Slow Trader

Tag: gold

  • A chart mix

    My mother missed her step coming off a pavement and fell and broke her hip. She is doing remarkably well and I look forward next week to getting back to my trading, I’m a couple of weeks behind.

    Trading GBP/JPY on the 5 minute charts works well for me. I like the size of this market and on many days GBP/JPY can be quite defined. Anyone familiar with EUR/USD or even GBP/USD will find GBP/JPY quite lively.

    Many that trade major pairings will not take the spread into consideration, a mistake I think, but not a big one. Particularly if they trade from 15 minute charts or higher. GBP/JPY however, on a lower time frame, teaches us the necessity to consider the spread. To do otherwise, and be consistently profitable, is more difficult – I think.

    To make the best of both possibilities I’m happy with my results of concurrently trading GBP/JPY on the 5 minutes chart (as the priority chart) with a watch on USD/CAD, Gold and EUR/USD – each of which are on the 15 minute chart. I tried many possibilities but these choices give me good opportunity, diversity, liquidity and a spread value that I prefer.

    For example, GBP/JPY does not work with GBP/USD as both react almost in unison. Moreover, oil is often a mirror image of USD/CAD: so to trade one would have too much influence on the other. I do find that Gold and EUR/USD often have similar movements and on such days I consider a swap to AUD/USD or (and I’m in the early stages of this) the US 500 SPTRD.

    Other FX pairings, and particularly exotics, are not considerations for me. Primarily due to spread but also we are dealing with randomness and probability, and we don’t need big uncertainty too. As already mentioned, I’ve looked carefully at the US 500 SPTRD and this is a possibility on the 15 minute chart with good liquidity once the US market has opened.

    To trade the fund on the 4-hour charts is not possible (for me anyway) with already four intraday charts to manage. If my results are what I know they can be (and so far so good) over the next few weeks I will consider how to join the slow trader fund within this – more intensive – methodology.

  • Slow Trader Fund, We’re Ready for Action

    Thank you for your patience while I’ve performed a complete overhaul of my short-term trading strategy. Readers will notice the amount of work involved in the ‘how I trade’ page. This has been a great exercise, and one of which I’m confident will be well worth the wait.

    A reason for taking so long is that our strategy, I believe, can only truly be devised under live trading conditions. The way we react to probability trades under live conditions is significantly different to what would otherwise be developed under benign back-testing conditions.

    To that end, I’ve traded and worked on the strategy these last few months with my own account and traded small. The fund has remained in waiting.

    Now I’m at the other end of the strategy development, we will see a gradual build-up to normal fund trade amounts.

    My thoughts on how I see the fund going forward from today:

    Slow Trader allows investors the opportunity to access a short-term trading fund.

    Why an opportunity, and why short-term trading is not possible for most people:

    • Firstly, short-term traded funds are not readily available. Moreover, expert (and hopefully successful) short-term traders charge a lot – up to 50% of profits and large participation fees.
    • Secondly,  short-term trading is a difficult skill to master. It takes several years for a trader to graduate from the ‘beginner’ level, through ‘intermediate’, to ‘expert’. And, expert is where all the capitalised reward is found. In other words, short-term trading, in contradiction to its name, takes a long time to learn.
    • Finally, learning the short-term trading skill is often, through the beginner and intermediate stages, financially penalizing.

    From the 4-hour chart the fund trades:

    1. Nick’s qualifying UK shares – long only.
    2. Currency pairings GBP/USD, EUR/USD, AUD/USD, USD/JPY – long and short.
    3. Commodities Gold and Oil – long and short.

    For each of these I’m looking for an edge:

    1. Nick’s qualifying UK shares already have the fundamentals. And, although fundamentals are normally not a factor for a trade of less than 9-months duration, we nevertheless have them on our side. The principal trading advantages that I use, however, are probability, context and price action.
    2. In our currency pairings we again bring probability, context and price action to the fore.
    3. Commodities also use probability, context and price action but are also traded inline with the COT report.

    The 4-hour chart is used in preference as this provides at least two trading opportunities per day. This means that trades can be open from several hours to several days.

    The page ‘how I trade’ is written with the 5-minute chart in mind but applies equally to the 4-hour chart and is the essence of how I approach probability, context and price action. Nick’s qualifying UK shares are published quarterly through this blog and guidance on the COT will also be given as the COT occasion provides – the COT cycle for each commodity coming round independently a few times a year.

    I provide an annual detailed report on the fund and a semi-annual ‘how goes it’ review.

    The goals of the fund are:

    1. Not to lose money (and this defines our risk level)
    2. Increase the fund by 30% (as a minimum year on year)
    3. Compound the fund year on year

  • The short the medium and the long

    What is new for 2017?

    Firstly, for my day trading from 5-minute charts I’ve chosen:

    EUR/USD  AUD/USD  GBP/JPY  GBP/USD and Gold

    I trade these most days (half day Friday) from 8am to 6pm. With an hour or two off here and there for good behaviour. I will report day trading ideas from time to time through this weekly blog.

    Secondly, for the ‘slow Trader fund’ from daily charts I’ve chosen:

    The UK top 200 shares

    This was after reflection over the holiday period. Trading currency pairings on a higher term chart, when probably taking the opposite view on a lower term chart, is difficult. Therefore, we needed a home for the fund and the UK top 200 shares fits the bill. Why not US stocks? There is a change in tax on US stocks and also we consider that later this year a large move in the dollar is likely. There is enough going on trying to pick share direction – we don’t need to have to factor in major currency changes too.

    I’m excited about this move of the fund. We will trade both long and short based on ‘price action’ technical analysis. It will provide stability and the increase that we’re looking for. I review all qualifying shares every trading day morning. Entries are based on daily charts, however, best entries may be found on lower time frame charts. Ideally we are looking for entries to last a few days out to a maximum of a few weeks.

    I’ve chosen a selection of the top 200 shares that have what I’m looking for in terms of price, liquidity and stability. I will blog the complete list later and keep members updated of results through this blog.

    Finally, we also want to provide information for the best UK pension ever. That is long-term (many years) investment via a UK share ISA.

    This is a reintroduction to Slow Trader of fundamental analysis. Nick has kindly agreed to provide regular information from his spreadsheet on which UK shares are great performers and available at the right price. Nick will be reviewing the FTSE 350 (that is the FTSE 100 and 250 combined) and I will keep you updated from this list. I won’t provide a description of companies, as I’ve done before, but simply the essentials from the spreadsheet. These are for long only consideration.

    This is all about the fundamentals and the incredible analysis tool that Nick has created. However, James and I will add our long-term (weekly and monthly chart) technical slant. More of this soon.

     

  • Brexit, are we going to trade it?

    Before Brexit here’s gold and silver last week.

    You will recall that we are only looking for short positions in gold and silver. We took profits in both nearly 2-weeks ago and have been looking for an opportunity to take a short since then. Although both gold and silver crept down and tempted everyone to jump on board, this would have been hopefulness.

    Here’s silver: silver provided a short signal which I missed, and mentioned last week. That would have given us a profitable move down and exit at the blue arrow. However, without a clear ‘short’ context the danger was always the strong pullback, which happened yesterday, and that is why it was correct to not hold our original short too long. The pull back may just be to the moving average, shown by the blue line, or a move to equal the previous high at 1,800; or, significantly higher with a measured move of the previous leg. We will need more information before acting.

    Snip20160604_1

    Gold below shows the short that we exited on 19th May. I was somewhat quick as the second leg down would have doubled our profit. However, the move up yesterday (similar to silver) has brought the price back to our ‘buy back’ position on the 19th. As the climb yesterday has closed above the moving average I’d expect more upwards movement next week before providing a short opportunity.

    Snip20160604_2

    How will Brexit affect our trading? As an aside, one issue we have with trading gold and silver, particularly with a reasonable sized fund, is the size of the average bars (potential movement of price on average over a certain time period) in respect to spread. If you have bought shares in a SIPP before you will know that your broker charges you anything from £5 to £14 per trade. That is why you need to buy a certain amount of shares otherwise your broker’s fee represents too high a percentage against you. The same is true in reverse with spread betting.

    Silver, for example, has a spread of 3 pips. That is, for your buy/sell you will pay 3 pips at whatever price per pip you trade. If you trade £1 per pip, then, from the broker’s perspective, you are charged £3. (Not actually £3, you will notice that your entry line on your chart is 1.5 pips to the negative as will be your eventual exit line – with both together equalling 3 pips). That’s fine at £1 per pip, and actually a good deal. However, you ain’t going to retire soon on £1 per pip in silver. Our fund trades more in the region of £10 to £20 per pip; and that represents a high broker’s fee if the trade goes against us.

    Far more representative of average bar size – when compared to spread, and also compared to the amount we wish to trade – is the currency pairings GBP USD and GBP JPY. The spread on these are about 2 pips and 3 pips respectively (I say ‘about’ because they do fluctuate, particularly in times of high volatility). However, typical corresponding bar sizes of the above currency pairings (GBP JPY being the biggest) are 10 to 20 times bigger than say gold or silver. And that is why we need to move most of our fund trades to the currency pairings.

    That brings me to the initial question, how will Brexit affect our trading? Clearly we all know that it will be a time of high volatility in GBP and anything in association with GBP. To that end, the spread will increase significantly. This will need to be carefully monitored. But spread increase is okay if average bar size increases in unison. Brexit could provide a lot of barbed wire (bars that bounce up and down but close fairly tight and don’t actually go anywhere) or, of course, it could set-up a great trend. My own thought is that it is going to be a bit of both and we need to read the movement well to take advantage. So are we going to trade during Brexit? probably not on the 23rd June, but for the run up – most certainly we are.

  • A neutral few days

    A neutral period looking for re-entry opportunities, but nothing taken this week.

    USD CAD seemed to take-off only to pull back to the weekly support line. A good buy opportunity now – or a few pips lower.

    Brent crude oil is at a position – that we projected a few weeks ago – that is ready to short. We will take shorts from the hourly chart (rather than the daily) as we feel oil is more easily managed from the hourly (rather than the daily) chart.

    Silver provided a reasonable re-entry short opportunity on Thursday. Missed that, but a second chance may present itself again this week.

    Gold has dropped just over 30 pips from where we took profits at the end of last week. Now likely to drop a further 20 pips before meeting a monthly resistance line. If we get a retrace we will take a short as gold has the potential to drop a further 70 to 150 pips over the next few weeks.

    We have listed a new page called strategies. This is written (and added to and changed most days) in a short format – as if we are preparing the ground for a computer algorithm. Therefore of little meaning to a non trader. However, it provides an idea of the precision involved.

  • Profitable gold and silver – missed USD CAD

    A good week with profitable trades in gold and silver. The week did come with a small loss and missed opportunity in the currency pairing USD CAD. Also, we were out of the money for much of the week in crude oil only to grab a brief break-even buy back moment. Overall, a good week.

    Silver daily chart: each bar represents one day’s worth of trading. A black bar means the price closed lower than the open. Each candle (as they are called) shows the open and close price and the wick (either top or bottom) shows how high or how low the price actually went between the open and close times.

    Snip20160521_1

    We shorted silver at the red arrow and we bought back that short at the green arrow. Just over 80 pips of profit for us; a pip is the smallest upwards or downwards movement. (In stocks and shares it is called a tick.)

    Gold daily chart:

    Snip20160521_2

    We shorted at the red arrow and bought back our short for a profit at the green arrow. Gold trades less than silver per ounce and therefore our gold movement this week represented only 30 pips. However, the smaller size is offset by the traders equation: based on probability, our profit target, how far away our stop is and the representative amount we’re prepared to lose.

    USD CAD daily chart:

    Snip20160521_3

    Over the last few weeks we went long at the larger green arrow and took our profits at the larger red arrow.  We went long again a few days later at the smaller green arrow only to be stopped out of the trade (within a couple of pips!) at the smaller red arrow for a small loss. I then missed the subsequent move up. That is trading. Did I set my exit stop at the wrong place? Maybe. Hindsight is a wonderful thing, and a few more pips below the moving average would have been sensible. But my overall judgement was correct, in that the price was going to go up – and I take confidence from that.

    Crude oil daily chart:

    Snip20160521_4

    My best trade of the week without making any profit. Let me explain. We shorted at the red arrow and were out of the money all week to the tune of 200 pips at one point. We bought back our short at break even price at the green arrow. Best trade because although we were out of the money we did not reach our stop position and we managed a break even price. Ready for the next one!

     

  • gold and silver – are prices ready to drop?

    Copper – An uneventful week for the commodities. All except copper which moved down without us and with gusto. Copper, however, had an unclear read on the COT (often the case with copper) and an unclear read on the daily charts. Therefore we are correct to be out – as to stay in would have been to rely too heavily on hope.

    Crude oil and USD CAD – We hold a small position on crude oil short. But a 200 pip climb is likely and at which point we may add to our shorts. USD CAD, which often reflects a delayed but exact opposite price movement to crude oil, shows a clearer picture. Too much reliance on the difference between these two charts (crude oil and USD CAD) is, however, a ‘chicken and the egg’ question and should be considered but not relied upon.

    Gold – Having taken some profits (short) from gold last week we continue to hold a small position short. Expecting to add to shorts anytime this week. Net position of the commercials remains at a 5-year low. This will provide great momentum to a drop in the price of gold if gold price per ounce falls to the $1,200 region.

    Silver – Similarly with silver. We took some profit last week and continue to hold a small position short. Looking for a price climb to $1,730 before adding to shorts. Silver, however, has an even more dramatic picture on the COT as the net position of commercials is at a 10-year low. As with gold, any significant reduction in the price of silver will probably result in an exaggerated acceleration short.

    Intraday strategy – As an aside, much work has been done this week developing our short-term momentum strategy (namely using GBP USD intraday charts) on trading range breakouts and subsequent channels. I know this doesn’t make a lot of sense to the investor, but to a trader it is a high probability strategy with measurable risk and reward. And possibly the most lucrative of intraday strategies.

  • 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.

  • Gold and Silver finish week on a high

    Silver finished the week on a strong move up. Silver is at, or slightly above, a three-year trend line. The COT shows the net position of commercials at a multiple year low; meaning the majority of commercials (the big buyers and sellers) have short positions on silver. As do we. Difficult to hold through, but that is the strategy.

    Gold provides, as it so often does, a similar picture to Silver.

    Crude oil ventures up towards the position suggested on my charts last week. A possible short on crude may present itself this coming week.

    USD CAD had little movement in weekly chart terms.

    Copper dipped early in the week and gave us a reasonable out position. Copper reversed back up by the end of the week as anticipated.

    The strategy on commodities is to go long or short reasonably early based primarily on commitments of traders (COT) information and supported by analysis of weekly charts. We use weekly charts as that corresponds to the weekly COT release. The COT is released UK time late Friday evening and is based on the previous Tuesdays collation of information by the CFTC.

    This strategy often calls for a significant period of time, several weeks or even months, where the trade is out of the money. Treat the COT as turning a large tanker ship analogy – it ain’t quick!

    To balance this ‘slow’ strategy we’ve decided to include a portion of the Slow Trader fund in our intraday trading. That sounds fancy, but is just a way of saying we trade with charts that are incorporated within the day. In our case 1, 2, 15 and 60 minute charts.

    In this instance we take as many as 9 to 15 trades a day and normally complete all trades before the end of the day. I’ll discuss our strategies for intraday trading in next week’s blog.

  • Copper, Gold, Silver, Crude Oil and USD/CAD this week

    Copper has had a strong week and finished high. Silver in particular has spiked up. Gold also increased but finished the week more or less even. Crude oil has finished the week reasonably strong. USD/CAD is still some way from turning up and will need careful management.

    Here they are in slightly more detail:

    Snip20160423_2

    My premise on Copper has changed. Copper, I feel, is some way from a big turn down. I would consider a small increase in price before a drop to our low 2 weeks previously – and then a possible climb. We will look for the best price to exit our copper trade.

    Snip20160423_4

    Silver has had a dramatic couple of weeks. Two strong weekly moves up taking silver from the one year trend line to the, higher, 10-year trend line; indeed, the price of silver bounced exactly off this line – marked with a circle. Always difficult to short when everyone else is long. But that is exactly what we did. Of importance, and supporting our case, the COT for silver shows commercials at an 8-year record with the number of shorts compared to longs. Hold onto your hat!

    Snip20160423_5

    Gold has not been as dramatic as silver. Up in price all week, gold finished low for the week supporting our prediction of gold progressing further down in price over the coming weeks.

    Snip20160423_6

    I’m a supporter of a drop in price again in crude oil, but it may take its time. Price possibly getting to somewhere marked by the red circle. For now, we remain on the sidelines.

    Snip20160423_8

    USD/CAD price mirrors that of crude oil. Therefore, a trade on both is double the risk and a significant consideration. As with crude oil short, it is early days to consider USD/CAD long. A turn somewhere in the green box however is a good probability. But risk reward is excellent when we catch a trade early. Probability is the other major player in the traders equation; moreover, good management of early trades is essential.

  • Achieving excellent trade entries helps alot

    How our trades have progressed this week:

    Snip20160415_3

    We are short Gold. We shorted at the red arrows. That is, we expect the price to go down. If Gold goes down in price we gain. It is always difficult to find the best price and often it is simply ‘good is good enough’. But our first take here seemed excellent. Price this week had risen giving us a chance to add to our short. Again, this seems to be at a near top. We now have a lower high (the difference in height between the first and second arrow) and, therefore, the possibility of a continued drop in the price of gold, at least for a few weeks.

    Snip20160415_4

    We went long USD/CAD at the blue arrow. That is we want the price to increase. Our strategy starts with a major trend reversal, and that is often a difficult call. Probability of success is low at this stage, but reward, if it goes our way (up), is worth a trade. Our target is near the top of the screen shot.

    Snip20160415_5

    We first took Silver short at the left red arrow. Price went nicely our way – down. This week, however, has seen a good recovery in price. We entered again, short, at the second red arrow. This is a higher high – often not ideal for a short – but the three pushes up is good context for a trend reversal. From being nicely in the money, to out of the money, is part and parcel of our strategy. We hold until something tells us different, or until we get to, or near, our target. Our target is at the bottom of the screen shot.

    Snip20160415_6

    We shorted Copper at the red arrow position. That is we want the price to go down, and so far, Copper has obliged. We continue to hold until target. The recent retrace in price this week was not sufficient for us to add to our short trade.

  • Our medium term strategy holds good, for now

    Here is a snapshot of  our (open) results for the last week. I won’t normally show this detail as it can be misleading when we have a mix of recent and longer term open trades. But as all our trades have similar creation dates, I felt it was okay to include.

    Snip20160401_2

    We have a medium term strategy for these trades. Meaning from 6 to 12 weeks, we are 10 or so days in. Part of the strategy is to open the trade early. If an early trade is not close enough to the extreme (a top or bottom) then we will manage the trade to achieve better entries. Being early is difficult for many as it is nearly always contrary to popular opinion. Also, being early can provide excellent gains only to see those gains retrace to a loss – which is emotionally difficult and the reason why many traders cash-in too soon.

    By early trade, I should mention that we should also not be unreasonably early (it’s never that easy!). Patience is still key. For example, I think, a short in crude oil, currently, is too early. Crude has started to decrease in price this week from a recent up; but to take crude short now is premature. The picture is Similar for long-term treasury bonds that have a potential near term short opportunity.

  • Current short trades in Gold, Silver and Copper.

    We have open trades short with Gold, Silver and Copper.

    Our strategy here shows promise. The aggregate of these trades has seen us in the money by some £1,000. Soon followed by us being out of the money by about £900. The latter was a consequence of the last FOMC meeting and interest rate announcements.

    Higher prices, however, allowed us to add to our short trades more favourably and, later, as the price dropped again, to break-even on a our lower priced, original, trades.

    Our open trades (taken from eleven days ago) currently stand at over £3,000 in profit reasonably distributed between each of the commodities. Early days, however,  as we hold through (as long as our premise remains the same) to somewhere near our targets.

    The following is an update of our trade watch list for Slow Trader fund:

    No change in – Gold, Silver, Copper and Crude Oil.

    In preference to the S&P, I’ve included the 20+ Treasury Bond ETF.

    Moreover, in preference to the currency EUR/USD we will take GBP/USD.

  • Slow Trader Trades

    In our fund (Slow Trader) we recently invested short – that is to say, we want the price to go down – in Gold, Silver and Copper. (This strategy is a one to three-month trade, but varies slightly for each commodity). 

    Fund exposure is currently £70,738 (we are leveraged)

    Silver stop risk is £1,953 – between 4 trades.

    Silver target is £4,633 – between 4 trades.

    Gold stop risk is £1,252 – on one trade. (A limit order is in place to short more if gold price rises).

    Gold target £2,518 – on one trade.

    Copper stop risk is £1,929 – between 2 trades.

    Copper target £2,918 – between 2 trades.

    We use the Commitments of Traders (COT) report to give us a small edge. The COT is, other than cyclical analysis, probably the only indicator that is not price based. And, therefore, an independent view-point. We combine the COT with our own technical analysis of each commodity.

    Here is an example of the COT released last night. The same information is available for each of our commodities. My attention is on what Commercial is doing.

    Snip20160319_6

    The importance of getting the technical analysis right is due to the COT being in lag by nearly 2-weeks. Which, based on our strategy, is between a half and a quarter of the expected trade duration. In other words, we need to use a good amount of interpretation (and rely on technical analysis) for a significant chunk of the trade time.

    More specifically, COT figures are from each Tuesday but are not available until late evening (UK time) on the following Friday (i.e. 10 days). As the markets are closed till Sunday night (UK time) it puts the COT information nearly 2 weeks old. But even with that considered it’s still the best, broad, indicative information we have – other than our own technical analysis.

  • Slow Trader Fund Update

    Slow Trader is now closed to any new funds until next year. Here are the amounts:

    Snip20160305_1

    For the sake of simplicity, percentage gain or loss refers to original funded amounts.

    We are now ready for 2016. Our attention this year is on gold, silver, copper and crude oil. We will also trade from time-to-time the SPDR S&P 500 ETF fund (all sessions) and currency: namely the Euro against the US dollar. We may trade the occasional stock.

    We have an excellent short signal developing for silver. That is, we consider silver will drop again in price. Signals for each of our commodities happen no more than a couple of times a year. Therefore, when we get them we need to take full advantage.

    The S&P and EUR/USD are not cyclical like the commodities – therefore we will trade these via lower time frame charts (one or four-hour chart and, occasionally, as low as the 15 minute chart).

    Commodities are traded through daily charts and in conjunction with the COT report.

    For those building funds for grand kids, or simply looking to buy the Aston Martin DB11 – then here we go!