Sold ST Engg at 3.83

Just one day before the fiscal cliff. I really do not know what to expect. But one thing I am certain: I do not want to ride my profits anymore, I want to avoid more volatility going forward into the fiscal cliff. Not that I think it will be fiscal Armageddon but rather fiscal Roller Coaster.

Bought ST Engg at 3.65

...on 30th Nov.

Again I am buying it at a high. That does not make me popular does it? But then, that is how I consistently make profits for the past 2+ years.

Stop loss 3.57. I am using a last bar stop (the bar before the entry). I am using the low value, of course. This is in the book "How to Make a Living Trading Foreign Exchange" by Courtney D.Smith.

In the book he describes the 55/20 breakout strategy he uses, which is a variant of the Turtles breakout trend- trading strategy. This is one of the strategies that I find still works quite well. I also use it in my forex trading as one of my longer term strategies. (My main strategy trades up to 3 times a day, and of course that is automated)

Most strategies I came across work sporadically or not at all (and I do come across lots of them, as I do my automated programs for various clients across the globe in addition to my own research). Some just looked good on backtests but that is altogether another subject.

Target 3.89

Nice Short on GOLD

For those who start to think I am a GOLD fan, think again. This time I short GOLD instead of buying that yellow metal.

I shorted GOLD using my Dukascopy Forex platform. Yes, I do not always just buy GOLD. This is a countertrend trade.

GOLD broke the uptrend on 26 Sep. Alas the positional risk was too great for me then at 1750, because I determined a stop above 1795. My target is at just above the 350 SMA at 1680. Hence the Reward/Risk ratio is 1.5. Not good. So I did not take the trade there and then.

Then on 1 Oct,  GOLD reaches 1795 before closing with a bearish upper wick of a candle at 1777. Nice. What's my Reward/Risk ratio? 5.3 (1777-1680 divided by 1750-1777). And because my R/R ratio is big, I can now command a bigger position at the same risk I take for most of my trades, which is 1% of my trading capital.

Along the way to my profit, I was almost stopped out just below 1796 on the 5 Oct.

On 2 Nov, I took my profit at 1678 for a 5.3R gain.This is my big profit for this year.

Well not quite my usual trade of following the trend. This is a countertrend trade supported by MACD divergence. One of my favourite supporting indicators for countertrend trades. It is just an idea from one of many setups I learnt during my 6 years of trading. I took the trade as usual on 1% risk to my trading capital.

Trade small, at 1% of trading capital, my decisions tend to be better.

Sold Google at 696.7

The day before, Google breached my 690 stop level and proceeded to a low of 680ish while I was sleeping. So today I resolved to cut my position and I sold it at 696.7 at a small loss of 0.5R. Normally I would lose 1R if I lose which is about half of the time.

For my keeper stock play, I enter half position size to be followed by scaling in of another half upon bullish confirmation. And that will be my full position for the keeper stock. And being a keeper stock, I tend to want to keep it for longer so my stop was at 2 degrees of support down, which is 690.

Alas the keeper stock breached my stop and I cannot keep it anymore. At least I can say I own GOOGLE for a week!

Bought Google at 753.74

It had a recent high of 774, that is an all-time high. My stop is at 690. This is a keeper stock meaning I will trail a loose stop if the price goes high. Remember risk small.

I doubt anyone is following my trade or will follow, because I always seem to buy at a high price. Well what works in normal life certainly do not work in the financial markets. People always want to buy cheap, me too. I always look for bargains in the supermarket, in restaurants, in the Great Singapore Sale etc. And once upon a time I do look to buy cheap at the stock market. Now I simply don't. What's cheap tends to get cheaper as it really reflects the weakness in the stock.

Notice that with my previous pick of ST Engg, my trailing stop was quite tight. For Google, I am having a loose trailing stop.

Please view the chart of Google here: (do some work and click on the link, will ya, I hate to spoon feed pictures in my blog, because anyone can access it on Yahoo Finance or MSN Money, and this is not a photo blog)

http://finance.yahoo.com/echarts?s=GOOG+Interactive#symbol=goog;range=5y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

Sold ST Engg at 3.47

Sold ST Engg at 3.47.
Profit of 2R.

ST Engg surged to a 3-year high of 3.58 last week. I did a mental trailing stop of 3.47, one point of perceived support of 3.48.

I once talked about buying stocks that seem to be at a relatively high price. But then when the price is high, it reflects the value of the stock. Conversely a when a stock is cheap, the fundamentals underlying it is also of equivalent value.

You may argue that you cannot make much by buying at high prices. But then let's not talk about making profits first. Talk about preserving your capital. Statistically only a small minority make meaningful profits on a consistent basis. I venture to say it is less than 5% (and I am one of them!).

Let us look at professional hedge funds. There are 3000 over of them in the US. Again, only a minority is making money consistently year after year. Most just come and fade away. Some have stellar growth and even larger implosions (collapse). Turns out they indeed have risk management in place but their traders manage to sidestep that! That is NO risk management.

Reading from: http://online.barrons.com/article/SB50001424053111904571704577404264215025458.html#articleTabs_article%3D2
"In the last three years, the Top 100's average annualized hedge fund returns were an impressive 25.55%".

Keep that in perspective, and you will probably think more about what it means to invest in the markets.

I need a robust development methodology for my JForex business

Trading Development Methodology v.0.0.1
1. Formulate new trading idea
2. Draft prototype
3. Test prototype
4. Select degrees of freedom variables
5. Formulate test plan for each DoF
6. Backtest
7. Forward-test
8. Optimize
9. Launch  

ST Engineering near 3.5

Looking at the strong support throughout the week, ST Engg seems poised for a breakout above 3.5. I will be watching for signs of volatility and weakness to determine if it is still worth riding further

Bought ST Engineering at 3.31

Stop loss at 3.23
Tentative target 3.5, but I will watch the price action nearer that level to determine whether to take off half my position or to let it ride on.

Ride on!

Yanlord is no go

Alright, Yanlord broke support at 1.24, displayed further weakness by knocking on the support repeatedly before plunging to 1.17 with an intra-day rebound to the support level again. It ends this week at the support level of 1.24. Well, well... I will skip this trade.

For those with itchy fingers who bought at cheaper prices. Well why did you buy on weakness? Did you have any statistical evidence or other compelling reasons to buy? If not, you are gambling, pure and simple. I am not saying it is wrong. But most gamblers end up in the poor house.

I buy on strength, because I have done my homework in reviewing my system and found positive expectancy for trades like these. And it is a lot of hard work. 19 out of twenty times, the promising system I envisioned falls flat with negative expectancy over the long term. And that is painful. Trading is 'painful' and a lot of hard work. My best forex strategy trading at the moment is painful. Its win rate is 35%, meaning I expect to lose most times I trade. It helps that it is automated of course. It helps that I know in the long term, it has a good positive expectancy.

Fact No.1 : systems or mechanical trading is very much like testing to find a light-bulb that works.
Fact No.2:  successful trading is not about winning but about making your money grow.

Targeting Yanlord for a buy

I will buy if Yanlord goes up to 1.3 in 3 days time. Otherwise I skip. Yanlord has an obvious support at 1.24, broken to the downside. I am trading on the premise of a false break.

Plus points:

• General uptrend now at support going back to October last year. 
• Potential triangle breakout to the upside following a false break of resistance

To summarise:
Trigger to buy : 1.3
Stop Loss: 1.21
Target: 1.48
Risk 9cts per share

Suppose I have $20,000 in trading capital, my 1% risk is $200. I buy 1000 shares or 1 lot and if I lose the trade at 9cts ie. it goes down to 1.21, I lose $0.09 X 1000 = $90. Add in commissions of roughly $60 to buy and sell and you have a loss of $150.

If you do not understand, please do not trade. A little knowledge 'half cooked' is dangerous to your financial health. Becoming successful in trading is like taking an MBA course. Please do not think otherwise.You can always do your due diligence to educate yourselves with trading books of real value like those I listed.

If nothing else, just learn from me that limiting yourself to a 1% loss per trade will save you from inevitable sleepless nights and big losses further down the road.

Sold M1 at 2.43

Sold M1 at 2.43 for a loss.

I am training to be a good loser. Good losers lose small. Now how about that bigger win, my dear Mr. Market.

Bought M1 at 2.5

Bought M1 at 2.5 on signs of resistance yielding.

2.43 cut loss
2.71 target