tutorials in applied · a review of this writer’s last month of trade results showed successful...

November 10th, 2018 A publication of Guppytraderscomsg Pte Ltd since 1996 CRN200409379K. Copyright © 2015

1

Weekly for Saturday November 10th, 2018. Based on Thursday’s Close

CONTENTS

• PATTERN FRUSTRATION pg1 • BIG, ROUND AND PROBABLE pg6

• CLEAR TREND TRADING pg9 • NEWSLETTER OUTLOOK: OCTOBER REBOUND CAUTION pg12

• PORTFOLIO CASE STUDIES: MONEY MANAGEMENT pg13

PATTERN FRUSTRATION By Daryl Guppy

The move below the support level near $0.40 is an exit signal. The trade is closed at the best possible price on Friday following the close below the support level. This gives an exit at $0.40 for a loss of $1395.35 or 6.98%.

Three lessons come from this trade. 1) This is a pattern trade and it should have been closed near $0.50

when the breakout pattern first failed to continue its momentum 2) The general market condition in October – fall and anticipated

recovery - should not have been used as an excuse to let the trade slip further.

3) Trade discipline is the essential element of success. Chart patterns

provide a clear model for trade management.

This has become a characteristic of many flag patterns, with a fast breakout, followed by consolidation, and then by another upward move. We apply the stop loss conditions in the diagram with a stop at $0.445. This is also the CBL stop value.


2

In the LOOKING FOR OPPORTUNITY article we added IPD* as a trade example. This is a flag pattern. The preferred entry is near the lower edge of the flag so traders

can collect the full breakout move. For case study purposes the trade was entered at the midpoint in the flag near $0.43. There are two projection targets. The technical target is $0.74. This is

calculated by taking the height of the flag pole and projecting it upwards from the point where the price moves above the upper edge of the flag.

However the IPD chart shows a very strong support level near $0.66. This support level is most likely to become a resistance level, making it difficult to breakthrough and reach the technical target near $0.74. A sell order is placed near

$0.66. This sell order will be adjusted depending on the momentum of the price breakout. If the momentum is strong then a new sell order will be placed near $0.74.

The spreadsheet shows the trade calculations.

FOOTBALL BACKLINE UPDATE RMB has rebounded and moved above the long term GMMA. It’s a weak

move so the new uptrend remains weak.


3

As noted elsewhere in the newsletter we have added a sample hedging position to this trade. For case study purposes we are going to keep this case study open. We hedge the losses in the trade with a short-side position which is now closed.

The hedge strategy is shown below, marked to the market close on Thursday.

Currently the hedge delivers a profit of $630.06. This is consistent with a successful hedge strategy.

This trade example was selected based on a series of newspaper articles that talked about a defensive portfolio. We believe there is no such thing as a defensive portfolio. There is, however, defensive trading and investment strategies, and that is

what protects investors and traders. The final backline is RMD with its sleep solutions. It’s defensive because

everyone needs a good sleep. TECHNICAL ANALYSIS Trend strength started in 2016 and has remained very strong for the past year.

Long term GMMA is well separated, and there is consistent separation between the two GMMA groups. This points to trend stability.


4

TECHNICAL CONCLUSION Strong trend behavior in past 2 years. Stress test loss in 2008 is 43% which

make it’s the best of these defensive selections.


5

We add RMD as an example of this portfolio.

Entry is near $15.43 and the stop loss is at the lower edge of the long term GMMA near $14.87. The exit is assessed against the trend behavior on the weekly

chart.

You can download the ATR indicator for MT4 at https://www.mql5.com/en/market/product/29683 Use this to improve your trade risk management.

CASE STUDY EQUITY CURVE

The case study IPD* trade is closed for a loss of $1395.35 or 6.98% loss. The

case study portfolio return is $23,424.70 or 23.42% for the period starting July 1,

2018 and ending June 30, 2019. For the year starting July 1, 2017-2018, the case study portfolio return is

$115,330 or 115.3%. For the year starting July 1, 2016-2017, the case study

https://www.mql5.com/en/market/product/29683

https://www.mql5.com/en/market/product/29683


6

portfolio return is $92,464.15 or 92.5%. For the year starting July 1, 2015- 2016, the case study portfolio return is $156,450 or 156.45%.

Equity trade size is generally kept constant at $20,000 in the case study

portfolio so it is easier to compare the case study trades over this and other years. Unless otherwise noted in the trade management notes, all equity case study trades

are managed on an end of day basis, with the exit taken at the best reasonable price on the day after the stop loss is triggered.

Warrant and CFD trades are generally kept constant at $10,000. Warrant and

CFD trades are closed on an intraday basis using a guaranteed stop loss as this is a primary method of managing derivative risk.

FX trades are generally kept constant at $5000. Stops are managed intraday. This capital allocation reflects the risk in each of these asset classes.

BIG, ROUND AND PROBABLE By Karen Wong

Going once, going twice…. SOLD at $2 040 000! $1 110 000! $980 000! During a live auction on TV a leading bidder refused to increase his bid by $1000 to make it $1 451 000, resulting in the sold price of $1 450 000 to a competitor. Reading the

auction results of properties sold you will see more often than not how prices end with nice rounded numbers- levels where buyers, sellers and price intersect. Much the

same can be seen in trading too. The big figure numbers and the round numbers can provide high probability areas to take a trade.

Support and resistance levels are often incorporated into the trading plans of

many traders. Price tends to either stop and bounce off these levels or pass through these areas to reach new targets as buyers and sellers place orders around these

psychological areas. Finding support and resistance levels at round numbers provides added probability that price will react once this figure is reached.

In the following GBPUSD trade a round figure of 1.3000 is identified at a support/resistance found on the Daily Chart. Using a price action strategy a trade opportunity is identified and a trade is opened.


7

Figure 1: GBPUSD Daily Chart

Using a top down multiple time frame analysis, the starting point for this trade is to

look at the Daily chart for anything of interest that would suggest the future direction of the trend. The Daily Chart of GBPUSD, Figure 1, shows price moving in a downwards direction. A blue line of support/resistance is drawn at the 1.3000 price

level. Price tried to push up through resistance at 1.3000 unsuccessfully. A bounce off the 1.3000 line sees price move down again. Turning to a lower timeframe enables us

to investigate the action of price further.

Figure 2: GBPUSD 1 Hour Chart

On the GBPUSD 1 Hour chart the focus is on the far right side of the previous Daily Chart. A double top as indicated by the 2 blue arrows is added confirmation that

price wants to move down. An inner trendline in purple is drawn and it is where we look for price to break. In order to get closer to what price is doing we look to a lower

timeframe down for an entry.


8

Figure 3: GBPUSD 5 Minute Entry Chart

The 5 Minute chart, Figure 3, is our Entry Chart. At the upper right side of this chart is a large blue arrow which is the right side area of the double top seen on the 1 Hour

Chart in Figure 2. Price has broken through the purple inner trendline with a back end retest of that line, signaling an entry. A short trade is opened on GBPUSD with a Stop

Loss at 1.2880 as seen by the red line at the top of the chart and a Take Profit price of 1.2831. Entry price was at 1.2857.

Figure 4: GBPUSD 5 Minute Chart

On the 5 Minute Chart, Figure 4, we see price move down then back up through

the purple inner trendline. A micro double top forms as marked by the 2 smaller blue arrows. The formation of this pattern signals a high probability that price will resume

its movement down in the direction of our trade. Price moves down and reaches the Take Profit price of 1.2831. A profit of 26 pips.


9

A review of this writer’s last month of trade results showed successful trades of the following FX pairs at round figure numbers:

USDJPY @ 111.00, 112.00 GBPUSD @ 1.3000, 1.2700

EURUSD @ 1.1600, 1.1400 AUDJPY @ 81.00

Support and resistance levels are good areas to identify on a chart as a starting point for a trading plan. They become more interesting and meaningful when they

also correlate to a round figure number. This tends to make the probability of price movement and possible profits even greater.

CLEAR TREND TRADING By Daryl Guppy

FX trading has a reputation for volatility but we find that the trends are more stable, the trend breaks clearer and more reliable than for many stocks. FX trading uses a higher level of leverage than CFDs, so more care must be taken. There is less

room for error and the ANTS selection and trade methodology that we apply increases the probability of selection success.

Over a 44 month period trades that are entered when they meet the entry conditions have an 86.5% success rate. We apply an ANTS selection process to identify high probability opportunities, and then use GMMA analysis and the ATR stop

loss to manage the trades on an intraday basis. We publish trading notes for AXI three times a week as shown below.

Note the clarity of the trend and the trend change. Some FX pairs are less clear and these are easily avoided. However there are often 3 to 4 top choices that have remarkable clarity of trend direction.


10

This trade moved quickly to reach and exceed the trade plan targets, delivering

a 249 pip profit. The ANTS trade methodology is used to set the potential targets for each price move. There is an 87% probability that these targets will be achieved. This

has been consistently verified over a 44 month period. Some trades, like this EURAUD example, exceed the trade plan targets. Other

trades are stopped out at a smaller profit level. We apply the same analysis and trade management techniques to commodities

like oil and gold, and also to index trading. These trades are used to supplement

equity and CFD trading. Readers interested in looking at these AXI FX notes should let us know at

[email protected] We will add you to a trial mailing list.

mailto:[email protected]


11

FOR LIMITED TIME ONLY

Get a trial to the FX Guppy Trading Notes as provided

to AxiTrader clients three times a week.

Email [email protected] * to participate.

EURCAD trade posted Monday 25th. 41 tick profit utalising the MT4 ATR Indicator.

39 month summary.

PROGRESSIVE MARCH 2015 – May 2018 TRADE SUGGESTION RESULTS

• 52.84% of entered trades have been exited at target or higher.

• 87.5% of entered trades have been exited at a profit including those exited on stop below profit target levels.

• Average profit pips per trade is 163.88 pips • 494 trades were introduced since March 1, 2015. • 352 trades triggered entry signals.

• 43.47% of entered trades were exited above trade plan target levels. • 36.93% of entered trades were exited at trade plan target levels.

• 36.36% of entered trades were exited on stop below profit target levels • 10.23% of entered trades were exited at a loss


12

*terms and conditions apply

NEWSLETTER OUTLOOK: OCTOBER REBOUND

CAUTION By Daryl Guppy

The narrow support band between 5560 and 5650 provided support for the rapid rebound. However, this rebound takes place within the context of a strong downtrend collapse. The rally is testing the lower edge of the long

term GMMA. There is a high probability the index will retest the support level near 5885.

The daily XJO chart shows the strength of the downtrend. The long term GMMA is widely separated, although it is showing some signs of turning

upwards. The rebound rallies have not broken above the lower edge of the long term GMMA. This is a strong rebound rally within the context of a strong downtrend.


13

The usual development in this situation is for a rally that tests the resistance at the lower edge of the long term GMMA. This is followed by a retreat. A new rally develops that moves into the long term GMMA and tests

the upper edge as a resistance level. The retreat from resistance is less severe and is often accompanied by a compression in the long term GMMA.

These are not normally rapid developments. This rally and retreat behaviour makes for a trading environment.

PORTFOLIO CASE STUDIES: MONEY MANAGEMENT

Starting cash position $100,000 - no brokerage or slippage 2% of risk = $2,000 NOTE Entered date is the newsletter date which contains the case study discussion.


14

OVERALL PROFIT TO DATE

The case study portfolio return is $11,424 or 11.4% for the period starting

July 1, 2018 and ending June 30, 2019. The case study portfolio return is $156,450 or 156.45% for the period

starting July 1, 2016-2017. Note that this includes 6 to 21 trade results. The case study portfolio return is $92,464.15 or 92.5% for the period starting July 1, 2015- 2016. Equity trade size is generally kept constant at $20,000 in the case study

portfolio so it is easier to compare the case study trades over this and other years. Unless otherwise noted in the trade management notes, all equity case study trades

are managed on an end of day basis, with the exit taken at the best reasonable price on the day after the stop loss is triggered.

CUSTOMER CAUTION NOTICE AND COPYRIGHT

Guppytraderscomsg Pte Ltd (CRN 200409379K) Pte Ltd is not a licensed investment advisor. This

publication, which is generally available to the public, falls under the Singapore Media Advice provisions. The information provided is for educational purposes only and does not constitute financial product advice. These analysis notes are based on our experience of applying technical analysis to the market and are designed to be used as a tutorial showing how technical analysis can be applied to a chart example based on recent trading data. This newsletter is a tool to assist you in your personal judgment. It is not designed to replace your Licensed Financial Consultant or your Stockbroker. It has been prepared without regard to any particular person's investment objectives, financial situation and

particular needs because readers come from diverse backgrounds, with diverse objectives and financial situations. This information is of a general nature only so you should seek independent advice from your broker or other investment advisors as appropriate before taking any action. The publication should not be construed by any reader as Publisher's (i) solicitation to effect, or attempt to effect transactions in securities, or (ii) provision of any investment related advice or services tailored to any particular individual's financial situation or investment objective(s). Readers do not receive investment advisory,

investment supervisory or investment management services, nor the initial or ongoing review or monitoring of the reader's individual investment portfolio or individual particular needs. Therefore, no reader should assume that the Publisher serves as a substitute for individual personalized advice from a licensed financial professional of the reader's choosing. The decision to trade and the method of trading is for the reader alone to decide. The reader maintains absolute discretion as to whether or not to follow any portion of our content. Publisher does not offer or provide any implementation services, nor does it offer or provide initial or ongoing individual personalized advice. It remains the reader's exclusive

responsibility to review and evaluate the content and to determine whether to accept or reject any strategy and to correspondingly determine whether any such strategy is appropriate for a reader's individual situation. Publisher expresses no opinion as to whether any of strategy contained on this publication is appropriate for a reader's individual situation. The author and publisher expressly disclaim all and any liability to any person, whether the purchase of this publication or not, in respect of anything and of the consequences of any thing done or omitted to be done by any such person in reliance, whether whole or partial, upon the whole or any part of the contents of this publication. Neither

Guppytraderscomsg Pte Limited nor its officers, employees and agents, will be liable for any loss or

damage incurred by any person directly or indirectly as a result of reliance on the information contained in this publication. The information contained in this newsletter is copyright and for the sole use of trial and prepaid readers. It cannot be circulated to other readers without the permission of the publisher. Each issue now incorporates fingerprint protection that enables us to track the original source of pirate copies. If we find that you are redistributing the newsletter then, at our discretion, we will reduce the

length of your paid subscription by the value of the multiple copies we believe you are circulating. Share with nine friends, and we cut your subscription period by 90%. Contributed materials reflect the personal opinion of the authors and are not necessarily those of the publisher. Articles accurately reflect the personal views of the authors. Stocks held by the authors are marked* and are not to be taken as a trading recommendation. This is not a newsletter of stock tips. Case study trades are notional and analysed in real time on a weekly basis. Any past investment-related performance . referred to may not be indicative of future results, and therefore, no reader should assume that the

future performance of any specific investment, investment strategy will be suitable or profitable for a reader's portfolio, or equal historical or anticipated performance level(s). Guppytraderscomsg Pte Ltd does not receive any benefit or fee from any of the stocks reviewed in the newsletter.

Guppytraderscomsg Pte Ltd is an independent international financial education organization and research is supported by subscription fees. Please note that in the interest of timely publication of the newsletter, this document may be incompletely proofed.


15

OFFICES; Guppytraderscomsg Pte Ltd Head Office, 20 Cecil Street,#20-01 Equity Plaza, Singapore 049705, Singapore, 22 Hibernia Crescent, Brinkin, Darwin, Australia, Room B105-A17, No.14, Chaoyangmen Nandajie, Chaoyang District, Beijing, China.

tutorials in applied · a review of this writer’s last month of trade results showed successful...

Documents