Tuesday, 12 April 2011

Newton's Law

"A body continues in a state of rest or uniform motion unless acted upon by an impressed force". I wrote this from memory after having learnt it at high school in Sydney. This had a profound impact on me even though I had not started trading yet. Newton's three Laws are very applicable in trading, although not in a direct physical sense.

This law really tells me that once price starts moving, it will keep on moving until something or someone stops it. Sounds very simple and logical. Why am I even writing this? Well, I'm writing this because traders often don't look at this aspect of the market in both placing trades and exiting them.

Fractal pivots (FPs) are a great example of this. High and low FPs are where stops are. Sometimes this is where my fav Fib point is too. Why do some of these work and others don't?

From my observation, it is because a break of these FP's in the direction of the new trend will give continuation, while a break against the change of trend will be a failed breach and the fav Fib works. This can be a trading system in itself.

When I woke I the ES was already down. I traded the DAX for a while but it was thin and the market action was more weird than usual. After making enough to pay for breakfast, not lunch, at a Mickey Ds (if there was one here) I waited for RTH.

The market tried to close the Gap, but failed and a trend day down began. Flo was in her element. I'm still trading the ES and will if the trend down continues. See the pic.


  1. Thanks for continuing to post your daily thoughts!

    - given the kind of instruments you use, you must have a pretty high cash balance, %-age wise. Do you attempt to park it in the strong currency of the day, or do you always have everything in GBP/EUR? I'm curious about your strategy here.
    - could you give us any more examples of long-term (non-day trade) you made recently? You had an interesting post about this a while back.
    - what kind of yearly return do you achieve on your trading/long-term accounts?


  2. Anon, currency is a long term strategy. My goal in my longer term stuff is 2% to 4% a month and that includes currencies. I remember the environments when T-Bonds yeilded 17% and I believe that longer term strategies should do at least twice as well as that.