Up until recently he was trading on one of Dublin’s larger trading floors. However he has now quit that and is trading for himself, from home.
Roger says his trading is largely technical (i.e. based off the charts) but he keeps a close eye on the news too.
Riding The Waves – Cable And Oil
Ahoy there mateys. This is my first financial spread betting blog for paddypowertrader. As you might know Mr FT is on his hols, so over the coming two weeks I’ll be sharing my trading with you all. I’m also hoping to help you make your own trading more profitable with some insights into my own trade selection.
Every day, I’ll be outlining some of my actual trades. Playing the markets certainly has its ups and downs and the going can get rough on the high seas. But with the right approach, good research, solid discipline and the right frame of mind it is possible to be a consistent winner! Lots of small consistent winning trades equals big profits. Remember, this is a marathon, not a sprint!
Before I jump in, a quick few words about this old sea-dog. I’ve been a professional trader for the last eight years, trading various financial markets in London, Dublin, Chicago and New York, from equities to futures, commodities to currencies. Up until recently I was trading on one of Dublin’s larger trading floors. However I’ve now quit that and am trading for myself, from home.
My trading is largely technical (i.e. based off the charts) but I do keep a close eye on the news too.
Righto mateys, let’s see how she fairs! I’m guessing we’re not going to see a whole lot of action on the U.S. Stock Market before the Fed announces interest rates this evening at 7.15pm. So let’s take a look instead at the currencies and also oil, which is as volatile as ever. Like a lot of you, I am keeping a close eye on GBPUSD and with the daily technicals showing us an oversold market following this recent run off that is hopefully due for a bounce, I am taking a bullish view on this market. Yarrr!
So my first trade: I bought GBPUSD at 1.9550 and moved my stop loss to 1.9490. My short term target is 1.9780.
Well, shiver me timbers – over the last few weeks, crude oil has pulled way back from its highs. Before going further I do want to say that trading oil is not for novices, the faint-hearted or those without the cash to back their convictions. However for the rest of us, what with all this volatility around there are opportunities to hoard some gold.
Easing tensions with Iran and U.S. customers driving less (3.7% less than this time last year) are contributing factors to its current weakness Even news of tropical storm Eduardo yesterday couldn’t scare them landlubbers into buying oil – indeed, it hit a 3-month low. This tells me have a way to go yet in this current sell off, but my view is that in the bigger picture we are in a big bull market.
After this initial fast sell off today I decided to trade this by going long. Part of the reason was those two long thin bits sticking down out of the red bars I’ve highlighted. The jargon for this is a long-legged doji candlestick, and that sort of pattern can indicate a panicky initial sell off that might fail to maintain this move down. Also decreasing momentum (which I’ll cover in another blog soon, I promise) can indicate a change in direction is due. I feel this trade has a lot of upside potential if we can get on a winner.
So there’s my reasoning and in I go. Picking bottoms can be a dangerous sport, mateys, so hold on to your hats – we could be in for a fun ride!
I bought the US Crude September bet (otherwise known as West Texas Intermediate) at 119.00 and shoved my stop over to 117.50. My target: 123.50.
My money is in. Call back later to see how I did.
August 5th, 2008 at 3:41 pm
Ahoy there matey!
Looks like your oil trade walked the plank! Ohhh shiver me timbers.
August 5th, 2008 at 4:23 pm
Welcome! Hope your boat is still afloat but I suspect that it won’t be…charts notwithstanding. Just shows how dangerous it can be only to rely on charts…
Dow going mental, oil going overboard, and all the merchants screaming to sell gold and buy dollars. The perfect outlook for my trading but I suspect the perfect storm for yours…
August 5th, 2008 at 4:48 pm
Aaron! How are ya, matey?!
Well, the oil trade is still going strong. It was the US Crude contract (also known as West Texas) that I bought this morning at $119.00. After making a high of over $121, it came off to $118.50 and is currently around the area where I got in, actually about 30cents higher. Perhaps should have taken some profit, or maybe moved my stop higher to protect the profit, but I really am looking for this one to run. My downside stop is $117.50 so we’re still in the game on this one.
How did you do today? Pick any winners out there? There be treasure in them thar hills!
August 5th, 2008 at 4:58 pm
Thanks for the welcome Flashrabbit!
I think it would be a foolish seaman that relied on just one single portent. I try to use charts along with the major fundamentals of the time to make a trading decision.
This oil trade could be a dangerous one alright, but she’s onside at the moment, and significantly so earlier on today. And I do feel this GBP/USD is due a bounce. Only time will tell, matey.
I hope those markets are kind to ya! Yaarrrh!
August 5th, 2008 at 5:18 pm
Well, for what it’s worth I’ve been short gold since it was at 977 and long the dow since it was at around 11180. So today I’m having a very good day….Oil…well, it might bounce – especially in hurricane season – but my view is that it’s got a fair bit further to fall… But it’ll be interesting to see which of us is right…Presumably your cable trade is a bit underwater? Again – and I’m only a rank amateur rabbit so no-one should take ANY notice of me – my call is still to be long the dollar. And I am – the GBP/USD and AUD/USD short trade has been a monster in the last few days. But I could of course be very wrong…!
August 5th, 2008 at 5:29 pm
Great trades in gold and especially the dow!! I must admit I am a bit wary of some analysts announcing the end of this bear market, though, and can see commodities making a run up again. I am keeping a close watch on earnings coming out and wondering just how far this banking crisis can run. But as you say, who knows? These are volatile times indeed. How long are you going to hold that dow position? Are you using a trailing stop? Either way, great call! Smart Rabbit!
August 5th, 2008 at 5:43 pm
I’m not calling an end to the bear market either, but I do think that there’s a bunch of demand destruction happening on commodities – basically, everyone has run out of cash to buy stuff… so that’s what I think is pushing down commodity prices. That, in my very simplistic analysis = lower inflation = lower interest rates in smaller commodity dependent currencies eg AUS/NZD = higher dollar. And oil and gold just have to follow. An awful lot of people have invested an awful lot of cash in the long commodities/short financials trade but I’m not going for that any more. And when big beasts come out of that trade my take is that there is likely to be a big adjustment.
Has taken nerves of steel to hold the dow long this far over the last couple of weeks – especially the other day when it hit 11600, and then plummeted – but what’s kept me going is the history of all the small dow shorts that I was in and out of on the way down – for example earlier this year I went short of the dow from 12100ish and god knows how much money I would have if I’d had the nerve to hold it…so my plan is to keep going. Just a stop sitting at around the 11220 mark to make sure I don’t lose anything. I certainly think we might see 17500 on this rally, so that’s my immediate target…then I will think again…
On the other hand, I certainly don’t discount the peak oil/emerging markets/commodity scarcity argument, so…who knows?
August 5th, 2008 at 8:04 pm
17500 for the Dow? Sounds like the end of the bear market to me. Or are you targetting a lower number — 12500?
August 5th, 2008 at 8:43 pm
sorry – mistyping!!! 11750!!!
August 5th, 2008 at 8:46 pm
…and…my gold thesis has been proven beautifully this evening…now $100 clear of my entry point, and still going…
August 6th, 2008 at 12:04 am
Question for RJ as you are a chart-man – when a double-top (for my purposes, call it a M) returns to the midpoint of the M on its way back down the second leg, does it keep falling – or can we expect a technical bounce. Apologies for the badly worded question – try it this way, if Eur/USD rose to 1.603 -ish in April, then fell to 1.535-ish,(mid-point of M) then back to 1.60-ish in June; when it falls down the second leg of the M and reaches 1.535 again in early August, will it just keep falling or should it bounce a bit. Totally hypothetical question of course!
I know there’s no definitive answer, but presumably double-tops follow a pattern and you’ve been seeing these for a while longer than i have.
I’ve made some good money on long dollar, short commods since mid-June. But, I feel it may be time to close down and let things settle a while – also, I hate trading oil on a wednesday, those crappy stats (which i reckon they pull out of a hat) can send the market loopy. Also, right now, all my long USD trades are hitting channel-bottoms (on my chosen-channels anyway) – so i fear a temporary bounce tomorrow. I think, i just convinced myself, time to take some profits. Can i get off the couch now? How much do i owe you?
August 6th, 2008 at 11:33 am
Nothing happening for me yesterday Jolloy Rodger, not a saussage. I am completely miffed as to why.
Flash Rabbit, i hope you had the house on that gold trade? If you tell me you only have a lousy buck on it, i shall be very dissapointed….
August 6th, 2008 at 11:59 am
Have made a good chunk on the gold trade so far….! A very, very good trade by my standards, but not enough to completely bankrupt anyone…. The key lesson though is that I’ve been in and out of it, and had I held my nerve I’d have had 3 or 4 grand rather than around 2. But I’m not complaining… Started with just a £1 short at 977, added to it at various points, generally cocked up several very good trades (ie going very short at 955 and getting very nervous and cutting it…). So my original bet is still intact, with a stop at 920 to lock in a chunk of profit, plus other shorts from 926, 900 and as of yesterday 890. Still short! (although it’s looking a bit more dicey to be short gold/long USD today, what with oil inventories, wobbly indices and Freddie unveiling another spectacular crock). Holding my nerve for now…
August 6th, 2008 at 12:04 pm
Good man yourself.
August 6th, 2008 at 12:40 pm
Hi Ed,
Double tops are notoriously hard to trade exactly. If i understand your question exactly, and I think I do,at the point where it is on its way back down the second leg, you can expect it to consolidate here a bit as the struggle between the buyers and sellers decides a future direction. Most of the time, in a true double top, we would expect that market to sell off, back to levels seen as it was on its way up the first leg of the ‘M’, as you put it. So I would cautiously be trying to stay short.
Of course it happens that you have triple-tops before this happens sometimes, before the market comes back to lower levels. Technical analysis is far from an exact science, but does help to try to put you in a position where the odds are in your favour. Maybe check out the ideas I put forward in my piece today on Momentum to get an idea where the market might be headed.
That long dollar/short commodity trade has been great for you since June. You have done well to hold onto it! No harm takin’ profits out of it, and standing aside waiting for the next trading decision. The smartest thing to do sometimes is to let the market come to you. Have you considered maybe taking half your position off, adjusting your stops and trying to ride the rest of the trade? Just an idea!
Anyway, good to hear from ya, and good luck in there!
August 6th, 2008 at 1:55 pm
Oil looking pretty bearish to me…(although there could be a bounce pre or post inventories…). I hope Roger Jolly isn’t going to get jolly rogered…
August 6th, 2008 at 2:33 pm
Welcome aboard RJ. (wee oooo weee oooo-my best ‘piping aboard’ impression!)
‘England (and ppt) expects’ and all that!
Interesting calls you have made and one of the first times I have seen a Bollinger band used; perhaps we should use the term Roger Bolly instead!! Or is that just the champers of choice after raiding them thar spreadbetters?
I’m having a bit of trouble/confusion with the long legged doji concept-I thought doji started and finished at about the same place? So it looks like a +
First candle looks to me like a massive sell off bar (on volume) which took out all the stops sub 121 and then rallied modestly off the bottom, but closed nowhere near where it opened.
Agree that the market isn’t closing at the low of the bar which indicates some buying pressure.
I read some interesting speculation this morning suggesting that under the new rules the CFTC had reclassified an operator who had a 500m barrel position as a speculator rather than a hedger (meaning that they would have faced much higher margins-hence the rapid selloff).
A story trying to fit the price action? Guess we’ll see in the next few days.
Good luck with the trade(s) and I oil shoots through the congestion at 120-121 for you.
GG
August 6th, 2008 at 2:34 pm
well, all I can say is I’m glad I’m not trading oil. You’d need to have deep pockets or be an adrenaline junkie (or both…).
August 6th, 2008 at 6:25 pm
Hi Ed
RJ has offered a prett good explanation of a double top, but I’ll just chuck 2 cents worth of what I learnt on a webinar last evening, which included a view on the S&P & the Euro-if indeed it was the euro you were after in the original question.
This guys view was that the Euro had been in a trading range of (round numbers,1.5375-1.6025). Key points he made were that at both extemities, although the numbers were breached intraday, the candles failed to close above/below, suggesting significant selling/buying pressure at those levels.
If you whizz off a daily chart you’ll see what I mean. Not sure if they are long-tailed dojis, bearded dojis or even crested dojis!
The long & the short; he expects another probable test of 1.5375, and ONLY when a confirmed break is made would he be looking for his next target, which would be a fall of (1.6025-1.5375) about 650 pips, which coincidentally, ties up quite nicely with the 1.48 congestion (resistance) area before it took off in Feb.
Which also ties in nicely with RJ’s observation that a multiple top often retraces all the runup.
Hope this helps
GG