Monday, 9 July 2012

Early Weakness

We had early weakness in the stock markets this morning, London time. While my longer term view is a rally, I trade what I see and I saw weakness.

Not a lot of action.


  1. Hi EL
    I am interested in your second trade here on the dax. i actually sold the same trade and almost the same price, but a bit earlier than you because i like to use volume spread analysis for my entries; i seem to get myself in all sorts of trouble taking every 6CI cross!
    anyway did you make profit on this trade? because i took a 3 point loser (6 ticks). i took 16 points heat on this trade, so in my mind i am always looking for at least 1:2 risk to reward ratio. i wanted a break of the low. were you hoping for a break too? i think perhaps you took a few ticks at the lows and got out the rest for scratch. but surely it was too soon to move stop to break even after just a few points profit?? how did you manage this trade?

    yesterday's action was pretty terrible in most markets. did you completely stay out of trading after your last trade in dax yesterday? and if so was it because you saw the day was heading to be very dull? how did you know the day would develop into a very low action day? is it just experience?

    i can never seem to tell until after the event, when i tally up my very small losses and end the day a bit disgruntled !!

  2. alex, yes I had a winner. Risk/reward is a myth. You can't see what the reward will be. The answer is Trade Location and context. I try and understand what is happening. The level of my stops depend on this. Draw a trendline joining the highs before this trade and you can see why I stayed in the trade. Too tight stops are a hazzard to CP. I covered when the momentum down was clearly over. Yes, yesterday's action was pretty aweful. I only day trade a couple of hours a day. I tradeuse Flo and my longer term options more nowadays instead of sitting there for 14 hours.

  3. thanks EL and i think it will help me a lot drawing in the trend lines. it will take some getting used to not to think about a risk/reward ratio. but i will definitely take it on board.
    i guess the momentum was over once the 6CCI crossed above zero after a couple of divergences? isn't this sometimes a little sensitive though? leading to getting out of good trades too soon. i guess getting out when this happens is not a set in stone rule when you're trading; rather you sum up all the evidence as you see it. someone else who had more of an opinion (like me)may have ran it a little further till the 45CCI went positive or price crossed the 33MA.
    so would you say then that a trader must control their expectations about the outcome of a trade?
    do you ever get strong opinions from time to time and for example give yesterday's trade a little more room like i did, if you thought it was really weak? so it would be rule based but with discretion. this then would come down to experience