Archive for November, 2009

Sorry for the off topic subject but it is amazing. From my window you can see airplanes coming to land in London City Airport. For those who don’t know this is the windiest area in all London.

Watching the wind throwing these poor airplanes in the air make you feel sick and lucky that you are not on board. I feel that a big acciaident surely will come. Don’t be on that fight!

For me this was the most difficult question. Many time I opened a trade with a stop loss too tight only for the stop order to trigger and then bounce again leaving myself upset!

The idea is to setup a stop loss not too close but not too far either. So how do you set your stop?

I take this idea from ‘Come into my trading room‘ by Alexander Elder. It calls ‘The chandelier exit’ and it helps you to setup a stop loss out from the market noise.

The formula is very easy:

(Highest value of the last 22 bars-3)*ATR(22)

for shorting is the same but with the lowest value of the last 22 bars.

The idea is to move your stop loss forward as long the trade goes in your direction. But Never move it down!

The code that I use to add it to IG index chart packaging is this:

RETURN highest[22](High)-3*AverageTrueRange[22](close)

and for short:

RETURN lowest[22](Low)+3*AverageTrueRange[22](close)

this really works well for me and saved me many time from being stopped out!

After a big drop yesterday the market is calm down a bit but I fill it is the quiet before the storm. It is 30 minutes before the opening in US and you can feel that everyone is waiting to see how the market in the states react to the Dubai news.

That’s why I had a quick trade today on Rio Tinto and run a way after a quick profit. I know bought it at 3040 and sold it on 3060. I know it could easliy end the day around 3200 but on the other side it can finish around 2900. Yes I can use a stop loss but if I need to carry the trade to next week the stop loss could worth nothing if the market opens sharply lower.

It is the same with oil and EUO/USD… I am waiting to see. No mater what I won’t trade in the first half hour. If by then I will see a sharp move I may jump on the train (hopefully it would not be too late!)

I’ve tried for long time to find a good package for decent price. I tried sharescope and wasn’t happy.

Now I am using IG Index charting package.

I am using it through my CFD account and it cost £30 a month but you get a refund if you make 4 CFD trades in a month. It is not perfect package but it offers me what I need and it looks great. Highly recommended!

It has to be capitalspread.co.uk

1 point FTSE, DAX, EUR/USD

2 points GBP/USD

3 points Dow 30

you won’t find better than that!

Having said so the platform is a bit old and slow.

For the last few weeks oil (light crude) is running between $77-$80 which gives nice setup for trading. I’ve played several time in this range and it worked quite well.

Yesterday I had an order to buy the black gold at $77. I woke up in the morning to see that I am in.
By 10:00 I was 50 points up so I moved my stop loss to 77.02. I was stopped out.
I was upset to see it up again to 77.50 and I put another order to buy it at 77. Soon I was in again but this time I was caching a falling knife. Before I knew it the oil was at 76. Few minutes after it was 75.55 my stop loss was at 75.40 and it seems very close.

It recovered a bit back to 76.10 just to go back to 75.80. Today it was the same story. Recover a bit to 76.20 just to move back to 75.80.
I was waiting for the US inventory data praying that I won’t stopped out. Minute before 15:30 the contract touched 75.49 and I though that I need a really good data to bail me out.

The data was a bit better than expected so the oil recovered. First to 76 and then to 77. Using the Euro gain against the Dollar the oil rose to 78 and I closed my position. What a roller coaster!

What I’ve learned from that? to use my brain more. It is good point to buy at 77 but first let it fall below then I should buy it on the way back. Lesson learnt.