/CAD

    Until now we have traded the commodities: gold, silver, copper, crude oil and USD/CAD on a weekly basis. That is referring to weekly charts and a weekly COT report. We have also, as discussed last week, considered introducing the fund to intraday trading.

    Each of which (weekly and intraday) are rather on the extreme. On one hand, we have the overly slow weekly chart market, and on the other, the rather demanding intraday market.

    The balance for the fund is daily charts. Why? …weekly charts are emotionally difficult as we see good profit generated only for that profit to disappear as we remain invested in order to reach our target. There is no compromise here, because to take profit before a target, unless our premise changes, does not provide a traders equation (that is: the trade had more risk than reward).  Over the longer term this would be a losing strategy.

    Gold and silver have emphasised this over the last few weeks where they dropped in price to provide us with good profit potential, only to extend higher than I considered.

    Daily charts, rather than weekly charts, usually means tighter stop positions and therefore lower risk, but in contrast our targets are shorter. Timing wise we are in trades for a week or three rather than several months.

    The COT suits the weekly charts, but often goes against my daily chart readings. This of course happens at all levels of chart, for example, the difference between the daily and the 4-hour chart or between the  5-minute and the one-minute chart. However, I report weekly and to have a profit at the end of one week only to know that profit will go away as we wait for the bigger (targeted) profit seems emotionally foolish.

    With moving to daily charts, our targets are closer and therefore we can take profit more regularly (if available) and wait for the next entry. This means that we will occasionally miss the big move – but trading is rarely perfect.

    This week we took profit from our short in gold as it sank from its high of the previous week – and before Friday’s monthly non-farm payroll brought it up again. Also, we took profit from a short in crude oil as it came down over the week and from our long in USD/CAD as, conversely, it climbed nicely over the week.

  • Context

    There are many ways to trade. It is not important which trading method we choose as long as it works for us.

    My own method comes under the general name of ‘Price Action’. Simply, this requires the ability to read raw chart information and can be used on all timeframes. Here’s a couple of charts: can you tell the timeframe?

    Snip20151027_7

    Snip20151027_8

    The top chart is a daily candlestick chart of Gold, and the bottom chart is a 15-minute candlestick chart of Silver. The point being that it is not possible to see a difference in these charts without the timeframe along the bottom. Price Action works similarly for all timeframes.

    It is good, however, to ground ourselves on a certain timeframe and use only the neighbouring timeframes for clarification. For instance, if I were to use a daily chart to find a trade then I may venture to a weekly chart for guidance and possibly to the 4-hour, or even 1-hour chart, for final confirmation. But probably no lower. Equally, if I were trading from a 5-minute chart then the 15-minute, or possible the 1-minute, chart may provide some price clarification.

    On another point, the distinctive parts of Price Action are: firstly, knowing the meaning behind each of the candlesticks …yes, they individually tell a story and the greater the timeframe the more defined is the story. Secondly, and more importantly, is the need for context – that is the story that is told by a stream of candlesticks. We may take a trade based purely on context but we would never take a trade based only on the distinction of a single candlestick. Too many trading methods and seminars base their teachings primarily on the story a single candlestick tells, where the real ability is in reading the stream, the context.