All still looks good in the pm, gold came back up quite a bit but it matched the downward motion very well. If turbulence shows up we should get wild down swings in gold. Russell bounced back nicely so added and moved the stop and also went long yen.

Yen is nice to trade because of the 12 hour difference. It is also very different from other currencies. It can sometimes tell you things about other products, especially gold.

I expect that one or more of these positions should work out this week.

update: another bullish signal on the Yen.

Nothing really carried through from yesterday. The Yen position failed, but am trying again long today. Gold and Russell looked flat and weird, which tells me someone is trying to be tricky. I got out of gold a minute or so before it shot up and am now long gold. The Russell I held a half position long and added on the big candle down. Am currently underwater on the position but I feel good fading that push, especially on the open.

All of this is typical of multiple markets searching for direction. This is where trend traders just lose money slowly and wait. It also tells you why its a good idea to trade multiple markets.


russ open

So how is that candle on the Russell resolving?


russ2


The consolidation points to the upside so we retain the position, otherwise we would get out about halfway up the candle. If I were a scalper that is probably what I would do, fade big candles, where do you put your stop though? full length of the candle? half the length? Interesting question.

As it is I use this little scalping technique to mediate slippage. I have a lot of slippage with this method. On a list of pros and cons that would be a con.

The bear movement was fairly strong and persisted long after the open, but odds favor trend continuance so that's how we play. Lets see how this shapes up in the pm session.

so here is the resolution at the end of the day, very good information there.


russell resolved


you see where it resolves? as if the downtick never happened?

Bullish sign in a bullish market. Titans are go!





download

So today's action negates our bullish bias on Russell and gold. Short both now.
What I am really looking for is something like this;


18k


All of those lines represent entries of a single contract (Yen is $6 per tick, $60k contract), so in the end there are 8 entries over the course of a month with a total take of about of $18,000 for a $200 initial risk. In the end of course you are risking the full $18k but its found money (OPM) and you keep moving your stop up. This is a four hour chart.

As the market headed back down, you of course lose a good chunk of the money, that's the way the cookie crumbles.
Finding this situation every once in a while is crucial to the profitability of this system. It happens more often in commodity and currency than S&P and family.

Here we go!

this morning's Yen


Yen half hour



Looks good right? Meh. Its Friday and here's the daily


yen daily


So it has a long way to break out of this slow downtrend, just as likely to hit the trendline and creep back down again. I took the profit and will re-evaluate next week. If you're in the long term you can get in and out as you please. As you step back its more leisurely, also less like working. Long term trend trading is more like playing a lottery where you have really good odds. Not that bullshit they sell downtown.

Gold looking sketchy as always, still got my short and long oil.

Welcome to the working week, as Elvis Costello used to say.
"I know it don't thrill me, I hope it don't kill me."

So here we have some nice action on the Russell, I assume other indexes are more or less following along.


russell 3


micro Russell contracts are very small, 11k so it is a good one to practice adding. You can see three green lines where I added contracts and the all important blue line of my stop.

The stop is so important because if its too close you get kicked off the trend and too far and you're loaded up with contracts and take an outsized loss, what to do?

It looks like I'll be doing some math to see what my stop gets me. We are now at $3 a tick so if we get stopped out I lose $50 of my original capital plus the $250 equity in the trade. I like the stop and feel good about it. Maybe we will get to add another contract tonight or tomorrow. I REALLY like to stay in these long trades on Russell as there is a substantial upward bias, but I don't want to fall in love with the trade so much I'm trying to ride out an obvious downtrend, clutching my stress ball singing that song "Got to turn around sometime"

No thank you.

Yen presents a problem as it is a 60k contract and adding makes my stop expensive very quickly, so we will likely let that one ride until I get stopped out.

edit. 2366 is the march high, so we will exit around that point and reassess.

Turtles


sea turtle


Do you know about Richard Dennis and the turtles? He and his friend made a bet they could grow traders like they grow turtles in tanks like in China. It reminds me a lot of the bet Mortimer and his brother made in Trading Places. Orange Juice futures, remember? That did not work out well for them.

Does anyone still trade orange juice futures? Tropicana right?

I read a book one of the turtles wrote, he used Donchian channels, adding contracts at each level. Essentially the same thing I'm doing. You only make money on trends. He made a million dollars his first time out, in natural gas. He got so excited he forgot to sell the contracts prior to expiration, Dennis had to remind him. Where would you store 100 million in gas?

Now I'm not saying that Richard Dennis used that method himself, but he did teach it. Also he said this (from turtletraders.com)

Dennis had some severe down periods before that banner year of 1986. Perhaps his political ambitions had caused a loss of focus. Adding to his responsibility, by this time he had moved beyond trading only his own money. He was trading for others, and managing their money was not his strongest suit. He said, “It’s drastically more work to lose other people’s money. It’s tough. I go home and worry about it.”

This was not what his clients wanted to hear. In 1983, when his as- sets under management peaked at over $25 million, his accounts for clients hit turbulence. After a 53 percent rise in January, accounts dropped 33 percent in February and March. That drop was enough to prompt George Soros to yank the $2 million he had invested with Dennis only two months earlier. After a partial rebound in April and May, Dennis’s funds dived another 50 percent in value. His 1983-era computer that cost $150,000 did little to console nervous clients. It took many of his investors more than two years to get back to even with their investment. Most didn’t stick around, and Dennis closed down some accounts in 1984. He rebated all management fees to losing accounts and conceded that trading client money as aggressively as his own money was not something clients could psychologically handle. What did that aggression look like on a month-by-month basis?

Dennis was famous for those big returns, and that was what his clients wanted—to become rich like Rich. They got on board knowing full well the voyage would get rocky, but conveniently forgot that fact when rough sailing made them seasick. At the first sign of troubled waters, when they were puking losses, they cut short the voyage and blamed Dennis. He was learning the hard way about people’s irrational expectations.

In 2005, Dennis looked back on his troubled times in the fund management arena:

I think the problem is that a money manager very rarely ever sits down with the person whose money it is. There’s always a representative of a firm of a firm of a firm. When you have customer money, you generally try to please the people who want “passable,” whereas you might be able to explain it to the ultimate end user whose money it is that “this might look brutal, but we’re trying for something spectacular.”

I don't expect to take spectacular losses doing what I'm doing, but failing to find a good trend for an extended time can certainly look like that. lots and lots of small losses. So I think of it as more good odds on a lottery than trading.

I will guess not many people do it because if your self esteem is performance directed, and everyone's is to some extent, there are periods where a trend trader will feel less than. I have no desire to be a million dollar trader, just get by and enjoy my remaining years on this beautiful planet.

russell daily



so here's my ideal scenario, currently short the russell at a small profit, if it goes down to 2273, my next expectation would be to shoot up to 2366. could happen within 3 days?

I am doing a lot of thinking lately about where I want to put my time and I'm quite torn. I saw the post about a member's mom who is doing a 10k to 1 million challenge and thought that was really cool. she is trading on a very small time frame and I started thinking what if I tried smaller time frames again? Scalping but in a more leisurely fashion. I think if nothing else it may encourage me to look at the markets in a slightly different way.

I did it on Friday, 100% win rate on 4 attempts, 3 in Russell and 1 in gold, a take of a little less than $200. I will try it for 2 weeks and post more exactly what I am doing, Friday was mostly dicking around, cherry picking set ups, but the feel of it is more focused and less exposed. My sense is that I will pick up on trends anyway and trade accordingly, also it is summer time so perfect time to explore new strategies. My big fear is that I will be out of the market when a big trend explodes so maybe I end up in all the time but scale up as the opportunities come, who knows?

I am working on a project for a deck of cards used for schools where kids identify and try to draw different animals within the various biomes (a biome is like desert or woodlands etc) If it works out, it will be a companion set to a book my friend has written, but it has me painting again, got some new brushes and it has been very fun to do that again. We also tried to bathe dog at the local Chow Hound, she was NOT having it, but we did it in the tub and she smells a bit less like the lake today.

Have a great week everyone.