What’s Next – Update

Here’s an update to the FTSE100 “What’s Next” post

Let’s take a look at the current position:

Ok so what have we got?  We’ve just had on this DAILY chart a DTosc bullish reversal right on the 38.2% fib level of the A-B swing up.

The WEEKLY DTosc is still bullish.

On the chart below we have in RED – the 38.2% fib level and I have placed 2 black horizontal lines on todays (Tuesday 13th Dec 2011) bar.  these lines mark our ENTRY and STOP positions.

So tomorrow, Wednesday 14th December 2011, I will go LONG the market (FTSE100) if it hits 5526, as soon as that happens I’ll place a stop at 5412.

The difference is (5526-5412) 114 points – I’d have preferred todays bar to have been shorter but we can’t demand! Remember the market can do anything it likes at anytime and we are powerless to stop it.

How much am I prepared to lose on this trade if my analysis is wrong?  Well I’m happy to lose £150 on this trade – this represents less than 0.1% of my entire trading account, but there’s no clear trend so I’m playing cautiously.  I’ll be taking what’s known as a spreadbet in the UK so I need to bet  per point so £1.31 per point I will do (£150/114)

I could if I wanted to drop down to the 60 or 120 min charts and enter following a DTosc bullish reversal on those time-frames (if ones setting up), rather than enter above the high of today – that would lower the risk exposure of the trade and get me in sooner.  But for the purpose of this trade we’ll just stick with the entry 1 point above todays high (as shown on the chart)

Trade set-up

Okay, the next chart shows my target zones – First off I’m looking for a 1:1 risk:reward as the absolute minimum (=5640), ideally 1:2 (= 5754) there’s a cluster of 2 fib levels there and it’s the highs of point 3.

But As soon as the daily DTosc makes a bearish reversal I will trail a stop 1 point under the low of the bar that made the bearish DTosc reversal – WHATEVER the profit or loss I’m in.

Let me make this last point crystal clear prior to the trade taking place – if the DTosc makes a bearish reversal on the daily chart that we are looking at BEFORE price get’s to my target levels – I’m looking to exit the trade by placing a trailing stop loss – if it’s hit I’m out of the trade – no questions.

Once again the numbers and letters on the chart are only there for reference.

Potential Trade - Entry, Stop & Target zones

Now for my 1:1 Risk:Reward ratio to bear fruit price needs to go above the highs at point B – If price can’t do that then it’s a bearish sign.  At the end of the day we just don’t know for sure what will happen and we need to take the trade and see what happens – only if my parameters are hit.

The 3 areas that I’m watching are 1) the highs at B, 2) the 127% Ex ret line and (ideally) 3) the 2 lines at 5766 (green 61.8% App line and blue 161.8% ex ret line) – all the while I’ll be monitoring the position of the DTosc as the days progress.

What happens if tomorrows price bar FAILS to exceed the tops of todays bar? I simply move my entry down to the top of that new bar until I enter the trade OR the trade fails due to DTosc position – I’ll explain if it happens.

What’s my exit strategy?  If the Daily DTosc reaches the OB zone I will trail a stop on that bar and trail it up until stopped out, like wise if we have a DTosc bearish reversal before it reaches the OB zone I’ll look to get out of the trade.

I have a feeling that at the end of this week (Friday 16th Dec 2011) the weekly DTosc is going to be OB – if that’s the case then I can’t take any more long positions, in fact I’ll be looking for price falls and will be looking to go short thereafter.

Really what I am doing is playing the DTosc reversals to time price reversals and get into trades as close as possible to the start of those price reversals.

NOTE:  I’m out of the office all day Friday, 1st at a funeral in the am and then on the road driving 6 hours to the English Lake District for the weekend, so I will not be able to monitor trades during Friday, apart from the 2 hours of trading – I never leave trades open when I can’t make trading decisions, so I might have to set stricter stops after the markets close Thursday or early Friday am to protect any position I have on  – I understand that this is not ideal to learn from, but I am simply not prepared to leave a live trade in place without a fairly tight safeguard in place – this is real trading

Whatever happens I’ll keep you informed and update Thursday or next Monday.

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5 Comments

  1. I forgot to mention that the exact entry/exit techniques can be found in the book on the left – the nominated book of the year.

    Reply
  2. Ryan Quilter

     /  December 14, 2011

    Andrew,

    In regards to the daily DTosc. To be considered OB, do both of the lines need to reach the OB zone, or just the fast one?

    Reply
    • Hi Ryan,

      Just the fast one – you will find that most of the time the slower lagging line will also reach the respective zone along with the fast line, but there are occassions when the fast lines pokes it’s nose over the OB/OS line and the following bar makes it do a u turn – when this happens the slower/lagging line won’t have chance to get to the zone.
      If you enlarge one of the charts in the post and look between point 1 & 2 – apporx 16th September the DTosc did just that the high bar pulled the DTosc into the OB zone (I set it at 80) and you could then trail a stop 1 tick below the low of that bar, if you’d of waiting for the DTosc bearish reversal then you’d be looking 3 bars on from that high and your stop would have been on the low of bar, 1 bar prior to the big drop.

      At the end of the day, there’s no right or wrong – it’s down to what you as a trader are happy to accept and work with

      It depends how I’m trading a market but more often than not as soon as the fast line enters the OB/OS zone I’ll start trailing a stop. The bar has to close for it to make a definite DTosc position.

      Keep an eye on the entire site as over time I plan to include more DTosc indicator strategies and I’ll update the Indicator pages to show etc.

      Reply
  3. Quick update for you – I’ve had to increase the risk on this potential trade – I told you I didn’t trade this index much and the min bet is £2 per point so I can’t do £1.31 – this has the effect of making me risk £228 – which I am happy to do for this trade

    Reply
  4. Thursday 15th Dec – quick update.

    The trade is still live BUT – yesterdays price action the DTosc made a Bearish Reversal so it’s now a case of waiting for a BULLISH reversal and we’ll look to go long.
    As previously mention I’m not at my screen Friday – I’ll do a new brief post today with the new parameters for the trade, as I’m hoping Friday will be positive and execute the trade.

    Reply

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