I like to start the “Round up” with a review of the purpose of this Blog. It is where, as we like to say where I am from, I put my “cock on the block”. I wax on how a few basic tools, etc can have you trading competently and profitably. I am not talking riverboat gambling, shoot the doors off kinda stuff, though we will have the odd trembler as we go. Those are the ones that will make our patience and process worth while – you will see. We started at the beginning of February, 2020 with a THEORETCIAL portfolio of $ 100, 000. It currently sits at $110,087.00.
We are using six symbols, charts coming…
A simple method will be explained as we examine each chart.
S&P 500: We look at the trend first. It is a simple method using moving averages. The blue is 21 (EMA = exponential moving average), is below the brown (55) and the red (8) is our trigger. When the 8 crosses the 21 in line with the trend, we are ready to act. In the chart above the blue is below the brown – downtrend. We will only look to short. Since many of you don’t have futures accounts or have accounts that preclude shorting, we will switch to a stock market symbol that will turn the trick for us. I show that chart as we get triggers on the futures charts. Neither the price nor the red EMA closed above the blue and crossed back. The price did use the blue as resistance, so I am prepared to go short under support at roughly 2200. (On the ledge of the rising window).I will place a trade – a stop -sell – to achieve this and show the chart of the stock symbol and capital allocation when (if) triggered.
Gold: Blue EMA (21) is above the brown (55) indicating an uptrend. The price has had a close(!)below and crossed back above the blue. It then closed above the red trigger line. I shall place a stop-buy just above resistance at 1643. Chart, position size, stop placement will be duly reported should the trade trigger.
Oil: A slippery customer these days (you are most welcome). Blue below brown – downtrend. We will only short. There has been a close above the blue. A cross by the price of the red will see us short. As an aside oil has been building a bit of support at the $20 mark, but we shall look to short below the $20 level. If triggered the stock symbol, etc will be displayed.
Bitcoin: From the kingdom of the crypto currency. My choice of symbols to follow, while a short list, covers a broad swathe of the market. This one, however, poses a bit of a problem. There is no suitable proxy for it in the conventional stock market world. There was supposed to be an ETF, but for some reason it got pulled back. Let’s continue with our homework, anyway.
The blue EMA is below the brown, therefore a down trend. We can only go short. The price has not closed above the blue yet, so we will sit on our hands.
Apple: Apple was brought on board to assuage your disappointment at not being able to trade Bitcoin. This stock has been trendy as all get out and I don’t mean in a Carnaby Street kind of way. You will see at the start of my books the pyramid opportunity it provided, up and down. A clever segue to my book link:
Currently, 21 EMA is below the 55 EMA indicating a downtrend. The price has come back and kinda touched the 21. Not enough for us at this point. We will need a cross back over the 21 by the red (ideal) or at least the price.
A treat for you: a look at my Point and Figure chart for Apple. You can see that the trend lines on the right have not been broken. If we step back, we can see this symbol has not yet entered a full blown downtrend. Here, anyway, we wouldn’t be shorting. This brings up the, “wait just a minute” moment from the EMA signal. Which are we using. As you go forward you will come up with two or three methods that you like. The answer is, Grasshopper, use the first one to trigger using your rules.
USD/EUR: A currency pair. Going long on this symbol means that the base currency (the first in the pair) is stronger than the second, the Euro. At this moment the blue EMA is above the brown EMA, therefore we have an uptrend as our set up (and the American dollar is stronger that the Euro), The price has dropped below our blue EMA and kindly risen again. We will go long at the little blue arrowhead. If this triggers, you know the rest Mr. Phelps.
This is a Point and Figure chart of the EUR/USD. In this case the Euro is the base, so the chart shows the opposite. You see a line of support has formed at about the $1.04 level. It has been tested a number of times, therefore likely to break at the next touch.
Any questions or criticisms, please drop me a line at: firstname.lastname@example.org
Reminder: Do not construe anything you have read here as investment advice. This is a teaching exercise only.