Here we are once again at the weekly round up, or as you like to call it, your favourite time of the week.
This is the continuation of the theoretical trading that commenced in my book, Basic Trading: ‘A Beginner’s Guide to Trading and Investing…PROFITABLY!’
Click on this link: https://abeginnersguidetotradingandinvesting.gr8.com/offer_page.html
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: email@example.com.