S&P500 Trendline support broken

Just when everyone was happy the major US indices made up for the losses from the year start the break happened.

I few dyas before on CNBC I learned about several reports from the exchanges that collected data on the short interest -- the fact was that those companies with the biggest short interest like C, GM and so on were actually those that fueled that rally.

So it's not that hard to understand that the quick surge on the S&P was mostly due to short covering. Now that the March and Q1 is near end and those shorts are covered I assume things are going back to normal >> that is going short for a challenge of the recent bottom.

EURUSD Bullish Flag

Here is another idea from the 4-hour charts.

Yesterday was a choppy, tight range day -- a day I would just skip in any other chance I have to fathom it before the fact.

This Bullish Flag implies continuation of the previous trend IF broken on the upside...

.........

Seems to me that I still miss some parts to my charting and analysis - since I become too confident once I find a good tradeable pattern but then market challenges my opinion.

Certainly there is a point in the old adage: 

"Lose your opinion in the market, not your money."

EURUSD Tringle & Unorthodox Bullish flag

........................ Hourly chart.

Weekly trendline Support -- I just experimented with geometrical symmetry fo find a pattern that looks tradeable.

This strange idea of a Bullish Flag /which is a continuation pattern/ is however spoiled by the spike in middle but I decided to observe if this pattern might produce a continuation as the classic one.

............4-hour chart.

weeklt Resistance Trendline has turned Support now..

The Symmetrical Triangle consolidation is trapped in the middle of the Horisontal Range Channel.. Possible target of an Upside break are 1.3650-80 area

Consolidation Range Whipsaws & Rotation

After reading Frank Dilernia's concept of Range Bar and Rotation of price the picture of price vibration along the Support & Resistance levels gets more clear.

Here is a Reminder I'd like to leave for future notice as in choppy, rangebound markets this patterns are always the same.

Any consolidation needs a break to end the range trading and to free the price to move in a certain direction -- while the Support and Resistance levels are visible on the chart, the tricky part is actually the EXIT out of the consolidation.

The chart shows the obvious points where there is a fake breakout, followed by a ROTATION to the Opposite side of the range and most probably continuation of the breakout of the opposite range border..

USDJPY testing the trendline Resistance at 98.40/50

  My first assumption from the start of the week was Selling the USDJPY ahead of the Trendline Resistance.

However the Hourly charts didn't tip that strategy so I covered.

Right now we see a test to break through the 98.40-50 level. I confirmed break has an easily defined Target at the 200-day MA at 99.50.

The 21-day MA is providing an immediate Support -- while the Rising 55-day MA is showing the trend ddirection clearly.

PATIENCE - Key to successful trading

As they say: "Rome was not built in a day".

Patience might be viewed from multitude of points. However in trading it translates into several most important points to be respected in order to build a sustainable trading performance.

1. Staying Power -- as Jay told me many times it's all about managing your position SIZE so you have the staying power to let your idea/scenario play out into the market.

I noticed that my performance tends to be tightly correlated to the Position Size I operate with.

As a self-educated trader my goal is to become a professional while following an approach based on a sound frame of rules for developing trading ideas and for managing my risk exposure to the level that I would preserve my capital while taking advantage of the high probability setups as they present themselves in the market.

The Key to sustainable success is Patience.
- Patience to wait for the setup.
- Patience to start small and test the market first, then add on confirmation.
- Patience to use Stops in a comfortable level where a random whisaw or spike will not affect my idea.
- Patience when I am very profitable.

>>> I'd like to leave a mark here of this phenomenon I observe as a psychological profile:
I tend to become overconfident once I pull out of the market a nice profit. Next day I always feel unsatisfied with little profit and want to achieve a better result. That makes me enter with larger position and once in the trade I become more vulnerable from psychological standpoint.
I like to describe this role as a Victim of its own Success. I tend to dislike and I'm working on correcting this issue as it tend to open a self-destructive spiral.
.................... ......................... .......................

I read Castaneda today (Tales of Power, 1974). Don Juan tells little Carlito that to be sebsitive and succeptible to Knowledge he has to be achieve a Personal Completeness.

This similar to the Concept of keeping Oneness and being Centered in Daoism.

And common sense people call it Peace of Mind... Patience and Peace of Mind are the 2 sides of the coin. Once you have stillness in your mind toy own a clear viewpoint. That translates into sound judgement and ignoring of emotions in the decision making process.
> It also makes the odds of being lucky higher maybe just because you DON'T PUSH YOUR LUCK.

As Lao Tzu admonishes in DaoDeJing the concept of non-action helps you achieve your goal 'effortlessly' - which means without rush or strain but waiting patiently for the parts of the puzzle to fall into place.

My Father likes repeating to me:
"Wise man said: Only fools rush in!"

EURUSD Falling Wedge pattern

The Falling Wedge is deemed to be a Bullish Reversal Pattern.

Logically enough for me to enter Long position on the break with stops at the M1 pivot point at 1.3444. Target for this trade is the Channel Upper border around 1.3650.

......................

Previous trades in USDJPY and AUDJPY were closed for small profits as the consolidations didn't tip extended corrections at the moment..

AUDJPY Short Trade

Approaching the Uptrending AUDJPY with the assumption that a Short term distribution phase is in its due course. Therefore I entered a low leveraged Short position. 

I work on the premise that Descending Trinagle consolidation is a Bearish formation with a tendence to produce a breakout on its flat side. Allowing for the mode to unfold with stops comfortably above the Trendline Resistance I target the 50 - 61.8% Fibonacci retracement area.

This is what I would call a Support convergence area -- marked by the Rising 89 hourly MA. The sustainable trend progress angle suggests that once the correction meets that cluster of support it will be a good buying opportunity for trend resumption on the Upside.

However let's leave guesswork at the doorstep. 

USDJPY Short Trade

This is a short term trade based on Hourly chart. The nice Uptrend Channel is meeting the multiday resistance Trendline from the March 05 -- High 99.67.

Playing safe with stop above that TL.

 I target a logical 50% corection of the parabolic upmove reassured of the natural inclination of price to rotate back to its mean in a given period of time -- in this case the 89 Hourly MA is a clear mark as it coincides with the 50% Fibonacci retracement target. This might take probably 2 days to play out..

Sure enough a break above 98.56 Daily High negates the correction setup.

EURUSD Running into Tight Cluster of Resistance

Global Stocks rally along with USD weakness brought EURUSD up.

However the psychological effect of the latest 'Bailout plan' might be losing steam in the end of the week. 

Charting of various geometric angles of Support & Resistance tells me that a pending second test of the 200 day MA (1.3872 now) may fail again as the parabolic upmove might lose steam in the cluster of Resistance trenlines.

I assume more Rangebound trading in the 1.3350 - 1.3750 area.

24.03.2009 - EURGBP 8H flag consolidations

looking for tradable patterns -- accumulation and distibution phases are clearly observed while the price is vibrating at an ever-changing scale

GBPUSD 4H Channels

Lost in a Dream

eu kaprikorn 08:45 GMT March 13, 2009 
95<>5: Reply   
martin -- should agree with you..

the pro side is very good

the lesson I have as part of the 95 crowd is that with lack of quality info and most of all Lack of consistent MM rules and patience to build a stake in a sustainable way is hard 

not sure why but seems I didn't make it since I wasn't disciplined enough to follow Money Management rules no matter how good my TA experience grew -
- in other words even my overconfidence in 'getting' the moves in the charts was actually my fault as I couldn't profit from them as most of the time I overleveraged and got out of market just to see my calls were correct...
just another story of a man who lost his wealth in chasing a dream.

......................

just a reminder of my failure.

Xi'an - 18-22.11.2008

well it have been well over a month of my stay in Wudangshan - body gets stronger and purifies the toxins of some previous mistakes..

once the energy is stored and guarded the mind enters a truly different perspective of clearness

the only thing to save the balance is close watching the subtle changes and immediately reacting to fix the issues as they arise

this is just a memo of the present state of mind that is an aim to preserve so that a sustainability of the development is attempted to be reached..

this takes both patience and perseverance -- next will and intent - and of course hard practice every day so that the process is assured a continuity..

Losses, Losses, Losses

Just read this nice peice from Brett Steenbarger:

Learning to Win at Trading by Learning to Lose
One of the fascinating conclusions of the research I posted yesterday is that traders learn by trading; that it is the number of trades placed--not the amount of time spent trading--that best predicts success in markets. That same research, however, finds that there is a very high attrition rate among traders; the most common learning that occurs in markets, quite literally, is that traders find out that they can't make money at what they're doing.So we have a catch: traders need to learn by trading, but they also need to preserve their capital as they traverse their learning curves.As I stressed in the Trader Performance book, much of learning in trading is pattern recognition. If that is the case, than it may be the frequency and intensity of exposure to patterns--and not the trading itself--that facilitates learning. This very much fits with my experience that traders can accelerate the development of competence by engaging in simulated trading (with live data) and by reviewing their trading via video. "Any techniques that you use in trading--whether for money management, self-control, or pattern recognition--require frequent repetition before they will become an ongoing part of your repertoire" (Psychology of Trading, p. 154). Traders drop out of markets, perhaps not because they lack talent, but because they fail to achieve the necessary repetitions to internalize skills prior to depleting their capital.They also fail because, even with repeated trading, they do not have a system for reviewing their performance, setting goals for improvement, intensively working on goals, and holding themselves accountable for those. Instead of a week's worth of experience, they repeat a single day's learning five times over.The research cited yesterday, as well as this interesting study, suggest that an important component of learning to trade is learning to avoid behavioral biases in taking profits and losses. The traders who lose their disposition to sell winners early and hold onto losers are those that tend to be most successful. Ironically, turning loss-taking into routine behavior may be one of the most important learned skills in the evolution of a trader's success. The key is staying small enough, long enough to learn from the experience of losing.

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........................................................................

just to remind myself in future about the critical period I have been going thru here..

It's 8.11.2008 - my third week in China.

I lost the first stake of $6k I had in the GFT account upon departure for China - don't really remember how I did it - it just happened so quickly in a monday morning - I have been crying and maning and feeling desparately helpless.

Then I transferred another $5k - made them $9k in a week and lost them 2 days ago...

Then the only $450 lost in the account I made a nice trade with 50pip stop and 150 pip target -- it was great and it happened nicely to my profit.

Then I had a long long day starting with 1 mini lot in eurusd, then added 1 in gbpusd - then 1 more in eurgbp, then also 1 in audusd, then also 1 in usdcad...

well from a starting point of 650 I nearly managed to make them 2 times 800 then I closed it a few times around 500 or 450 - the last time I just lost control and hit the sell with 6 mini lots audusd and I just lost all.

At that time I was also trying to trade futures contracts in gold, S&P and Crude Oil..

.............

.............

Man, what the fuck?!?!?!?!

Just anybody looking at me would say the obvious: Stop!

I felt very sick and I was and I kept saying well stop you are very sick and it doen't help to try to strain your nerves for noting but I just kept.

Then I just realized I would have benn much wealthier /and I keep reminding to myself every day/ if I just didn't try to multiply all the money I had. Instaed it was just pure gambling and loss after loss -- what did I learn actually?

...................................................................................

Thinking critically I realize a few points:

1. I overtraded massively

2. I didn't have any plan

3. I didn't have any specific goals or targets for both risk or profit

4. I didn't let my SL to be hit nor let the profitable trades to proceed

5. I kept changing my mind on a 15-min chart swings and was just jumped from timeframe to timeframe - from 15-min - to daily > to weekly > and all the way back = just to realize I was totally lost ..

then it was like a revelation to me once my mind started clearing and the sickness starting fading away...

here is the Daily chart of EURUSD -- I have been trading this chart 2 weeks and lost 2 accounts -- what do you see?

It is a 2 week extended rangebound congestion!

Damn - isn't it so hard to recognize it -- 2 week congestion without any sign of a breakout or anything -- pure consolidation after the steep trend...

they say usually time of price movement is spread like this:

60% consolidation and 30% trend... anyway that's technical analysis discussion..

.........................

So am I doing or thinking wrong:

1. Clearly I lost only because I was impatient

2. I overtraded

3. Never ever got a plan to follow

4. Didn't have any risk management rules to go by

5. Switched my mind and reversed my positions on 15-min chart swings so many times - most of the time just to realize if I made just one trade with 1 lot I would have made /MADE!!!/ money instead of losing them all.

========================================

So why is this story so long?

Think it's long because of the pain and the insight I get after the pain starts to diminish and the mist is starting to clear.

You can't get rich in a flip of a coin - you made it a few times just to realize it was due to massive and totally unexcusable risk!

I clearly remeber August maybe 19 or 20 when I was in Ljubliana on the Euro trip - then I was chatting with my Mentor AL Benjamin -- then I told him I was feeling something was very wrong with me and my trading.

It was too easy back then -- getting at the average daily range's high /low and just averaging out with huge 1, 1.5 mio positions for a nice 10-20 pip profits...

I also felt I had stopped learning. I felt dumb as a stone. Had lost my spark.

..................

..................

Anyway I feel a bit different now - think I got the spark again.

I know I need to develop a system that fits me and represents my understanding of the market.

I know I have to make and follow my risk management rules.

I know I have to manage my position sizing to reflect my Equity size.

I know I have to kep things simple. KISS rulez!

I know I have to undertrade! Bruce Kovner says 'whatever the position you think - cut in half'.

I know it's good to take losses!

I want to take the losses. Every time I have stop loss level I want to let it go.

I want to learn to be disciplined and control my own decisions.

I know it is important to have a plan and execute it step-by-step.

I know hard work is the source of satisfaction.

I know one is purified by hard work, exhaustion and determination to reach his goals.

I know one has to go through a very miserable period to understand the reality.

I know there is no easy way, no shortcuts.

I know too much - better just start doing. Period

Wudangshan, Hubei Province - China - Oct 2008

Losses are hard to handle once they overwhelm you...

Just got to train a couple of months Daoist Taiji in Wudangshan - the birthplace of Zhang SanFeng Taiji.

On 24.10.2008 the day all the markets were liquidating and saw huge losses I lost my GFT account of 6000 USD.

I was again trading against the trend and my positions were way over-leveraged..

Then after the range as already 350 pips in GBPUSD who could think it would make another 300 pips more... Crazy stuff but nobody to blame for this stuff.

Trying to get back to basics and to fix the long time issues I had been putting aside while it was easy to make money just averaging out of the daily range trading..

So back to school. and back to hard training.

FX & Futures LOSSES... 13.10.2008

just to make a note of how much money I made and lost these 2 last months:

:: in the end of spring - April 2008 I depostied 10k USD in GFT --outcome:

1. in August I made 55k - withdrew 7k -

2. again made it to 55k and lost it on a single trade in 5 minutes when the GBPUSD daily range from 300 pip overextended to 400+ pips ina liquidation trade..........

3. deposited 15k USD again made it to 21 k and lost themm in a trade

4. Oct 2008 deposited 15k USD more -- made them to 34k - withdrew 6k

5. these left 27k - I made into 38 k the same week and then lost them today in a single trade while shorting GBPUSD - AGAINST THE TREND!!!!!!!

6. the 9K I had in CMC CFD trading account I made to 12k and lost them while trying to buy the bottom in S&P and Dow futures... AGAIN AGAINST the TREND!!!
........................................................................................................................
........................................................................................................................

how much money I have to lose to get this simple idea that to be consistently successful I have to act right :

1. discipline -- to wait for the right moment and for the opportunity to reveal

2. discipline -- to use leverage only when in profit and when the edge is in my favor!!!

3. discipline -- to develop scanerio and risk level and respect the RISK levels and initial strategy!!!

4. disicipline -- to use leverage only to the level I can manage the drawdown and to be able to come back if I am wrong or late to bail out...

5. DISCIPLINE -- to make the hard choise of being with the trend - buy high - sell higher if in trend mode!!!

6. TREND - to start trading first define the market mode :: Trend or Range ?

SOFIX - 585 - 10.10.2008

I saw Sofix 575 had a support level..

I entered when Sofix close at 585 on 10.10.2008

6000 shares - MONBAT /5MB/

4000 shares - CHIM /6C4/

3000 shares - EUBG /4EH/
------------------------------------
today monday 13.10.2008 seems a reversal is in the works - a bull rally in bear market actually

Dow closed like 800 points up - from a bottom at 7 890 - to a intrtaday high at 9 440...

----------------------

however my losses in FX and futures keep me crashing - my 'wealth' shinks too fast in the last 2 months...

SOFIX and BG Stock Exchange

well my secong or maybe third attempt to long the SOFIX shares proved another failure and I exited in the end of August 2008 with a 30% loss.

I tried to long CHIM /6C4 at below 7.95 - had 10 000 shares at that price and then some 2000 more in the 8.70 and 8.50 area -- unfortunately the move was weak and I even had to sell from 8.35 till 7.95 so it was a failure again.

The big stake of 8800 share in EUBG/4EH I had for a repo-credit that I bought around 5.20 I had to sell around 4.80.

FIB / 5F4 also was weak and I sold it around 5.85 but now it looks better and holds above 6...

I watch the main indices close as I'm very intereseted how the post bubble effects will affect the market.

4 September 2008 -- Black Swan upon me -- 55k USD loss

it was Sept 4, 2008 when i was struck by the Black Swan event.

I lost all my trading stake of 55 000 USD in blink of an eye on a 'sure trade'

the event: I longed eurusd & gbpusd at the session lows after they had both descented 200+ pips so I felt pretty sure I would get a little profit riding the quick retracement

needless to say I was stupid enough not to use stops!!!

for a minute the prices backed down so I loaded more to a 1 mio per both positions - then once they reached breakeven they both stalled -- then I thought 'they are pretty weak maybe I'd better sqaure here and wait and see'

well I didn't square - instead they started free-falling and I kept buying until I had 5 mio Long GBPUSD and 3 mio long EURUSD and then they just kept falling until the dayly range extended to the surprizing 300+ pips in both...

pretty unusual event -- but that doesn't excuse my mistake not to manage my risk thru stops!

---------
well what can I say - just as I fel sure in myself and I thought I had a basic system to trade I lost it all - now again I have to start from a scratch

in the last 6-7 months I turned 10k stake into 57k and it would be even greater since I drew on the account around 21k...
nominal return was 550%
........
well man, next time please do it better!