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Watch out: TLDR material

 

 

Hi,

 

After being around for a while on this forum without any major contribution I thought I could share a little bit of my

journey as a trader and exchange some information with other traders about swing trade ideas for the futures markets.

 

Your own ideas are more than welcome in this thread as I'm always interested to see further potential opportunities.

 

But let's first give briefly some background info on my path as a discretionary trader.

 

After losing a lot of money through intra-day trading (winning periods of 2-3 months interrupted by major blow outs), I

came to the conclusion that intra-day trading is not the right way to go as a retail trader. You might think that my

psychology was the issue here, but I'm sure it's the method which led to my emotional response every 2-3 months - proof

for that is that I do not have that problem when swing trading. Anyway, I believe that intra-day price movements are

largely random; hence, the edge - if one is able to develop one - is very small in my opinion for retail traders (now, that

will provoke one or two traders here, I guess... ;-) ).

 

Just to be clear, there are for sure excellent traders out there making good amounts of money by trading short-term order flow

or similar. However, those who are able to do that year after year after year - and especially when they approach their

late thirties or fourties - are for sure one in a million.

 

If you are one of them, good for you! If not, maybe you should try something different...

 

In contrast to intra-day trading, I am certain that most people can learn and master swing trading strategies - i.e. trading

higher time frames for larger movements - as this is a totally different animal. It is a lot less stressful than intra-day

trading and requires a different skill set. Also, it is possible to have a day job and earn extra money on the side with

swing trading, something that is impossible with intra-day trading. That way, you can reach your financial goals much faster,

than with only one income stream.

 

Anyway, before elaborating more on the pro's and con's of intra-day versus swing trading, let's get down to business.

 

My discretionary swing trading strategy is based on classical chart patterns and I look only at price development (sometimes

I take some clues from volume development as well, but that is more secondary), no fundamentals, no fancy stuff.

I hold positions from one day to several months, depending on the situation.

 

I try to look at various futures markets to generate trade ideas with no preference for any particular contract.

 

I use fairly wide stops. In order to be able to do this, you have to be well capitalized. There is no way this

strategy will work for you, if you have only USD 5,000 in you account and plan to hold a position requiring USD 3,000 overnight

margin. This would kill you very soon. If you do not have enough money for this, paper trade, earn money somewhere else

in the meantime and come back later to trade with real money if you have enough available.

 

Furthermore, please note that I might change my mind on a scenario (and my position!) fairly quickly. So, if you plan to follow

any of these ideas, please be aware of that. I try to post any changes of my position in time, but can not guarantee that.

 

Finally, I do not know whether exposing myself and my trade ideas in such forum will harm my performance. But we will see.

 

In the next posts I will explain my current trade ideas. The first two are ideas where I already have a position in, the

third one is a breakout I'm waiting for to occur.

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Sounds interesting. I found that there was a learning curve to go from "planned trading" to "real-time" trading. The skills required for "real-time" trading are rather specialized and many don't understand this difference.

 

I wanted to add that options (options on futures) are a possibility for those who desire to swing trade with perhaps less capital and/or limited risk. I have seen what looks like some potential in these instruments but haven't much experience with them, yet.

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The trades I am currently in are:

 

- LONG silver from USD 33.14 (mini-sized December contract)

 

- LONG crude oil from USD 87.50 (mini-sized January contract)

 

 

Note: Sorry, for the "cheap" charts, but currently I have only access to my tradestation platform every 2-3 weeks (I'm on a project

outside my home town). As I do not use any fancy indicators or automated system, I use barchart.com for my analysis, which is fully sufficient, and

place my trades through the webtrading application of tradestation. This is all very rudimentary, but it works. I choose to post my ideas

now with these charts instead of waiting and posting the nicer looking charts, as timing is critical in this business. Will try to post

tradestation (TS) charts whenever possible. I take screenshots of my TS charts with me for reference during the weeks when I have no access to TS.

Hence, my reference below to the TS charts.

 

 

 

Here is the rationale and the parameters for the LONG silver position:

 

After developing a major pennant in 2011 and until the summer of 2012, the breakout out of the pennant occurred in September at about $31.

Usually the price move leading to the pennant is copied from the breakout point. This would lead to a target of about $60.

 

After a move to about $35 price retraced to around $31 where it was "defended". I entered slightly above that level and

plan to sell 50% of my position at around $38-40 and keep the rest until $60 is reached or a reversal pattern occurs.

 

My stop is at $33.13. I will flip my position with 50% of my original position if that level is reached - with the new target

being $30.

Silver_01_LT.thumb.JPG.e504739e267635404b05b15c44240dd8.JPG

Silver_02_MT.thumb.JPG.898be426aadf711e7a567e272d98c0df.JPG

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Preview

 

 

--------------------------------------------------------------------------------

Here is the rationale and the parameters for the LONG crude oil position:

 

 

That trade is a bit unusual for me, as it is somewhat "experimental". I could not find anything really helpful in the monthly

or weekly charts - which I like to do first before moving to the daily charts. However, I saw this small rounding bottom on

the daily chart which got my attention.

 

Price tried to break to the upside twice in that pattern but moved back to continue with the rounding pattern. I took my

chance at $87.50 with a LONG position and expect a breakout of this pattern on "short notice" with a move to around $95.

I will sell 50% of my position there and keep the rest until $105 is reached or I'm stopped out (will adjust my stop level

when $95 is reached). The $105 is derived from the trend line shown in the weekly chart.

 

My current stop is at $86.275 and I will flip my position, when that stop is hit -> new target then: $80.

 

 

Note: Beware of the back-adjustment of the continuous contract. This one looks different when I apply my standard back-

adjustment procedure on my tradestation platform (i.e. no rectangle there, but declining upper trend line). Hence, the $105

target, instead of $110.

CrudeOil_01_ST.thumb.JPG.103a8ba34695a6035c84e2fd9c7caffd.JPG

CrudeOil_02_MT.thumb.JPG.5760764e40901aa6160e2398b4562ac9.JPG

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What I'm currently watching:

 

BREAKOUT out of the trend channel in Wheat

 

Burned my fingers already a few times on this one, as I've incurred some losses earlier due to fake breakouts (or premature activity by me :( ). Now waiting for a clear move outside of the trend channel before taking any trade.

 

Upside target: $1,200

 

Downside target: $600

 

Note: Beware of the back-adjustment of the continuous contract. This one looks different when I apply my standard back-adjustment procedure on my tradestation platform (i.e. no rounding bottom there, but declining lower trend line). Hence, the $600 target for the short setup, instead of something like $700. I will provide my respective TS charts on this one later.

Wheat_01_ST.thumb.JPG.f00be9ff621503f43a33c983ef61afeb.JPG

Wheat_02_LT.thumb.JPG.42b53cc869dee051fc80841524ec52d0.JPG

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New trade:

 

LONG Soybean (mini-sized Jan 2013) @ 1446.44

 

 

Price broke out of a huge triangle - which started in 2008 - in 2012 and retraced to the upper boundary of that triangle (see notes in previous posts on back-adjustment - ascending triangle on TS charts instead of symmetrical one). Now, on the weekly the picture looks a bit different - and that's why this is a risky trade. On the weekly, a small Head & Shoulder has been formed with a break of the neckline (disregard the "potential" in the text box of the pic - was too lazy to change it :) ). However, the neckline of that H&S was pierced yesterday again from the downside. Hence, my bet on a continuation of the move upward.

 

Interestingly, a further bigger H&S formation could form in my LONG scenario. The left shoulder and the head are visible, but the right shoulder has yet to be formed.

 

Target: around $1,600

 

Stop: $1,370

 

Overall, watching different markets now in the last few weeks I saw some correlation between different instruments. From my perspective the next 2-3 weeks are crucial for the general market direction. This relates for instance to this trade but also for the S&P or Nasdaq. Do we get the next strong upmove or the final break down? The next few weeks will probably give an answer to that.

Soybean_01_LT.thumb.JPG.9caae7e92c728373b3e816079172c5b5.JPG

Soybean_02_MT.thumb.JPG.36c2c98ccc914ad3fb60b220910d12be.JPG

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Hello Karoshiman,

 

I have enjoyed reading your posts and would like to add some of my comments. These are not meant to dissuade you from from your plan but are for a healthy discussion. I like your main focus on price itself and find it to be refreshing.

 

For the soybean I consider this trade to be a bit risky for my taste. The monthly chart shows the price was unable to go above the high and collapsed back below the 1650 level. This I would consider a sign of weakness in the longer intervals. The triangle break and retracement back to the top of it seems to be the key that might trigger a move in your favour. We'll have to see how the demand fares now.

 

The daily is in a downtrend as shown by the downtrend channel lines I have added. I would have at least waited until the the break of the channel before engaging in a long.

 

Nonetheless, I am sure with your stops the worst case is you'll just have to exit. Like you I also believe the coming weeks for the market are very crucial.

 

Keep up the good work.

 

attachment.php?attachmentid=33143&stc=1&d=1354103002

 

attachment.php?attachmentid=33144&stc=1&d=1354103002

 

Gringo

Soybean_01_LT.thumb.JPG.6e7d2c81fed56117586fe0f6f40f4c45.JPG

Soybean_02_MT.thumb.JPG.52d29de45b3a73b84a68b0639bb6f747.JPG

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...

 

For the soybean I consider this trade to be a bit risky for my taste. The monthly chart shows the price was unable to go above the high and collapsed back below the 1650 level. This I would consider a sign of weakness in the longer intervals. The triangle break and retracement back to the top of it seems to be the key that might trigger a move in your favour. We'll have to see how the demand fares now.

 

The daily is in a downtrend as shown by the downtrend channel lines I have added. I would have at least waited until the the break of the channel before engaging in a long.

 

Nonetheless, I am sure with your stops the worst case is you'll just have to exit. Like you I also believe the coming weeks for the market are very crucial.

 

...

 

 

 

Hi Gringo,

 

Thanks for your productive reply and compliments. Great points you mention there.

 

I am especially worried about price moving into the $1,300-$1,400 area you have marked with a box. However, soybeans seem to be pretty volatile and prone to false moves, e.g. the breakout on the monthly chart was followed by a shakeout move before price continued its way up.

 

Volume development seems to favor also the long side. The breakout is accompanied by increasing volume and the retracement took place with lower volume (can be best seen on the monthly chart).

 

Anyway, I am just trying to convince myself to be right... ;-) But you are right, when my stop is hit I am out of my long and go short. My short target is by the way around $1,200.

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UPDATE:

 

Not yet out of Crude Oil. Moved my stop to $85.70 (yes, I do that sometimes). But it's still possible that I get out before that level, if overall market does not look healthy.

 

Today might be the day of the breakout either way...

 

 

UPDATE 2:

 

Out of Crude Oil at $86.10. Short now from $85.65 but not yet sure whether this is going to turn up again.

 

Stop for the short at $86.30. Going long again, if $87 is hit.

Edited by karoshiman

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Hi,

 

You begin your swing trade journal via specifically stating the problems "you had" with intraday trading as a retail trader and that you're now swing trading.

 

With that said, your trade management is in conflict. You're using swing trading profit targets and swing trading/position trading higher time frame analysis. In contrast, so far, you've been using intraday stop targets even though that's not what you have called them along with flipping trades and adjusting stops like an intraday trader.

 

Simply, you seem to "want" to be a swing trader prior to entry but you're still trading like a day trader (intraday trader) after entry.

Edited by wrbtrader

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Hi,

 

You begin your swing trade journal via specifically stating the problems "you had" with intraday trading as a retail trader and that you're now swing trading.

 

With that said, your trade management is in conflict. You're using swing trading profit targets and swing trading/position trading higher time frame analysis. In contrast, so far, you've been using intraday stop targets even though that's not what you have called them along with flipping trades and adjusting stops like an intraday trader.

 

Simply, you seem to "want" to be a swing trader prior to entry but you're still trading like a day trader (intraday trader) after entry.

 

 

Hi wrbtrader,

 

You are right in your analysis. Shakeout days like these still cause me trouble. My stops weren't placed well. They were still too tight and my position probably still too big.

 

Also, it's the first time I trade CL. Heard that it's volatile but was still surprised by the moves it makes. Flipping CL intra-day is probably not a good idea for swing trading...

 

Regards,

k

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My long scenarios are still intact. Price tested previous resistance levels and bounced back. Should have had my stops below that levels. Learning point for next time.

 

Summary of current positions:

 

QM (mini-sized Crude Oil, Jan. contract):

LONG from 86.30 (will add if price breaches 87.60)

Stop: below 85

 

 

YI (mini-sized Silver, Dec. contract):

LONG from 33.52

Stop: below 32.90

 

 

YK (mini-sized Soybeans, Jan. contract):

Long from 1446.44

Stop: 1370

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I agree with wrbtrader. If you are going to swing trade you've got to modify your understanding of price movement. Your philosophy to swing trade might be correct, but are you sure you have enough study time to truly trade market context? There's no harm in staying out of the market until you're ready!!

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What a day...

 

Out of my Crude Oil short with a loss. Now long from 86.30. Will add if price breaches 87.

 

Re-entered silver long at 33.41.

 

Very good thread and your thinking about swing trading and adequate capitalization is correct but still your stops are too tight in my opinion. Have you back-tested your method? I think you should do that. I am not sure but it may or may not be a profitable method. I tried swing trading GBPUSD before with 40 pips stops max and I lost 40% of account no matter how hard I tried. Then I saw the system they have in the price action lab blog (here, click on GBPUSD patterns) and I got suspicious that my stops were too tight. I now use 120 pip stops and I have doubled my account in 5 months.

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Very good thread and your thinking about swing trading and adequate capitalization is correct but still your stops are too tight in my opinion. Have you back-tested your method? I think you should do that. I am not sure but it may or may not be a profitable method. I tried swing trading GBPUSD before with 40 pips stops max and I lost 40% of account no matter how hard I tried. Then I saw the system they have in the price action lab blog (here, click on GBPUSD patterns) and I got suspicious that my stops were too tight. I now use 120 pip stops and I have doubled my account in 5 months.

 

 

Hi, thanks Gianno!

 

You are right about my stops. Agree 100%.

 

Yes, I've backtested my strategy manually for the last 11 years, but not on all instruments. I think that was the problem I had with Crude Oil as it is so volatile and my stops too tight for that one.

 

Regards,

k

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Got stopped out of my YI position. Think silver will consolidate first before moving up (see chart).

 

New trade: Natural Gas

 

Price broke upward trendline & last swing low on Friday. Got short at 3.600. Target below 3.200.

SILVER_W_2012_12_03.JPG.e539f6b6b80e98c70d22a959ef03e6ea.JPG

NGAS_D_2012_12_03.JPG.82ea727e6a6a69934a4325d0ff4022c0.JPG

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Stopped out of QM as well. Trying a short from 87.80. The long scenario is not valid anymore. Price needs to go above 90 in order for the long scenario to play out.

 

Various markets are taking a dive today.

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