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In this news letter:

Emails and commentary

The Market Review

5 New 1 year highs this week

Peter in Adelaide and Perth at ATAA

Recently I received some emails from traders, I thought they were worth sharing, particularly after my last news letter about choosing a trading time frame. Here is the first one:

Hi Peter

Weekly momentum system now down to 2 holdings. Giving back some profits recently has been disappointing, but have stuck to the system. Looking forward to the next run up whenever that may be

Lou

Then another from Lou

Any thoughts on profit protection methods?

Recently read about a swing trading system where any position that reached +3 R (in profit 3 times  the initial risk of the trade ) was reduced by 2/3. Haven’t had time to test it. That goes against the idea of ‘let your profits run’ but so often it is not the obvious that works

Cheers

Lou

Great questions from Lou, shows he is really thinking, brought on by experiencing some pull back in his method and wondering how to cope with or improve that issue. Here is my answer.

Your method mentioned does work, however like any method has pros and cons.

The result is there are more trades in the short term and less profit in the long term.

So: it comes down to your objective...are you a swing trader or a trend trader?
What time frame will you trade in? Daily or Weekly?

Profit targets give less profit in the long term, but less draw down in the short term.

A option for you to consider is that if the trade is in a certain profit…..like 3R or say 30%(just an example number)

you then tighten your stops more than usual.

You could use this rule in a weekly system as well as a daily.


Of course the only way to decide is to test these ideas, so you know what effect it will have on your system.
How many more trades you will do, and how it will affect draw down etc.


Thanks for the email, you have prompted an idea for my next news letter!

cheers

Peter

Lou is disappointed that his system gave back profits in the recent pullback, yep, that’s what trend trading methods do, and it’s a part of trading. The positive is he still has 2 stocks running, and they could be the big ones that make him the most money. Or, Lou may need to re visit his method and shorten his exit to get him out quicker (do more trades) or lengthen his exit to stop getting whipped (signaled in and out of trades frequently) but he will have to sit through some bigger pullbacks.

The really positive thing here is that he is sticking to a method. Now he has something to test and measure his performance with, financially and psychologically.

Another email:

Hey Peter,

 I really should buy you a beer or two. The following article lists the top 10 (and worst 10) performing stocks for the year.

 http://www.smh.com.au/business/markets/3500-rise-stock-of-the-year-20130628-2p2av.html

 I currently hold 7 of the 10 best stocks !! Your Centurion system is still working well years after you developed it.

 BTW - I never held Sirius resources (or BSL and TPG) as I did not like the looks of the SIR chart (have a look at it as weekly and you will see why).

 Oh - And I entered MFG again about a month ago.

Geoff Dodds

Control Systems Engineer
INDTEC P/L

Geoff is a good trader, he sticks to the system. I cant take all the credit for the development of Geoffs method, he has altered it to suit himself, and had input from my trading colleague Max. The point here is that he is a few years down the road than Lou, Geoff has learnt what works for him, realizes pullbacks happen, has devoted an amount of capital to trade that is removed from his everyday living expenses, so it reduces his trading stress. He also employs some discretion learnt from experience when selecting his purchases, which is fine, but once he is committed, he lets his profits run and cuts the losers. He took a great profit on MFG from a "tightening method" I mentiioned earlier, but is now back in the trade. That shows a flexibilty and willingness to "flow" with whats happening, not fighting against or wishing the siganls to buy or sell be different to what they are.

New 52 week highs:

If you go to the 52 week high section of the website you will see some new signals being generated.

http://www.easysharetradingsystems.com.au/How-to-Trade/52-week-highs.html

If this is a good sign of a market recovery or a “bull trap” (a short term market rally at the start of a falling bear market) remains to be seen, time will tell.

Green line 6 EMA  Red line 24 EMA

The XAO has crept above a 6 weekly EMA (which is equivalent to a 30 ema daily).

As I said time will tell as to if the market can consolidate and travel further or it is the start of a longer term consolidation or fall.

Recently I have been posting this chart. Comparing the Aussie 500 to the US 500, I said that the probability was that we would follow the US trend. This has happened and to me (we all see charts differently) the US trend looks a little stronger than ours, but as always the best thing to do is not predict and create expectation within our self, but follow the market and respond accordingly.

ATAA Adelaide and Perth next week

I will be speaking at the ATAA in Adelaide on the 17^th of July at the Education Development Centre, for details click on the link below

http://www.ataa.com.au/adelaide

I will also be speaking at the Perth ATAA at  on the 18^th at St Catherines College. University of WA, for details click on the link below (ignore the error in the link saying the 16^th)

http://www.ataa.com.au/display-view/perth-thursday-16th-july-at-6-00pm-/perth-meeting.html

I thought some of you may be curios to see some of the trades mentioned in the top ten performers, here are a few charts using the same system I discussed in Melbourne last month and the one I will discuss in Adelaide and Perth.

As I say in my lectures trend trading takes discipline and patience, and it is often through those practices where the big profits are. Some great examples in the charts above.

Thanks for reading, if you got this far, if you are coming along to any of the meetings next week I look forward to meeting you, and am also looking forward to catching up with a couple of clients in W.A.

All the best

Peter

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