Owner: Technical Logic Trading URL:http://tltrading.blogspot.com Join Date: Sat, 28 Apr 2007 12:09:29 -0500 Rating:0 Site Description: Examines the Logic Behind Technical Trading Indicators. Seeks to develop a strategy
that will return 1000 percent per year in all markets using all available instruments
such as Forex, Options, Currency, LEAPS, Stocks, Derivatives and Futures. Updated Site statistics:Click here
Forex Trade 2007-04-27 03:47:00 Yesterday I sold 2 contracts of the USD/JPY at 118.34. Right now the USD/JPY is trading for 119.60. That means that I have lost quite a bit of money on paper. The key word is "paper". I haven't really lost anything until I buy the contracts back and I have no intention of doing so anytime soon.My style of forex trading is fairly long term. I will hold positions for as long as a month if necessary to realize my profit target. Depending on the situation my profit target can be as low as 75 pips or as high as 300.My latest trade may be even longer term than usual. I am playing a possible meltdown in the carry trade by selling the USD/JPY. If the carry trade were to be disrupted by a Japanese interest rate raise, then the JPY would rise rapidly against all other currencies. If the Bank of Japan doesn't raise rates within a few months then I will just wait for a dip and liquidate my positions.This is a fairly low risk trade with a medium potential for profits. I will post again when I liq Read more:Forex
, Trade
Day Trading Part two 2007-04-21 07:53:00 Over the last week I have had a few more opportunities to test my Day Trading
Strategy further.The results have been very good. The strategy yields a 72% win rate. As mentioned previously, a stop loss order is set at $0.05 and the trade is closed when the stochastic reaches the top of the cycle. This yields about $0.30 per winning trade in profit. I have not tested enough to calculate an annual percentage yield if this was pursued full time. Preliminary calculations suggest that it would be about %300.This strategy definitely has some major drawbacks though. It requires full time attention to the computer screen while the market is open. This is not practical for me. I also found it to be very fast paced and stressful. I have decided not to pursue this strategy any further, although I will retain the details in case I want to use it in the future. Read more:Day Trading
Market Thoughts and Forex Trading 2007-04-20 06:31:00 If ever the stock market was irrational, it is now. The S&P 500, Dow Jones Industrial Average and NASDAQ are all near record highs. The USD/JPY is kept artificially low because of selling pressure created by the carry trade. Recently when economic numbers were announced better than expected, the stock market crashed. Why? Because investors were afraid the feds would raise interest rates.Is it my imagination or is this backward? Good numbers used to mean that the economy was sound, giving investors confidence. Bad numbers used to make investors cautious. Not anymore. We have entered a new market era that requires a different approach to investing. Some investors used to be successful predicting the direction of the stock market.I have talked to a few of them over the last 3 months. They have different opinions of where the market is going next, but they all agree on two things. This market is like nothing they have ever seen, and it is very unpredictable.Fortunately, some investors lear Read more:Forex
, Trading
, Market
This Weeks Trades 2007-04-10 06:38:00 RACKOn the 4Th of April I Bought To Close the RACK $20 JAN 08 LEAPS for $2.20.I also Sold To Open the RACK $20 APR 07 call for $0.10 to generate extra income.FMTOn the 4Th of April I Sold To Open the FMT $10 APR 07 call for $0.10. Selling the near month calls for 10 cents on RACK and FMT may seem worthless to some people, but over time 10 cents adds up to a substantial percentage of the original stock cost. Little things make a big difference in long term investment returns. Just selling a near month call each month for 10 cents will add up to over 5% of a $20 stock in one year. Of course we are looking for much more than 5% a year, so we sell LEAPS at the top of the price cycle (Detailed in previous posts) as our primary income source. Read more:Weeks
Imposing Trade Duties On China? 2007-03-31 21:05:00 I don't like the sound of this.The U.S. Commerce Department, reversing more than two decades of practice, decided Friday to levy new duties on imports from China
to compensate for Chinese subsidies to exporters. The change of policy by the Bush administration comes as it faces increasing anger over soaring trade deficits. The duties, which take effect next week on a preliminary basis, apply initially to imports of coated paper from China. It also opens the way for steel companies, textile producers and other manufacturers facing competition from China to apply for the same protection.Courtesy Google News Read more:Trade
Covered Call Management FMT Calendar Call 2007-03-31 17:18:00 Because of a hectic work schedule I did not have time to post my latest covered call management positions as I entered them the last few weeks. I have entered one new position and completed one (Sold and then bought back the call for a profit).On the 16Th of march I sold to open the FMT JUN 07 $10 call for $1.15 (Previous Post Here). At that time FMT was trading for just under $9.On the 29Th of march I bought back the JUN 07 $10 call for $0.85.This trade could have been timed better, but I didn't realize that FMT was in an uptrend until the 28Th when it moved up slightly. The trade still worked well, I just didn't make as much as I could have made if I had waited for a confirmation signal before selling the call. Overall this was a very good learning experience.Click Chart To EnlargeOn the 26Th of march I sold to open the RACK JAN 08 $20 call for $3.10. The JAN 08 $20 call currently trades for $2.60. I have placed a limit order at $2.20 to buy the call to close.Click Chart To Enlarge Read more:Covered
, Management
, Calendar
Day Trading 2007-03-24 04:35:00 Over the last few weeks I have been experimenting with a Day Trading
Strategy for stocks. So far it has been fairly successful. About 66% of the trades have been winners with my down side risk set at $0.05 cents per share and average profits of $0.30 cents per share on winning trades.I use my brokers built in screening tool to find stocks with the highest % change and volume for the day. After selecting the highest ranking stocks based on this criteria, I create one day, one minute, streaming charts for them along with a streaming Stochastic, Oscillator and Volume indicator set.An example chart is below with theoretical entry and exit points based on these indicators in Green letters.Top to bottom: The price chart, Volume Graph, Stochastic and Oscillator.Click Chart To EnlargeI rely primarily on the Stochastic, using the Oscillator and Volume as confirmation indicators. When the Stochastic drops below 25% and then breaks above it I enter a long position. When the Stochastic rises above Read more:Day Trading
Oil Company Price Gouging? 2007-03-24 00:57:00 I found this article in an Email newsletter that I recieve. I think it makes a very good point.******************************************************************The new speaker of the House, Nancy Pelosi, calls oil company profits “obscene.” And at first blush, many would agree. Over the past 12 months, for example, ExxonMobil has made pre-tax profits of $164 billion on sales of $369.5 billion. That’s a lot. But are big profits bad?Hardly. Companies exist to maximize profits. Profits are what keep workers employed. They keep companies innovating, creating new products and services. They keep the economy humming and the country strong. And they allow you and I to invest and secure our financial future. Even the school teacher who plunks some of her retirement account in an S&P 500 Index fund benefits from Exxon’s rising share price – which is a direct result of Exxon’s rising profits. Many will argue that there is nothing wrong with profits, per se. It’s just that Exxon is Read more:Oil Company
DELL Limit order executed @ $3.05 2007-03-23 04:56:00 This morning my limit order on DELL executed at $3.05.Click Chart To EnlargeI also made a small profit day trading ICE during the last 1 1/2 hours of the trading session. A single day one minute chart showing my entry and exit points is below.Click Chart To EnlargeI will be posting more about my day trading strategy in a few days. Read more:Limit
More Technical Jargon 2007-03-22 02:25:00 Here are links to definitions of some of the technical terms I used in my last post.Back Ratio SpreadBasic overview of ratio spreads from Investopedia Here.ShortI was impressed with the Investopedia definition of this one. LongAnother good definition from Investopedia.Stop LossInvestopedia's definition was short enough to paste directly."An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position. Also known as a "stop order" or "stop-market order."Simple, but it gets the point across.Net DebitIn the context mentioned in my previous post, a net debit is the actual out-of-pocket expense to an option buyer and/or seller. The net debit can be reduced by selling one or more short options to finance the transaction. Read more:Technical
Trade Log 03/20/07 2007-03-21 05:39:00 EBAY Stop Loss triggered @ 4.21Click Chart To EnlargeCCU Stop loss triggered @ 2.25Click Chart To EnlargeI am still in DELL with a slight profit.I might have set my Stop Loss orders too low. I don't have enough data to decide though, so I will leave them at 2% for now. I will consider raising the stop loss point to 3% if the next batch of LEAPS gets stopped out as well.I am also exploring 1:2 Back Ratio Spreads for the longer term trends. A 1:2 Back Ratio Spread consists of selling 1 call short at the first strike in the money and buying 2 calls long at the first strike out of the money.When constructed properly a Back Ratio Spread limits the downside transaction risk without limiting the potential upside profit. For all practical reasons the short call simply finances the purchase of the long calls giving an extremely low net debit.I apologize for using so many new technical terms in this post, but I don't have time right now to hunt up definitions and links for them. I will post a Read more:Trade
I Love My New Broker 2007-03-17 23:55:00 Sometimes we get really excited when we experience something new, even if it's fairly normal for most people. My recent switch to a new broker definitely got me excited.I started trading with Firstrade.com and never tried anything else. I thought all brokers took two days to respond to emails, had regular crashes and errors on their platforms, and restricted trading levels for new clients (I was still restricted after two years so I'm not sure what their definition of NEW is).When I mentioned to a friend that I needed to find a new broker because I wanted to use some strategies that Firstrade.com restricted, he advised me to try Thinkorswim.com. I will be forever grateful to him.I have been using Thinkorswim.com for a few months now and they continually amaze me with their commitment to customer service and world class trading platform.I have received responses to every email I have sent them within two hours, with 45 minutes being the average response time. They also have instant c Read more:Broker
FMT Covered Call Management Technique 2007-03-17 03:07:00 This morning I Sold To Open one FMT JUN 07 $10 Call for $1.15. This sale is consistent with the Covered
Calls Management
strategy that I use. I have placed a GTC order to buy back the call at $0.35. This order should give me a 5% return in about 2 weeks and should execute when the stock drops to about $6.15. Click Chart To EnlargeLike my previous RACK LEAPS Trade I used a 25% safety margin in case the stock doesn't cycle completely to support before heading up.If the stock breaks through resistance and starts heading up I will still make money by exploiting the difference between the option and stock price caused by the option delta.
New LEAPS Positions March 15th 07 8:30 am PDT 2007-03-15 16:48:00 This morning at 8:30 am I entered three new LEAPS positions that meet the criteria outlined in my "Seven Rule Theory".CCUBought +100 JAN 08 $35 LEAPS @ 2.30 average fillClick Chart To EnlargeDELLBought +100 JAN 08 $22.50 LEAPS @ 2.65 average fillClick Chart To EnlargeEBAYBought +100 JAN 08 $32.50 LEAPS @ 4.30 average fillClick Chart To EnlargeI have placed OCO orders at 2% downside and 10% upside on these positions. Read more:March
Sold To Close INTC and CSCO LEAPS 2007-03-15 00:57:00 This afternoon I Sold To Close
the last two LEAPS positions that I opened on March 6th. A list of the buy and sell prices and a percentage profit and loss analysis is below. IBM JAN 08 $100.00 LEAPSBuy Price: 4.40Sell Price: 4.90Days Held: 1Percentage profit or loss: 11.3%CSCO JAN 08 $30.00 LEAPSBuy Price: 1.65Sell Price: 1.40Days Held: 9Percentage profit or loss: (17.8%)INTC JAN 08 $25.00 LEAPSBuy Price: 0.52Sell Price: 0.44Days Held: 9Percentage profit or loss: (18.1%)I did not follow my 2% stop loss rule as I originally intended to because I wanted to test the results of a lower stop loss. It is obvious that a 2% stop loss would have saved me a lot of money. This is an excellent example of what happens when rules are broken. I won't make the same mistake again.Despite the fact that I lost a higher percentage on CSCO and INTC, I actually came out with a decent profit because I had twice as much money invested in IBM.My average profit percentage on all th
Irrational Exuberance 2007-03-11 05:47:00 Written in the year 2000, after the technology crash of 1999 but before 09/11/01 and the recession of 2002 that followed, "Irrational
Exuberance" by Robert J. Shiller was a timely, almost prophetic warning of the events to come. Investors who took Robert Shillers advice would have diversified their portfolios away from mutual funds and stock into safer investments such as goverment bonds and T-bills, and would have sustained substantially less losses during the difficult times that followed. They would also have missed out entirely on the recent market gains, an event not predicted by Shiller.Shiller argues that the rise in stock market prices since 1988 cannot be justified by the economic growth the United States has experienced. He exposes the disparity between corporate profits and stock market growth, and reveals similarities between investor psychology in 2000 and investor psychology before the famous crashes of 1929 and 1987. Shiller developed many of the indicatores that he uses
Liquidated my IBM LEAPS 2007-03-06 21:05:00 At 12:05 PM I sold to close my IBM
Jan 08 $100 LEAPS at an average fill of $4.90. My cost basis was $4.40. That is a return of 11.0% in about 6 hours using $44,000.I would normally hold a position like this longer, but if I can make 11.0% and free up $44,000 for other trades in one day I'll do it anytime.My LEAPS positions in CSCO and INTC are up slightly but I will continue to hold them until I make 10% to 15% or lose 2%.
New LEAPS Strategy 2007-03-06 03:57:00 I am testing a new strategy for buying LEAPS based on the Stochastic and MACD.The rules for entering a position are: 1: The fast line must be pointing up or sideways after dropping below the lower support line.2: The slow line must be in the lower 50% of the normal trading range.3: The stock must be trading in the lower 25% of the price channel or below the normal resistance levels.4: The Slow and Fast lines on the MACD must be below the zero line.5: The MACD histogram must be in the red or below the zero line.6: The company behind the stock must be established with at least 500 million in market capitalization.I will add to and refine these rules as I learn from my Paper trades. Here is a list of the positions I entered this morning with charts showing the MACD and Stochastic indicators.Bought 100 IBM $100 LEAPS @ $4.40 Click Chart to EnlargeBought 100 CSCO $30 LEAPS @ $1.65Click Chart to EnlargeBought 100 INTC $25 LEAPS @ $0.52Click Chart to Enlarge Read more:Strategy
RACK LEAPS order executed at 2.40 2007-03-06 03:56:00 This morning my order to buy back the RACK Jan 08 $20 LEAPS @ $2.40 Limit executed, giving me about 70 cents per share profit in six days. Click Chart to EnlargeIt looks like this trade was timed well.The Stochastic is just starting to turn upwards indicating a trend reversal and the stock is almost at the bottom of the price cycle.The MACD looks a little irregular but should continue up.I will sell another Jan 08 or 09 LEAPS as soon as RACK cycles back to the top of the channel, but until then I am looking into some yield enhancing features such as selling a near month call at the bottom of the price cycle.
RACK Update 2007-02-24 05:59:00 The price movement on RACK has been encouraging over the last week. It has moved up for 6 out of the last 7 trading days.Click Chart To EnlargeThe MACD indicates a firmly entrenched uptrend, although low Volume suggests a possible short term sideways move, especially since RACK has not really broken through the short term resistance line. Read more:Update
Covered Call, Fremont General Corp. Symbol FMT 2007-02-24 05:27:00 This afternoon at 12.45 PM I bought 100 shares of FremontGeneral
Corporation(FMT) at an average fill of $12.59 and sold one March 07 $12.50 Call for $1.40. This gives me an uncalled return of 11.10% and a called return of 10.40%.I was fortunate to be able to complete the transaction before the delta effect had fully acted on the call giving me an exceptionally high return. You can view a chart of FMT HereI have added a new label called "Paper Trades" and modified the labels on a few posts. From now on trades made in my paper(or fake) money account will be labeled "Paper Trades" while trades made in my real account will be labeled "Stock Trades".You will notice that I almost exclusively pursue a covered call strategy in my real account, although once I develop a strategy in my test account that can consistently produce higher returns than covered calls I will slowly phase into it with my real account. Read more:Covered
, Symbol
Out of Google 2007-02-21 17:37:00 This morning I liquidated my GOOG Jan 08 480 Calls at an average fill of $59.95.My cost basis was $55.80. This leaves me with a profit of a little more than $4150 dollars over 7 days using $55,800 dollars. In percentage terms thats a 7.40% percent weekly return, or 384.4% percent noncompounded annually. If it is compounded however it becomes 4634% annually if all proceeds are reinvested.Obviously this is an idealistic situation. It is probably not possible to make a 7.4% per week return every week of the year. It would also be impossible to reinvest 100% of the proceeds on a weekly basis. These are encouraging numbers however as they show that it might be possible to achieve my goal of 1000% returns annually with careful management and a lot of revisions to the core stategy.Click Chart To EnlargeI still think GOOG could easily get to $500 within a month and I am not suggesting that anyone sell this stock yet. But since I already made over $4000 on my Calls and am using a test(paper mo Read more:Google
Google at buying levels 2007-02-15 06:53:00 This morning at 7:30 PST I bought 10 Google
$480 Jan 08 calls in my test account, at an average fill of $55.80. When the market stopped trading this afternoon Google had shot up $7.90 and the calls were selling for $56.85.If I sold the calls right now I would realize about $1050 dollars profit. I have decided to hold the calls for awhile longer however, because I feel that Google could go up a lot more in the next few weeks.It has just bounced off the the lower price channel and could easily go to five hundred dollars or more before trending down again.Click chart to EnlargeThe MACD is indicating that GOOG is in the early stages of a reversal. With the upward bounce today I am confident that this is indeed a trend reversal and not just a temporary correction. This should put the stock at about $515 within 2 months.I would highly reccomend buying this stock before it goes higher.I will post the results of this trade as it unfolds. Read more:levels
Covered Call Rackable Systems Inc RACK 2007-02-10 22:28:00 On the first of February I bought 200 shares of RACK at an average fill price of $20.00 and sold 2 FEB $20.00 Calls (Symbol: RQOBD) at $1.25 average fill for a 6.3% called and uncalled return.The stock subsequently dropped about three dollars. This is the first time that a stock has gone down after I bought it, so I am exploring several possible management techniques to bring this trade to a profitable conclusion.By selling the covered call I have lowered my cost basis in the stock by $1.25 to $18.75. The simplest way to resolve this trade would be to continue selling calls on it until I had paid for the stock. Another simple method would be to sell a LEAP and trade in and out until I had collected enough money to pay for the stock. Of course if the stock rose to my original cost at any point I would sell it and keep all the profits I had made from the options.By studying the chart below I have come to the conclusion that there is a high probability of an upward price movement in the s Read more:Covered
, Systems
Google 2007-02-10 06:57:00 All the talk on the stock boards about shorting Google
(Stock Symbol: GOOG) has brought my attention to this internet giant. In general, talk about shorting starts when the stock has taken a tumble. If a stock takes a tumble it usually rallies in the weeks after and gives back all the losses it sustained during the fall. Thus I usually become very bullish on a stock that is being shorted.It is with this in mind that I write about Google to explore the possibilities for the coming weeks. In the weeks ahead it will either rise and stay in the channel or continue to fall and break out to create a new channel at a lower level. As evidenced by the chart below, it is likely that Google will prove true to the channel theory and stay within the red channel lines.Click Chart To EnlargeNote the SMA (Blue line in the top section of the chart) and the Projection Band (Purple lines in the top section of the chart). Google is currently below the SMA and in the lower 25% of the projection band. This
The Successful Investor 2007-05-01 00:22:00 In "The Successful Investor
" William J. O'Neil draws on over 45 years of experience in the markets, to outline a winning investment strategy employing both technical and fundamental analysis. Much of the material is fairly basic and aimed at long term "buy and hold" investors, but I found plenty of new information to keep me busy for several days studying chart patterns in my spare time.Williams investing system is heavily trend based. He recommends liquidating almost all stocks during a bear market and only entering new positions in a bull market. Bear and bull markets are identified using a system of numbers, percentages and volume indications, which is far too complicated to explain here.New investments are found using a proprietary screener called CAN SLIM which sorts through all available stocks and ranks them according to the quality of their fundamental data.CAN SLIM stands for:C = Current Quarterly EarningsA = Annual Earnings IncreasesN = New Products, New Management, New High
New management positions for RACK and FMT 2007-05-19 05:12:00 I entered new covered call management positions
for RACK and FMT this week.Neither of the stocks are at the absolute best point in their cycle for call sales, but I should be able to squeeze a small profit out of both.RACK 05-09-07Sold To Open, 2 RACK Jan 08 $15 Calls for $1.35.Click Chart To View Full SizeFMT 05-14-07Sold To Open, 1 FMT Sep O7 $7.50 Call for $1.35.Click Chart To View Full SizeNo that's not a typo. I got 1.35 for the RACK and the FMT calls.I placed limit orders at $0.35 for the RACK calls and $1.00 for the FMT call.I placed the limit order on the FMT calls a little higher than usual because FMT moves in a very shallow cycle. I will monitor both positions and change the limit prices if appropriate.
LEAP Trades and Time Crunches 2007-06-03 21:28:00 Between running several small companies, doing the book keeping for another not so small company, working part time in sales and construction and trading forex, options and stock, I have had little time for writing this month.Several important events have occurred since my last post. First, I was able to get out of my underpreforming position in FMT. On May 22nd FMT opened up over $3.00 and drifted down slightly through the rest of the day to close in the green by over 20%. This allowed me to leg out of my long LEAP and sell the stock at a slight overall loss. Normally I would have held this position until I could realize a profit, but because of the lack of LEAP strikes to choose from I was forced to sell a nearer month LEAP than normal. This could have created a position in which I would be in danger of being called out for a loss, if I had continued to hold the LEAP.I also bought back my LEAP on RACK for a $0.10 gain, and sold another LEAP at the next high point for $1.30. I placed
Technical Terms 2007-02-28 23:55:00 I seem to be using a lot of technical terms on this blog. I had originally intended to use plain English for the benefit of people who are unfamiliar with technical investing jargon. But it seems that technical stock analysis and technical stock jargon are inseparable.I thought it might be helpful if I defined some of the more obscure terms that I occasionally use. Whenever possible I have linked to helpful articles explaining the terms, as it would be impossible for me to fully explain all of the terms in one post.In the rare cases where I was unable to find a satisfactory article or definition for a term elsewhere, I have attempted to define the term myself. These definitions of mine are by no means authoritative, and I do not pretend to be an expert on technical analysis or the usage of various words related to it. They will give insight into the way I understand and use the term however.Technical
AnalysisHere is a good overview of technical analysis in general.MACDExcellent Wikiped Read more:Terms
RACK Trade LEAP Strategy 2007-02-27 11:05:00 With the pullback of RACK from the short term resistance line I decided to sell two JAN 08 $20.00 LEAPS for $3.10. This will allow me to profit from a drop in the stock price. I placed a GTC order at $2.40 to buy back the LEAPS. According to the current Delta this order should execute when the stock price drops to $16.26.Click Chart To EnlargeMy order to buy back the LEAPS is represented by the green line in the chart above. You will notice that I placed the order at about 75% of the current price cycle. This gives me a safety net in case the stock doesn't drop completely to support before cycling back up. It also limits my profit somewhat, but experience has shown that 75% is the most profitable price point for this type of order.Management techniques like these are what makes Covered Calls such good investments in up, down and sideways markets.I will post again when this order executes. Read more:Trade
, Strategy
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