Slow Trader

Tag: S&P

  • Let the market show its cards first

    Trade the ‘now’ and not try to force the trade to do what we expect, is a worthy consideration.

    We come across this from time to time in most areas of our lives. In trading it happens daily, sometimes several times a day.

    We have a preconceived idea of how something will play out, which is fine, it’s called planning. But when this blinkers us to the flexibility of reacting with the ‘now’ the planning can be detrimental.

    Day trading, more than any other form of trading or investing, brings this out more clearly because of the short time frame involved. By that I mean that the lesson is learnt and understood because it all happens in one day and we can analyze it correctly for what it is.

    In other forms of trading or investing the time frame can be much longer, several days, weeks or years. And this gives us time to reanalyze, rethink, and convince our brains that how it played out was actually our original (failed) plan all along.

    Trading should be analysed and planned, as I showed in my last blog with regard to the possible future price movement of the S&P. But in following the plan, the ‘market’ will buck and fake and keep us guessing. If we let greed take over and we try to force our plan onto the market to squeeze every penny from the trade then more often than not we will not win.

    If we don’t read the ‘now’ signals we will waste a lot of cash trying to force the market to do our bidding.

    To combat this, it is correct to analyze and plan but not at the expense of the ‘now’. By the now I mean the price movement that is happening at this moment.

    Let the action play out, let the market show its cards before we commit.

  • Slow Trader Diary – week 40

    A small move in the right direction, we’re now up by a total of 3%.

    I won’t break this down into broker costs as I think you’ve got the idea of broker costs now. Also, I will only show the percentage gain as a whole number (rather than its actual of 3.74%, as we have trades open and therefore the percentage is only a snapshot).

    Again, this month has been light on trading as the S&P, on the daily charts, is at a junction. Let me explain:

    Snip20151010_4

    The S&P 500 is at a trading range turning point. From here the S&P is statistically more likely to go down and stay within the price range of the last few weeks.

    This is reflected, to some degree, in individual shares within the S&P. And here’s the trading dilemma. We have to be patient and wait for the next move to show itself before we commit.

    Fake moves may also occur that dummy one way and go another. Part of the joy of trading.

    80% of trading range moves will stay within the trading range. Therefore, statistically, we favour a down move at this point. However, a breakout of the range, and a move up, is clearly a probability. A 40% to 50% probability.

    There are many price action techniques that will guide us as to the next move as it develops.

    Returning to the week already traded, here’s where we got our gain. It’s a trade, taken unusually for the Slow Trader fund, on the 5 minute chart. As there was nothing on the daily charts I took a day trade similar to one in my personal fund. Here it is:

    Snip20151010_7

    For those not familiar with charts in different time frames this can be odd. The 5 minute chart immediately above is the S&P price movement throughout a single day shown in 5 minute bars. In other words, the chart immediately above is the price movement within the very last, rather small, bar of the top chart above.

    We made money from the market going down. I’m not saying from this that I’m favouring the S&P market going down, just that for that part of the day we had a 60% chance of the market dropping. So we took it. Our exit was (in this time frame) at a major support level.

    You will notice from the chart above that after we took the trade we dropped to, what I would call, a minor support level. We were in nice profit, and then the market turned back up again.

    This is a swing, and is something an inexperienced trader finds hard to manage. An inexperienced trader jumps ship too soon. Our target was the major support, however, we had to see our profits build – go back to zero – and then build again, as we roller coaster our way to our target exit point.

  • Slow Trader Diary – week 39

    We remain just above even. No trades taken this week.

    The week was spent trading small amounts with my personal fund (£1 per point in the currency pairings).

    This gives me the chance to work through, and live trade, many of the lessons from the holiday modules with small risk.

    It would be silly to just jump straight in. Trading is like any other demanding job, you need to work your way back in after a break.

    Slow Trader is daily charts and therefore not day trading; however, the day trading techniques I use in my personal account are the same for slow trader with the daily charts. What I do in one day with day trading takes a week or so using daily charts. However, daily charts are more defined to my mind; and, as I trade much larger amounts through the daily’s, I need to be on my game. Daily’s are my prefered charts.

    Due to the China situation, both the S&P and the FTSE have seen a large drop since August. That will be reflected in individual stocks and shares of course. I am watching the S&P for a turn.

    Snip20151003_2

    Commodities to keep an eye on:

    Coffee price is at a 10 year low. The COT report supports an increase in Coffee but it’s early days. As coffee price increases we can look to see what effect this has on coffee companies such as Green Mountain.

    Gold is at the same price that it was in 2009. Gold price remains uncertain. The COT is a buy and gold shot up yesterday in reaction to the US nonfarm payroll monthly report. From our point of view, however, gold is now a wait and see.

    Crude oil is, as we all know, at a significant low. The COT is at a minor buy stage. However, the trend down for crude is so strong we would need to see an established move up before considering buying. Most amateurs will buy crude thinking it can only go up…..not sure about that one. I certainly would need to see evidence first before committing. Okay, we miss the very bottom and therefore maximum gain, but to try to find the bottom is very weak in terms of probability, actually it’s foolish.

    Currencies:

    Those not thinking that we live in a global economy should have watched the nonfarm payroll at exactly 1.30pm yesterday. The results were not favourable to the US and most major currencies (including the S&P) moved, simultaneously, the price difference of a big trading day in less than a few seconds. Eye watering stuff.

    As a trader the above shows the importance of knowing the big event news item times. I do not trade the news, for me the probability of getting it right is too low.