Diversified Trend Trading Approach

Well that was an interesting week for longer term trend traders. Following the prior week's unsettling trend reversals and trend retracements due to global uncertainty associated with the deteriorating oil price, I was anticipating this week that I might be able to jump onto new emerging trends offerring high momentum and things were faring well until the FOMC announcement.

Bass, you were absolutely correct in your prediction of where the chips would fall following the FOMC announcement. My hat is off to you Sir. :-)

Market activity yesterday was painfully slow and I am hoping that we at last are entering the festive season where traders can put their feet up and relax a bit. I certainly am looking forward to getting away from the screens and analysis a bit and taking some time out with the family...... not to mention the pile of domestic chores awaiting my return.

Despite the effect of the FOMC I was fortunately able to claw back some of my losses from last week, and it is looking like the end of December will put the month into positive profit territory.....but the fat lady isn't singing yet for the end of the month as anything can happen between now and then.

My next post will feature closed trades for the week and then I will venture on to show the few remaining open trades that have managed to stay afloat following the FOMC.

Regards

C

Trades Closed During the Week

Note that I will use R Mutiples as opposed to pips to reflect the outcome as it is far more meaningful.

USDSGD (R Multiple = 1.41) I had high hopes for this trade but it was not to be.


AUDUSD (R Multiple = 1.77) Having reached 2.5R I reduced the SDC to 0.5 to ensure some profit was locked in, but paid the price with a single touch that closed the trade before it continued to resume in-trend. Still the strategy must be observed at all times....*grrrrr*.


DAX (R Multiple = 0.96) No thanks to FOMC as this was short lived but enough to get me to 2.5R to lock in some profit.


DJI (R Multiple = 1.14) Most of the indices sufferred the same fate following FOMC. Here we were enjoying nice short trends and 'vroom...like a rat out of an aqueduct with not so much as a bye your leave....hasta la vista baby'.


CADJPY (R Multiple = 1.06) Fortunately this trade also found 2.5R before turning.


EURCAD (R Multiple = 0.31) This tried to reach 2.5R in vain........before the bend.


FTSE (R Multiple = 0.21) I was fortunate to reach breakeven on this before the worm turned.


USDJPY(R Multiple = -0.56) Not much hope with this trade. A brief period of joy before it was cut short at the knees to bring me back to earth.


EURAUD (R Multiple = -0.23) Not quite enough to get to break even but not far off.


EURJPY (R Multiple = -0.47). This was never going to make it. A generally miserable trade which I regretted soon after entry.



........my next post will focus on remaining open trades.....the last few soldiers alive to tell the tale.

C

Open Trades
I am expecting a soft end to the month and am not particularly positive about the fate of these trades......however you just can never tell.

AUDJPY. Not expecting much from this. At least I am beyond break-even so far and it is now at fair value levels in the trend near the mid-range of the SDC.



AUDUSD. Another bite at this cherry. You will note that I was closed out of AUDUSD by a whisker in my post above. There could be some continuation short in this trend so I am crossing my fingers.


USDCAD. This is not looking to bad and my hunch is that it may be a long term trend opportunity.




....that's it. Only 3 instruments alive in a portfolio of 24. It pretty well sums up that the market is entering a quiet consolidation patch for the festive season. The indices are trying their best to have a resurgence but my hunch is they will run out of steam. We will recap this on my weekly analysis that will follow in my next few posts.

Regards

C

Analysis for next week.

Expect typical low volume and erratic festive market behaviour. For those not dependent on trading....a good time to have a break and enjoy the best of the season. For the purposes of this system test I will continue to monitor the market and post weekly updates.

Note that I have included more annotation on the charts including lines of support and resistance (S/R) to assist those who are seeking to determine where to place predictice entries (pending/working orders).

________ These lines represent major Monthly S/R lines

_ _ _ _ _ These lines represent major Weekly S/R lines

............. These lines represent less important daily S/R lines

While S/R is important to signify potential retracement points and possible trend reversals, ensure you do not let it get in the way of the SDC in interpreting likely trend moves. The SDC is your friend and you should focus your attention on it as opposed to diluting it's effect with S/R predictions. The main benefit of S/R points is in placement of your entry positions to ensure it is clear of possible obstacles to allow momentum in trend to do it's trick. The reason I have marked S/R lines in grey is to reduce their visual impact on the charts and make you focussed on the SDC channel. If you can't see all of them, then don't worry about it.

AUDJPY


AUDUSD


CADJPY


GBPUSD


ASX


DJI




....more to come over the course of the weekend.

C

....weekly analysis continued.

EURAUD


EURJPY


EURUSD


EURCAD


NIKKEI


FTSE



....more to come shortly.

C

USDCAD


USDCHF


USDJPY


AUDCAD


DAX


XAUUSD



.....last post to wrap things up for the week ahead coming.

C

USDSGD


NZDUSD


XAGUSD


NZDJPY


NZDCAD


GBPSGD



Well that's it for next weeks outlook.

I hope you all have a safe and merry christmas. It is going to be the traditional hot stinker down here in Oz so the prawns and salads are on their way.

As we draw close to the end of the year I will shortly be giving this years wrap up for the strategy which has been a challenging but prosperous trading season for trend following strategies such as this. Despite the very quiet mid-year section, volatility returned in spades in the last few months which has been a windfall for this approach. It has also brought a bit of pain (as in last weeks efforts) but that is to be expected from time to time.

Stay safe and have a great week.

Regards

C

Thank You!

i study lot from you

Merry Christmas for you!

Merry Christmas to you to sainthun. :-)

Trading the Primary Trend or the Retracement

One of the critical decisions that you need to face in applying this approach is determining where to commence drawing the SDC. While the rules state that the SDC for a long must commence at the swing low and the converse for a short trade (from swing high), the key is to determine using Multi-Time Frame Analysis, where this low or high is situated.

For example using the H1 timeframe using this criteria, the following SDC (dotted green channel) would be drawn upon entry from the Swing Low drawn on the chart. But what you need to ask at this point is the following, is the SDC representative of the longer term primary trend on higher timeframes? Quite clearly in the chart below this is not the case as the SDC of the primary trend (in yellow) is a better reflection of the underlying trend than that reflected on the H1 timeframe. In assessing where to place the SDC, you need to be aware of the trends in higher timeframes and whether the trend you are trading conforms with the primary trend, or whether you are trading a possible retracement of the primary trend.

By applying the SDC on the H1 timeframe you will find that the trade needs to possess increased momentum than that experienced on the longer term timeframe and is likely to have a shorter duration than otherwise possible. By taking this trade using the Green dotted SDC, your position size determined by 1R will mean an increased position with a higher risk profile than that achieved by a more conservative approach that chose an SDC that was more appropriate for the primary trend. Take a while to mull this over in your hear and think about it.



Switching to the higher time-frame will give you an idea of the slope and width of the SDC you need to give you the greatest probability of staying intrend on the longer timeframe. For example the W1 timeframe below details the primary trend direction to which you want to take advantage of. On this timeframe the current price is still at fair value and has not reached the overbought zone signified by the upper SDC. Price is clearly moving in the direction of the primary trend.



Now let's switch to the D1 timeframe and see if we can define a good swing low to draw our SDC on the H1 timeframe from.



As you can see in the chart above the D1 trend that is consistent with the longer time frame in direction and volatility range is defined in yellow. This SDC has been drawn from the swing low on 9 October 2013. This is therefore where you should be looking to draw your H1 SDC from. The final result is detailed below. Now you could be more conservative than this and use an even longer and wider SDC which will correspondingly reduce your position size further but reduce your risk exposure. The choice is ultimately yours but it is essential that the trend slope is at least consistent with he longer term trend timeframe.




Obviously if you are therefore trading a retracement you will be determining the placement of the SDC using the shorter term timeframe as your prior determinant but using the longer timeframe SDC's to evaluate the extent if the anticipated retracement.

....anyway, I thought this may help a bit as the placement of the SDC needs to be based on rational logic as opposed to mere unthinking application to give you the greatest probability of success.

Regards

C

Preparing the Setup

Following on from the previous post, I thought I would discuss the processes involved in preparing for a setup when price is approaching the predictive entry (working/pending order).

I am now closely watching USDSGD as price is approaching my prior predictive entry condition (refer to last weekends analysis). During this watch and wait phase I am configuring my SDC channel based on the prior post's discussion to maximise my probabilities of success upon entry.

The Monthly Chart looks like this. It's a new infant long trend that has broken S/R at 1.3199 so looking good for a ride up to the next S/R at 1.345.


The Weekly Chart looks like this. A similar story to M1. A long trend in place and S/R at 1.3199 has been breached. Looking good for more upside.


The Daily Chart looks like this. Note how I have defined the SDC with extended dotted lines to assist in H1 SDC placement.


The H1 chart looks like this. Note how I have set my H1 SDC (in yellow) to conform with the slope of the W1 SDC (pink dotted line). The commencement of the SDC is highlighted by the vertical yellow dashed line commencing from the swing low on 23 July 2014. Note also the green dashed line which is simply the SDC drawn from the swing low of the H1 chart. This green dashed line is NOT the SDC to use in this instance as it is overly ambitious and is likely to NOT result in you staying in the primary trend for long. Now following the definition of the SDC for the H1 chart to use, I will sit in wait until the predictive green line has been breached (using alerts or pending orders) and then I will release the trigger finger.



Regards

C

Well that was a painfully slow week with light volume and low volatility. To be expected during the festive season. If you were not shackled to the trading screens, this would have been the week to take off and pretend you had another life.

Nearly all of the 24 instruments I watch decided to sideways track during the week so not much to report in about.

Trades Closed During the Week
Only one trade was closed for the week as detailed below.

AUDJPY (R Multiple = 0.29). Just not enough momentum to keep this trend alive within the confined SDC.



Trades Opened During the Week
Two trades were entered for the week as follows.

GBPUSD



DJI (Refer to Post 150 which details the decisions that were made for this entry)



....and that's it for last week. A pretty uninspiring week where a good book was in order. I certainly am not expecting much activity until the festive season is over and the business cycle returns in force.

......but you just never never know.......have a great week for next week.

I will post next weeks outlook shortly.

Regards

C

Weekly Outlook
The week ahead is anticipated to be subdued given the time of year. Below is a technical assessment of what to expect given this particular approach to trend trading.

AUDJPY


AUDUSD


CADJPY


GBPUSD


ASX


DJI


......more to come this weekend.

C

Weekly Outlook continued....

EURAUD


EURJPY


EURUSD


EURCAD


NIKKEI


FTSE


.....more to come shortly.

C

Weekly Outlook continued....

USDCAD


USDCHF


USDJPY


AUDCAD


DAX


XAUUSD (Spot Gold)



...almost there for the weekly update. One more post should do it.

C

hi Copernicus,

by chance i noticed your post and charts, just want to say thank you because as i reviewed some of your charts i noticed a pattern that i did not notice on my own compact charts [ my own trading charts display just 22 to 30 bars mostly].

see the USDCAD below, i took a screenshot from your own posted Monthly chart. also intend using the same screenshot on my journal, i hope u don't mind.
What i noticed was a bullish saucer in the making, confirming my longterm analysis. i'm posting the extract below. i can see a minimum of 2,000 pips here...as you, i also have long positions in this pair. if u don't like me posting here than you can delete it or inform me to do so, but since no harm was meant, i hope u take it in that spirit. Thks again.

No problems Sunshine. Thanks for the post. I must admit that I am not a master of chart patterns so your input is appreciated. Let's hope for a nice long ride. The more pips the merrier. :-)

Weekly Outlook continued....

This post should be it for the weekly outlook.

USDSGD


PS: Sunshine I would be interested if you see a saucer pattern on the M1 chart above as well. :-)

NZDUSD


XAGUSD


NZDJPY


NZDCAD


GBPSGD



...well that's it for the week. I hope you all have a great trading week next week but I think we are going to get more of the same festive flop.

Next weekend I will give an annual wrap up as this strategy will have 2 years testing up it's sleeve. I must admit that since I have commenced looking at trades this way, my whole pessimistic philosophy to trading has taken a turn for the better.

Cheers to all and have a great New Years bash. :-)

C

C., thank you for your serious and hard work, I'm following you with much interest.

Best,
B.R.

Thanks B. I hope you had a great Chrissy. All the best for the New Year.

C