FTSE100 Trade Update


Would you believe it?  Well yes I can – I half expected it, but you never know for sure.

Why did I expect it?  The 60 min 34 DTosc was Bull OB Friday am when the trade triggered – IF that was the start of a new trend upwards then the lows would not have been taken out.  This is trading though – we know and accept that not every trade will work out – this was just one of those times.

Let’s talk a little about risk – just imagine if we’d have had £10,000 exposed to that trade, it would have been gone!  Luckily I only risked £140 ish and lost that – that’s still less than 0.01% of my trading account, but I don’t like being beaten – especially by the market!

I am still waiting to get back in on this trade as I have a couple of possibilities.

Let’s take a look at the big picture: – The Weekly DTosc is bullish still – the fast line is in the OB zone but the slow line is not.  This weeks price action is critical.

The 8 DTosc is not behaving as we’d like hence the loss – that does not mean it’s no longer not a useful indicator – the 13 DTosc is nice and smooth and bearish.

Price is still at the first fib support zones.

My thinking is this – The 8 DTosc is starting to display jaggered false moves – if this continues we can’t reply on the 8 DTosc to filter our reversals, we’ll have no choice but to use the 13 DTosc – the problem with this is that during the transition stage from 8-13 DTosc we’ll have losing trades if we continue to use the 8 DTosc.

Look at the 2 charts below one shows the 8 DTosc and the other shows the…..13 DTosc

8 DTosc

The chart above shows the 8 DTosc – the 8 just refers to the look back period so in this case it’s looking back 8 bars, as this is a daily chart we are looking back 8 trading days.

Look at how the 8 DTosc has oscillated during the past few months – it’s reached the OB/OS zones on most corrections.

13 DTosc

Now look at the 13 DTosc – for the past few months it’s not really been any good – hence why we’re not using it.  BUT since 25th November 2011, it has oscillated nicely & very smooth, which is why I’m starting to consider it’s use.

Once again if price manages to break this support level we need to look at the next levels down – the 61.8% level is usually a favourite for price, but there’s a shelf of levels around the 5200 area – we’ll just have to see what happens.

For the trade and I will recoup my losses! – I’m still looking at the 8 DTosc as my preference, but aware of the position of the 13 DTosc – the 60 min 34 DTosc is now bullish and I am dropping down to a 15 min chart to get long again  – I’m not illustrating this part as this is akin to day trading which I do not promote – If you want to know further details then that will be on a tuition basis – see my HIRE ME page for details.

If over the next week (leading into Christmas) the 8 DTosc continues to be jaggered, I’ll have to move to the 13 DTosc – no the as of today Monday 19th December 2011 the 13 DTosc is still bearish – that suggests price should move sideways to down for another day or so – but even the 13 DTosc is suggesting thereafter a bounce!

If the 13 DTosc is now the driving factor of this market, it could see price heading to one of the lower fib levels for support.

Right now you are probably asking yourself why I am so uncertain as to what is going to happen – no one knows what the market is going to do next, but we can take positions based on high probabilities, but we need to remember than those are only probabilities and sometimes the unexpected happens!  We simply have to sit tight and wait to see what happens.

So to review what we know so far with this trade:

I picked a random market to analyse, I don’t trade this index often, but we identified in advance possible support levels from points A-B.  We saw price stop on 2 areas of that support – the 38.2% and 50% levels! The weekly 8 DTosc is suggesting further bullish price action so we need am 8 or 13 DTosc bullish reversal on the daily chart to go long.

We did that last week on the 8 DTosc but got stopped out during the day – the 13 DTosc could be making a return!  We just have to watch price action and the DTosc’s – we cannot tell in advance which will be best – no one indicator setting tracks the market perfectly – think about it, if it did we’d all be using it!

If the downward slope is not over, then we know as we have done our work in advance, where the possible support shelfs/levels are in the market – if and when price gets to those levels we will reassess and form another trade plan for this market.

I reiterate once more, it is not whether this particular example is profitable of not – it’s the thought process, identifying support levels and potential turning points in advance of price getting there and using a completely objective based set-up for taking a trade – if we can guess correct (that is what we are doing!) 70% of the time then over time we will be very very successful – you have to keep your losses under control – this is something that I cover in depth in my forthcoming Money Manual to be released 1st quarter 2012.

At the end of the day every bit of my analysis is telling me that any day a bounce will happen in the market – now once it bounces the story should be told in how hard/high it bounces – that’s when the next piece of the jigsaw will be planned and thought about, If there’s a little minor bounce it will suggest that the downside is high probable following the next bearish reversal etc – yes I am just guessing and forward thinking this market but it’s all based on high probability scenarios.

Quick update for you, I’ve made up the loss from Friday – this am – by dropping down to a 15 min chart and taking many 8 DTosc bullish reversals and watching the market like a hawk for those reversals to strip out points and profit.

I only intend to do this type of analysis and post it here once every so often, this post has taken 3 hours to type, prepare, copy charts, edit, check and post!  I don’t have that time available usually and I want further blog posts to look at other key areas rather than just a trade.

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