So, we have had a bit of excitement today with a trade being triggered.
First a quick mention about our open trade in UBT. It is continuing to trundle along.
To the chart, Robin…
We have been waiting for this symbol to trigger for a few days now. It is UGL which is the stock market proxy for the up move of gold.
You will remember that the 21 EMA (blue) was above the 55 EMA (green) which is our quick and dirty way of determining trend which is up. We then need our triggers either price or the 8 EMA (red) to signal a long trade to match the uptrend by crossing above the 21 EMA (blue).
We had those things but were stopped in our tracks by a level of resistance. We had noted here that we needed a close above resistance and then we would put in a stop-buy just above the close of the candle that did the closing above the resistance line.
I have enclosed the up candle from today that triggered us with a yellow almost square.
Details of our trade are as follows:
$13,000 (10% of the portfolio) / $65.37 (our stop-buy as recorded earlier) = 198.86, rounded to 200 shares.
Our trailing stop will start life just below support at $56.93. The risk is $65.37 – $56.93 = $8.44 X 200 shares = $1688 (<$2,800 (2% of the portfolio))
All systems are go. We have placed the trade according to our process and the risk and position size are also within guidelines.
God speed, little trade! Be well, and prosper!
If you have any questions or concerns (other than me talking to our trade), please drop me a line at: firstname.lastname@example.org.
The most exciting time of the week: The Weekly Round UP. Maybe not that exciting as the main markets skived off at the tail end. Ah, well, we will still take a look at all the charts, regardless.
As you are aware this THEORETICAL trading exercise continues one started in my barn burner of a book: Basic Trading: ‘A Beginner’s Guide to Trading and Investing …PROFITABLY!’
We use 5 symbols derived from the futures representing: The S&P 500, Gold, Oil, 20 year treasuries and the Dollar index.
We use UP and DOWN stock market symbols so that all may participate if they so choose, no matter the make up or restrictions their accounts may have.
We use a very basic system to demonstrate a point. It will be explained as we go, either today or when we have a trade. You can also look at other day’s entries if your OCD is too much for you.
The portfolio started in the book at $100,000 January 1st, 2020. It currently stands at $138,720.10.
This is thanks to one great trade. I want to reinforce the idea that the market does not move in nice averages, it spurts. You need to take all trades per your process and make sure you protect yourself with stops.
The S&P 500 for example took 13 years to exceed the level it attained in 2000. Many would say, “but look at is since, it has doubled”. It has but how many lost patience especially after having their heads handed to them in 2007/8.
I cannot emphasize enough the importance of consistency of action and following a process.
This mission we are on will continue until the year 2020 expires. For most of us, none too soon! We shall see how we do. All is revealed. If you have any questions, objections or concerns, please drop me a line at: email@example.com.
To the charts, Robin…
S&P 500: SSO = UP, SDS = DOWN
The SSO is the ETF that mimics the rise of the S&P 500. You can see that the blue EMA (21 Exponential Moving Average) is above the green EMA (55). This denotes uptrend in our process. We will trade if we get the go ahead from our triggers: price and/or red EMA (8).
We have it. Our problem is a resistance level just above. We need a close above that level before we act.
Gold: UP = UGL, DOWN = GLL
The UGL mimics the rise in gold. You can see we have all systems go in our chart. We needed a close above another pesky resistance level to go ahead. You can see we got that. We have a stop-buy in just above the close of the candle that closed across the resistance level. It is at $ 65.37. A rise by UGL above that price will see us triggered in.
Oil: UP = UCO, DOWN = SCO
UCO is the ETF that mimics the rise in oil. Oil has been an interesting story. First of all it collapsed like no one’s business. It has based or consolidated for a while and may now be attempting a comeback. As with all matters in this exercise we don’t really care. We wait for all conditions of our process to be met to act. In this case we have a zone of resistance that needs to be closed above before we act.
Patience is a big part of trading.
Dollar Index: UP = UUP, DOWN = UDN
UDN represents the down of the Dollar Index. This one is a bit different in that the Dollar Index is a struggle between the U.S. Dollar and a basket of global currencies. If the price rises the dollar is increasing relative to the basket. If the price declines, the basket is rising in value against the U.S. dollar.
UDN is hovering betwixt and between. We need all our conditions to be met including a breaking of resistance to place a trade.
Remember that as with all our symbols we are looking at the inverse as well for trade signals. It makes sense that if one side looks like it might be a sell signal, that its inverse just might be a buy, At the very least, warrants a look.
20 Year Treasuries: UBT = UP, TBT = DOWN
This is the one symbol that is actually an open position. At position one you can see that the price rose above the close above the resistance level, we were triggered in. We have a trailing stop placed at $16.94 under the trade price, which was also just below support. Below support is usually a spot where we are wrong in our trade for the simple reason it means our trend maybe violated.
Slow week, I guess. We have an open trade in UBT which was detailed to you on Tuesday.
Today, we don’t have a trade, but I thought I would remind you of the situation with the proxy for the up move for gold, UGL.
UGL is the ETF (exchange traded fund) that goes up when gold does.
You can see above that the 21 EMA (exponential moving average) blue, is above the 55 EMA (green), this is an uptrend in our world of simple definitions. We would now look for a trigger to go long since we want to trade with the trend.
You can see that the price and the 8 EMA (red), our triggers, are above the blue EMA. This would normally mean “giddyup”, but we have an impediment in the form of a resistance level just around our trading point. We would normally wait for a close above that level and then place a stop-buy just above the candle that did the closing. We have done so at $65.37. If the price moves above that level, we will be in automatically.
Trade details will appear here as if by magic should that happen.
A treat for you: the point and figure chart for gold.
It is a thing of beauty, is it not?!
I won’t explain the workings of this chart other than to say that, a trigger to buy is close. You can see blue Xs to the right, one column to the left is Os, and to the left of that a higher column of Xs. When the column at the furthest right gets higher than the previous column of Xs, it is giddyup time in the Point and Figure world.
That is it for tonight. Our next instalment will be the Weekly Round up. That time of the week when we go through all the charts whether there has been action on them or not.
Any questions or concerns, please drop me a line at: firstname.lastname@example.org.
Just a brief report today. As you may remember from the roller-coaster of a report also known as the the weekly round up, we were keeping an eye on the symbol UBT.
UBT is the ETF that represents 20 year treasuries on the stock market. We use it as a proxy.
The chart we looked at showed a level of resistance that if we had a close above we would place a stop-buy at a point just above the high of the candle that did the closing.
To the chart, Robin…
If you cast your eye to the chart above, you will see, at position 1, a candle with a large wick (the skinny bit rising above the body of the candle). Just to the left of that you can see a green candle that has closed above our resistance level. Our stop-buy was placed at $135.89, which was just above the green candle.
The wick at 1 had a high of $139.45 which caused our trade to be triggered. Our trailing stop began life at $118.95 which is $16.94 below the trade price. Our trade, risk, etc, looks like this…
$13,000(10% of the portfolio)/$135.89 = 95.665, rounded to 100 shares.
The stop of $16.94 X 100 shares = a risk of $1,694.00 which is <$2,700 (2% of the portfolio).
This trade has adhered to all the elements of our process from the triggering through to risk exposure to the portfolio.
We will now leave the trailing stop to do its work.
That is all for today. If you have any questions or concerns, please drop me a line at: email@example.com.
Buy or don’t buy (thanks, Yoda,), but at least grab a couple of free books you might like.
We start January 1st, 2020 with a theoretical portfolio of $100,000. We use 5 market instruments only and one simple method. It shall continue until 2020 expires.
The portfolio stands at this moment at: $138,720.10
The weekly round up is so popular and anxiously awaited by many because we go over the charts for all five of our instruments at this time whether there was any action in them or not.
Let’s get started…
S&P 500: UP = SSO, DOWN = SDS
The symbols we use are stock market symbols that trade as stocks. They are ETFs (exchange traded funds). We do this because the instruments we use would normally be traded as futures. For many, this is not feasible. There maybe restrictions on the account for shorting, being too tall, or whatever.
For example the SDS will rise like the Dark Knight when the S&P declines. It also does so double time. If the S&P declines 1%, the SDS rises 2%.
We have been following the SSO recently as the S&P has been rising – yes, like the Dark Knight, if you must.
The ROC has warned us that maybe the SDS is ready to make some noise. Our simple method calls for us to trade in the same direction as the set up. If the 21 EMA (blue – exponential moving average) is above the 55 EMA (green) that represents an uptrend and as such we will look to buy when our triggers confirm. Those triggers are the red EMA (8) or the price rising above the blue EMA, which is already above the green EMA.
In the chart above you can see the price and the red EMA making a move on the blue EMA. Our problem is that the blue EMA is still below the green EMA – downtrend. We allow ourselves an exception. If the price or the red EMA close above the blue EMA, but the blue is still below the green, we consider ourselves a go if the ROC crosses above the 0 line.
We are nothing if not patient. We will wait for our process to actually confirm before taking any action. So far all we have is a warning from the ROC that the lowest price was not matched by a low in the ROC. This is a divergence.
Oil: UP = UCO, DOWN = SCO
The UCO chart has started to look as if it wants to rise. The problem is a formidable resistance zone which is also a consideration if it is in the neighbourhood of our trade. If we look at where we would place a stop and add the stop distance to the top of the purchase price, it needs to be below the resistance level. If not we risk the trade just bouncing off of that level, so we set our stop-buy just above the candle that CLOSES above the top of the resistance zone.
Gold: UP = UGL, DOWN = GLL
We have been attracted by UGL because a few days ago we were stopped out of GLL – it’s inverse – at a loss (you can scroll down to the the exciting episode in which that happened – if you wish).
If you look at the chart above you can see we have price and the red EMA above the blue EMA which is in turn above the green EMA.
What we need now is a fearless candle to CLOSE above the resistance line. We will then place a stop-buy just above the high of the crossing candle.
20 year treasuries: UBT = UP, TBT = DOWN
In this case we do have a fearless candle closing above the resistance line. And we have placed a stop – buy just the high at $135.89. If the price should rise above that level, the trade would trigger and all details will be found here. Things such as position size, risk management, etc.
Dollar Index: UUP = UP, UDN = DOWN
The dollar index is the stuggle between the U.S. dollar and a weighted basket of major currencies. When the price rises it means the U.S. dollar is gaining strength and if the price declines, it means the opposite.
Our systems would be a go for this one, but I need it to close above resistance at the upper horizontal line.
As an aside we did have some funny price movement at position 1 which caused us to be stopped out because we were using a trailing stop. When the high was hit, our trailing stop was anchored as it should be, but then the price fell off a cliff and stopped us out – these things happen. I can’t be bothered to find out why it happened on that day. For a number of reasons, the main ones being, I don’t give a toss and two if it was based on some news or another, how would it have helped us?
We follow the instruments we do because they cover a broad swathe of the market place: stock market, two of the most traded commodities on the planet, interest rate cycle and some currency exposure.
This is meant as a teaching group, but there is no reason not to use them indefinitely.
Any concerns or questions, please drop me a line at: firstname.lastname@example.org.
We have had a bit of excitement today. As you may remember, we were stopped out of GLL yesterday. GLL is the ETF that rises as Gold declines. Once that happened, it became logical to check the inverse of GLL which is UGL. Now, UGL goes up when gold does – just twice as fast. As we have talked about because of this characteristic of the ETFs we trade in this exercise, we have to be even more disciplined about stops than ever. Not sure how we can be more disciplined than using them with every trade.
Let’s take a look at the UGL chart.
You can see that our trade is all systems are a go. The blue EMA (21 exponential moving average) is above the green 55 EMA. This is our quick read of trend which is UP. Our triggers, either the price or the red EMA (8) is above the blue. We had one tiny impediment when last we looked, the resistance level is close to our trade. We need, therefore a close above that level to really be all systems go.
Today our little green candle closed above the resistance level. We are therefore placing a stop-buy for $64.47. This is just a little above the high of the candle that closed north of our horizontal black line.
If the price of UGL advances tomorrow above $64.47, we will be triggered in.
At that time I shall give details: trade size, risk management, etc.
That’s it for today. Any questions or concerns, please drop me a line at: email@example.com
Here we go, a new week. What does it have in store for us?
To kick things off, we were kicked out of our GLL trade today.
To the chart, Robin…
You can see from the chart above that the price had a small drop today. Not much, but enough to see us off.
The high attained after the trade was $41.16 at position one. This anchored our trailing stop which was following, dutifully, behind at a respectable distance of $4.23. Therefore when the price crossed the stop price of $36.93, we found ourselves on the sidelines.
So, if we have a stop out of the DOWN version of gold. We need to look at the UP side of gold to see if there is anything there for us.
The UGL is the ETF that mimics the rise of gold. If we break down our trade set up we can see that this symbol is in an uptrend per our definition i.e. the blue EMA (21) is above the green EMA (55). Now we look at our triggers: the price and or the 8 exponential moving average (red). The price and the red EMA have crossed the blue EMA. We should be good to go.
Sadly, we can also see that a resistance level is in our way. We do not want to enter a trade to have the price bounce back down from resistance. A trailing stop needs to be placed so that as the price moves and with it the anchored stop, so that our trade can become risk free before the price hits the resistance level.
This cannot happen with UGL. Therefore we will wait until the price has closed above the resistance line. We will then place a stop-buy just above the high of the candle that did the closing.
I think that is all clear, if not, drop me a line at: firstname.lastname@example.org.
The weekly Round up, is there anything more exciting…ok, the odd thing.
It is that time of the week when we look at all the charts whether anything happened or not.
Let’s start with Big Daddy, the S&P 500.
S&P 500: UP = SSO, DOWN = SDS
We are looking at SSO because it has been the best candidate for moving up. (Versus SDS).
We were in this symbol until recently when we were stopped out by a close across the trend line.
At this moment, following our process, pay attention, I won’t repeat it all through the other symbols. The blue EMA (exponential moving average) 21, is above the green EMA (55). This is an uptrend in our world of trades. The price crossed above the 8 EMA (red), but did not close there, so we have no trade at this moment. When a close takes place, we will look at resistance levels and decide whether we can place a trade right away or whether we need to wait for a close above resistance.
Gold: UP = UGL, DOWN = GLL
GLL is our only open trade at this moment. As you can see it is declining. The trailing stop anchored at $36.93. Just a few more pennies and we are out of this trade. Which means we would look at the inverse, UGL for a buy signal.
Oil: UCO = UP, SCO = DOWN
As you all know, Oil had a catastrophic fall which helped us massively, but now it seems to be consolidating. We are only concerned when our process gives us permission to buy. You can see that the blue EMA is still below the green EMA which would normally having us sniffing our noses at this symbol. The thing is that the ROC is above the 0 line which would normally be the get going sign. The only impediment is a resistance zone. We need a close above the upper horizonal line to enter a stop – buy. Until we see that, we sit on our hands and remain patient.
20 Year Treasuries: UP = UBT, DOWN = TBT
There is triangle pattern trying to complete on this chart. We are not trading patterns in this exercise, so we shall leave it alone. Of course it is available in my book – link at the end.
We have a gathering of the moving averages, but nothing we can hang our hats on.
Dollar Index: UP = UUP, DOWN = UDN
This chart, this symbol is showing the fight between the US dollar and a weighted basket of global currencies. At the moment, we have an uptrend, blue is above green, but he price has fallen below the red. The price and/or the red are our triggers once we have a set up. We were stopped out after mysterious price movement at position 1, so we really must insist on a close above resistance.
Not much to report this evening. GLL , the only open trade, is still hanging on.
Maybe this is a good time to review why we are here and what we are doing.
I have a Beginner’s book for traders and investors. I will put a link at the end. In that book I take 5 market instruments and by using their stock market mimics trade them using essentially one simple method.
The instruments are: S&P 500, Gold, Oil, 20 year Treasuries and the Dollar Index. We use the stock market proxies representing the UP and DOWN movement of these instruments because not many of you can use futures or have short positions in your accounts.
The method we use is a simple moving average cross over system. This is explained as we enter trades. You can scroll down if you want a demo of how it works.
In my book I started January 1st, 2020 trading a theoretical portfolio of $100,000. The latest edition of the book went up on Amazon in May. I traded in the book until April 30th, 2020. This blog is a continuation of that exercise. Same method, same symbols.
So far the portfolio is up almost 40% to date. This is on the back of a beauty of a short position in oil. As I talk about in the book, we are looking to probe for trades and if possible to pyramid one of the positions as long as we can do so within our risk parameters which are detailed as trades are triggered.
We are patient. We only act when our process is in full agreement. The key is acting on what we see, not what we hear about, think might happen and other magical thinking.
Take a look at this link. Even if you don’t buy the book (don’t worry about me, I will be fine), there are a couple of freebies to be had that I think you might enjoy.