Price analysis you see is CLF13, for the week of November 23th, 2012:
USO 15m BATS chart with Fibs, Kelts/MA's & Momentum
Weekly highlight: After an initial burst higher (and a break of the previous peak at 89.67) prices spent the remainder of the week consolidating those gains on talk of mid-east peace. The significant uptrend line pointed out last week (on the 2 hour chart) held on a mid week test and remains my 'bull/bear' line going forward. A break lower from current levels would suggest a test of that line and a break of that trend-line's corresponding upper channel line would suggest a test of last week's highs ought to be expected.
Trading
Strategy (1 week):The included 15 minute chart highlights current OTE long/short levels and current momentum readings. Until we see a substantial bottom in both the MACD Historgram and the W%R indicator, I shall be looking for prices to correct. Indeed, USO's current OTE Long SS (70.5% Fib retrace) is more than 1% lower than current levels. Since those bullish and bearish levels are slightly higher and lower from where we finished Friday, I shall be waiting for a resolution at or near either extreme before planning my next trade.
Mental
State Review: My goal of late has been to hold positions longer, I feel I have been doing well at that task. I am getting a bit impatient with myself. I have relegated myself to practice account trading and not stepped up to the plate. I am not 'failing' but I am not succeeding either. I believe it is time to get this train going. I am going to force myself to trade my Combine account for the full duration of trades. This should be an interesting week. I am going to try and post blog entries of each trade (with justifications) this week too.
Trading
Plan for this coming week: Watching for and using 'OTE' setups to
identify buying and selling opportunities at key support/resistance
levels on the 60m-4hour charts. Confirm 'good-trade-location' based on
30m/15m/5m Kelt bands. Once trade zones are entered, drill down
to 15m/5m for OTE entry points (coupled with momentum/volume
divergences) and follow the trade process.
Trade
Process: Once 60m/4hour OTE sweet spots are entered and market has
confirmed vol/mom divergence, b/s 1 aoco (-.21/+.41) at 5m OTE entry
levels where prev. peak/trough (+/-.10) is no greater than 21 ticks....
Daily Risk and Profit objective: Either 2
initial losses ($-430) or three wrong trades in a row (-$645.00)
equates to end of day (Very hard to do!). Gains of more than $1000/day
equates to end of day - and a big pat on the back.
That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
http://www.therationalinvestor.ca
http://crisdaytrading.blogspot.ca/
p.s. here is an added treat. Monthly Crude with Significant Fibs & Gaps highlighted
Monday's Trade:
Review: Well didn't start the week off on the best note. I Did not wait patiently for OTE levels and as a result, probably had 50/50 chance the market would go either for me or against me. Couple that will relatively poor trade locations and it was a quick 2-2 for -$420 (ugh). Done for the day in combine and will try again tomorrow to be more patient and choose to fight only at OTE levels and once at OTE levels to focus on good trade locations. Since I believe one must be able to take 3 strikes and you are out, I shorted the 87.64 level in my practice account. It will be interesting to see if that trade works. A move into the hourly OTE long SS would give this .64 short the AOCO profit fill at +.41.
Tuesday's Trade:
Review: Watched yesterday's deadcat bounce take price back up into the $88.00 area and the hourly OTE Short SS zone at 88.18. This move was on a 30 minute momentum divergence suggesting there was a potential short play developing. That top did come in through the LKZ. On the initial break in price I calculated an OTE Short SS at 88.10 (on the 5/15m charts) and entered my order. An AOCO (-.21/+.41) would let me be able to handle a test of the overnight highs and gave me a realistic profit window (near the overnight OTE long SS). I was filled in the wee hours of the morning and did have to take a short period of heat on the trade. Once that euphoria subsided, price began a relentless decent. While I may have exited prematurely (at +.41) I am more than happy with the results. Indeed, this one trade made up for yesterday's two poor location trades and goes to show how with a 2:1 risk reward model one can actually be less than 50% accurate and still make money. I do concede I missed two subsequent trades (buying the OTE Long SS and then selling the test of the 15m 13EMA) but I was happy with the 1-1 trade for today. Additionally, because this is a $30,000 Combine (and more importantly a maximum daily loss limit of $499.99) I am only trading 1 lots. As a result, I have to be happy with a +.41 fill and wait for the next setup. Should I graduate to larger account (and with it a bit more of a risk window) I will consider multiple contracts. Needless to say, selling 1 contract at the +41 and riding the 2nd would have been immensely profitable today.
Wednesday's trade:
Review: I am proud of myself today in that I waited very patiently for some signs of a momentum bottom before I went fishing. Indeed, prices had fallen dramatically overnight. So much so that we even went shooting past the 4 hour OTE Long SS (86.11). After drawing a 5 minute Fib retracement off the 8AM price spike reversal I determined that the OTE long SS (70.5% retrace) on a test of the lows was around 85.56. Since I can only risk 21 ticks on the trade that ment my stop would have to be at 85.35. This in itself made me a little uncomfortable as I like to be able to take 10 ticks of risk below/above the prev. peak/trough. In this case that low was .40 so ideally I would have liked to have my stop at .29. The market did test those lows and even broke them and with my stop so tight I was sweating. The market ended up reversing 1 tick above my stop (which would have been 7 ticks above my ideal stop) and this un-nerved me. As a result, I fell back into my old habit of just looking to get out at a small profit. I MUST LEARN TO TAKE THE AOCO RISK TO TRADE FRUITION. I ended up selling to position on the first burst higher for a 10 tick profit ($95.00). Looking back on the trade, I literally sold the market just as it was confirming the bottom I had been looking for. Within 15 minutes I would have had my +41 tick profit trade booked and hit my performance goal.
While it is small consolation, I am happy that I approached today with discipline and made money. My patients in waiting to get 'in' paid off, my specific trade location could have been a little better timed (open order to buy at 85.50 not 85.56) and once in the trade I should have just left it alone. I recognize these two hurdles (trade location and holding a trade to fruition regardless of potential outcome) and am working daily on overcoming them.
Thursday's trade:
Review: One significant warning sign for me is when I start to deviate from my trading plan & basic rules. Today I put a trade on before I had done my daily set-up (a major warning sign) and then when stopped out (which in hindsight was inevitable) I hastily put on another short position in fairly short order. This is very dangerous trading and I have noticed over the past year that when I start to act like this, things can get really ugly really quickly. Luckily, the market was near a short term top (based on the oscillation around the 1 hour OTE level and needed to come back down and check it). Ironically enough, I did yet another classic Brian trading error in that once the account was basically at break even I moved my stop loss order instead of just letting the trade run to fruition. To add insult to injury, while my adjusted stop order was at .72, I was filled at .75 and as a result ended the two trades down $10. (gross =/-0,net -$10 in comm.)....ugh.....this process was a major warning sign for me and so I decided to stop trading for the day. Too bad too, ORT long was huge winner, and subsequent OTE Short setup at the 4 hour OTE level proved even more so. Tomorrow is another day....
Friday's trade:
Review: Tomorrow is another day indeed! I have historically had a difficult time with Friday's and today was yet another example. What I do like about this blog (and me posting each day's performance/trades) is I can really see where I am succeeding and where I am going wrong. Today, for example, I took only one side of the ORT (Opening Range Trade) . It was a failed trade and according to the model, one should take the opposite side on an initial stop hit. Had I done so, today's results would have been rather different (that trade ran for more than 60 ticks). Meanwhile, I myself was stalking an OTE (Optimal Trade Entry) Short SS based on a 70.5% retracement of the overnight failure. While that premiss was in itself ok, I blatantly broke my rule #2 (respecting 15 minute momentum & volume patterns). As pointed out on the chart above, there was no momentum top to work with and volume was rising at the time. It was like I decided this was going to happen and I became blind to what I knew subconsciously was happening. At the time of the trade I was perfectly calm but felt that this was a slow grind up day and I got in too early. I chatted about how I was just going to go with the trade and take the appropriate risk and that my biggest problem of late was not holding on the trades to fruition. Interestingly, I am proud of my 'non-tinkering' and I don't really mind the loss, I think the part that bugs me the most is that the trade was simply wrong. It was a stupid trade and a waist of my silent partner's (L) time. A good resolution - I have to take position entry far more seriously and be stern about alignment (rule #2).
At this point I have a rule that says if you start the day with two losing trades in a row then you shut it down. My combine was down $400 on the day and so it seemed that it was time to call it quits (for combine trading). Had I had a bigger risk tolerance ($500 max risk) I would definitely let that go to 3 in a row. Indeed, my second attempt at a Short did come in on ERT (Extreme Range Trade) wherein prices touched the previous swing peak at 88.69 and I shorted in the practice account. That trade ran to the +.41 AOCO level and so looking back in hindsight I felt that today was really a scratch trade (Combine -400, Prac Ac +400).
I am coming to learn two important things
1. $500 max risk per day is simply too little to be able to trade my model in Crude Oil. I have seen on numerous occasions that trade #3 usually brings me back to scratch if I start off on a bad footing (today was a great example). I like the idea of starting the day with the ORT. Since that model suggests 15 tick risk on two attempts, I must be willing to risk $310 on that trade alone (and a reason why I think I was reluctant to take the other side of it this morning). So with this in mind I have started a new $50k combine (that has a maximum daily risk limit of $1000) coming this Monday. It does have a higher profit objective but I will deal with that hurdle when the time comes.
2.if you have a consistent 2:1 reward to risk on every trade - you are scratch with 33% accuracy, profitable with 50% accuracy and a super star with greater than 66% accuracy. Looking back on this past week's trade - it would seem I have the eye, but I am making a lot of mistakes. Those mistakes are what is keeping my average currently between 33% and 50%. I see that if I had just been a little more disciplined, I would have done far better.
I am really encouraged by the transformation I am actively taking. Rules are being followed, ideas are based on sound principles and I am articulating those thoughts well (this blog for example). While there is far more to be done, my personal trading environment is good and my emotional level seems balanced. Life is hard but we must move on (for my silent partner's sake!).
I am optimistic about the larger risk window and can't wait to report on my 3 swings theory. Lets see how it goes...
