Wisdom Quote

"Making a few correct calls using only a bottom-up strategy may influence investors to think that they are great stock pickers.  In reality, it's more likely that they have just been on the right side of macro trends without realizing it, such as choosing stocks from a sector that was in favor."

--Fracois Trahan

from The Era of Uncertainty

by Francois Trahan and Katherine Krantz

Stock Market Still in an Uptend..despite what the financial news says

I think most traders and investors too, eventually realize that at a minimum, financial news needs to be taken with a grain of salt and more likely just needs to be ignored all together.  I've started seeing the bearish headlines and concerning stories pop up but when I pull up my charts, all I see is a nice trend that is taking a much needed breather.  Here's the S&P:

I believe Jesse Livermore said something to the effect of he learned to make big money by sitting on his hands..something like that.  What he meant was that timing every wiggle of the market is generally a losers game...the big money is finding a trend and then riding it until it's done.  As you can see from the chart above, my system says the trend is still up, so I'm staying long with stock..plain and simple.

On a separate note, I stumbled across this blog today http://share-tos.blogspot.com/.  It is filled with all sorts of ThinkorSwim codes that the authors share.  If you're into tos, it might behoove you to go spend some time at the blog..I know I will.

TLT

Euro is in a Box

The Euro is stuck in a pretty tight trading range (aka a box) as the world watches the EU to see how they handle all of the mess regarding Europe, Greece, etc.  The buying pressure, or lack of selling over the last couple of weeks, has been tripping buy signals on some of my systems and neutral signals on others.  I'd imagine a bunch of other systems are seeing the same thing.  The important thing to note is that all of these systems were giving sell signals only 2 weeks ago.  So where do we go from here?

Discretionary traders or classic charting traders will be looking for a break of the trading range (see the blue box on the chart below).  A good amount of professionals will be looking for any sign of weakness after a break higher in order to fade the move (short the euro).  I'm currently long the euro b/c that's what my system is saying to do.  Another thing I like to look at in these situations is the Commitment of Traders Report (or C.O.T.).  The C.O.T. is a report of positions of Commercials (big hedgers), large traders (traders holding large positions) and small speculators.  Until recently, the commercials and large trader reports were still bearish, but in the recent report, we saw the first bullish sign in quite a while.  Here's the chart:

When I see a tight trading range and then a change in the COT, I follow signals that are in the same direction as the COT.  Commercials will begin selling (b/c they are hedging so a bigger number is bearish and a smaller number is bullish) and large traders will be buying..and I'm looking to buy as well.  I generally ignore the small speculators number.  There's probably something to be gleaned from it, but I don't use it.  If you're interested in looking at these types of charts, here is a great free website for it.

Have a great weekend.

TLT

St. Lucia: Pics from my recent trip

One of the best stops on the cruise that my wife and I recently took was St. Lucia.  This is a beautiful little island that is a rainforest mountain rising out of bright blue water.  It's a place that my wife and I are considering buying a vacation home/villa at.  Here's a couple of pics.

Have a great Friday.  I'm planning on posting an overall market recap this weekend.

TLT

LIve Trade: Opening Range BreakOut in the Eur/Usd

I've got a position on in the Eur/Usd today.  So far, it is working out to be a potentially good opening range break out trade.  I've put on 2 units of the trade and am trailing one unit with an ATR stop.  Here's a screen shot of three charts:

Notice that I'm looking at the S&P (via SPY) and the VIX in addition to the Eur/Usd.  It is important to see that SPY is above it's opening range and the internals are bullish (as indicated by the green painted bars on the spy chart).  The VIX is pulling in too..so along with spy and internals, it shows that the markets are all working together which gives the trade a higher probability of being successful.  At this point there's not much to do but wait for pull backs to add to the position and/or get out once price action starts tripping sell signals.

Hope everyone's having a great day.

TLT

Got a Sell Signal on the Euro this Morning

Building a short in the Euro/Usd, beginning with a fresh sell signal that occurred this morning. 

I hope everyone's off to a great start for the new year..let's make it a good one.

TLT

Will Be Back in 2012

My wife and I are going on a 10 day cruise in the Caribbean.  Not sure how 2011 went by so quickly.  Everyone have a Happy New Year and I'll be back posting in January.

TLT

ID/NR4 Bars and Thinkscript

Linda Bradford-Raschke, Laurence Connors, Tony Crabel and many other professional traders have referenced narrow range bars as part of there trading setup arsenal.  LBR likes the ID/NR4 which stands for Inside Day Narrowest Range in 4 days.  That means the high and low of the bar have to be within the prior bar (an inside day) and the overall range itself has to be the narrowest in the last 4 bars.

Referenced in many books authored by the above mentioned traders, ID/NR4 and NR4 bars provide a low risk high reward trade setup.  The setup generally involves trading the break out above or below the ID/NR4 bar and placing a stop at the other side.  Then trail a stop for another bar or two.  LBR stresses that in the event your initial stop gets hit, you should stop and reverse so that you are now in the trade in the other direction.  She states that this is important because many of the moves can be false break outs but the move in the opposite direction can be very powerful after a false break out.  Regardless, these setups do allow for very tight stops and can provide some very good short term edges.  Adding some additional research such as current trend direction if any (Crabel does a lot of this research) or monitoring an opening range break out after a NR4 day (Crabel does this as well) or using some volume analysis can all help you filter NR4 or ID/NR4 bars for even higher probability trades.

Here's a chart, note the blue dots above bars indicate an ID/NR4 bar:

And for those of you on ThinkorSwim, here is the thinkscript:

###DELETE THIS ROW WHEN PASTING INTO TOS###


# ID/NR4 Bars
#
def range = high – low;
def na=double.nan;

def plotter=high+range*0.3;

def longvol = volatilityStdDev(100);
def shortvol = volatilityStdDev(6);

def volratio = shortvol/longvol;

def isnr4 = (range <= range[1] and range <= range[2] and range <= range[3] and range and high<high[1] and low>low[1]);

plot lowvol = if volratio<.5 and isnr4 then low-.0005 else double.nan;

lowvol.SetDefaultColor(color.violet);
lowvol.setstyle(curve.points);
lowvol.setlineWeight(3);

plot nr4 = if isnr4 then plotter else na;

nr4.SetDefaultColor(Color.yellow);
nr4.setstyle(curve.points);
nr4.setlineWeight(3);

###DELETE THIS ROW WHEN PASTING INTO TOS###

This code was adopted from a code for NR7 bars written by ReadtheProspectus at his blog with the same name.  If you like thinkscript it would be well worth it to spend some time at his blog.

Happy Holidays!

TLT

Covered My Eur/Usd Short

Over the past week, I have been managing one position...a short Eur/Usd.  It turned out to be a pretty decent trade that probably has more profit potential...however, booking profits seemed prudent right now.  Total, the trade booked about 400 pips which is a pretty big winner for my swing trading.  100-200 pips is the standard size for winners. 

The trade was a good one but I really wanted to blog about taking off the trade.  For me, booking profits is actually one of the hardest aspects of trading.  I have found that there are 2 methods that work for me.  A trailing stop or a profit target.  Quite often I use both.  For this trade, my take profit point was 400 pips.  It was tempting to continue to trail my stops but there is a high possibility of seeing a bounce.  3 day one direction moves usually get corrected.  Furthermore, we had a fed day yesterday and it's options expiration week..both are events that can move the equity markets and in turn put pressure on the euro.  Sometimes booking profits and sitting out for a bit is the best thing to do..as long as you fully accept that the trade "may" have been much more profitable had to left it on.

So what's the game plan?  I do think the Euro could fall quite a bit farther, it will just be a matter of patiently waiting for a pull back and an entry signal to put the trade back on.  This is likely a very crowded position and a good rally may shake out a bunch of the shorts and provide some fresh fire power for a move lower.  We'll see.


TLT

ThinkorSwim Indicator: Multi-Time Frame Stochastics

Here's a code for a multi time frame stochastic.  This will allow you to plot a stochastic for any time frame that is greater than the one that your chart is currently on.  For example, it can be helpful to know what the hourly stochastic looks like if you're trading on a 5 min chart.  I'm playing around with using this a filter for mean reverting systems..such as ignore a "Buy Signal" if the stochastic on a higher time frame is over 60.  Here's an example of using the 15min stochastic with a 1 minute chart:

Here's the code.  To use this code, copy and paste it into TOS and then delete the // marks at the top and bottom.  These marks are necessary for posting the code on blogger and the indicator will not work in TOS if you don't delete them. 

Hope everyone had a great Thanksgiving!

TLT

//

declare lower;

input aggregationPeriod = AggregationPeriod.DAY;
input KPeriod = 10;
input DPeriod = 10;
input slowing_period = 3;

plot FullK = Average((close(period = aggregationPeriod) - Lowest(low(period = aggregationperiod), KPeriod)) / (Highest(high(period = aggregationperiod), KPeriod) - Lowest(low(period = aggregationperiod), KPeriod)) * 100, slowing_period);
plot FullD = Average(Average((close(period = aggregationPeriod) - Lowest(low(period = aggregationperiod), KPeriod)) / (Highest(high(period = aggregationperiod), KPeriod) - Lowest(low(period = aggregationperiod), KPeriod)) * 100, slowing_period), DPeriod);

//

Live Market Commentary Video

Once again, looking at the Opening Range for the Eur/Usd, the SPY and the VIX to generate trading signals. 

Have a great day.

TLT

Market Recap Video

Trying something new...playing around with the screen recorders..maybe gonna start recording some trading examples and market commentary.  Here's a video where I talk about today's trading in the Eur/Usd.  There's a couple of opening range breakout setups and I walk you through what types of things that I'm looking at when I put on these trades.  Volume is not the best, so turn it up to hear...I'll do better with that next time.

In the video, I mention that the Adaptive Opening Range Indicator was from Thinkscripter, however, I misspoke.  It is actually an indicator that was programmed by ReadTheProspectus and is available here.  If you're not familiar with the site, you should spend some time with it and consider donating to get access to the "Donors Only" codes.  I don't know the administrator of that site and gain nothing from this recommendation...just think it's a useful website and a good blog.

TLT