The JSE and finance forum for South Africa
General Category => Shares => Topic started by: DontPanic on July 13, 2018, 12:47:29 pm
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Hey guys
This is my attempt to hold myself accountable to not only myself but on a public forum- to stick to the strategy come thick or thin- and not second guess it especially in the middle of active trades. I will freely post my trades for all to see. If it helps anyone else that's just great.
A bit of background: I used to trade the "beast" making excellent money, but along came the market crash of 2008 I think it was and not only did I lose a small fortune on Metorex and Merafe but also took a massive hit on my trading confidence on trading the ALSI- although the strategy was as sound then as it is now- just my trading "mind" was damaged.
So about two month's ago I started a new account at IG Markets- deposited a smallish amount- and have increased the balance by about 42%. However, I find myself messing up things by second guessing trades- trying to "know" why things are happening. This runs contra to what is supposed to be my trading philosophy...The LESS I know about the markets the better. This is a semi-mechanical strategy based on the assumption that the market will statistically keep on doing what it has done in the past. I'll elaborate on the strat in due course- but it is based on EMAs crossover on two timeframes 1 hour and 5 minutes- constantly alternating long and short on each- so much of the time the positions are hedged.
Let the fun begin ;)
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This is the 1 hour strat.
EMAs are 23-38-81. I don't use IG for this because I don't want after hours (speculative) trading messing up the charts!
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This is the 5 minute strat.
The EMAs are again 23-38-81
I use IG markets for this as it affords the opportunity to trade after hours (hedging the 1 hour strat whe.re necessary)
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I love these. Hope you keep it going through good and bad.
*Fetches the popcorn*
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Thanks Nivek
I believe the strategy works...its just that little issue of the mind !! :-X
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The ALSI is living up to it's nickname of "The Beast" currently, and takes much conviction in the strategy.
The 1 hour remains short with the 5 min about to go long
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OK so the 5 min (23-38-81) have all crossed up. So long position taken- although it's difficult to fight the feeling that the market wants to go down.
The 1 hour strat is still short
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Okay it's time to write down the rules/ observations- to be added to as time goes by- and theoretically they shouldn't be made or changed in the middle of active trades!! (very easy to do when second guessing yourself). ;)
1. The hourly strat (23-38-81) is the main one. When the EMAs cross they do it for a reason. Don't question why just reverse the position and go with it. If Trump has opened his mouth about something, or SA's financially doomed or whatever it will usually always be reflected in an EMA crossover (up or down). No need to know why...just trade !
2. The 5 minute strat (23-38-81) is like a tug boat, fine tuning the hourly strat. It obviously moves quicker and is there to almost protect the 1 hour strat (hedging where necessary).
3. Both the 1 hour and 5 min strategies will make money independent of each other in their respective time zones. Think of them as separate from each other.
4. Always fight the urge to be "right" (this is a work in progress !!). This strategy works best if you "Know" as little as possible about the markets. Trade it mathematically. It's a numbers and probability strategy. End of story.
5.Take each and every trade/ edge without fail- especially after a failed trade !!
6. Each trading day look at the charts of both strategies and make sure my positions correspond with the price action relative to the moving averages. In other words, based on the picture at any given time, would you rather be long or short, and make sure the positions are aligned to this. (this sounds obvious but anyone who trades will know the feeling of being on the wrong side of the market and staring in disbelief as the market runs away further from you).
7. The market gives and takes away just as quickly. When the market moves in my favour, be quick to take some money off the table. Experience has shown that more often than not the market will retrace somewhat -turning a great trade into an average one.
8. Always use a stop-loss. Not negotiable!- (IG Markets is good in this regard because their OTC platform means you can't be hit by stop-loss hunters as the Stop-Loss order sits on their server and not in the open market....).
9. Carefully consider holding positions over the weekend or at least closing half
10. Re-read the rules constantly !! ;) ;) ;)
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Mind if I ask how much money you'll be putting on the line?
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Hi Patrick
No problem. 2 contracts @R2 each on the 1 hour strat (a total of R4/pip) and either 1 or 2 contracts on the 5 minute strat depending on my conviction on the actual trade.
The idea is to do this time and time again, build up the trading capital, while regaining trading confidence, and gradually increase the contracts over time.
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Why heikin ashis on the one but not the other if you do not mind me asking?
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No problem
Only because I can't find Heiken Ashies on the IG basic platform.
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Have closed position on 1 hour and waiting to go long
The 5 min is still long
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My only thought on this is that it's damn close to scalping, considering your timeperiods. In my view that's best done by an algo / bot that watches the market every second. That's not a life, for a human at least, because at some point you need to eat, sleep etc. Also, you mention a stop loss but you are going to be in and out of trades very quickly based on your time periods. Can you get through the spread and take enough profit on your winning trades (50%), to beat out your losing trades (50%) with your stop loss? Do you adjust your stops and take profit levels with changing vol levels? If you say that you can do better than 50% wins over time then I lose interest right away because that's simply not possible, unless you're trading positive gamma which you need to pay a premium for. I will not trade on less than a monthly, weekly and daily chart all throwing the same signal, although I use a 30min and 5min chart to get my timing right.
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OK so the 5 min (23-38-81) have all crossed up. So long position taken- although it's difficult to fight the feeling that the market wants to go down.
The 1 hour strat is still short
Are you using IG's ability to force two positions to be open at the same time and not net-off? To me it looks like you simply reduced your short of 2 contracts by stopping out of 1.5 contracts, so still net short 0.5 contracts, not long? Your later post around 5:12pm shows you still short but now only 0.25 contracts, amidst a steadily rising market. Little confused here and not sure of the intention?
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I prefer using Macci-D's vs. EMA's simply because it packs more info but is based on the same underlying assumptions. In my MACD below the red signal line is a medium-term momentum indicator and should be paid close attention to i.e. whether it's above or below the zero indicates the prevailing strength of the market. The blue line is a short term timing indicator.
So, I also would have looked to go short around 9:10 (my times below are UK times so 1 hour behind), with the blue timing indicator crossing down over the red momentum line. However, the red momentum line was still in positive territory so this indicates cross-current, choppy, sideways action.... better to sit on the sidelines. Around an hour later we get a nice cross upwards (blue line crossing up over red) and red is just inside positive territory still... would have gone long then. Another hour later we get a blue line crossing down over red, indicating more cross-current price action.... depending on your stop loss and take profit levels at that point, would have probably stuck with the long and rode out the bumpiness. Shortly afterwards we get another cross upwards to go concurrent to the upside... would have added to my long position etc.
Clearly it's easy to comment after the fact when you can see the resulting price action. However, I've found this combination of momentum and timing lines to be invaluable over the years. The key is to see how the red line is doing - positive or negative, and to not trade against that. Combine that with some basic resistance levels, bollinger bands to gauge market stretchiness / volatility, some basic and obvious trading mentality patterns such as bull and bear flags, and 50% retracements, and that's pretty much all I use these days.
Whatever edge you keep using, the key is that you stick to it and work on your discipline. Over the years I've found that is what will either make or break you as a trader. And not caring about what happens once you've traded, stopped out or taken a profit. Amazing things happen when you just trust, set your stops and go walk the dog. :)
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Hi Bevan
Will look to answer your questions later today. But just on the one point in terms of scalping.
If you look at the numbers 23-38-81 on a 5 minute chart. To my reckoning that means it's 23 times 5 and so on which equates to 115-190-404. What this means is that a full crossover of the EMAs only occurs every 2 or 3 days.
On the 1 hour the full EMA crossover only happens every 10 days to 2 weeks.
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UPDATE
5 min long
1 hour neutral
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UPDATE:
1 hour neutral
5 min short
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Hi Bevan
Sorry for the late response- been busy with the day job.
Yes I am using IG to trade- for the very reason that you can be both long and short in the same account at the same time (force open).
My idea is that both time frames (1 hour and 5 minute) will both make money over a given time, independently of each other. It just so happens that at times one will hedge the other. But in my mind they are separate. Don't know if that makes sense?
Thanks for sharing your strategy...I'll have a good look at it on the weekend. I totally agree with you about sticking to and trusting your "edge" !! ;)
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The 1 hour remains neutral
The 5 minute is also neutral. It has been whipsawing long and short all week. Very difficult to trade and very frustrating. However I do believe that over the course of the month the inevitable break out-long or short- will compensate for the losses. Over time it would be good to find a way to identify a choppy market beforehand. :o
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1hour long
5 min long
But watching closely due to Trump's latest trade war threats
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The 1 hour remains neutral
The 5 minute is also neutral. It has been whipsawing long and short all week. Very difficult to trade and very frustrating. However I do believe that over the course of the month the inevitable break out-long or short- will compensate for the losses. Over time it would be good to find a way to identify a choppy market beforehand. :o
I get the idea but if you trading the same size in both you will only ever win or lose on your net position. Instead of trying to time the market once per trade you're now trying to time it right on both sides. And of course your spread is doubled... IG mst love you... They take 2xspread and no need to lay off risk in market for themselves. Of course this strategy can work but you need to be extra disciplined and avoid running your losses on one and cutting profits on the other. Good luck, it all hangs on whether you can stick to your stop loss on one side, and then make more on the other side.
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Hi DP
Have a look at this website https://realchartist.com. The guy post some nice detailed videos of his input of the alsi.
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Thanks Oversix. Will do :)
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1 hour long... (behaving itself as usual)
5 min long (after a very admittedly choppy period...let's see how we go on this one)
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With today's uncertain financial markets we have no balls. Not even crystal balls to predict longer term movements. We have Nix. Nada. Fokol to go by. Look at the ALSI chart. So short term CFD's to the extent of scalping will or may be the way to go. For a part of one's portfolio. I am concerned at the tax implications though. Almost half would go to tax where investing will be about 13%.
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With today's uncertain financial markets we have no balls. Not even crystal balls to predict longer term movements. We have Nix. Nada. Fokol to go by. Look at the ALSI chart. So short term CFD's to the extent of scalping will or may be the way to go. For a part of one's portfolio. I am concerned at the tax implications though. Almost half would go to tax where investing will be about 13%.
Even with scalping you're trading against algos and bots who react in nanoseconds. Market patterns have changed noticeably over the last two years with the prevalence of long and short bots now. There's still the underyling upward surge of all the passive money simply being blindly thrown into the market every month but fairly soon people are going to start realising that it's not a one-way street anymore. The great unwind of passive money exiting all those tracker funds is going to be amazing to see. Not sure when it will happen (1 month, 1 year or 5 years) but when the momentum catches on it's going to be epic.
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1 hour is neutral
5 min is supposed to be short (I missed it due to working)
I've decided to not look at charts at all on IG (I'll only use the free charts on Investing.com) as I don't like the fact that after hours trading (5.25pm to 8.30am) distorts the EMAs picture too much. However I do like the fact that with IG you have the opportunity to open or close positions/ hedge positions after hours if necessary (eg if there's big market moving news).
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1 hour long
5 min long
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1 hour is long
5 min is long
Lessons learned: the 5 minute strat works but you need to catch it crossing! (hard for me due to day job).
The 1 hour remains dependable and I'm convinced more than ever that if every cross (edge) is taken it will continue being profitable.