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Underexposed - Canadian Stock Journal

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Underexposed - Canadian Stock Journal

  #241 (permalink)
Calgary Alberta/Canada
Posts: 934 since Feb 2014

this is a test post I am uploading a graph and embedding it into this message

All I did in the 3/4 of an hour was refresh my computer then take another screen shot

I will now upload the two screen shots

note the disappearance of the attached file in the message BUT not from the attachment manager...so I did not remove the file.

I will now preview the message and post it....

hmmmm...all attachments appear in the attach files

let us see if all graphics appear now

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  #242 (permalink)
Calgary Alberta/Canada
Posts: 934 since Feb 2014

ok...all graphics show now.....let us see if they still do after 1 hour

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  #243 (permalink)
Calgary Alberta/Canada
Posts: 934 since Feb 2014

Ok...I think I have proved the missing images are not a problem at my end as in my last post those images lasted for several hours before disappearing. In another post I made a screen shot of an edit of that post showing the images properly embedded in the document but no longer visible.

I will make only one more post today after trading has ended today showing the status of the portfolio at this week's end.

there has been a strong correction the last couple of days to bring us off the near record high for this portfolio....but the problems are not specifically related to a single stock...rather it is just a global correction so there is no reason to panic sell....in fact it becomes a buying opportunity.

From the look of it the TSX is following the DJIA slowly though curiously the TSXVenture index is not as affected...so far.

Gold is rebounding AGAIN in response the drop in the main indices....{sigh} just seems to be wandering like a rudderless boat

This weekend is a bank holiday in Canada so we get a long weekend......I will talk about Bollinger bands some time early next week.... TTFN

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  #244 (permalink)
Prince George BC Canada
Experience: Advanced
Platform: IBs TWS
Broker: IB
Trading: Stocks
deaddog's Avatar
Posts: 789 since May 2013
Thanks: 118 given, 1,913 received

Just so that you are aware. I looked at your test post last night a few minutes after you had posted and there were no images.

You then posted that you were going to wait an hour. On my end there were no images before you made the second post.

When you talk you are only repeating what you already know. When you listen you might learn something new
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The following user says Thank You to deaddog for this post:
  #245 (permalink)
Calgary Alberta/Canada
Posts: 934 since Feb 2014

deaddog View Post
Just so that you are aware. I looked at your test post last night a few minutes after you had posted and there were no images.

You then posted that you were going to wait an hour. On my end there were no images before you made the second post.

I know it is weird...the images were there for 10 mins....they think perhaps I removed them but I didn't and I showed a screen shot in another thread that the image code for all images was in place but the images some how vanished.

But I think because of the new rollout they are going to do anything.

there is more discussion here if you are interested


Anyway I want to be past this and move on to my discussions on overlays and indicators that I use and how I use them.
I find it curious that it is irratic...sometimes the images are ok but other times not. I cannot do anything more as I have no access to the code...but even then I doubt I could do much as my computer skills have lapsed a bit from the days when I was a VB software tester/debugger...that was 15 years ago...but testing I was good at....if the code could break...I would find the way to do it

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  #246 (permalink)
Calgary Alberta/Canada
Posts: 934 since Feb 2014

End of month status for July/14

well a major correction in North America markets for the last few days but we still scored a small profit for the week.

The $150 profit comes from the TD Bank quarterly dividend......every little bit helps

Have a good long weekend if you have one in your country...in Canada it is a bank holiday on Monday

have a good one.

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  #247 (permalink)
Calgary Alberta/Canada
Posts: 934 since Feb 2014

Bollinger Bands - a major overlay

Bollinger bands, also known as BBs or Bollies which I well usefrom now on, were developed by John Bollinger in the 1980's as a way to measure volatility in a stocks price. Actually this overlay can be used on other indicators thought there are few charts commercial (especially free ones) that will allow you to use BBs on anything but price.

The calculation is very simple and is based on statistics (mean and standard deviation) though it is thought of as a pseudo statistical approach as the results usually assume a normal distribution (I will show a diagram of what I mean below) of values and especially in a breakout (up or down) the numbers are anything but a normal distribution in nature. But that criticism aside, this is one of the most useful overlays IMHO.

The Bollies consist a simple moving average SMA, typically of the past 20 averaging periods in the chart (20 days on a daily chart) from which the standard deviation is calculated. Then an upper and lower band is plotted from this data and usually it is +/- 2 standard deviation units. So you have an upper/lower/middle band the latter in reality is the SMA.

Normal Distribution

Here is what a normal distribution looks like...see the significance of what 2 standard deviation units means??? IF the data from which the average is calculated IS a normal distribution then +/-2SD units represents 95% of all values from which the SD was calculated...the other 5% are represented by the extremes at either end and would be called outliers. Now of course, in a bullish or bearish run this distribution curve would be anything but a normal distribution as the prices would be skewed high (a bull run) or low (a bear run ) however when the share price runs flat then the data gets closer and closer to normal.

But statistics be damned...it is still very useful as you will see. Here the bare bones stock chart with candle sticks and a Bollie overlay

Basic Bollie Chart

By itself the value of the bollies may see quite limited but there are nuggets to understand even here...however, as you will come to see, when combined with other indicators...(my choice is BBwidth, Slow Stochastics and MACD) this overlay and
these indicators become a very powerful tool for TA analysis.

My observations don't seem to jibe with what books on the subject discuss in the page or less they usually devote to this topic and often I disagree with their observations...but here are my deductions for what they are worth.

1. the biggest movements in the stock price occur when the upper and lower bollie are as tight as possible...the so-called "Bollie Squeeze"...this is the point where the volatility of the stock prices is the least.

2. By itself it is very difficult to determine the direction of a stock price movement inside and leading up to that Bollie Squeeze. But there are hints to help you out....only hints though....not buy/sell signals. Pay attention to the price movement when within the squeeze. Is the price above the middle band (20 daySMA)...Jan 1/14 and March 24/14 are good examples as the price is consistently above the 20daySMA prior to the bullish breakout a few days later whereas on May 1/14 you see the price drop below the 20daySMA this hints at the bear movement to come.....but it is not guaranteed as you can see on June 1-15...this hinted at a bull run...which happened when the bollies expanded but it was a head-fake and PLUNGED....WTF!!!

So you can see by itself Bollies can be a bit unreliable...but with help from other indicators you will see the reliability improve dramatically.

3. Note what happens when the share price rises above or below the upper or lower bollie. Remember earlier we said that data beyond the extremes of 2 standard deviation units were outliers...rareties.

Consider Feb 8...see how the break out went far above the upper bollie??? Again on Feb 21??? Apr 1-3...also June 14...what happens soon after? The share price pulls back until it re-enters the Bollie envelope....the bullish movement is a sideways slightly positive slope as in Fed 24 the worst is the neg decline on June 17....if you follow the chatroom BUZZ and you hear "time to back up the truck and load up" or " here comes a 2 bagger" but you see the price above the upper bollie...don't get excited...within 2-3 days (max 5 days) that stock will pull back...it still might be bullish afterward but by knowing and planning for the pullback you can usually buy it cheaper.

Consider May 9 to 20...see how the price dipped below the lower bollie??? note how each time the stock rose to re-enter that Bollie envelope...no charting book discusses this.

4. Notice what happens at the end of a bull or bear run....the stock price gravitates back to the 20daySMA...from there it is in consolidation rising and falling around the 20daySMA until the Bollies tighten again...when the next major movement will occur.

SO...while in this consolation period...is it a good time to make a purchase??? Of course, it will depend on your investing goals but once it reaches that 20daySMA don't expect much movement other than osscillating around the 20daySMA...I normally like to make my decisions when the bollies are tighter.

So! There are the observations that I make when looking at a Bollie chart with nothing else.

Would it not be nice if you could...

1. predict the timing of a breakout (bull or bear) more accurately using bollies?
2. predict the end of a bull or bear run?
3. recognize a head-fake movement with better accuracy...sometimes befor you bought in?

Well in the next few posts I well show how combining with specific indicators makes interpreting charts much easier. The next post will discuss Bollinger Band Width (BBwidth)

Hope you find this discussion interesting

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  #248 (permalink)
Calgary Alberta/Canada
Posts: 934 since Feb 2014

Bollinger Band Width indicator

As pointed out in the previous post, Bollinger Bands (Bollies) are useful by themselves in giving the chartist a visual representation of volatility. During the Bollie squeeze we can anticipate a major price movement but the timing and direction are difficult to predict using just the bollies.

Fortunately, there are indicators that when combined with the bollies make a much more reliable buy/sell signal.

The first indicator to discuss is directly related to Bollinger bands and that is the Bollinger Band Width (BBWidth)

One of the problems with the normal bollie chart is that it is hard to measure the exact moment that the bollie bands converge to the maximum and then diverge. This divergence when it is sudden and pronounced is the TRIGGER to a major movement. That is, it is the trigger that precipitates a buy/sell order.

BBwidth solves this problem. Here is its formula for calculation:

BBwidth = (upper BB - lower BB) / middle BB x 100

the division of the difference in upper and lower bollies by the middle band (the SMA of the bollie interval) is important as it sort of normalizes the result as we shall see in this updated chart from the previous post.

I have numbered several features of this updated chart for discussion

Buy/Sell breakouts

Notice that the Bollie squeeze looks tighter at Position 2 compared to Position 4 but when you look at the BBwidth at these positions you see they are pretty close in value. Also notice that major changes in price direction occur when the BBwidth reach a certain level...in this case about BBwidth = 5.0 as shown in the dot-dash line at Position 1.

this helps a lot in deciding when the sudden change in direction in the BBwidth will occur...ie: the trigger to buy/sell. Between those times that the BBwidth is above this level there could be a rise or fall in a relative slow change for the most part. One should pay attention to this stock if one is a long term player as it is here when major events take place.

Positions 2 and 3 show definite buy opportunities....see how abrupt and strong the BBwidth changes direction...this is the trigger you want to see for a BUY signal. Also note that the share price for the most part was over the middle band of the bollies.

Now look at Positions 4 and 6....there is a sharp change in direction of the BBwidth as well but look at the share price...in both cases there the share prices are dropping fast prior to the BBwidth signal....this is a definite SELL signal. I don't do any short selling, but I think this could be a good signal for shorting a stock.

Position 5 shows a head fake...it looked like a breakout rebound but see how muted that BBwidth response is. Other indicators may help us avoid this head fake. When you see this muted response of the BBwidth and you bought in in anticipation of a new bull run...then you should probably exit quickly even if you take a small loss.

Position 7 is similar but also notice we are high above the upper Bollie so that alone alerts you that this breakout should pull back...as it turns out it did and notice the more positive breakout signal a few days later.

How to anticipate the end of a bull/bear run

This last chart is getting crowded but you can look at it to see instances of the next discussion on BBwidth. Here is a new chart to check out.

I have shown 2 examples of swing buys/sell (green and grey) and 2 examples of a short/cover short (red and blue) scenarios

as you can see the Buys and Shorts are signaled by the sudden rise of the BBwidth and the Sells and cover shorts are signaled by the reversal of the BBwidth rise.

You could say....well yeah I could see that from just the chart...and I guess you could but this gives a more objective view...

Can we make these buy/sell signals more clear....yep...by the addition of 2 more indicators to this chart

The next discussion later this week is the addition of Slow Stochastics indicator.

Good trading.....

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  #249 (permalink)
Calgary Alberta/Canada
Posts: 934 since Feb 2014

Aug 6 - mid week status

Well it has been a short week as Monday the Canadian markets were closed for a bank holiday.

Well we made $5 so far but considering the downturn in the past week of so...I'll take it. Gold appears to be coming back AGAIN....{such a tart!!} so LSG.TO is increasing nicely but I won't get excited til Gold exceeds $1325/oz and keeps on rising...but it seems to be falling back after short gains...luckily (so far) LSG is holding its price pretty good on these gold pullbacks.

I am considering placing a trailing limited stop loss on Lundin metals LUN.TO ...very close to doing so but really would like 20% and we are getting near there with 16.59%...otherwise I am pretty content...

I am working on that discussion on how I use MACD and about 1/2 finished....I will post it later this evening.

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  #250 (permalink)
Calgary Alberta/Canada
Posts: 934 since Feb 2014

MACD - Moving Average Convergence Divergence

MACD was developed in the late 1970's and is one of the most popular indicators used today.

The main MACD line is simply the subtraction of 2 exponential moving averages and these are traditionally the 26 period EMA and 12 period EMA. I say period as the MACD indicator can have any period interval you want... minute, hour, day or week.... it does not manner...so if we were using a daily time period the fomula would be:

MACD = 26dayEMA - 12 dayEMA

traditionally a signal line wanders above and below this line and is used to generate buy/sell signals. This signal line is usually a 9 period EMA or for a daily chart it would be a 9dayEMA.

I am not a great fan of using a signal line in daily charts I find that the signals they give are too late. I would much rather trend the MACD line and forget about the signal line all together. In intra-day charts though, where you are using shorter time periods of 1,2,5,15 min time intervals then I do think that a signal line might help but I still would like to trend the main signal.

The following is showing a chart with the normal MACD below then followed by a MACD with no signal line but trended and finally a naked MACD chart

As you can see, Bonavista was in a bullish uptrend until May when it changed into a bearish down turn.

the vertical lines are indications of a buy (green) and sell (red) signals. Perhaps a short term swing trader can make money out of the plethora of buy/sell signals but if I was more into trend lines the pink and light blue resistance/support lines gives me as much or more information that the 9dayEMA line oscillating around the MACD....by those trend lines in the main chart one could buy on Nov 13/13 ($11.60) and held the stock til May 10/14 ($16.60)....a nice $5 gain per share.

If I trended the MACD I would buy a little earlier, I would hold the stock because the MACD is moving sideways and sold it also on May 13/14....I might pick it up again on May 27 when it crossed the MACD resistance line (around $16) but sold it soon after on June 24 (around $16)...the jury is out right now.

Is the signal at the far right (dotted green) a buy signal given in the traditional MACD about to happen?? Well trending the peaks shows it still following the narrow channel so it is a watch by that chart.

I don't like all the buy/sell's generated by normal MACD ... I find it much easier to just trend the MACD

However the use of MACD is very much more enhanced when it is combined with Bollinger Bands and the BBWidth indicator as shown below:

this charts make the decisions easier....

The buy or sell signals are timed ONLY to situations where the BBwidth is diverging rapidly....the decision to BUY or to SELL depends on what direction the MACD is trending at the time.

The Blue lines are showing the end-of-a run...this is a place where as a swing player you might take a profit but for a long term player this is a WATCH point. You are usually making this observation beween Bollie squeeze events and this is a consolidation period following a bullish rise or bearish fall.

The trigger for this "hold" occurs when (for a bull run) the BBWIDTH changes from a pos to neg slope and the MACD changes from a pos to neg slope at the same time....if one makes the change but the other does not, the run could still continue...BOTH CHANGES must occur.

the dotted green line shows a false buy (head fake)...see how muted the BBWidth rise is this gives a clue things are not going to continue

The coral circle is very interesting. The end of a bearish run is also triggered by a reversal of a BBwidth chart which did happened on about July 23 or so....but the MACD instead of rising has gone sideways. When this happens it casts doubt that a stock has reached a bottom....it suggests the stock is just resting and further losses may happen yet...it is not clear at all as to the direction.

Consider this chart

In this chart on the left you see a clear sign that the bearish fall found a bottom...I call this a "MACD/BBW pinch" see the BBwidth clearly reverses...the MACD mildly reverses and then shoots upward.

In the example on the right...the BBWIDTH does not go neg ... it moves sideways...the MACD then shows its true colors and heads down again...there are morse losses to come.

The buy/hold/sell sell signals are clearly shown here.

There is one more problem to solve....at the end of a run (blue) line....How do I know if I should sell out or continue to hold before reaching the BB squeeze???

Well that is where our final indicator fits into this chart....the Slow Stochastics oscillator and that will be the next topic.

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