Bo Yoder S&P Analysis

The S&P 500, (NYSE:SPY) continues to stay “pegged” near its highs.  Friday, the volatility expanded radically, and it looks like the market will test lower…Down to the $216 50sma support levels.

SPY 8-28-16

The gold ETF (NYSE: GLD) is reaching down into the $120’s as forecast, and we are stalking this market for a long entry near the $124-$125 per share area.GLD 8-28-16

Exxon Mobile (NYSE:XOM) has begun to slowly stair-step its way down towards the $85 per share area as forecast.

XOM 8-28-16

Bo Yoder

RBJ Financial Group

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“Nearing” is an important word.

Federal Reserve Chair Janet Yellen said the case to raise interest rates is getting stronger as the U.S. economy approaches the central bank’s goals.

“In light of the continued solid performance of the labour market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,” she said in the text of a speech Friday to central bankers and economists in Jackson Hole, Wyoming.

She also said the economy is “nearing” the Fed’s goals of full employment and stable prices. The Fed chair didn’t discuss the specific timing of a rate move in her first public comments since June.

Yellen did not indicate when the U.S. central bank might lift rates, but her comments reinforced the view that such a move could come later this year. The Fed has policy meetings scheduled in September, November and December.

There is a lot of financial data to be released next week crested by the jobs report on Friday. All NFP data is important but this month’s payrolls number will be a game decider.

Yesterday the initial reaction from the market was good and the Dow shot up 100 points after the news. This gain was very soon reversed when the FED vice chair Fischer said on CNBC that the increase in rates could come as early as next month. The dollar advanced across the board. Once more we see that the cost of money in paramount in the minds of investors.

Fridays price action around and after the news from Yellen and Fischer has charted a very ugly reversal candle on both the USA and UK stock markets. The bar/candle pattern is known as a bearish “outside day”. It normally precedes a further selloff.

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In the UK the Ft100 pulled back over the last week (started last Thursday 18th August) to the last old top charted towards the end of July 2016. This was the 6770 level that I wrote about here for what seemed like months. From this level the Ft100 bounced with the Dow on Friday afternoon but in a similar way to the USA gave up all the gains before the London close.

Many cast doubt on the willingness of Janet Yellen to put up rates ahead of the US Presidential Elections. This would not help her fellow Democrat, Mrs Clinton a great deal.

The VectorVest Composite of the UK remains in a Down/Up situation. The first word refers to the Primary Wave or the short term trend of the UK market. The second word refers to the underlying trend and that’s been UP since the third week of February 2016. The Primary Wave has been down since Thursday of last week the 18th August.

As you know, in addition to the share trading reported here, I also take intraday trades on the Ft100, based on a 30 minute chart. These are attempted when I have both the time, focus and inclination. I take intraday trades only in the direction of the Primary Wave and thus have only been taking short positions since the 18th. I was short on Friday afternoon after the initial surge upwards reversed. As any keen FIB scholars would expect, the Ft100 reversed at a 62% retracement of the last 30 minute range after charted a rather ugly, but still valid, Gartley 222 pattern.

On the VectorVest Composite the underlying trend remains strong with the magic MTI indicator falling but still well above its threshold level of 1. The MTI is currently at 1.44 falling from a high of 1.63 on August 15th. As discussed in this blog an MTI reading of greater than 1.6 invariably precedes a selloff. Thus the Primary Wave turning down since the 18th was no great surprise.

The DEW market timing system is still “long” of the UK market. This simple but robust market timing model uses a 30 day weighted moving average and a momentum study called a Detrended Price Oscillator (DPO) to gauge market direction. If the Composite should fall below the 30 day average and the DPO falls below its threshold level then a sell signal for the market is printed. This market timing system is slower to react than the Primary Wave but has a faster response than the underlying trend. If the market continues to fall there can be a DEW sell signal in the next week. This would be a stern warning that the selloff is getting serious and I will consider taking profits at this point. Please watch for this signal over the next few days.

If you load a chart of the VectorVest Composite, just use the drop down menu (below the chart) to display the DEW Buy and Sell signals, automatically on the chart. If you struggle with this, then that’s the perfect time to get acquainted with the support staff at our call centre. They will talk you though this vital exercise and can be reached at 0800 014 8974 in the UK and on 0800 981891 in South Africa. It’s a free call. You really need to know whether the market is going UP or down as everything follows on from that.

I have held all the shares in my portfolio that I have discussed here over the past few weeks. Fevertree and Hill Smith are extended from their base and open profits in these shares need to be carefully managed. If your strategy is that of a swing trader then you should have taken profits already. If you are a position trader then let profits run and manage the risk via a trailing stop loss. The London User Group calculated that a 16% trailing stop was optimal some years back.

In the past two weeks I have added a new position in the Hastings Group. The share is undervalued by the market according to the calculations on VectorVest and growing earnings aggressively and safely. The earnings potential (RV) is a very impressive 1.52 and it’s my belief that this number drives the share price. The share is on a BUY recommendation on VectorVest and with a CI or Comfort Index of 1.41 the longer term trend is strong and positive. The share had a very good day on Friday. The chart of the Hastings Group is shown below.

david

I am now invested in 8 shares on the London markets. These are Hill and Smith, Fevertree, JD Sports, Cranswick, Hastings Group, RSA, Keller and Trifast.

Cranswick pushed through the 24 pound barrier on Friday. This level has been a ceiling for the share for many weeks. Trifast is moving slowly but surely, as it casts off the spell around the 52 week high. I expect great things from this excellent small company.

Please be careful with open profits.

David Paul

August 27th 2016

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Can you trade with 100% success?

Over the years, I’ve witnessed some pretty amazing events from trading the financial markets. I’ve experienced most styles of trading too; from volume analysis, Fibonacci, market profile, Gann, price action, indicators and even lunar cycles. Any style of analysis can be profitable but I’ve yet to see any single style better than the other. Generally, it’s the individual trader that makes it work or not. But there’s one thing in common all these styles and more have; none of them are right 100% of the time….

Around 12 years ago, a trader got in touch via email asking for advice. He had been trading with a particular style and had been doing really well. He’d had a number of winning trades (he was a swing trader) and had become so confident in his strategy that he decided to re-mortgage his house to release £40,000 of equity to add to his trading account. Obviously you NEVER trade on credit but the story gets worse…. He hadn’t told his wife either…

He was a school teacher and so earned an average wage and saw this trading as a way of making some serious cash – which of course you can indeed do if done correctly. So he topped up his trading account with the £40,000 and then took a whopper of a trade on the S&P 500 because his strategy was essentially telling him to short it.

The S&P started to rally so he sat on his position ‘because it always came back like it did in past trades’ he told me. Only this time it didn’t. It just kept rising and rising over a period of weeks. He sweated on his position with no stop loss in place because he thought he would ultimately be right so why put a stop on right? Well not this time and he was ultimately closed out with a margin call and over £50,000 in losses.

It was at this point that he contacted me as he was now down to around £1000 and he wanted help to turn it back into £40,000 as quickly as possible so that he ‘could repay it back off the mortgage without his wife ever finding out’. He had become a desperate man with a crazy idea of trying to find a way of turning a 4000% return in quick time which obviously is ludicrous. The best advice I could give him was to sit down with his wife and explain what happened and start looking at doing some exam marking to make some extra funds to repay the loan.

No one is going to be able to trade well with the pressure that he put round himself at that point so the best thing he could do was in fact not trade. He simply didn’t have the trading skills to handle the situation.

So if you know you cannot possibly be right 100% of the time, why take crazy risks with your hard earned money? Unfortunately this is not an isolated story. People become so convinced they have found the holy grail that risk management gets cast aside and the only thing that does become 100% certain is their ultimate downfall. So as always, discard risk at your own peril. You can make extremely good returns as an independent trader without ever having to bet the proverbial ranch….

eurosimon-1

Moving over to the currencies, I’m writing this piece on Saturday so don’t know what Monday did as you’re probably receiving this on Tuesday. However, I believe we’ve had a game changer move in some of the markets after Yellen’s speech last Friday. The Euro has already tested its 500dma (red line on chart) a week ago and the sell off last Friday could mark the start of a more substantial fall on the back of a more hawkish Federal Reserve.  Unless Friday’s high is broken, sellers are in control and the only thing I see that could trump this is Donald Trump himself in the upcoming U.S. elections. Although we could have some consolidations after this move, Friday’s non-farm payrolls could add the additional kicker if they come in strong…

Have a great week

Charlie Burton

Ezeetrader.com

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Next Stop Jackson Hole

All roads lead to Jackson Hole, Wyoming, for direction on USA Monetary Policy. The gathering will take place next week. The communication by the FED during the last few weeks has given myself and other FED watchers a very sore head and confused disposition. My experience over 25 years of watching the FED, is that mixed messages mean no change.

Last week the stock markets of the world sold off after FED New York president Dudley told Fox news that he felt the market had underpriced the odds of a September rate hike. I believe it would take a hawkish message from Yellen at Jackson Hole plus a big jobs number at the start of the month to precipitate a September rate increase.

The cost of money as we saw after Dudley’s talk last week and from the Feds miscommunication folly at the end of 2015, is the biggest stock market headwind in town.

In the UK, RBS reports that it will soon charge corporate clients to keep their cash. The QE experiment charges on with the BOE buying over 1 billion pounds worth of long term Government IOU,s or debt. In the same week the treasury sold over 1 billion pounds worth of long dates Government debt. A nice little earner for those wise fellows in the middle. I am just a Mechanical Engineer at heart and certainly no economist, but this makes little sense.

The short term trend on VectorVest UK has turned down after the close on Thursday `18th August and remains down at the close of Friday 19th August. The underlying trend remains UP. That’s been the case since the end of February 2016. The advice on the front page of VectorVest suggests caution and that’s excellent advice in a market that seems much overbought. Overbought and oversold are dangerous words and to paraphrase Jesse Livermore “I have never seen a share to high not to go higher and too low not to go lower”. All measures of sentiment such as the VectorVest proprietary Indicator MTI (discussed in detail here last week) and the CBOE VIX are screaming “be careful out there”.

The VectorVest Composite is shown below. Please note the overbought level of the MTI in the window below the price. Also note the bearish rising wedge that’s in its final stages. Please be very careful with open profits.

david paul

During the week I have sold my position in Gleeson. The share has recovered its Brexit losses but still is within a downtrend as defined by my 20/40 week moving average technique. The Weekly Zone Trade (WZT) technique indicates that the share is a candidate for a short sale. The WZT is a model of market action that I have spoken about in this forum over the last few weeks and at the VectorVest User Groups in both countries. It is a robust trend following model of price action that requires scrutiny and possible action only once a week. The only indicators employed are a 20 week and a 40 week simple moving average. If the 20 is above the 40 then we are in BUY mode. If the 20 is below the 40 then sell mode. The best place to BUY is when the price pulls back into the zone between 20 and 40 averages. The entry then needs to be confirmed with a reversal candle.

Fevertree and Hill and Smith have had another good week with the latter breaking above its first FIB target. The first FIB target is 1.618 times the last pullback added to the low of the pullback. VectorVest calculates the target for you and in my Monday afternoon webcast I will show everyone how to go about this exercise. All VectorVest customers should get an invite and guests are welcome to call for an afternoon guest pass. Our call centre is on 0800 014 8974 in the UK and 0800 981 891 in South Africa.

The first FIB target on Hill and Smith was 11.50 and the second target (a 2.618 expansion of the pullback added to the low of the pullback) is 14. That’s close to the VectorVest calculated value of the share. The technical and fundamental view are for once coincident. I bought Hill and Smith at 8.90 and it’s been a great ride that’s seems far from over. The entry was a pullback into the 20/40 zone that was confirmed by a “hammer” weekly candle pattern. It was a text book example of the WZT that you should study to fully understand a very simple but powerful chart setup.

I held Fevertree through Brexit with an entry at around 7. The share is fully in sync with the 20/40 WZT and is trading at 10 pounds at Fridays close. Fevertree is trading well above the VectorVest valuation of the share so I urge caution here. I will bank this fairly soon as 40% profits in a few weeks can be defined as “windfall profits”. My first mentor in SA taught me to take windfall profits without hesitation.

JD Sports gave our hearts a free checkup during the week. The share has now recovered all of the fall and the weekly candle has charted a very positive “hammer” candle. Old cynics would probably agree that nervousness around the CPI number caused shares to move from weak hands to strong hands. Last week’s trading has the look of classic smart money accumulation. I think after this is complete the 13 pound ceiling to date will crumble. The first FIB target as computed by a 1.618 extension of the last pullback is at 15 pounds while the VectorVest valuation is at 20 pounds. The second FIB target is at 18 pounds and with a fair wind from the overall market that’s highly probable. Unfortunately there will be many a scare like this week market action between now and this target being attained.

JD Sports, Fevertree and Hill and Smith are examples of what occurs when the fundamental position of a company is in sync with the technical position (trend) of both the share and the general market. When all three measures are positive then extraordinary gains are possible. This is my personal method of using the VectorVest program and it’s a style of investing that I named “Value Momentum Investing” a few years back. I have resolved to use the weekly 20/40 system to define the technical position of the share.

Cranswick has retreated from the last high at 24 pounds. The last high was the third attempt to break 24 and my mentor MR Gann always believed that markets would break on the 4th attempt. I am happy to sit in this exceptionally well-managed company. The relative safety (RS) on VectorVest is 1.47. On a scale between o and 2 this is well above excellent. The probability of Cranswick dropping the ball is low.

Trifast has moved upwards a tad and closed the week at 1.40. The VectorVest valuation is 2.00 and the technical target from the flat topped triangle on the weekly chart is about the same. The company has a lot of its earnings from Europe and thus should benefit from the weakness in the pound.

Both Keller and RSA Insurance have done little since I purchased them although both are trading slightly above water. If the market should continue to fall over the next few days they will be the first to be sold.

I am watching the market action on Dart carefully. The share has good fundamentals as defined by VectorVest and recently has charted a potential double bottom. The 20/40 weekly system is still intact but the reversal weekly candle is still missing in action. Until this occurs and the share turns upwards I shall continue to watch and be patient.

It’s been a great few weeks. My job now is to make sure that I don’t much of these profits back to the market while still obeying rule 1 which is “Let winners run”.

David Paul

19th August 2016

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Bo Yoder S&P Analysis

The S&P 500, (NYSE:SPY) continues to stay “pegged” near its highs.  We sit on the sidelines as we wait for resolution, knowing that extremes in volatility are expected as this range breaks.

SPY 8-21-16

The gold ETF (NYSE: GLD) has also gone dormant… we are watching for a possible long entry as price reaches down into the $120’s and the 50sma (Orange line).GLD 8-21-16

Exxon Mobile (NYSE:XOM) has been hurt recently by the low price of oil, and has formed a bear flag on its daily chart.  This indicates that there is a high probability that the $85 per share area will be the next to test for this stock.XOM 8-21-16

Bo yoder

RBJ Financial Group

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Taking profits…

Not in the literal sense… No I mean enjoying some of your profits by withdrawing actual cash from your account. Many traders I speak with are only interested in growing their account balance which of course should be the goal but trading is not something that’s tangible. We don’t make anything for our hard efforts, no product is seen at the end of the process, all we see are numbers in something called a P&L within our broker platform!

For many traders, becoming profitable is not something that occurs overnight. Usually they have had to spend quite a bit of time learning the art of trading and risk management before they see positive results. Then when these profits start coming in, they are encouraged to see growth in their account. But as I’ve already said, trading isn’t tangible but we can make it so…

It’s important to have something to show for your profitable trading so periodically, withdraw some of your profit and buy something! It’s doesn’t have to be big, but just something you know your trading paid for. One trader I know simply bought a mug for his regular tea break! It’s as important as setting a goal. It gives your trading a purpose and brings your results to life.

Personally, much of my trading these days is done for my pension but I still make the point of using some profit periodically to buy something and this weekend my trading account has just ordered a new car (although I’ll tell it on Monday!).

So, enjoy the process of trading, the challenge of pitting yourself against the markets each week, but also enjoy the results periodically too. The account will still grow but actually withdrawing money for a purchase, no matter how small is an important step in your trading career….

Moving over to the currencies, the AUDUSD has done tremendously well to run up to its long standing upper trend channel line seen on the monthly chart. But what now? Traditional technical analysis would look for a reaction away from this trend line to resume the larger trend and we’ve already seen price stall at this level last week. The potential is there for a run to 0.74 but should we see price break through that trend line, a complete breakout could then be at hand with 0.79 being a potential target. We should have a better idea after this week’s price action as to which way it’s going to go…

audsimon

Have a great week

Charlie Burton

Ezeetrader

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The Wall of Worry

The London stock market as measured by the top 100 shares has left the 6770 level, which I have been discussing here, well behind in the week ending Friday 12th August. The next objective for the Ft100 index is the April 2015 high at 7110. The ft100 index closed 1 point up on Friday at 6916.

In the US all of the main indices made a new high during the past week. The low volatility of July was cast aside as animal spirits reentered the fray. The reverse divergence between the 14 day Stochastic and the cash price of the Dow forecast the move, as discussed here last week. Reverse divergence, hidden divergence or a slingshot are names given to this excellent technical setup. It occurs when the price makes a rising low but the Stochastic charts a falling low. The setup is a continuation pattern and it precedes a resumption of a trend after a pullback. On Friday after hitting the record highs on Thursday the indices drifted lower. This was on the back of a poor retail sales number and producer prices that were weaker than expected. The Dow Jones cash closed down 37 points.

Back in the UK the VectorVest Composite UK which is much broader measure of the market than the Ft100 (all 2200 shares that VectorVest follows on both the LSE and AIM) has already left the April high well behind. As I write after the close on the 12th August the underlying trend of the UK stock market is UP and the trend has been confirmed by price action. This signal known as a Confirmed Call and it has been in place since the end of February.  The Primary wave (short term trend) is also UP and that signal has been confirmed the RT kicker timing system. This just means that a short term signal from price action has occurred and that short term momentum is also rising. The Color Guard has been a sea of green all of the last week showing that the price of the Composite, the momentum of the Composite and the breadth of the Composite are increasing both day over day and week over week. An exceptionally healthy trend following view.

The Market Timing Indicator (MTI) is the basis of defining the direction of the underlying trend. The MTI is an oscillator that’s mathematically massaged to fit between 0 and 2, akin to all metrics on VectorVest. It’s a momentum indicator of the price of the VectorVest Composite and the breadth of the UK market as measured by the VectorVest proprietary BUY/SELL ratio. The latter two studies are then combined into a single oscillator which is the MTI. Simply, when the MTI is above 1 the underlying trend is UP and when below 1 the underlying trend is DOWN.

The MTI also possesses strong leading characteristics when the study becomes overbought and oversold. Years of patient observation have shown that when the MTI is 0.6 or less that’s it’s a good time to be buying shares and when the MTI is greater than 1.6 that’s it’s a good time to be wary.

In the last few years the MTI has called the market lows and highs exceptionally well. It advised to buy shares at the lows of October 2014, in late August 2015 and in mid-February 2016. I would advise starting to build positions slightly after the low when the turn upwards has been confirmed by green lights in the Color Guard. For position traders this can easily be a standalone system.

In the UK a value on the MTI of 1.5 found the top in April 2015 and the pre Brexit high in April. At present the MTI is at 1.62 and that’s a time to be wary. I will certainly be keeping my eyes peeled on the Color Guard, riding this trend for as long as it runs. If the short term trend should turn down, then there could be quite a nasty pullback, with the market so extended. The VectorVest Composite and the MTI are shown below.

david

The main threat is from Europe and largely bankrupt Italian banks. Growth in the EU especially in France and Italy has fallen till its lowest level since the middle of 2015. These numbers will be especially disappointing after the extent of the stimulus and action on interest rates taken by the ECB.

Market professionals make use of the CBOE Vix index to measure investor sentiment. The Vix which is a measure of expected equity volatility is known as the Wall Street fear index because it moves inversely to investors risk appetite. The sight of the Dow making new highs while the VIX moves lower unnerves the Street. When the Vix falls to its current levels traders worry that market participants are becoming much too optimistic about the future. I have watched the Vix for many years and have a signal on the study based on a Bollinger band. This has recently given me a signal to be very careful.

My shares have all had a good week with Fevertree and Hill and Smith leading the charge. I have held on to Keller. The share has traded a Doji or indecision candle in the 10/20 weekly zone. If this is confirmed by an up week, bullish candle, then we have a Buy signal and the opportunity and permission to add.

The trend seems to be turning upwards on Gleeson after the disaster at the vote although official figures show that the construction sector in general has moved into recession. Annualized output in the construction sector has fallen each month so far in 2016. Gleeson is far removed from high end builders in the south of the country but they all tend to be tarred with a single brush. If markets turn south then care and focus will be needed in this share.

On the Pound Dollar exchange rate 1.2930 is a key level. This is 78% of the last range and as I write just after the LSE close the pair is trading at this support level. If this level fails to hold then I fear a sudden and quick move to 1.25.

I am hoping that the trend in the stock market has another month to run to take the Ft100 over the April 2015 high. However with the MTI and the Vix at these levels caution with open profits is needed. Stay in the moment and for end of day traders that moment is quantified by the Color Guard. In this moment all is good.

David Paul

August 12th 2016

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What Makes The Best Traders Different?

What Makes The Best Traders Different?

Anyone can trade, but it takes someone different to be a trader. It takes someone with tenacity and patience, someone with confidence but not cockiness. It takes, in other words, someone special to be one of the best traders. The thing is, it’s not something that can be learned in a classroom. There are books, but they’ll only help you get started – they won’t teach you how to be successful. And there are other traders, but since everyone is different it can be tricky to learn from someone else.

The best traders learn as they go – they make mistakes, they pick themselves up and they start all over again if they need to. It’s what makes them stand out. They also do a few other important things…

They Think Before They Leap

Premeditation is the name of the game when it comes to the best traders. There is no guessing, no taking a stab at it, no closing your eyes and pointing at the screen to choose a trade. Everything needs to be planned in advance, as far as that is possible with trading, and that is the only way to enjoy long-lived success.

Some traders – the ones who don’t get very far – think that in order to get started they need to just pick any old trade and see what happens. The problem is, if they lose they might not bother to trade again, and if they win they might believe that guessing in the way to do it. Until they lose and lose big, in which case they’ll give up. So either way, not having a strategy in place, not knowing the entry signals and exit levels, will result in a short term trading ‘career’.

They Are Disciplined

So, so disciplined… The best traders take what they do very seriously, and that means sticking to the plan no matter what. That discipline can sometimes be tested, but for the best traders it never wavers. Never. And most people just can’t do it – it takes an extreme level of concentration and dedication that only the best traders have. This is the discipline that means your strategy is never deviated from, even if it looks a little fragile. It’s the discipline that means you can stop trading for as long as it takes until the right trade comes along. It’s the discipline that means you aren’t constantly staring at the screen or the phone in your hand to see what’s happening in the markets. Can it be learned? Not learned exactly, but you can ‘persuade’ yourself to think in those terms, although it will take much practise and you must be prepared to make some mistakes along the way.

They Can Add Up

Yes, as much as we might not like to admit it, the best traders know that trading is all about the maths. As is everything in life. Maths is more important than even our old teachers might have considered, and when it comes to trading, arithmetic is your friend. Trading is a game of probabilities, not certainties. That can put some people off, but the best traders understand how to use those probabilities to their advantage – and that sets them apart from the others who simply accept that nothing is guaranteed in trading. The excellent traders know that just because they won or lost a trade that result means nothing when it comes to their next trade. They are simply not connected. Many people, however, become emotional or even superstitious, and feel that just because they lost a trade they are ‘bound to’ win the next. Or just because they won a trade they must be on a winning streak. Trust us, there is no such thing

They Are Psychologists

In an amateur kind of way (unless, of course, they actually are psychologists…) that is. But amateur or not, the best traders are able to read people – and the market. And this gives them a major advantage over many of the others involved in the trade. Professional traders can understand how amateur traders work – and then they will do whatever the opposite is. Why? It’s because the market very rarely performs as a newbie would expect it to. So by examining what the newcomers are up to and doing the exact opposite, it’s possible to pre-empt the market. 

They Lose

Yes, you read that right. The best traders lose. They have to. Losses are inevitable. But they don’t read too much into them. And they don’t try to avoid them either. Beginners avoid losses like the Wicked Witch of the West avoids water but when they try to do that it all goes horribly wrong. They might trade without a stop loss. They might rush into a trade to make their money back. Whatever it is, there is no way to avoid a loss so it’s important not to try. If and when it happens, just pick yourself up and get on with the next trade. Because there is always a next trade.

Rob Colville aka The Lazy Trader

The Lazy Trader

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Bo Yoder S&P Analysis

The S&P 500, (NYSE:SPY) continues to grind higher as record options positions keep the market “pegged” near its highs.  Bearish power continues to build , and we are waiting to take on some short exposure, but need to see a confirmation in the form of a bearish reversal pattern.

SPY 8-14-16

The gold ETF (NYSE: GLD) has begun the pullback we forecast, and we are watching for a possible long entry as price reaches down into the $120’s.GLD 8-14-16

This remains a time of extremes.  Record options positions have locked the markets in a tight range, the political risks are extreme, and the opportunities are limited.  The great benefit of the 3D Apex Predictive Failure Technology™  is that it offers us a clear picture of the odds for success or failure BEFORE we get involved in a trade and get stuck.

I have never seen so many “NO!” signals in my life, and am patiently waiting until the market “season” changes to allow for a series of low risk/high odds trades to show themselves again.

Bo Yoder

RBJ Financial Group

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Win rate versus profitability…

Many traders obsess over being right as often as possible. They want to trade with high win rate techniques and see having a low win rate as failure. By itself, having a high win rate is not a bad thing at all but what I often come across is traders trying to trade with high win rates above all costs.

What traders should actually obsess about is profitability. You don’t have to have a high win rate to be very profitable. I’ll give you an example. A trader submitted some test results to me that he had accumulated over several years of data. He looked at various techniques for profit taking, some of which had solid win rates, others were lower. The technique with the highest win rate yielded 26,000 points over the test period (64% strike rate). Now this information by itself sounds impressive but at the other end of the spectrum was a win rate of 38% which delivered 34,000 pips.

So the much lower win rate gave a much better result over years worth of data. Interestingly, the trader couldn’t bring himself to actually trade the setup that gave those highest points. He stated that he simply hadn’t developed his psychological side enough yet to be able to handle such a low win rate, despite knowing that it gave the most profitable result.

He opted for the mid ground which was a 58% average win rate and 29,000 points. Is it wrong of him to do this? Well if you trade a system that you’re not comfortable with, you’re likely to make mistakes with it so he is probably right not going that far. However it is something that he can work on for the future.

Another trader I know averages a strike rate of just 39% and yet is very profitable. Risk versus reward is more important than win rate itself but of course we as humans have to be able to cope with lower win rates. I guess that’s where the work comes in – learning not to get in the way of our own potential profitability….

jpysimon-2

Moving over to the currencies, the USDJPY is currently sitting on a precipice. The trendline I have shown on the chart is being constantly tested. Either price is going to have a bounce or we see a break to the downside. A strong close below and we could see another run for that June low….

Have a great week

Charlie Burton, EzeeTrader

Join Charlie in the live trading for 2 days free of charge – click here

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