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P. 66
Your
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o Personal Trading Coach
Nr. 11, November 2013 | www.tradersonline-mag.com
The Halloween
Effect
Good Times ahead?
New Evidence P. 22
Weekly Options
Trading
P. 6
Alexander Elder
Technical
Analysis
Lawrence
McMillan
Options
Toni Turner
Stocks
Harry Boxer
Technical
Jeffrey
Kennedy
Futures
Toni Hansen
Strategies
Linda Raschke
Strategies
Tom Sosnoff
Options
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EDITORIAL
www.tradersonline-mag.com 11.2013
Lothar Albert
Editor-in-chief and publisher
Good Trading
TABLE OF CONTENTS
www.tradersonline-mag.com 11.2013
TABLE OF CONTENTS
November 2013
68
COVERSTORY
22
24
News
Find the latest notes and
announcements from around the world
of trading in our News section.
INSIGHTS
TOOLS
16
18
TRADERS Talk
We talk with Carol Harmer about her typical trading day and
how it is to be a female trader in a male dominated world.
Trading Seasonalitys
Thomas Bopp presents the two most promising candidates for
Black Friday after Thanksgiving.
30 New Products
The Latest Trading Technology
32 Software Review
TradeShark
36 Book Review
20 The Unhappy Marriage of the Market and the Government
Clem Chambers takes a look at the relationship between
governments and the markets.
The Playbook
by Mike Bellaore
38 App Review
22 The Halloween Effect
Thomas Hupp discusses some recent studies.
StockTouch
TABLE OF CONTENTS
PEOPLE
Publisher
Lothar Albert
Subscription Service
www.traders-mag.com;
www.tradersonline-mag.com;
abo@traders-mag.com; Tel: +49 (0) 931 45226-15
Address of Editorial and Advertising Department
Barbarastrasse 31a, 97074 Wuerzburg
STRATEGIES
42
BASICS
56 Trading Journal
Valentin Rossiwall shows two trades in the Dow Jones.
Editor-in-Chief
Lothar Albert
Editors
Katharina Boetsch, Prof. Dr. Guenther
Dahlmann-Resing, Corinne Endrich, Marko
Graenitz, Lena Hirnickel, Sandra Kahle,
Rodman Moore, Stefan Rauch, Katja Reinhardt,
Karin Seidl, Tina Wagemann, Christine
Weissenberger, Nadine Wiget
Articles
Thomas Bopp, Simon Campbell, Clem Chambers,
Marko Graenitz, Thomas Hupp, Jens Klatt,
Azeez Mustapha, David Pieper, Jens Rabe,
Valentin Rossiwall
Pictures
www.fotolia.com
Price data
www.captimizer.de; www.esignal.com;
www.metaquotes.net; www.metastock.com;
www.tradesignalonline.com; www.tradestation.com
ISSN
1612-9415
Disclosure
The information in TRADERS is intended
for educational purposes only. It is not
meant to recommend, promote or in any
way imply the effectiveness of any trading
system, strategy or approach. Traders are
advised to do their own research and testing
to determine the validity of a trading idea.
Trading and investing carry a high level of
risk. Past performance does not guarantee
future results.
2013 TRADERS media GmbH, Barbarastr. 31a,
D-97074 Wuerzburg, Germany
COVERSTORY
www.tradersonline-mag.com 11.2013
that are completed one right after the other. There are
180 / 42), which was rst held on Hawaii in 1978. To this day,
eSignal Futures
Trader allows
you access to
more than 40
FCMs
Seasonal Study
identifies cyclical
patterns in the
commodity
futures markets
Market Profile
organizes
market activity
in a distribution
curve (histogram)
Alert Ticker
features an
adjustable,
all-in-one display,
so you'll know
when to make
your trades
For nearly 30 years, eSignal has provided serious traders with the tools they need, in a single, easy-to-use platform
eSignal delivers the industrys best quality
data at lightning-fast speeds even on your
smart phone or mobile device.
TODD HARRISON
CEO and Founder, Minyanville Media, Inc.
COVERSTORY
www.tradersonline-mag.com 11.2013
finishing
lengths
you want to achieve. Be not (!) realistic here, but let your
themselves everything.
Nature or Nurture?
when trading a very direct signal to tell you how much your
traders whose pulse rates are too high may easily deduce that
of emotion-based errors.
COVERSTORY
five
million?
Ten?
Or
more
This chart is included in the strategy article by Achim Mautz published in TRADERS 09/2012 and shows
an optimal intraday setup in Amarin (AMRN). The chart clearly shows the necessary parameters for a base
and break trade: 1) Strong initial increase and rising EMA(9), 2) formation of a base, 3) prices compressing
between EMA and resistance line, 4) breakout.
Source: www.tc2000.com
If you have a specific goal and really (!) believe that you
are going to achieve it, thats already half the battle. This
Triathlon
Goal
1st Year
2nd Year
3rd Year
The table shows an example of what a basic 3-year process can look like both for becoming a professional trader as well as nishing an Ironman triathlon. Within each
year further processes on a smaller scale are to be established in detail. It is best to do that with the help of an experienced coach.
COVERSTORY
www.tradersonline-mag.com 11.2013
120
600
100
500
80
400
60
300
20
2012
KW 30
KW 32
KW 34
KW 36
KW 38
KW 40
KW 42
KW 44
KW 46
KW 48
KW 50
KW 52
2013
KW 4
KW 6
KW 8
KW 10
KW 12
KW 14
KW 16
KW 18
KW 20
KW 22
KW 24
KW 26
100
2012
KW 30
KW 32
KW 34
KW 36
KW 38
KW 40
KW 42
KW 44
KW 46
KW 48
KW 50
KW 52
2013
KW 4
KW 6
KW 8
KW 10
KW 12
KW 14
KW 16
KW 18
KW 20
KW 22
KW 24
KW 26
40
200
The charts show typical examples of two training records the author kept from his Ironman preparation. You can see the weekly kilometres he completed by bike (left),
the kilometres he ran every week (right), and a 5-week moving average for each. Ideas for future improvements can be derived from this data, for example, more evenly
long training units or a longer winter break. Its much the same in trading: Those who record their stats week after week may gain valuable information from them that
help improve their trading.
Source: TRADERS graphic
seemingly not the case but should be. After all, even
at
extreme
market
exaggerations
(Larry
Connors
to be constantly profitable.
Do Not Overexaggerate
10
COVERSTORY
Stocks like Tesla are the top shares with massive trends that can provide traders with large portions of their
annual performance. However, it is psychologically difcult to hold a winning position for so long just as it
is difcult to increase the pace and keep it up in the nal sprint of a competitive race.
Source: www.tradesignalonline.com
If you can only trade well after you have completed some
until it does not. And then you will be glad to still be alive
still exists.
training.
one way that you learn on the stock market: from your
swim, cycle, and run at your own pace. After all, its
stop, for example, you can learn a great deal from this
11
COVERSTORY
www.tradersonline-mag.com 11.2013
and where you get out of the water and what the fastest
Keep a Record
cycling his way back to the top of the field at high speed,
the time your exit is made? What are your best setups?
the most benefits from them while still keeping the risks
which faster times and where did the time invested lead to
12
COVERSTORY
You can never be sure of being successful until you have crossed the nish line.
worst case, you will run out of steam in the final sprint
just recognise the losing trade and get out of the race.
curve that you have stayed the course just like the
the contrary, and hope that their body will be able to cope
until the very end, will be risking their own health and
potential.
flat tyre and lose the race. Or during the running event
before the finish line forcing you to limp on and let your
But you can never be sure of any success until you have
13
COVERSTORY
www.tradersonline-mag.com 11.2013
A Traders Retirement
earlier. You will not really have failed until you finally give
Join a Club
have been in the past, its only when you have finally
alive), that you have crossed the finish line for good.
Never Give Up
the things that you can use best for your own purposes.
until you have reached your goal (and then set yourself a
new one). Along the way, you will encounter all sorts of
keep learning from his mistakes, and grit his teeth when
Depending on how bad your injury is, you will need to take
to fret about your goal. But you can also see this as an
identity.
the Ironman on Hawaii and being the big star in the scene
Marko Graenitz
M
M
Marko
Graenitz is a freelance author who writes
aabout the stock market and trading. He conducts
iinterviews with traders and writes professional
aarticles on capital market anomalies and trading
sstrategies.
marko.graenitz@traders-mag.com
14
www.tradersonline-mag.com 11.2013
Carol Harmer
www.charmercharts.com
TRADERS Talk
Patience Is a Virtue
Carol Harmer has over 30 years experience of analysis and trading the worlds markets and is undoubtedly one of the most respected
technical analysts in the world today. Her career started in the early eighties, trading futures on the oor at LIFFE where she quickly
discovered Technical Analysis as a way to maximise prots. She was one of the rst traders on LIFFE to discover and study this form of
analysis and quickly became widely recognised as an expert in its use as well as highly protable. This soon led to a position as Senior
Technical Analyst for Midland Bank. She was later head hunted for the role of Manager of Technical Analysis for Nomura Bank where
she was responsible for establishing a European technical department. She later became Head of Technical Trading at Credit Suisse
where she also continued to trade for the bank. Carol is also one of the rst TAs from a bank to join the STA (The Society of Technical
Analysts) in the mid 80s and has trained and worked with some of the UKs leading technical analysts. In 1996 Carol returned to LIFFE
and launched Charmer Charts to train independent traders in technical analysis, becoming the rst person to provide daily forecasts
for established traders on the trading oor. She became extremely well known and highly respected and enjoyed advising traders
throughout the day. She also made regular appearances on Bloomberg, CNBC and Reuters nancial TV and she continues to provide
her valued, expert opinion on the direction of nancial markets on CNBC today.
stay away from all the headless chicken noise you have a
about your trading. To begin with can you tell me what your
preferred products and markets for trading are?
16
game plan, then I look at the daily charts, and see where
they correlate.
achieve.
Harmer: You always try and get a 3:1 ratio. This way you
loss unless I see it traded there twice. The rst time will be
the market going back in your favour, so if you do nothing
rst hit. Then it does it again. At least then you know you
ahead.
22nd November, Carol will offer a full day live workshop near
www.marbellaschooloftrading.com
17
INSIGHTS
www.tradersonline-mag.com 11.2013
Trading Seasonalitys
Part 4: Thanksgiving Seasonality Good for Nasdaq 100 and Gold
In the US, there is an important holiday when all the family members sit around the table and feast.
Thats Thanksgiving Day. A seasonality that has been known for decades has often ensured that on the
following Friday the so-called Black Friday traders had enough money in their pockets to do their rst
Christmas shopping of the season. The two most promising candidates will be presented in this article.
on
the
Friday
of
the
is to be traded without any stoploss orders since there are exit days
on which to close your position.
18
INSIGHTS
Gold will reach the top of the green triangle consolidation at exactly the time of entry. We assume that this
will have been preceded by a breakout. The entry should be secured with a $40 stop.
Source: www.captimizer.de
Prot factor in %
Hit rate in %
Average Prot/Loss in %
%f Kelly
per cent. Last year the biggest loss suffered was -10.18
Nasdaq 100
Gold
6.25
22.14
70
80
2.68
5.54
58.81
76.39
0.6254
2.2143
Prot expectation in %
1.87
2.81
Geometric Mean in %
1.84
2.76
15.35
25.62
1.87
2.81
48.55
72.98
Average % prot
3.18
3.67
Average % loss
-1.18
-0.66
0.32
0.37
-0.12
-0.07
unexpectedly.
Largest % prot
5.39
10.31
Largest % loss
-3.08
-0.74
Number of wins
Number of losses
Video Update
MEGAN Ratio
Average % result
Average % result per year
For a holding period of ten days you have an unusually high prot factor. The
average prot is three times as high as the average loss.
Source: www.captimizer.de
19
INSIGHTS
www.tradersonline-mag.com 11.2013
The relationship between governments and the markets is tense and can wipe billions from the market. When rumours
that missiles had been red at Syria hit the market the FTSE-100 plunged. Private investment guru Clem Chambers, CEO of
ADVFN.com and author of ADVFN Guide: A Beginners Guide to Value Investing, takes a look at recent events and relates
them to tested market theory.
Clem Chambers
C
C Chambers is CEO of ADVFN (www.advfn.com)
Clem
aand author of several books such as 101 Ways to
PPick Stock Market Winners and A Beginners Guide
tto Value Investing.
the present.
However, credit growth causes a cycle of boom and
bust especially when the output of the application of
credit is tapped off into the non-wealth creating public
sector. One of the problems with growing the public
sector is that as it gets bigger it gets harder to control. At
some point it gets out of control altogether.
20
INSIGHTS
countries whose total GDP was less than 0.3 per cent of
what killed the Soviet bloc, and it is now one of the key
government.
Just a Coincidence?
political course set upon, you can trade it for a long time
out in the cold waiting for the changes needed to help the
market grow.
intervention.
Conclusion
21
INSIGHTS
www.tradersonline-mag.com 11.2013
The
Halloween
Effect
Good Times ahead? New Evidence
The Halloween effect states that stocks should be purchased at the end of October and sold at the beginning of May. For all
those who have their doubts about this market anomaly, Prof Jacobsen of Massey University has published a study proving
beyond any doubt that such an anomaly does exist. This article gives a short overview of the results as well as of further
improving approaches.
significant.
up. To prove this, Jacobsen examined both 300-and 60year periods as well as rolling 2.5 and 10-year periods
to find out that in 82 per cent of all cases, the Halloween
Sources
Puzzle
TThomas Hupp
T
Thomas
Hupp, along with Michael Uhl, is the
iinitiator of the MSF 4D asset oscillator fund of
ffunds and an adjunct professor of Asset Manaagement at Loerrach University of Cooperative
EEducation in Germany. Since 1996, he has been
sstudying investment strategies, focusing
ssince 2008 on seasonal effects of inef cient
sstock markets.
www.asset-oszillator.de
indicators to find out the best times for entry and exit.
Here the results generated by technical analysis were the
more successful ones.
To determine how fund selection and technical
analysis operate together, we have combined both results
in a simulation.
22
INSIGHTS
different
funds
and
Halloween markets that generated more than ve per cent excess return. The bigger the blue circle, the higher
the excess return compared to the Buy-and-Hold strategy.
Source: Jacobsen 2012
chart
Conclusion
10%
8%
7%
6%
4%
2.38%
1%
3.23%
3%
5.43%
5%
2%
9.25%
9%
0%
0%
0.33%
2%
4%
6%
8%
10%
12%
Downside Risk
Risk-reward ratios of different strategies. The points stand for the following strategies: grey = Buy-and-Hold
MSCI World in euro, yellow = mixed funds (67% MSCI World in euro, 33% REXP), green = Halloween strategy
MSCI World in euro and REXP with xed changeover times, orange = Buy-and-Hold REXP, blue = 4D AssetOscillator strategy (Halloween strategy MSCI World in euro and REXP with variable changeover times).
Source: Teletrader, own calculations
23
INSIGHTS NEWS
www.tradersonline-mag.com 11.2013
POSSIBILITIES OF US DOWNGRADE
The latest scal showdown in Washington could spark
last debt ceiling crisis, in 2011, when it cut the United States
the housing market ahead of the crash. Five years later, the
making. But two years later, that downgrade has had little
since
the
second
24
Source: www.thomsonreuters.com
INSIGHTS NEWS
www.tradersonline-mag.com 11.2013
in the top 10 are IBM (No. 4), Microsoft (No. 5), Samsung
relative
to
forex
effects
damage.
that
Over
threaten
recent
BLACKBERRY POSTS
RECORD DROP IN REVENUE
notes.
last year.
Source: www.oney.aol.co.uk
26
Source:owww.business.time.com
INSIGHTS NEWS
visit:
middle-east-retail-banking-2014
www.globalleadingconferences.com/conferences/
cent. The stock was halted for a while after several outlets
27
INSIGHTS NEWS
www.tradersonline-mag.com 11.2013
TWITTER DISCLOSED
FINANCIAL PRIVACY FOR IPO
Twitter has unsealed the documents for its planned initial
Source: www.timesondia.indiatimes.com
rise in July.
Source: www.dailynance.com
28
TOOLS
NEW PRODUCTS
www.tradersonline-mag.com 11.2013
WEBREVIEW
SOFTWAREREVIEW
New Products
BOOKREVIEW
APPVIEW
visit www.key-futures.com
www.ablesys.com
AbleSys AbleTrend
30
TOOLS
find on www.stricknet.com
FXstreet.com announced the launch of FXBeat, a news
Trading Diary is a trading journal app for the iPad from
news,
trading,
analytics
and
integrated
electronic
Stricknet
Full
real-time
market
coverage
of
all
major
31
TOOLS
NEW PRODUCTS
www.tradersonline-mag.com 11.2013
WEBREVIEW
SOFTWAREREVIEW
BOOKREVIEW
APPVIEW
TradeShark
Accurate Short-Term Market Forecasts Based on Global Intermarket Dynamics
Most individual traders nd it difcult to compete with nancial institutions, commercials and professional traders on the
basis of fundamentals so they turn to charts and technical analysis and software to analyse the one element price that
incorporates everything known about a market. TradeShark goes a step further by analysing the underlying relationships
among markets and using this data to produce predictive indicators that reveal accurate short-term market forecasts without
requiring any programming or other complex steps.
Installation
Overview
space
Intuitively,
traders
know
that
todays
globally
Data Provider
easy as possible.
32
TOOLS
TradeShark
really
shines.
patented,
Using the trademarked IntelliScan feature, TradeShark will lter through thousands of markets and stocks
within seconds to pinpoint the best trading opportunities for the trader. The lters are customisable, and
numerous lters can be used to rene the search. Using the suite of Predictive Indicators available in
TradeShark, you will be alerted days ahead of possible price turns.
Source: www.TradeShark.com
indicators
has
been
Predictive Indicators
markets.
Through
approach,
its
intermarket
TradeShark
creates
under
predictive
analysis.
capabilities
These
Utilising Articial Intelligence to analyse the relationships other markets have on the market being traded,
TradeSharks predicts the next days high and next days low giving you the days trading range. This
information is used by day traders as well as swing traders for setting stops and picking the best possible
entry and exit points.
Source: www.TradeShark.com
provide
33
TOOLS
www.tradersonline-mag.com 11.2013
Stocks
Apple
86.1%
Amazon
81.8%
Bank of America
80.5%
Educational Partners
Celgene
80.8%
Ford Motor
83.2%
81.1%
Netix
80.9%
Priceline
83.5%
Futures
with ease.
82.0%
84.3%
Euro/U.S. dollar
81.0%
Soybeans
81.9%
Forex
84.8%
81.9%
A mix of stocks, futures and forex markets were selected and tested from Jan 1,
2013 through mid-August 2013. The table shows the accuracy rates.
Quelle: www.TradeShark.com
Summary
Years ago drivers looking under the hood of their cars
could identify the fan belt, spark plugs, dip stick, and
reveal changes in market strength, predict the next days
hood wont help most people much. Now, all you have
accuracy.
34
LONDON
810 NOVEMBER 2013
JOHN BOLLINGERU/
9--
RUSS MOULDU-, -
www.WorldMoneyShowLondon.co.uk
or call 00 800 1414 8888 Today!
RALPH ACAMPORAU/
9--
JOHN BURFORDU", 8
DAVID FULLERU, /-
a Production of
TOOLS
NEW PRODUCTS
www.tradersonline-mag.com 11.2013
WEBREVIEW
SOFTWAREREVIEW
BOOKREVIEW
APPVIEW
The Playbook
An Inside Look at How to Think Like a Professional Trader
by Mike Bellaore
will help you get there. The only book of its kind,
expert critiques.
One
trade
at
time,
youll
discover
how
hidden pitfalls.
36
TOOLS
Bibliography
Bi
ibl
blio
iogr
io
g ap
gr
aphhy
hy
stem.
Trade bigger, with a proprietary trading risk system.
Title:
The Playbook
ons.
Develop a methodology to make trading decisions.
Subtitle:
ading
Understand what it takes to be a pro trader by reading
Professional Trader
Author:
Mike Bellaore
Pages:
448, Hardcover
made in real-time.
Price:
$ 47.99
ISBN:
978-0132937641
to succeed.
Release:
Publisher: FT Press
37
TOOLS
NEW PRODUCTS
www.tradersonline-mag.com 11.2013
WEBREVIEW
StockTouch
SOFTWAREREVIEW
BOOKREVIEW
APPVIEW
Heatmaps
The display of various market information as heatmap is gaining more and more popularity no wonder, because traders
receive the most important market information visually. We tested the app StockTouch for our readers. The following article
shows how the tool works in practice and which functions are offered.
Range of Functions
ranges from one day to five years and therefore the app is
investor.
38
TOOLS
market capitalisation
trading volume
Company-related news
The
information
is
updated
The heatmap shows the price development of the most important US stocks sorted by sectors. With one click
on a sector or on a stock the user receives additional information.
Source: www.stocktouch.com
Interesting Information
Perfectly Processed
We want to show you the additional
information and possibilities of the
app in Figure 3: You see the trading
activity on a weekly basis for the
100 biggest ETFs. The strength of a
display with a heatmap is obvious
the user gets an immediate overview
of the ETFs that have a trading volume
above or below average and he can
then include this information in his
analysis and trading ideas. Another
option of the app is the relative
The user gets a good total overview by selecting a stock or an ETF, that offers key gures, price development
and relevant news.
Source: www.stocktouch.com
39
TOOLS
www.tradersonline-mag.com 11.2013
portfolio-members
is
Individual Selections
All users who want to adapt the
selection
criteria
interesting
have
some
possibilities
with
Heatmap
different
can
stocks
display
sorted
by
largest
market
capitalisation
favourites
are
graphically
40
STRATEGIES
www.tradersonline-mag.com 11.2013
Weekly Options
A New Field for Active Traders
Part 2: Covered Call Writing
In the rst part of this two-part series of articles (TRADERS 10/2013), the
author had presented the main features of the increasingly popular Weekly
Options, explaining the basics as well as their pros and cons. In the second part
he will now be turning to a specic strategy that can be implemented by using
weekly options. It is one of the most widely used strategy implemented with
options: classic covered call writing. This is a combination of the purchase of
stocks and the simultaneous sale of call options.
42
STRATEGIES
case the trader, who is both the owner of the shares and
perusal.
many possibilities.
Basics
The buyer of a call option has the right but not the obligation
He can exercise this right (but does not have to) during the
simple example:
JJens Rabe
J
Jens
Rabe received his market training in
FFrankfurt and Chicago and had the opportunity
tto work, amongst other places, on the trading
oor of the CBOT. He is the author of the
(G
(German-language) book, Option Strategies for
tthe Practical Trader How to Secure a Steady
IIncome on the Stock Market.
www.optionsstrategien.com
43
STRATEGIES
www.tradersonline-mag.com 11.2013
Options
availableweeklys.aspx).
Exchange:
www.cboe.com/micro/weeklys/
investment is $15,497.
the shares to the buyer of the call option at the agreedupon price.
Purchase Price:
$15,497
perspective.
Premium Income:
$72.50
156
Scenario B:
S&P Rises Above 1560 (SPY 156)
The chart shows the development of the ETF on the S&P 500 (SPY) before the opening of the trade.
Source: www.tradesignalonline.com
44
STRATEGIES
can say that the sale of covered call options provides the
dream of.
in the S&P 500. The trader will not suffer any loss up
options or not; after all, even without the sale of the latter
Preview
COVERSTORY
PEOPLE
Markus Heitkoetter
secure their position that might drive crazy moves. In our cover
STRATEGIES
www.tradersonline-mag.com 11.2013
Increased Flexibility
Scenario A:
Weekly Option with a Maturity of Ten Days, Strike 156
day of maturity.
day of maturity.
Conclusion
Covered-call strategies with weekly options offer traders
a significant increase in performance compared to
Strategy Snapshot
Strategy name:
Strategy type:
Trend-following, systematic
Time horizon:
Daily chart
Setup:
Entry:
Stop-loss:
Take prot:
Exit:
Expected return:
46
STRATEGIES
www.tradersonline-mag.com 11.2013
Everywhere in daily life, we encounter the scholarly work of the greatest mathematician of the
Middle Ages, Leonardo of Pisa whether we are conscious of it or not. So-called Fibonacci
Ratios may also provide a valuable service in the technical analysis of nancial markets when
it comes to determining entry signals and price targets. An effective tool is a simple trading
approach based on a combination of retracements and projections.
tools can be used both on the price and on the time level.
David Pieper
D
D
David
Pieper is a CIIA and has been interested
iin stock markets since the end of the Nineties.
H
He concentrates on trading with CFDs and is a
ffreelance author.
david.pieper@traders-mag.com
48
STRATEGIES
The Setup
49
STRATEGIES
www.tradersonline-mag.com 11.2013
Target 2
(161.8%)
correction,
the
moment
of
the
Target 1
(127.2%)
hereby
identifying
the
potential
Entry A
(38.2%)
respective
Fibonacci
retracements
Entry B
(61.8%)
Stop
stop
should
be
placed
Entry into a correction is identied by using Fibonacci retracements. To determine the price targets the
original movement is projected upwards. RRR = Risk-Reward Ratio.
Source: TRADERS graphic
Concrete Examples
The example in Figure 2 is designed
to show specifically how the trading
strategy is used in practice. It is a
5-minute chart of the S&P 500 for the
period of 25th to 27th March 2013. On
25th March, there was a dynamic rise
of nearly ten points between 6.15 pm
and 7 pm.
In the S&P 500, there was a dynamic upward momentum on 25th March. The following correction seemed
an excellent choice for a long entry at the 61.8% Fibonacci retracement (Point 1). The stop was placed just
below the low of the original impulse movement. The projection targets (Points 2 and 3) were reached on the
following day so that a high risk-reward ratio of 2.9 and 3.8 respectively was achieved.
Source: www.tradesignalonline.com
50
STRATEGIES
Strategy Snapshot
Strategy type:
Swing Trading
Time horizon:
Setup:
Entry:
Stop-loss:
Take Prot:
Exit:
Prot Target
Conclusion
The procedure for identifying entry
and price target levels described
above is a simple yet effective tool
that can be applied to both larger
and smaller time frames. Those of
In the Apple stock, the massive downward gap between late January and early February 2013 was followed
by a short-term bottom, which was perfect for a long entry at the 61.8% Fibonacci retracement. Interestingly,
the second price target (161.8% projection) roughly coincided with the gap resistance of January so that an
exit near the high was possible.
Source: www.tradesignalonline.com
51
STRATEGIES
www.tradersonline-mag.com 11.2013
In the currency trading world, you need to speculate on one currency having more stamina than the other one this
is what will bring nice rewards as it enables you to follow the direction of the dominant biases and primary trend
conrmation patterns. Signicantly trending markets can be tumultuous at times, to the extent that speculators without
clearly-dened trading plans can be overwhelmed. Those with clearly-dened plans usually thrive without having to push
the envelope. Forex trading is all about matching weak currencies against strong currencies. Anyone who can do that
with satisfactory accuracy will enjoy occasional windfalls, while controlling risk effectively. This article describes one way
of achieving this goal with a simple trading approach.
Azeez Mustapha
A
A
Azeez
Mustapha is an ofcial analyst at Instaforex
CCompanies Group, a blogger at Advfn.com, and
a freelance author for trading magazines. He is
w
working as a trading signals provider at some
w
websites. He is a senior analyst at Paxforex.com.
H
His articles are also available on other websites like
w
www.ituglobalforex.blogspot.com.
azeez.mustafa@analytics.instaforex.com
52
STRATEGIES
and closing above it. Around this time, you would likely
methodologies.
sell the EUR against the JPY and not to buy it against the
mentioned here).
Strategy Snapshot
Strategy name:
Currencies Matcher
Strategy type:
Swing trading
Suitability:
Time horizon:
4-hour charts
Indicator:
SMA period 50
Setup:
Stop:
Target:
Position sizing:
Yen becomes seriously strong, you will see all the JPY
Risk-to-reward ratio:
1:2
0.75%
Expected gain:
1.5%
or the CHF is strong in its own right or not: the JPY pairs
Break-even:
Trailing stop:
Trade duration:
15 trading days
Exit rule:
7 trades at a time
53
STRATEGIES
www.tradersonline-mag.com 11.2013
in the first place. This fact is valid for Big Picture and
weakness in the Yen. On that day, all the JPY pairs crossed
Trade Examples
was exited.
is
used.
In
January
54
STRATEGIES
Note
significantly
2013.
upwards
throughout
January
group may not give the signals on the same day. In the
USD. Even the GBP/CHF would have its stop hit during a
Instrument 1: GBP/USD
Order: Sell
manually.
When the Cable is very week, you would hardly see other GBP pairs going upwards, except the EUR/GBP. So
the GBP/AUD went downwards and hit its target within eight trading days.
Source: www.metaquotes.net
55
BASICS
www.tradersonline-mag.com 11.2013
4.
1.
2.
3.
56
in the markets.
BASICS
the second trade. Why? The entry was not the major
and then you had to define the right stop-loss and the
a first-class setup.
trade.
The chart shows the relevant points of the trading day: the non-farm-payrolls at 2:30 pm (A), the short setup
(B), the prot-taking of part of the position (C), the acceleration after the statement of Putin (D), the closing of
the short trade with decreasing volume (E) and the long setup for the expected short squeeze (F).
Source: www.tradesignalonline.com
57
BASICS
www.tradersonline-mag.com 11.2013
In this series Jens Klatt introduces a multilevel process of developing a risk- and
money-management-plan. The rst part (TRADERS 10/2013) discussed the meaning
of money-management. Now in the second part we want to show the pitfalls and
how to avoid them as well as the contents of a good risk and money management.
JJens Klatt
info@fxcm.de, www.dailyfx.de
the main reasons that new traders turn to the forex market.
But many traders do not realise one thing: In trading they
have to deal with the real risk of losing money.
New traders can be blinded by greed. The negative
aspect here is not greed per se, but what it provokes in
58
BASICS
Figure 1 shows the daily chart of the GBP/JPY starting with the highs of 2007. The British pound lost about
40 per cent until summer 2013. A counter movement of about 67 per cent would be necessary to make this
movement up.
Source: www.tradesignalonline.com
two EUR loss for every Euro profit. This is the result of the
Most of the time the chances that the price will really
confirms
common
mistake
this.
The
among
most
forex-
You can see the average prots in some common currency pairs in blue and the average losses in red. The
graphic shows that traders accepted about two Euros loss for every Euro prot.
Source: DailyFX-Research
59
BASICS
www.tradersonline-mag.com 11.2013
the rule to earn at least two times the risk with a winning
trade and stick to it. That means that your profit target
pips.
lose money.
You should realise that even though you can use high
60
60
BASICS
www.tradersonline-mag.com 11.2013
Every trader knows about this: the market is quiet and uneventful and there are no extreme
movements. And only moments later the markets seem to go crazy. Often the reason is
economic data mainly from the USA. Today we want to introduce the durable-goods-report,
which is published once a month and provides data about investment activity.
manufacturing sector.
62
BASICS
new orders
shipments
unfilled orders
inventories
capital goods
revisions
The report of durable goods offers information about the activities of the industries. The durable goods new
orders are especially important for market participants. In addition to the total key gure an adjusted gure is
published that excludes munitions and transport goods.
Source: www.census.gov/manufacturing
Many
future
companies
production
plan
based
their
on
production.
63
BASICS
www.tradersonline-mag.com 11.2013
activity.
If
there
are
Example
Lets take a look at the development
of
the
currency
The publication of the durable-goods-report causes higher volatility, especially if there is a big difference from
the consensus. On 24th May the new orders were 3.3 per cent higher than expected. The market reaction on
the DAX was negative, because good economic gures increase the fear of a more restrictive monetary policy
of the Fed.
Source: www.tradesignalonline.com
stock
market
market
based
and
the
on
the
data, the higher the probability that the Fed will reduce
its influence.
Conclusion
Info
Indicator:
Durable goods
Organisation:
Census Bureau
Period:
Time:
2:30 pm CET
Market relevance:
High
Publication dates:
64
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Private
Mentorship
Indicators
Live
DVDs
Trading Room
Customer
Survey
81% rated
"Excellent"
Winner of London
Investor Show
Award 2012
PEOPLE
www.tradersonline-mag.com 11.2013
Hometown: Charlotte, NC
Interests: Trading, Music
Trading Style: Trend Following
Website: www.jonboorman.com
In this series we are asking Pro Traders about their psychological processes. Delving a little into how it feels to them when trading.
The good and the bad. How this has changed over time and what preparation they do mentally for performing as a trader. One of the
key features for us was that we wanted traders with experience who have been through the mill over the years and of course, we
appreciate those who were kind enough to talk to us so candidly. We hope this gives developing traders more to learn from. Each
interview in this series was conducted by Richard Chignell who is himself a trader. Please visit his blog at http://embracethetrend.com.
system.
anything, and for some people thats the hard bit. The
66
PEOPLE
have that shape our beliefs. What really drove that point
follower, knowing that I will have a low strike rate has all but
to treat them all the same with little emotion. Your only job
accept that there will be more losers than winners, and I can
never know what each trade brings, so after a while you learn
Money Game If you dont know who you are, the stock
resource in the hope that traders who have been in the market
on Twitter: @jboorman
Jon Boorman
Jon Boorman, CMT, is a market technician and trader with
over 25 years experience in global equity, forex, and futures
markets. He has formerly held roles as a sales trader to
hedge funds and institutions, prop trader, research analyst,
and buy-side head of desk. Jon currently writes the Alpha
play a large part, and have seen people talk about what
67
PEOPLE
www.tradersonline-mag.com 11.2013
John Person
John Person is a 33 year veteran of the Futures and Options Trading industry. He started on the Floor of the Chicago Mercantile
Exchange back in 1979. He then had the privilege of working with George Lane, the innovator of the Stochastic indicator. John
has worked his way throughout the industry as an independent Trader, Broker, Analyst and Branch Manager for one of Chicagos
largest rms. He is the author of several top rated trading courses and books. He was the rst ever to introduce traders to a
powerful combination of candlesticks and pivot point analysis. In 1998, he developed his own proprietary trading system and
began publishing The Bottom-Line Financial and Futures Newsletter, a monthly publication that incorporates fundamental
developments as well as technical analysis that includes the data from his trading system, with his powerful indicator Persons
Pivots. John is widely quoted in the industry and a sought after speaker for many of the worlds top professional organisations.
68
PEOPLE
www.tradersonline-mag.com 11.2013
trading firm.
really big tips for doing special running chores like going
his office and then his war room. That was his trading
chosen.
R1 = 2xP - L
R2 = P + (H - L)
R3 = H + 2x(P - L)
S1 = 2xP H
S2 = P - (H - L)
S3 = L - 2x(H - P)
On Balance Volume
70
PEOPLE
Figure 1 shows the E-mini S&P in three time frames: 60 minute (bottom), 15 minute (middle), and 5 minute
(top). At the end of the 60 minute bar at 9 am the indicator red off a bullish signal (green triangle on the right).
The 15 minute did the same at the end of the 9.45 am time frame; at the same time the 5 minute was in a
bullish mode. Coincidently we also had a 5-minute High Close Doji pattern too. The entry is to go long against
a pullback to the moving averages and for day traders stops can go under the low of the trigger bar.
Source: www.TradeNavigator.com
Call Spread
A long call spread is an option strategy where traders buy calls at strike price A
and simultaneously sell the same number of calls of the same underlying and
expiration date but at a higher strike price B for a net debit (see gure to the left
below). A short call spread is vice versa; selling the lower strike calls and buying
the higher strike calls for a net credit. As for the long call spread, selling a cheaper
call with higher strike helps to offset the cost of the more expensive call being
bought. This lowers the risk of the trade but at the same time, limits prots (from
where the call is sold). As for the short call spread, buying a cheaper call with
higher strike helps to limit the risk if the stock goes up while selling the more
expensive call earns the premium. However, buying the hedging call also reduces
71
PEOPLE
www.tradersonline-mag.com 11.2013
For
example
on
TD
72
PEOPLE
www.tradersonline-mag.com 11.2013
which was slightly less premium. The next day PCLN had
signal.
specific rules.
even put out a Twitter Alert as a follow up. The setup was
74
PEOPLE
rewarded.
balanced.
Here you see a trade that didnt perform. DHI generated a weekly buy signal at monthly support. The move
was supported by an increase in volume as indicated using the OBV indicator shown at point A. The entry
was at $20.17. The stop was placed at $18.72. The trade didnt work, momentum stalled.
Source: www.TradeNavigator.com
75
SEMINARS
www.tradersonline-mag.com 11.2013
Seminar
Firm
Location
Website
01.11.2013
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www.knowledgetoaction.co.uk
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04.11.2013
Houston
www.energyinstitution.org
05.11.2013
Knightsbridge
www.knowledgetoaction.co.uk
06.11.2013
London
Street
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Singapore
www.phillipcfd.com
06.11.2013
Technical Analysis:
Managing Risk
Fidelity Investments
Denver
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www.phillipcfd.com
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www.knowledgetoaction.co.uk
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www.phillipcfd.com
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New York
www.energyinstitution.org
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Nashville
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Annapolis
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Denver
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www.lme.com
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Shanghai
www.lme.com
76
Gaining
Conrmation
and
Liverpool
David Rukshin
Senior Vice President,
Infrastructure
D.E. Shaw
Attilio Meucci
Chief Risk Ofcer
KKR
2013
sponsors
www.terrapinn.com/QuantNYTradersMag
tel
COLUMN
www.tradersonline-mag.com 11.2013
Thilo C. Herr deals with mental blockades and their solutions. He knows from many years
of experience how false values can inuence the success of a trader. He is publisher of
the mental training tool for daytraders Der Mental Trader in German and he works as
private coach.
The Key
to Success Lies Within
Contact: privatcoaching@mentaltrader.de
website: www.mentaltrader.de
unimportant.
our experiences from our past most of the time from our
our actions. First of all there are our values. If for example
will get in the way of his long term success in trading. But
noticed 100 per cent. Your mind would collapse with all
78