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Technical Trading Exercise (Pavilion103 and tech/a) Charts and Spreadsheets

tech/a

No Ordinary Duck
Joined
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Ive noticed that over the years most who want to profit from Trading or Investing in Stocks
dont actually know how to apply the vast number of analysis options available to them
into a profitable trading Plan / Method.

Endless theories/ideas/hypothesis and constant changing from one idea
to the next when expectations are not met or fall alarmingly short.

Common sense and logic should prevail--right?

Over my own journey I have had a number of light bulb moments and Ill
share them with you here.
They were quite simply the building blocks for the Holy Grail---the light which turn dark into day.

Regardless of WHAT analysis you chose to use these lights will ensure you have the best
possible chance to profit. They will when implemented often change mediocre into spectacular.
Failure into the trash bin or on the road to better profit. You can implement what will be shown here IMMEDIATELY.

There are NO secrets as you will see.

This is not the be all and end all. It is not a system.
It is what you need to lift you beyond the smog of theory and out of the mud pit of confusion and indecision.

How you best implement it into YOUR way of trading is for you to decide.
I will show you but ONE WAY here.

Once you have this knowledge you have learnt "How to Fish".

The HTF can be applied to Systems but is probably best applied
to discretionary trading. All charts and trading in this exercise are discretionary
technical charts--we look both at the hard right of page and consider the left..

In the following I make a number of assumptions about you the trader.
You are decisive.
You are capitalized
You are organised and disciplined.

Light Bulb.gif

(1)

ITS NOT ABOUT BEING RIGHT.
ITS ABOUT BEING PROFITABLE.


Hrs pouring over balance sheets or studying charts in 4 different time frames
overlaying indicator after indicator on the page.
All the ducks line up.This IS the big one --- the mother lode.
How often it falls short. or fails to as much as glitter?

To be profitable we must either
Have far more winners with more profit than losers.
OR
Far bigger winners than accumulated losers
OR
A combination of BOTH.

Light Bulb.gif

(2)

STEPPING IN FRONT OF TRAINS.

There are endless ways to enter a trade. But for me personally I like to look for trains.
Stocks that are already on the move and can prove to me they are moving in my direction.
I have no idea if my train will keep at one speed---speed up or slow down or reverse.
All I can do from my analysis is "ANTICIPATE" where it is likely to go.

Entry
Exit
On the move

Thats all we can do is "Anticipate" what is likely to happen going forward.
We can from analysis have a high % of moves play out as analysed.
but we also have many that don't.

Its when things go astray that we need to get off the train.
Either JUMP off or Stand at the Door.

There will always be another train.
So if we jump in or off prematurely we will soon find another.

For this exercise I will be using Patterns and some VSA (Volume spread Analysis)
along with some conventional Technical analysis like Support and Resistance.
Some linear Regression Trends and Gaps. These I find useful in identifying
emerging and continuation patterns,Exhaustion and Looming Impulse moves.
At times when obvious Elliott.

Plus one of my own
CONTROL VOLUME.

But at all times it will be very simple.

Light Bulb.gif

(3)

TRADE AND PORTFOLIO MANAGEMENT
The Missing LINK.


This is by far the area where most fail.
The most important aspect of trading I wanted to get across to PAV and anyone else who is
struggling to make better than average returns.

Most know one way of position sizing is to use the Fixed Fractional Method (Google it for a clearer understanding)
This is the simplest way to determine initial risk and position size on a trade.
You can select whatever % of capital you wish to risk .5% for larger accounts/1/2/3% but 1 stop width is known as 1R. (Risk)
The resultant loss if the trade goes against you should never exceed 1 R if you adhere to your stop.
Your profit can then be expressed in terms of R (Reward) as a ratio if Risk. IE 1.5R your win is 1.5 X Risk.

I am constantly adjusting Risk from initial risk to potential draw down if a trade goes sour.
You will see in the Numbers of the trading exercise to date how this daily attention to Risk/Reward has skewed the
numbers in a more favorable manner to us the trader.

SEE Option (1) AND Option (2) Below

Light Bulb.gif

(4)

IMPROVING RESULTS
.
There are a few things we can do WITHOUT tinkering with the premise.
(Lower Risk and maximize Reward while increasing our win rate and decreasing our potential loss).

So one we have a profitable method

(1) Trade frequency--Increase it.
(2) Capital base --- increase it--margin perhaps
(3) Pyramid into profitable running trades--we have and will do this in the exercise.There are a number of ways of
managing Pyramid trades.

Now to the Results.

Over the last 5 mths we have had 48 trades
Losses are Red
Wins Are Green
Break-evens are Yellow
Setups that fail are Black--so you cant read them--Perhaps Pav you could make them BLUE

CLICK TO ENLARGE

Portfolio 24 may.gif
Portfolio 24 May 1.gif

Total trades - 35
Pattern fails – 12

Number of wins – 14

Option 1 - Number of losses (inlc be) – 21

Option 2 - Number of losses (without be) – 13

Average win – 2.61R ($1,307)

Average loss (option 1) = -0.46R (-$228)

Average loss (option 2) = -0.72R (-$361)

RR (option 1) = 2.19

RR (option 2) = 1.39

Initial capital = $25,000
Net profit = $13,500 exactly (27R)

Maximum drawdown

High
39,867
Low
38,500


1,366
5.46%

All record keeping and spreadsheets thanks to PAV!!
Good job.


Ill leave this to comment than move on to the trading.

Please Comment on the OTHER thread
 
Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Some great musings here Mistagear----

Should a break-even trade even be considered a valid score in a Risk/Reward System ?

I think so and below is why

If you scratch a trade at break even (Zero R ) what you do next is take another trade, so in effect, within your system you have taken funds out of a Zero R, and placed it in the next trade, a 1R trade.
Thats sort of equivalent to having not taken the first trade.

But you cannot deny that the trade was taken. Analysis anticipated a profitable trade and as you will see shortly the anticipation that momentum would continue allowed me or indicated to me that it was sfe to reduce my initial risk by moving the trade to a position of break even.

Some people may consider if the original stop placement was justified as signalling a fail of the trade and that the entry was a suitable entry, why now is the entry point the place to signal a failed trade.
I would suggest that THIS OBSERVATION is widely accepted by most here.

Again you will see that the setup I'm looking for are at best continuation micro patterns and at worst continuation patterns. So there is a group of bars often coupled with other analysis which indicates a continuation of the current move in my direction.
This pattern has a set boundary which we can determine indication of success or failure. It is this boundary which we set our initial stop/initial trigger/and importantly our position sizing (Not with standing your comments below--will get to them).

Why therefore, is not a 0.25 R or 0.5 R a better proposition than entering a new trade at 1 R ?
If you are not trying to be right, rather trying to be profitable, surely any risk less than you take for the next trade, remains a valid trade within the Risk/Reward System ?

Because we are letting each individual trade determine its own out come. We are not limiting the profit potential of the next trade due to the outcome of the last.

I struggle with this concept, life was easier when trades were singular, since trading became a series of loops, deploying funds like employees in a business, it's become less simplistic...am glad others here have it sorted

Why cannot it be exactly as you describe?

So lets have a look at some examples we have traded.

But before I do

Currently Pav and I are not finding the continuation patterns that were prevalent earlier in the year. In fact where a market in general turns you will find many exhaustion and ending patterns. I can and do find that some of the patterns traded at this time as continuation patterns turn out to be ending patterns. In these situations OFTEN our pattern will trigger only to quickly reverse and fail.
Here 1R losses increase (At the end of longer term moves).

This is why there are no NEW setups offered up ---as they appear I will post them.
I will also post Current longer term general market analysis. this I posted this week in the XAO thread (it is actually a chart of the XJO)

Some great musings here Mistagear----

Should a break-even trade even be considered a valid score in a Risk/Reward System ?

I think so and below is why

If you scratch a trade at break even (Zero R ) what you do next is take another trade, so in effect, within your system you have taken funds out of a Zero R, and placed it in the next trade, a 1R trade.
Thats sort of equivalent to having not taken the first trade.

But you cannot deny that the trade was taken. Analysis anticipated a profitable trade and as you will see shortly the anticipation that momentum would continue allowed me or indicated to me that it was sfe to reduce my initial risk by moving the trade to a position of break even.

Some people may consider if the original stop placement was justified as signalling a fail of the trade and that the entry was a suitable entry, why now is the entry point the place to signal a failed trade.
I would suggest that THIS OBSERVATION is widely accepted by most here.

Again you will see that the setup I'm looking for are at best continuation micro patterns and at worst continuation patterns. So there is a group of bars often coupled with other analysis which indicates a continuation of the current move in my direction.
This pattern has a set boundary which we can determine indication of success or failure. It is this boundary which we set our initial stop/initial trigger/and importantly our position sizing (Not with standing your comments below--will get to them).

Why therefore, is not a 0.25 R or 0.5 R a better proposition than entering a new trade at 1 R ?
If you are not trying to be right, rather trying to be profitable, surely any risk less than you take for the next trade, remains a valid trade within the Risk/Reward System ?

Because we are letting each individual trade determine its own out come. We are not limiting the profit potential of the next trade due to the outcome of the last.

I struggle with this concept, life was easier when trades were singular, since trading became a series of loops, deploying funds like employees in a business, it's become less simplistic...am glad others here have it sorted

Why cannot it be exactly as you describe?

So lets have a look at some examples we have traded.

But before I do

Currently Pav and I are not finding the continuation patterns that were prevalent earlier in the year. In fact where a market in general turns you will find many exhaustion and ending patterns. I can and do find that some of the patterns traded at this time as continuation patterns turn out to be ending patterns. In these situations OFTEN our pattern will trigger only to quickly reverse and fail.
Here 1R losses increase (At the end of longer term moves).

This is why there are no NEW setups offered up ---as they appear I will post them.
I will also post Current longer term general market analysis. this I posted this week in the XAO thread (it is actually a chart of the XJO)

Click on all charts to enlarge

XJO 33.gif

This is why we are seeing zero continuation trades and got hit recently with a number of completion patterns.
like this one with TLS
You can see the initial setup and as momentum had already triggered the trade I placed the initial stop in the body of the pattern. I would had we taken the trade at the point of breakout moved the stop up in line with momentum going our way,as it was I found it the day of breakout.
Filled the next day you can then see how quickly and aggressively the trade collapsed.
Note how the patterns has been tested and has acted as resistance!!
1R loss.

Matt 82.jpg

The other chart in the Shot is TPM I miss labelled it.
This pattern failed to trigger.

Here are today's shots of both charts.

Thread.jpg

Here is one of our FIRST completed successful trades.
This chart was labelled as the chart unfolded and sent as an educational exercise to Pav each time a management of the trade took place.

Thread 1.gif

This is how Ill label all charts as they are traded in future.
 
OK
5 Charts with buy patterns.
The Top blue line is the buy trigger value and the Red line is the INITIAL STOP.

If triggered then the trade will be added to the NEW portfolio.
If the pattern fails it will be removed from our watch list.

These alerts are currently patterned based within a chart history pattern (IE Continuing trend or Possible Emerging new trend.)
They are the best patterns of around 15 I have found during scanning for stocks to go on our watch list.
If a trade is triggered I will reveal the code next week or when closed---whichever is the soonest.

Position sizing will be 2% risk on Most.
We will if required use margin to take some trades.
We will use the 2:1 offered by IB which both PAV and I use as brokers.

Once triggered I will trade manage everyday those we are in and put up any prospects worthy of consideration.

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Tonight's chart updates

One closed FLT
stops raised where appropriate.
Plus one for the watch list from PAV

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More prospects from tonight's searches.
 

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Hi again

My image post hasnt been approved yet. This post is related to SDM and my image post hasnt been approved yet

I missed where you entered. I think it was after the breakout retraction. I also note the 70c resistance band i mentioned is a soft one as prices havened really touched it just close to it.

So the Entry valid on Volume reduction. Also with multiple days following with open and closes inside the range day.

Looking forward to your comments.

Shajer
 
Hi again

My image post hasnt been approved yet. This post is related to SDM and my image post hasnt been approved yet

I missed where you entered. I think it was after the breakout retraction. I also note the 70c resistance band i mentioned is a soft one as prices havened really touched it just close to it.

So the Entry valid on Volume reduction. Also with multiple days following with open and closes inside the range day.

Looking forward to your comments.

Shajer

Sorry lost me!
Trade has been stopped
 
This reply is related to Country Lads Post #245
HERE--

https://www.aussiestockforums.com/forums/showthread.php?t=26799&page=13

CL.

It is my intention to run this and any other exercise I've run,as real as possible.
When I mark a pattern on a chart it shows the external parameters of the pattern. Blue is the trigger line and red is the stop line.

IN real life most of us would set our buy and sell orders for the next day and shoot off to work.
Now in hind-site I could come home and adjust the parameters so that the unfortunate fill and reversal wasn't shown
on our records. But reality is I would have been filled.

I have learnt more from trading in draw-down and surviving than trading in bull markets.

If you have a look at the chart below and then refer to the first exercise Pav and I did you'll note
many many more successful trades. Clearly you can see why.

Im not unhappy with the result so far.
Soon the market indicate its direction negative we will be ceasing trading (Below 4990)-- Positive we will be trading.

THIS IS A CHART OF THE XAO
marked are the periods of trading for the First exercise and THIS exercise

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