St. Lucia: Pics from my recent trip

One of the best stops on the cruise that my wife and I recently took was St. Lucia.  This is a beautiful little island that is a rainforest mountain rising out of bright blue water.  It's a place that my wife and I are considering buying a vacation home/villa at.  Here's a couple of pics.

Have a great Friday.  I'm planning on posting an overall market recap this weekend.

TLT

LIve Trade: Opening Range BreakOut in the Eur/Usd

I've got a position on in the Eur/Usd today.  So far, it is working out to be a potentially good opening range break out trade.  I've put on 2 units of the trade and am trailing one unit with an ATR stop.  Here's a screen shot of three charts:

Notice that I'm looking at the S&P (via SPY) and the VIX in addition to the Eur/Usd.  It is important to see that SPY is above it's opening range and the internals are bullish (as indicated by the green painted bars on the spy chart).  The VIX is pulling in too..so along with spy and internals, it shows that the markets are all working together which gives the trade a higher probability of being successful.  At this point there's not much to do but wait for pull backs to add to the position and/or get out once price action starts tripping sell signals.

Hope everyone's having a great day.

TLT

Got a Sell Signal on the Euro this Morning

Building a short in the Euro/Usd, beginning with a fresh sell signal that occurred this morning. 

I hope everyone's off to a great start for the new year..let's make it a good one.

TLT

Will Be Back in 2012

My wife and I are going on a 10 day cruise in the Caribbean.  Not sure how 2011 went by so quickly.  Everyone have a Happy New Year and I'll be back posting in January.

TLT

ID/NR4 Bars and Thinkscript

Linda Bradford-Raschke, Laurence Connors, Tony Crabel and many other professional traders have referenced narrow range bars as part of there trading setup arsenal.  LBR likes the ID/NR4 which stands for Inside Day Narrowest Range in 4 days.  That means the high and low of the bar have to be within the prior bar (an inside day) and the overall range itself has to be the narrowest in the last 4 bars.

Referenced in many books authored by the above mentioned traders, ID/NR4 and NR4 bars provide a low risk high reward trade setup.  The setup generally involves trading the break out above or below the ID/NR4 bar and placing a stop at the other side.  Then trail a stop for another bar or two.  LBR stresses that in the event your initial stop gets hit, you should stop and reverse so that you are now in the trade in the other direction.  She states that this is important because many of the moves can be false break outs but the move in the opposite direction can be very powerful after a false break out.  Regardless, these setups do allow for very tight stops and can provide some very good short term edges.  Adding some additional research such as current trend direction if any (Crabel does a lot of this research) or monitoring an opening range break out after a NR4 day (Crabel does this as well) or using some volume analysis can all help you filter NR4 or ID/NR4 bars for even higher probability trades.

Here's a chart, note the blue dots above bars indicate an ID/NR4 bar:

And for those of you on ThinkorSwim, here is the thinkscript:

###DELETE THIS ROW WHEN PASTING INTO TOS###


# ID/NR4 Bars
#
def range = high – low;
def na=double.nan;

def plotter=high+range*0.3;

def longvol = volatilityStdDev(100);
def shortvol = volatilityStdDev(6);

def volratio = shortvol/longvol;

def isnr4 = (range <= range[1] and range <= range[2] and range <= range[3] and range and high<high[1] and low>low[1]);

plot lowvol = if volratio<.5 and isnr4 then low-.0005 else double.nan;

lowvol.SetDefaultColor(color.violet);
lowvol.setstyle(curve.points);
lowvol.setlineWeight(3);

plot nr4 = if isnr4 then plotter else na;

nr4.SetDefaultColor(Color.yellow);
nr4.setstyle(curve.points);
nr4.setlineWeight(3);

###DELETE THIS ROW WHEN PASTING INTO TOS###

This code was adopted from a code for NR7 bars written by ReadtheProspectus at his blog with the same name.  If you like thinkscript it would be well worth it to spend some time at his blog.

Happy Holidays!

TLT

Covered My Eur/Usd Short

Over the past week, I have been managing one position...a short Eur/Usd.  It turned out to be a pretty decent trade that probably has more profit potential...however, booking profits seemed prudent right now.  Total, the trade booked about 400 pips which is a pretty big winner for my swing trading.  100-200 pips is the standard size for winners. 

The trade was a good one but I really wanted to blog about taking off the trade.  For me, booking profits is actually one of the hardest aspects of trading.  I have found that there are 2 methods that work for me.  A trailing stop or a profit target.  Quite often I use both.  For this trade, my take profit point was 400 pips.  It was tempting to continue to trail my stops but there is a high possibility of seeing a bounce.  3 day one direction moves usually get corrected.  Furthermore, we had a fed day yesterday and it's options expiration week..both are events that can move the equity markets and in turn put pressure on the euro.  Sometimes booking profits and sitting out for a bit is the best thing to do..as long as you fully accept that the trade "may" have been much more profitable had to left it on.

So what's the game plan?  I do think the Euro could fall quite a bit farther, it will just be a matter of patiently waiting for a pull back and an entry signal to put the trade back on.  This is likely a very crowded position and a good rally may shake out a bunch of the shorts and provide some fresh fire power for a move lower.  We'll see.


TLT

ThinkorSwim Indicator: Multi-Time Frame Stochastics

Here's a code for a multi time frame stochastic.  This will allow you to plot a stochastic for any time frame that is greater than the one that your chart is currently on.  For example, it can be helpful to know what the hourly stochastic looks like if you're trading on a 5 min chart.  I'm playing around with using this a filter for mean reverting systems..such as ignore a "Buy Signal" if the stochastic on a higher time frame is over 60.  Here's an example of using the 15min stochastic with a 1 minute chart:

Here's the code.  To use this code, copy and paste it into TOS and then delete the // marks at the top and bottom.  These marks are necessary for posting the code on blogger and the indicator will not work in TOS if you don't delete them. 

Hope everyone had a great Thanksgiving!

TLT

//

declare lower;

input aggregationPeriod = AggregationPeriod.DAY;
input KPeriod = 10;
input DPeriod = 10;
input slowing_period = 3;

plot FullK = Average((close(period = aggregationPeriod) - Lowest(low(period = aggregationperiod), KPeriod)) / (Highest(high(period = aggregationperiod), KPeriod) - Lowest(low(period = aggregationperiod), KPeriod)) * 100, slowing_period);
plot FullD = Average(Average((close(period = aggregationPeriod) - Lowest(low(period = aggregationperiod), KPeriod)) / (Highest(high(period = aggregationperiod), KPeriod) - Lowest(low(period = aggregationperiod), KPeriod)) * 100, slowing_period), DPeriod);

//

Live Market Commentary Video

Once again, looking at the Opening Range for the Eur/Usd, the SPY and the VIX to generate trading signals. 

Have a great day.

TLT

Market Recap Video

Trying something new...playing around with the screen recorders..maybe gonna start recording some trading examples and market commentary.  Here's a video where I talk about today's trading in the Eur/Usd.  There's a couple of opening range breakout setups and I walk you through what types of things that I'm looking at when I put on these trades.  Volume is not the best, so turn it up to hear...I'll do better with that next time.

In the video, I mention that the Adaptive Opening Range Indicator was from Thinkscripter, however, I misspoke.  It is actually an indicator that was programmed by ReadTheProspectus and is available here.  If you're not familiar with the site, you should spend some time with it and consider donating to get access to the "Donors Only" codes.  I don't know the administrator of that site and gain nothing from this recommendation...just think it's a useful website and a good blog.

TLT

Opening Range Breakout

I went to a networking breakfast this morning and was not in front of my screen...which means there was no trading.  Getting home, it was not surprising to see that a picture perfect opening range breakout occurred on the Eur/Usd this morning.  While I'm not going to whine and claim that I would have taken the trade and squeezed every pip out of it (may or may not have happen), I will use it as an example of what the opening range breakout set up looks like.

This is a very popular set up with day traders.  Many daytraders make most of their money trading only this set up.  It works well on stocks but it also works well with currencies and futures.What you do is mark the high and low of the first 15 minutes of trading and then put the trade on when the first 5 minute close outside of the range occurs.  That's the basic trade.  You can add other indicators  or volume to confirm or use higher time frames to filter which direction you'll take..I'll leave that up to you to play with.  Once the trade is on, place a stop below (above if it's a short trade) the range and close out the trade if it trades back into the range and closes in the range.  Then you can trail a stop using your favorite method (i.e. atr, moving average, parabolic sar, etc.) or book profits once a specific profit is reached. 

Here's the chart of today's action.  Notice that the range (the bars in the red shaded rectangle) begins at 7:00.  That's because that is the time that New York opens for forex trading.  Currencies are a little tricky because they constantly trade on different exhanges through out the day.  As a rule of thumb, I trade a currency during it's home hours (7:00 central time for US) and use the first fifteen minutes.  So I would trade the USD/JPY in the evening when Japan opens or in the morning when the US opens.  You could also trade the Eur/Usd in the early morning, for those of us in America, when London opens.

 

Hope everyone has a great and profitable trading day.

TLT

Free Fallin': NFLX

Boy oh boy, I knew that I should have shorted NFLX back when Tilson covered his short and made a big media event about it...coulda, woulda, shoulda.  Netflix has basically dropped for the past 6 months and this morning it took a big plunge.  Check out the 5 min chart:

What a drop.  As for regular trading...this volatile market chopped me up a little today and I'm laying off the gas until SPY breaks 126 on the high or 120 on the low.  As for currencies, I'm looking to go long the Eur/Usd above 1.3960.  With the Euro, the price action better be very strong, as it has been incredibly choppy with all the action in Europe.

Hope everyone's doing well.

TLT

Leading Indicators Study Say's Bears are Still in Control

One indicator that I created a while back and have been following is called the "Leading Indicator Study."  No, these are not the economic data leading indicators, these are just different etfs of asset classes that represent the bullishness or bearishness of the market that tend to lead big moves.  It is based on the Euro (FXE), Copper (JJC), Small Caps (IWM), Emerging Markets (EEM), VIX (VIX or VXX), Long Term Treasuries (TLT), Short Term Treasuries (SHY) and Consumer Staples (XLP). 

I'm not going to go into exactly how this works, but I wanted to share the general idea...maybe it will spark some ideas with clever traders that look at such things to derive an edge.  The basic concept is to take risk sensitive asset classes, determine whether they are in an uptrend or downtrend, and then create a score based on the trends.  This particular indicator uses a couple of regression calculations to determine the trends and then it adds points for the bullish trends and subtracts points for the bearish.  Simple enough.  Regression is not necessary, you could easily use a moving average or volatility break out system in place of the regression.  The point is to look at multiple asset classes at the same time to get a heads up on what the market's current risk appetite is.

Here's a screen shot of the indicator paired with the S&P 500, note the colors of the price bars are indicative of the bullishness (green), bearishness(red), buycaution (yellow) and sellcaution(blue):

Hopefully you found this interesting and you can work out something similar or even better to implement with your own market analysis.  As you can see with the chart, price bars are red and the indicator score is a very low -92 which confirms the bearishness of the market.  That tells me not to get too excited about any rallies until this indicator gets back to bull territory.

TLT