Wow, it looks like we made it from one Round up to another without anything in between: no new trades, the three under way continue to trundle along.
Obligatory introduction. Briefer than usual because it turns out this is not a time of reading.
I started a theoretical trading exercise in my book: Basic Trading: ‘A Beginner’s Guide to Trading and Investing…PROFITABLY!’
Get it here with some videos and a couple of freebies:
You are most welcome!
We started with a portfolio of $100,000, a simple method and process and five market instruments.
It occurred to me that just maybe, there may be some use in continuing the exercise so that one and all can see that the trades were not cherry picked in the book. We follow our process. It is key, otherwise we might as well be in the trading world instead of the world of trades.
It started January 1st, 2020 and continued until April 30th, 2020 when the book went up on Amazon. It shall continue until 2020 expires.
The portfolio at this time stands at: $138,720.10
We could look at this and pat ourselves on the back and extrapolate the gains to the end of the year.
That would be foolish. The current balance could easily be the same one at the end of the year. The market does not move in nice averages the way it is portrayed in the tables. It moves in spurts.
Regardless, we shall not force things, if this is our lot – so be it. We let the market come to us. Patience is a big part of trading.
Our five instruments are: S&P 500, Gold, Oil, 20 year treasuries, Dollar Index. These things in their raw form are typically not allowed in certain accounts, especially if we are shorting.
To solve this we use ETFs (exchange traded funds) as proxies. You will see as we go how they work. Since we have covered a large section of the market with our symbols, you could easily use this structure indefinitely, which is kind of the point of the book.
Enough jawing, let’s start…
S&P 500: SSO = UP, SDS = DOWN
Yep, you heard. SSO mimics the market going up, and SDS – wait for it – rises like the Dark Knight when the market goes down. You don’t have to short anything and these symbols are eligible in any type of account – how good is that?
The moving averages: 8 EMA red, 21 EMA blue, 55 EMA green decide our trades for us. We are the weakest links in the trading process, especially if we are allowed to make any decisions.
Our process does it for us. It is objective. We take every trade our process kicks out for us as we review our symbols every day, after market close. If we don’t take EVERY trade, we just became subjective. We might as well get the monkey and his dartboard back.
The blue and the green determine the trend. Blue above green = uptrend, and the opposite = downtrend. We always go with the trend.
The chart above shows us uptrend. Now we look to our trigger: the price, and or, the red EMA. EMA, by the way, is exponential moving average. We need them to cross above the blue line to trigger a trade.
We should have been good to go, but a level of resistance got in our way. In this case we need a CLOSE above that horizontal black line. Once we get that, we will place a stop-buy just above the high of the candle that did the closing. We place a lot of importance on closing. Just crossing above and then back below does not cut it for us.
That has happened. We have a stop-buy placed at $140.56, the red horizontal line in the chart. If the price rises to that level, we will be triggered in. At the same time a trailing stop will be placed. All details are reported here on these fearless pages.
Gold: UGL = UP, GLL = DOWN
We have had an open trade in UGL for a little while now. You can see how the moving averages did their job. You can also see a level of resistance on this chart as well. We got a close above that level and then at the yellow box we were triggered in at $65.37.
We placed our trailing stop just below support which was $8.48 under the purchase price. Our most recent high is $77.35. The trailing stop has followed the price up, remaining at a respectful $8.48 behind. $77.35 – $8.48 = $68.87. This is above our trade price of $65.37. Translation: even if the price collapses, we have made a modest profit…we are risk free. It is a beautiful thing!
Oil: UCO = UP, SCO = DOWN
Oil has been a slippery crittur for some time now. Most of our portfolio gains were made on the short side of this pair (SCO). You can see a zone of resistance on the chart created by what is called a “falling window” in the Japanese candle world. If we get a CLOSE above the zone, we will place a stop-buy just above the brave little candle that did the closing.
In the meantime, we sit on our hands. Just your own hands, ok, anything else would be weird.
20 Year Treasuries: UBT = UP, TBT = DOWN
UBT is another open trade. You can see its unfolding in the chart above. We got in on a close above resistance at $135.89. The trailing stop was placed just under support at $16.04 behind the trade price. The most recent high of $145.60 has anchored our trailing stop at $129.56. We still have a little risk in this one. We are always on pins and needles until we become risk free.
Once we are risk free, we can look to pyramid, or add to our position. We will discuss this when and if it occurs.
Adding to our position becomes a possibility in any symbol once the initial trade is risk free.
Dollar Index: UUP = UP, UDN = DOWN
Also an open trade. This is a slightly different cat. UP means the U.S. dollar is gaining strength against a basket of global currencies; UDN means the opposite.
You can see once again the moving averages carrying out their job and alerting us to a trade. Once more a level of resistance needed to be vanquished. It was and we put in a stop-buy at $20.67, just above the candle that CLOSED above the evil line.
Our trailing stop was placed .51 cents below the trade price, which was just below support.
The most recent high was $21.16. Therefore, our stop out level is $20.65. We still have 2 cents of risk in this trade. We are almost at the promised land. On Friday we had quite a strong down candle. We shall see where that takes us.
That is all the newts from me this week. If you have any questions or concerns, please drop me a line: email@example.com. This could be anything in the investment world whatsoever. If I don’t know the answer, I will make one up (winking emoji).