Trading Review: 06-20-2016

Gross PnL: +$137.

Net PnL: +$84.

Obviously a bit of a commission burner day, but am happy to end up positive. Have been rating my trades out of 10 based on a few measures. So here are the ratings for today:
(1) Preparation: 7/10
(2) Patience: 7/10
(3) Risk-Reward: 6/10
(4) Discipline: 5/10
(5) Flexibility: 4/10
(6) Greed: 5/10
(7) Over-trading: 7/10

If I was to sum up the day - in particular what went wrong. I was marginally unprepared on LPTN for what happened - I know exactly how those plays work, so could have reviewed them before trading it.
Their was a marginal fault in discipline not having a clear stop-out plan for LPTN, which again comes back to preparation. In instances where a stock moves quickly and has an illiquid nature (as low floats do) to it; it is very important to be over the top prepared. My excuse here is that I can't have the stop-loss order in the market-place, while I have a limit order for closing my position. It is clear that I need to find a work-around for this, because in the case of LPTN it moved too quickly for me to manually do it.
Over-trading: It could be argued that I was over-trading by over-the-top scalping around my core position on LPTN. However, if I hadn't done that I wouldn't have had much locked in profit for when the squeeze came. Indeed if I had continued to scalp around my core position, and been more ready to cover on a dip (for a slight loss), I probably would have turned the entire trade into an amazing well. Then if I had covered weakness and looked for reshort opportunities I would have nailed them, switching from trade2hold move to move2move trading.
Flexibility: I initially came into the day thinking that LPTN had the potential to be a big winner, as a trade2hold until end of day close at the lows. I was far too slow to go from trying to nail the home run (which was probably the right approach), to just a trade that was standard. This meant that I missed the opportunity the stock provided for additional trades, and it also tied up my buying power all day - resulting in me missing other solid trades.
Greed: In line with the flexibility I think I was probably a little greedy wanting the big trade when it was no longer present.

LPTN - Have talked enough about the nuances of the trade. Each arrow is 1/2 a position size. With the exception of the cover right before the big rally (around vwap) where I only got a tiny fill. This sort of illustrates how I wasn't fully ready to hit out the trade because I was too picky with my order. One comment I notice looking at the charts again. By not covering into weakness, and being absolutely ready to cover into weakness, by the time the breakdowns came I was exhausted from riding the short position up and down.

EPZM - I am super happy with everything about this trade. Patience for entry was perfect (waited for 10.94, instead of 10.89) which made the risk-reward just that much better. The idea was also good - it was only ever intended to be scalp against the level. Got a bit of a pull but not quite enough. Really good stop-out as well - didn't hesitate, just took it.
If there was one flaw, it was that I didn't flip long into the pull after $11.00 break on the retest. However, that wasn't anything to do with this stock - I had my buying power tied up with LPTN all day as a result of other flaws.

Low Float Big Gap

Bit rusty on this play apparently, despite it being one of my biggest winners over the past few years.

Bigger Picture: A macro catalyst bringing attention to the stock, e.g. LAKE/DGLY more caution is warranted. However, most stocks that gap up 100%+ will end up being a great short on day 1.

Scenario's:
(1) Up-trend all day, ending the day 200%+. This does happen, although it is unlikely. Additionally it is usually pretty obvious 11am onwards.
(2) Down-trend all day. Never breaching vwap aside from the open.
(3) Bit of down-move off the open, then trappy like action, and a break to highs (and probably a moderate amount above) around mid-morning before likely closing at the lows. Note that this can turn into scenario one; as a big gap often needs time to consolidate.

The general thesis behind this trade is that the gap is simply too big to hold without genuine meaningful news (rather than pumpy news).

Controlling risk: It is very important to realise that while these stocks can give the illusion of liquidity, they are relatively illiquid and can move quickly. The usually occurs when scenario 1 or 2 plays out. The stock will be grinding lower, with an extreme lack of speed, and then seemingly randomly propel higher with 10x the explosive power. This requires very quick manual speed or an automated stop-loss to get a good stop-out.

The most difficult scenario to trade is scenario #2, because there is very little to distinguish scenario 2 and 3 during the first hour. The first indication is when it holds up, when maybe it should have made a new low, or when it makes a new low, and gets straight back above on big buying (trapping shorts).

Acknowledge that may get faked out on any stop, but it's well worth adhering to that stop.

How to Trade:
Scenario 2 will be confirmed by around 10:30am. From there can look to short around vwap/at levels. Be sure to enter only half size at each level to maximise probability of success - with ultimate hard stop a level or two higher.
On the open: Short strength half size, and once weakness and defined stop-loss at highs go full size; but take some profits immediately. There is a choice between controlling size and being prepared for a high of day test, and tight stop around vwap - then reshort once the highs have failed. It is situational.

Here is a pic of LPTN, around the open which caused a fair bit of grief. But in the end played out as it should have, closing at the lows.

Trading Past Month or Two

Has been a while since blogged. On somewhat of a losing streak and have been forced to downsize to grinding a small account.

I believe that ultimately this will be really good for my trading, forcing me to focus on tight, defined risk trades. And also focus on execution of trades (for small risk), rather than on ideas. This is especially the case because commission on this account is $5 (+ECN fees) a trade. That being said, I am without a doubt under-capitalised.

Reason for starting blogging again, is that have felt reviews etc have been slacking off a lot.

Will be focusing on posting a review daily, and a "piece of improvement". Whether it be a play, or perhaps how a stock should have been traded.

FX Week Starting: 05-08-2016

EURUSD: This euro level isn't incredibly clear, and could easily see a clean downmove through it. However, the rangebound nature of the euro at the moment keeps this pair on active watch. The zone to watch is 1.1210-1.1230.
Will be looking for a clean move below this level and subsequent failure to get long. Ideally looking for risk to be around 30-50 pips, and therefore be aiming for a move back to 1.13ish.

GBPUSD: Was a very hard reversal off the level last week. Based on the weakness it should lead to a test of support on the daily - however, that may be too bigger move for this week.
Zone of interest is 1.4000-1.4080. Given the wideness of the zone, may not be necessary for a fakeout, provided that there's an acceleration into the level.

GBPJPY: Level to watch for fakeout is 151.64. Given the nature of GBPJPY (bit more trendy, and wider range than most) want a little bit more confirmation of fakeout than I would with say the eurusd. The would come in the form of an acceleration through the level and clean reclaim of the level. Or a convincing rebound off the level.

EURCAD: 1.5000 a super clean level to trade against/get a fakeout of.

NZDUSD: 0.6760-0.6810 is the zone to watch. It's not the cleanest zone, so be sure to wait for clean fakeout.

NZDJPY: 72.50 a super nice level. At that point it would probably be over-extended. But could be nice.

FX End of Week Review: 05-07-2016

3 trades were made and 5 trade ideas triggered. One a decent winner, one relatively breakeven, and one -0.5R(ish). Of the two that weren't taken they worked perfectly assuming following the exact system outlined.

Overall, I felt like risk was too wide following the exact system outlined and would have preferred to anticipate entry, with tighter risk - then in turn take some profits quicker. On every single trade outlined this would have resulted in getting some of the trade off at 2R, and then been in an amazing spot to have a trailer on for the rest.

When I developed the system, I had in mind a system that would provide low risk entries (straight after fakeouts) with some form of confirmation, for a quick sharp move in the opposite direction, even if the predominant trend does continue. It seems obvious now, that as it currently stands it is more of a "reversal system". Sometimes those fakeouts do develop into reversals, USDCAD being the best example from this week, but also the EURUSD where it moved lower and consolidated then went on a second leg lower.

Changes:
(1) Aim for stops to be around 0.5ATR. This is achieved by anticipating entry. To anticipate entry need to be patient to wait for the true "fakeout" and subsequent sharp counter-trend confirmation move. Important to realise that I am not anticipating the fakeout, only entering once it's been confirmed that it was a fakeout.
(2) Use a time stop. The two trades that didn't work mucked around a lot before eventually turning away. I was already onto this, but there is a need to articulate it.
(3) Trail stop-losses by the H1 bollinger band (plus allowing for a little spike through). As these types of trades work quickly, there is no need to be slow about trailing the stop - as the two that didn't work this week showed.
(4) I also note that the divergence pattern was somewhat broken on a few of the trades (indeed the one's that worked quite well). Will still look at divergence, but by realising that I am aiming to play a quick counter-trend move, rather than a full trend reversal, it somewhat reduces the importance of divergence occurring.

The Trades:
(1) EURJPY. The first trade of the week and I followed the system to a tee on this one. The level to watch was 122.00, but it had already had a fakeout below it to 121.70, so to be super picky really wanted a fakeout below that level.
Entry: 122.70, stop 121.60, which gave a 2R target of 125.40. If it had got some legs it could have reached the target (other ones that seemed like chases easily reached their 2R target), but you'd been dreaming to expect any more than that. Took the trade off when it wasn't working for around 10 pips, so basically breakeven. Hindsight; I was spot on to take it off - hence the introduction of the time stop idea.
With some form of anticipation on entry, it would have you entering slightly under 122.00, with a 50 pip stop-loss and half taken off into 123.00. Overall, a much better trade. Then keep some on with the bollinger band trailer (which would eventually be stopped for about 1R, or even time stopped out for a bit better).
Daily and Hourly, arrows mark entry and exit:

(2) EURUSD. The zone to get short into a fakeout was 1.1460-1.1520. It had a super nice acceleration above this zone to 1.1600 which proved to be the fakeout. After the first one, I knew just based on how wide the stop-loss was supposed to be, and where the entry was that something needed to be done to get the entry and therefore risk, and ultimately risk-reward better. Two options were entering on a pull-back after the confirmation, or anticipating entry. In this case I chose anticipation. Had I chosen to enter on a pull-back the correct entry would have been around 50 pips lower, and who knows where stop-loss would be? It would be somewhat arbitrary.
Entry: 1.1560, stop 1.1620, target 1.1313. Ended up taking the trade off at 1.1399 due to upcoming news in the next 24 hours. So roughly a 3R trade.
This one sort of shows how it should work very quickly (the move from 1.1550 to 1.15), and then the continuation pattern, which never breached the upper bollinger.
Daily and hourly:

(3) AUDJPY: The zone I was watching on this one was 79.50-80.00. It got slightly below the zone and straight back over, but there was never really an acceleration to the downside. An anticipatory entry around here would have been 79.80, with a 40 pip stop-loss, which probably wouldn't have reached 2x R target, but would have been stopped on the trailer for breakeven and/or slight profit. I waited for the BB test, and with the wider stop. Entry was 80.30ish, stop 79.50ish, and eventually closed the trade out at 80.00 for -30 pips.
This is yet another one, that shows the anticipation works quite well, and another one that shows the trailing stop-loss works well as well.
Also the resulting breakdown from 80.00 is a lot more obvious after looking to fade the first test.
Daily and Hourly:

Now for trades I didn't take:

(1) USDCAD: This is a bigger picture reversal, so most certainly can't expect this every week. I felt uncomfortable chasing this one, so I looked to get it on a dip and missed it. Following my system outlined I would have entered around 1.2580-1.26, with a stop 1.2480ish. This would have met a 2R target around 1.28, and been stopped on trailer at 1.28.
It is interesting when you consider that this was a massive bigger picture reversal, yet only yielded a 2R trade - I think this backs up my idea of getting in with better risk-reward.
An anticipatory entry would have been once it got back above 1.25, so entry 1.2510ish, stop 1.2450, and would have yielded a 6R trade - much better!
Daily and Hourly:

(2) GBPUSD. Same as USDCAD I felt uncomfortable chasing this one lower. The level to watch was 1.4670. Following system, entry would have been 1.4620, with a stop above 1.4700, which ultimately would have yielded a 2R trade.
This is probably the one trade out of the ones looked at where and anticipatory entry would have had you in a lot earlier, and then stopped. That being said, the eventual acceleration through the level and failure is obvious, so you would have been stopped on the first, nailed the second, and ended net profitable by roughly 1-2R.
Daily and Hourly:

FX Mid-Week Review Week Starting 2nd May

A lot of the planned trade ideas were triggered early in the week. In the end it turned out I wasn't 100% comfortable with the execution plans I had set. Felt that risk was too wide, whereas when I designed the system I had in mind that I would like tight risk (risking say 30-70 pips). As a result I felt a tendency to try and improve entry price once trigger was given, and as a result missed two good trades.
Then the one trade I anticipated early resulted in a good entry, and much better risk-reward wise.

Usually a break in following the system is bad practice, however I am still in the process of working the system to how it suits me, so it's okay. Below is the mid-week charts, long with entries, stops and targets, and commentary:
Initial thoughts re that it may be beneficial to trail stop-loss by the bollinger band (plus a bit for a spike). Also the way BB's widen on news events which can cause the stop-hunt that I like to see, isn't ideal for entry system.

EURUSD: This is the one I anticipated early. Entered short at 1.1560, with a stop at 1.1624 (above the high, and targeting 1.1313. This gives an R-multiple of around 4x, and is by far the best trade in terms of risk-reward.
It is interesting to note that it has literally been straight in my favour, and provided you were patient for entry on fakeout of level (1.1460-1.1530) it was an extremely easy trade.
Had I not anticipated entry, the correct entry would be 1.1500, so the trade would be slightly in my favour currently and only offer an R multiple of around 2x.
The other thing for consideration is that entry wouldn't have been improved on too much by waiting and entering on a pop (like EURJPY would have been considerably).

EURJPY: This is the one that I waited for the signal, and took the wide risk. Thus far the trade is working okay, with price hanging around over/under entry. Entry: 122.82, stop 121.55, target 125.44. So on this trade getting a 2x R multiple.
This trade could have been improved immensely by waiting for a pull-back and would have ended up offering a 4x R multiple. All that being said, this is the only one out of the 4 trades that have triggered that is "mucking around" so it could very well be the case that while it offered a pullback, it offered one because the rebound hasn't been strong.
Time will tell, and even if this one doesn't work, doesn't mean that shouldn't enter on a pullback.

USDCAD: Literally straight up from the fakeout. That being said, is somewhat the result of oils decline. Risk-reward on the chase makes sense though, assuming a far-out target. That being said, USDCAD was overdue for a big rally.
Again, chase entry with a trailed stop would have worked, obviously didn't get a fill when I bidded on dips.

GBPUSD: Similar to USDCAD. Missed the entry because I didn't chase. The entry would be a little harder to anticipate on this one (say compared to the eurusd), but pretty clean once it got below the 20MA.

USDCHF: I completely missed this one. Very clean if you were solely purchasing it once it got back above the level. As it stands though it has barely given the signal to get long accordingly to my system... Hmmmm...

AUDJPY: As it stands I don't really like this one for a few reasons (audusd looks like a short, already long eurjpy, and the news flow is extremely negative on aud).However, unlikely the others it's interesting to note that it didn't really accelerate into/below the level; thus arguably no stops triggered below 80.00, and therefore trade thesis invalidated(?)

NZDUSD: Didn't get above the 0.7050 level. In fact it literally only got 3 pips above it, which ended up having exactly the same high. Could have risked 10 pips there for a 150 pip gain... Anyway what's particularly interesting about that is 0.6900, so anything above that could be considered a fakeout.

FX Week Starting: 05-02-2016

Am going to start trading false breakouts (only) on fx as a slow introduction of trading fx into my skill-set. Don't want this to take up too much time so will focus on setups on the daily chart, making a plan early in the week for the coming trading week.

The General Setup:

(1) Watch major levels on most pairs.

(2) Have Bollinger bands up. Not for a signal, but just to keep an eye on the tightness of the bands to ensure I'm not looking to fade a breakout from a contraction.

(3) Use RSI(14) to look for divergence on the daily.

(4) Ideally the fx pair would have had a couple of days strength/weakness into the resistance/support. 

(5) Should only pierce the support/resistance intraday.

(6) Look for a move back to recent swing low/high.

(7) Entry is only a counter-trend move to close the BB on the H1 after the breakout or over/under the 20MA. Stop the goes above/below the high. Should be able to risk less than 0.5ATR.

(8) Trade should work relatively quickly, so don't be afraid to get rid of the trade for around break-even if it's not working.

(9) Minimum risk-reward should be 2:1. Ideally get it up to >3.

EURUSD:

Super interested in this at current price. 1.1460-1.1530 is an extremely important zone of resistance. Given that it's not a clear level it makes it harder to play the "fake-out". However, it could be considered that 1.1500 is the "true" level.

Has rallied 250 pips in 5 straight green days to get to this level so should be getting somewhat exhausted.

The divergence isn't super clean on the RSI, but it definitely is there. If the price breaks out it will probably cancel out the divergence signal.

No high risk euro events this week, but a couple of US events to pay attention to.

GBPUSD: 

Along with EURUSD is also currently at it's zone of resistance. Overall I prefer the EURUSD setup, however if the GBPUSD setup triggers over the euro one I am happy to take it.

The price level is much cleaner (1.4670).

Bollinger bands potentially indicating the making of an uptrend, although they didn't contract convincingly.

Divergence not visible on the daily, but is on the H4.

No high risk pound events this week, but again there is US events.

EURJPY: Super clear level on EURJPY at 122.05. The last fakeout below this level worked really well, but as they say, you don't want go back to the well too much. This one is in complete contradiction with EURUSD, which is quite nice, because if both trades trigger they will somewhat hedge.

Bollinger bands certainly haven't contracted.

Very clear RSI divergence.

No high risk yen events this week.

Risk-reward provided on the H1 bollinger trigger wasn't the greatest, so tiny size taken. The target at 2:1 seems a long way away.

AUDJPY:

79.50-80.00 is the zone of interest. Very clear zone, with plenty of range for a decent trade if get appropriate risk-reward.

Bollinger bands haven't contracted.

No divergence on RSI, but it is getting over-extended coming into the level.

There is an RBA rate decision on Tuesday.

USDCHF:

0.9500/0.9475 is the level of support.

Depending on what the RSI does when it's down there it could have divergence at that level.

BB's not contracting.

Thus far has had 6 straight down days into the level.

NZDUSD:

Not at all an impressive uptrend. The last false break of high was rewarded with a 2-3R trade. Will look for similar 0.7000+.

USDCAD: An impressive down-move thus far. It is very consistent, so not worth looking for an entry yet. A 2000 pip move on a major pair means it is worth seriously monitoring for a trend change. Will watch 1.2360, or for a break in the consistent downtrend.