craftsman's Gadgets (Ideas/Analysis/Trades worth avg. +$10k/week)

Dear FF friends,


I am craftsman, a full time trader, programmer, data miner and entomologist, with 13 years trading experience.

I will post my trading ideas, analysis, statistics and charts in this trading journal, and probably I will post my daily p/l and trading analysis as well.

My first trade may date back to 2004.


Let the journey begin!
craftsman

Mar 2, 2017 (Thursday)
Forecast cloud - statistics of 5 year data by filtering "5 days or more down"

Today mainly focus on GBP/USD pair, as it is down for 5 consecutive days, so let us just set this "5 days or more down" as the filtering criteria to check what happened in the last 5 years.

Looking back to the performance of past 5 years, the event ("5 days or more down") occurs 27 times.
The first event occurs on January 17, 2013 and the last event occurs on November 18, 2016.
Recently, on average, there have been 0.46 events for every 100 trading days.

Based on above statistics I believe GBP/USD will have little chance to drop more despite USD index is making everything red now.
And the data analyzing shows us:
95% confidence coefficient that 1 day moving range is -0.25% to 0.6%. (1.2258 to 1.2355)
80% confidence coefficient that 7 day moving range is -0.5% to 1.1%. (1.2226 to 1.2424)

My trading action: holding GBP/USD long unless it closed below 1.2226 or reached 1.2424
(entry prices are most volume weighted levels today, 1.2280 and 1.2272)

Let us review this trade later in next week.
craftsman



p.s. Attached chart is forecast cloud (charting by Metastock R/T), getting this idea today from a smart young man.

Mar 3, 2017 (Friday)
Run-Up and Drawdown analysis on GBPUSD

Today's trading:
1) Keep holding GBPUSD long, now average loss is 6pips
2) Short scalping in the range of 1.2223-1.2337, based on the calculation of "5 days or more down" criteria as event in still valid

The reason I short scalping is because I already have GBPUSD long position as the "inventory".
I borrow the idea of "inventory" form petroleum companies - by short sell crude futures to cover the real physical inventory.

Another reason is that GBPUSD is now in up and down range, which is perfect for scalping.
On average of last 41 trading days, the accumulated daily run-up is 338pips, and the accumulated daily drawdown is -330pips.
Yesterday the accumulated run-up is only 206pips, and the accumulated drawdown is only -215pips.

I will set yesterday's 206pips as the stop loss level for short scalping.
And will set 4 separate automatic scalping algos to cover GBPUSD price range of 1.2223-1.2337.
Will start trading after London opening.


Best,
craftsman

p.s. I will try to explain in details that how I scalp next week, the idea is a little bit complicated.
Attached pivot chart is the statistics of daily volatility of last 41 trading days.
Attached Excel is the data set and calculations. Any questions are welcome.

Statistics showed that high probability (95% confidence coefficient, ref. #Post 2) that today's GBP/USD moving range is 1.2223-1.2337.

1.2220 has strong support and the bearish run would possibly be over. Not surprise that it rebounded to 1.2328 (23.6% Fibonacci retracement level).

Will review after London market closed.


craftsman

Attached chart is .DXY(U.S. Dollar Index, Green) and GBP/USD(Orange).

30 minutes before Yellen speaks, GBP/USD range is 1.2212-1.2283 in London session. (roughly in the daily forecasting range 1.2223-1.2337)

Services PMI is worse than expectation, no big drop as 1.2220 is strong support. (ref. #Post 4)
Yellen speaking will give it a decent chance to close above 1.2265 to make the daily bar green.

Short scalping is working well (1 algo activated) and the long position is now red at -25pips.
Total p/l green today.


craftsman

Yellen's speaking, dovish, good for GBP/USD


Fischer's speaking, conservative, further good for GBP/USD

Daily gain $5,518.
Still hold sterling long position, would be a good "inventory" if break 1.2385. Scalping ended.

Forecast cloud (ref. #Post 2) works very well, 95% confidence coefficient did not fail.
If closed above 1.2265 the event will be ended.

Will review the position next week.


Good weekend,
craftsman

GBPUSD closed above 1.2265.
The model of forecast cloud (ref. #Post 2) is void, as the criteria of "5 days or more down" is no longer fit.

Weekends headlines are neutral. Expecting a jump opening in Asia session on Monday.

An idea comes up when checking CFTC positions.
Basically CFTC non commercial position is short term and p/l sensitive, so a 70pips rebound would trigger more stop orders.

Will evaluate the CFTF data statistically, then plan the next move on my long position after Monday opening.


craftsman

Mar 6, 2017 (Monday)
Analyzing - GBPUSD CFTC Non commercial Net Positions

Today's Planing:
1) Hold GBPUSD long, current in green (+10pips)
2) Short scalping in the Friday moving range (1.2215-1.2283)
3) Get an exit plan for GBPUSD (if down)
4) Explore the best suitable instruments to trade this week (potentially Crude, Yen)

Short scalping is still good as the trend is not clear, also expected jump opening did not happen.
Will set two algos to scalp after the London opening, if trend is still unclear.

Did a study on CFTC positions, which shows there is no significant correlation between CFTC Positions and prices.
However, the latest data shows a heavy holding from leveraged fund, which makes me believe that a further rebound will trigger more stop orders.


craftsman


The correlation is not significant.

Heavy short positions holding by leveraged fund.

update:
1) GBPUSD weakened after London opening, however, short scalping algos were aborted as all other currencies and interested rate products are strengthening.
2) Will consider to use EURUSD (at around 1.0650 and 1.0805, if there is a chance) as exit plan, i.e., short sell EURUSD to cover GBPUSD exposure in the short term run.

Still expect the upside of GBPUSD, will wait a few hours to see how it goes.


craftsman

update:
GBPUSD London session slight down, EURUSD also lost momentum.
Pre U.S. session looks good, still has huge change to go up.

Usually Monday will give a clue of direction of the week.
So it is crucial to decide whether to keep my long today.


craftsman

Mar 7, 2017 (Tuesday)
No trade is a good trade.

Overall indications are bearish, however, the lack of sustained down moveis suggesting a strong support at this level (1.22-1.2220)
It is painful for me to trade in these low liquid, sluggish sessions.

Starting at 6:00am EST, the house of Lords will debate the proposed changes to the Brexit bill, including an amendment for requiring a "meaningful vote" on the terms of Brexit .
Lords are likely to win in the vote which is due in the early morning in Eastern time.

If GBPUSD fell below 1.2, the further drop would be very fast and it is not likely to come back , will get out long position in that situation.
Current long position is 50pips in red.


craftsman

Mar 8, 2017 (Wednesday)
Statistics - UK Budget days performance

Today's Plan, hold or exit the GBPUSD position. (now 75pips in red)

The average daily moving range (High minus Low) is 124pips for the recent 100 trading days.
In the last 2 weeks, the range was narrowed to 99pips, suggesting a firm downtrend with low volatility.

Today 7:30pm EST Britain's finance minister will announce his budget statement.

So I did a study of sterling's performance on budget announcement day of last 10 years, showing that the average daily moving range is 204pips on budget day, far more volatile than normal days.
Then I broke it down to upside and downside, expecting to find some clues.


craftsman


Table 1. Data on budget day, last 10 years.


Chart 2. Markets expect the budget plan today will support the economic defend ahead of Brexit, probably will boost sterling.

Mar 13, 2017 (Monday)
Statistics - PF Charts

Today's Plan, hold long or exit the sterling position (now 105pips in red, 45pips in red including hedging).
Keep short scalping.

Low volatility in the last two weeks due to a firmed and constant downtrend.
Not wise to hold long sterling, however, the reasons I did not stop loss：
1) It dropped slower and slower,
2) Total loss is still acceptable, as short scalping offset more than half of the loss,
3) Trade against the trend is not always wrong, the key is not to leverage the risk and to find a way out.

Now the GBPUSD look like a squeezed spring with too much pressure on it, as almost every news in the past two weeks is negative.
If there is a good piece of news, the released pressure will overturn the downtrend.

The statistic based on hourly PF charts shows low volatility in the last two weeks, implying another big movement may be on the way.
The average should be 90pips.


craftsman

update:
CFTC net position is nearly at historical low since the track record, meanwhile the leveraged money is highly sensitive to price change which is also at historical high in short position.


craftsman

GBP is round bottoming, received a kock down after rhe ask for a refeerendum on scottish indipendence, but however recovere.
I wait Tomorrow afinal dip and after the continuation of round bottoming to a trend high..similar to the euro..

Mar 15, 2017 (Wednesday)
Analyzing - Coming events today - GB claimant count change, US CPI, Federal fund rate

Trading Plan:
1) Hold long or exit the sterling position (now 115pips in red, 15pips in red including hedging).
2) Keep short scalping. (hedging purpose)

Trying to exit all positions is always in first priority.

There are at least three events with high relevance to sterling today.
Let us examine the past releasing data and performance on these events.

Relatively GB claimant count change at 5:30am EST has no significant effect to sterling, however, the most 5 recent releasing all dragged sterling down, not a good sign to sterling today.


US CPI do have negative effect to sterling, no matter the actual figure is better or worse than forecast polls.


The most important events today is of course Fed rate decision, a "sell the fact" consensus may happen as U.S. Dollar is already priced in for three rates hike this year, if the statement is neutral.
In general Fed event is good for sterling in the recent year, however, the last two hikes (Dec 2015 and Dec 2016) both pressed sterling down on the releasing day and the following two trading days.

Attached chart, daily volatility of sterling on Fed days.


I tend to keep the position mixed with fundamental news.


craftsman

update:
up 85pips in 10 minutes, as I mentioned before (ref. #Post 15), hefty short position held by leveraged fund is highly sensitive to upcoming event and risk aversion buy back.


craftsman

Gbp searching to go North, maybe helped by BoE.
Wait FOMC and elections in Holland then long, mybe on the dip of the FOMC