Home Works (December 2010)

General Markets

How time flies! I cannot believe it is already approaching end of another year. November provided below average but above median returns and another positive return making it 18th green month in a row for the homework book. Current median return on assumed 2 contract lot basis is $2,623 and current mean return on assumed 2 contract lot basis is $4,388. Click here for HW Trades result on 2 contract lot basis so far.***

I have added a page for FAQ on the blog page as well as a page for HW book trades. Please comment if there are any questions you might have. Also provide suggestions for any other improvements to the blog. Or we can interact via my Facebook page.

The new homework page is here. Given my upcoming vacation and other commitments before vacation, I will not be trading much during December 2010 so the home work contributions from my side could be bit patchy. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. Please click here for more information on email subscription. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader. There is also a Facebook page here for those of you on Facebook. You can like it to join the page updates.

Happy trading.

VS

*** for the sake of disclosure, this performance is calculated on 2 lot basis trading my Homework and should not be used as a reflection of my trading OR my account size/position size. I take all my Homework trades but in position size consistent with my risk capital.

- (c) author(s) of http://vs-trader.blogspot.com

HOME WORKS (November 2010)

General Markets

October was relatively better month for Homework book even though markets chopped around; providing above average and above median returns and another positive return making it 17th green month in a row for the homework book. Current median return on assumed 2 contract lot basis is $2,525 and current mean return on assumed 2 contract lot basis is $4,426. Click here for HW Trades result on 2 contract lot basis so far.***

I have added a page for FAQ on the blog page as well as a page for HW book trades. Please comment if there are any questions you might have. Also provide suggestions for any other improvements to the blog.

The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. Please click here for more information on email subscription. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader. There is also a Facebook page here for those of you on Facebook. You can like it to join the page updates.

Happy trading.

VS

*** for the sake of disclosure, this performance is calculated on 2 lot basis trading my Homework and should not be used as a reflection of my trading OR my account size/position size. I take all my Homework trades but in position size consistent with my risk capital.

- (c) author(s) of http://vs-trader.blogspot.com

HOME WORKS (October 2010)

General Markets

Its time – time indeed. The hunt for red October begins!
September was another low activity month for me due to certain other commitments which kept me away from desk. This resulted in below average and below median returns but still positive return making it 16th green month in a row for the homework book. Current median return on assumed 2 contract lot basis is $2,033 and current mean return on assumed 2 contract lot basis is $4,386. Click here for HW Trades result on 2 contract lot basis so far.***
The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. Please click here for more information on email subscription. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader. There is also a Facebook page here for those of you on Facebook. You can like it to join the page updates.
Happy trading.
VS
*** for the sake of disclosure, this performance is calculated on 2 lot basis trading my Homework and should not be used as a reflection of my trading OR my account size/position size. I take all my Homework trades but in position size consistent with my risk capital.

- (c) author(s) of http://vs-trader.blogspot.com

From Tokyo With Love

Case study for deleveraging and demise of carry trade

While the equities have not achieved much as the crow flies the USDJPY pair has a good story to tell for the power of deleveraging. Now when you think of Japan, you would imagine the spectacular collapse of the Nippon star, decade long deflationary cycle and developed world govt with highest debt to GDP ratio. Not an example of something which will inspire currency confidence and hence appreciation. But look at USDJPY (look at other pairs EURJPY, GBPJPY or NZDJPY as well) and you will find that after hitting a high of 147 in 1998, JPY is been in a constant down trend and broken out of a massive flat bottom apex in a classic fashion. So what is causing the whole world to buy JPY? Not a deep desire to buy Japanese assets but simply the desire to unwind a carry trade position. On back of envelop basis, if you had borrowed 147 YEN in 1998 and sold that to buy 1 USD and invested that USD, you would still be sitting on that 1 USD asset today (+ dividends etc). However that 1 USD would only get you 83 YEN today so you are short by nearly 64 JPY. That’s a big loss you are looking at.
Japanese Central Bank has made threats of interventions but I would think that they learn from the experience of our friends at Swiss National Bank who finally threw out the policy of intervention (and failed to stop the rise of CHF). I would think intervention if any would be short lasting and opportunity to buy YEN at weaker prices. I feel the significant low of 79.70 will be broken though that level is likely to offer some support and can be used a first target. I expect once 79.70 is broken, YEN would reach mid 60s level against USD towards Q1 2011. Against other currencies like EUR and GBP the results can be further spectacular. Yen is in a well defined downward channel and an interesting play on world that is deleveraging.

Not too far : As the crow flies

S&P 500

If flat tops bring market drop, we have a big one at our hands. S&P 500 is simply trading waters since March 1998. Today it stands exactly the same point it first crossed on the upside in March 1998. Nearly 12 years and nothing. And as far as current financial year go - nothing. This is the last quarter for S&P 500 to set a direction for the year as a whole and if prevailing 9 months have anything to go by, there is no clear trend still. The volatility has been grinding down progressively and the implied correlations across asset classes are slowly approaching 100%. The underlying risk in the markets is building up and severe price moves can occur to adjust for the ground realities. For a breakout trader, this is a point of extreme patience. Bigger the range, greater the breakout as they say. When it could happen, no one knows but it would certainly be a big one.

JPY has been rising steadily, even in the face of threat of interventions by BOJ. USD is also looking to breakout upwards after a recent pullback. These point to the continual deleveraging going on and corresponding destruction of outstanding debt. The US national debt may be increasing but the overall debt (govt + private) is decreasing fast and that is deflationary and constant source of worry. Commodity prices have started moving up for grains, softs and metals bur crude oil and energy sector looks poised for a correction down.

I am closely watching the foreign exchange markets for emerging signs about trend which is likely to break the range bound trades in other markets. If USD, JPY and CHF can continue to attract bids, it would be bullish for GOLD and Bonds but bearish for equities and consumption linked commodities. Meanwhile, waiting and waiting…

HOME WORKS (SEPTEMBER 2010)

General Markets

Like rest of the summer, August was marked with choppiness and lack of trading due to travelling and other commitments. However August provided below average but above median returns making it 15th green month in a row for the homework book. Current median return on assumed 2 contract lot basis is $2,525 and current mean return on assumed 2 contract lot basis is $4,608. Click here for HW Trades result on 2 contract lot basis so far.***

The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. Please click here for more information on email subscription. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader. There is also a Facebook page here for those of you on Facebook. You can like it to join the page updates.

Happy trading.

VS

*** for the sake of disclosure, this performance is calculated on 2 lot basis trading my Homework and should not be used as a reflection of my trading OR my account size/position size. I take all my Homework trades but in position size consistent with my risk capital.

- (c) author(s) of http://vs-trader.blogspot.com

The power of compound interest!

Think in % not absolute.

A dear friend has started a blog http://mydailytwopercent.blogspot.com on a very simple principle – to earn 2% a day. Now it might sound simple to lots of traders, it requires a lot of discipline and hard work to achieve. Most macho traders tend to think in absolute terms. They want to earn $x per day. They think in terms of risk and reward in $x per trade. Whereas trading is a game of percentage and probability. Winning $1,000 on a $1,000,000 account is same as winning $10 on $10,000 but many traders might scoff at the returns of $10 and not consider worth their while. 2% return per day can turn $1,000 into nearly 78,000 by the end of year. Now that is power of compound interest. This is also the reason I report my HW trades in 2 lot basis instead of absolute position size.

I am looking forward to following my friend’s success with all my best wishes.

2010 – The year of Forex?

Will smiling US Dollar dominate most of 2010

UPDATE : 6th Aug 2010 - I was simply adjusting border on the picture and this post has come up on top. This is nearly 7 month old post and please read it accordingly.

USD appears to be smiling again. Dollar smile theory, as per Stephen Jen, predicts gains for the greenback during times when the U.S. economy is either in a deep slump or growing strongly, and underperformance for the dollar during times of moderate growth. Now I am not sure which part of the smile Dollar is moving now but I sense that a trend change is emerging for US Dollar against major pairs and 2010 can be the year the dollar shines again. 2010 could also be the year dominated by foreign exchange markets. The bonds markets are played by central banks and equity markets are not going anywhere.
USD had been a short play for most of 2009 but lately USD appears to have formed a bottom against all major currencies and made impressive first wave highs. Now the question is – is this due to year end covering into USD positions OR a major shift coming. Strangely enough, I do not see much fundamental reason other than massive short position in USD to back this strength in USD. But Oscar has always said that fundamentals always come out in the charts first and as the charts are today, USD is going up.
So how to setup trades for this scenario? I will be looking to buy breakouts from highs for USD (or low for other pair) with stops 3 – 4 Average True Range. I will also look to buy pullbacks in USD (or sell rallies for other pair) at key retracement levels with stops below lows (above high in case of other pair). I will update further on the trades as they develop.

Glass half full or half empty?

S&P 500

I believe S&P 500 is at some inflection point and I get two projections. 1350 and 850. Now that is most troublesome considering I was outright bearish for some time. It all depends upon how the breakout from current formation occurs. Many correlations appear to be breaking from recent past. For one, S&P 500 has shown tremendous strength even in the time of falling treasury yields – i.e. bonds and S&P have risen together. Also US dollar has started breaking down recently indicating a risk-on attitude amongst market participants. Commodities have taken off strongly lately indicating an inflationary expectation BUT the bonds markets are not pricing in that inflation. Something has to give and what would that be? If an upward breakout occurs, the impulse wave from March 2009 correction has high end projection of 1350 for S&P500. However if we are to believe that the corrective wave from March 2009 lows has completed at 1219 then the next stop for S&P 500 should be 850 or about before resuming next down leg eventually below March 2009 lows. I know this is a “no view” post but that is the position I am finding myself lately.

HOME WORKS (AUGUST 2010)

General Markets

July was an erratic month for me with below average and below median returns – not only because I was on holiday half the time but also because it felt that markets are in a choppy mode without any consistent clear trend. However this was 14th green month in a row for the homework book. Current median return is on assumed 2 contract lot basis is $2,033 and current mean return on assumed 2 contract lot basis is $4,724. Click here for HW Trades result on 2 contract lot basis so far.***

The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. Please click here for more information on email subscription. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader. There is also a Facebook page here for those of you on Facebook. You can like it to join the page updates.

Happy trading.

VS

*** for the sake of disclosure, this performance is calculated on 2 lot basis trading my Homework and should not be used as a reflection of my trading OR my account size/position size. I take all my Homework trades but in position size consistent with my risk capital.

- (c) author(s) of http://vs-trader.blogspot.com

HOME WORKS (JULY 2010)

General Markets

The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. Please click here for more information on email subscription. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader. There is also a Facebook page here for those of you on Facebook. You can like it to join the page updates.

June was a below mean/below median month mainly because I was not trading most of the time busy with other stuff. This was 13th green month in a row for the homework book. Current median return is on 2 contract lot basis $2,525 and current mean return on 2 contract lot basis is $4,978. Click here for HW Trades result on 2 contract lot basis so far. From swing/long term perspective the month was good providing some key swings. Markets are developing strong trend once again and looks like it would be a good summer.

Happy trading.

VS

Is this the end of the suckers rally from March 09 lows?

S&P 500 (ESu0) and other indices

Most world markets responded strongly from the March 2009 lows and the rally went on much longer than anticipated and killed many a bears. But with fundamentals disappointing for such strong expected recovery and crisis after crisis unfolding it does appear that the rally has run out its time. In the attached weekly chart of S&P500 index, it appears that:

- Top of the rally as 1219 was a key Fib reversal point for the down move from 1576-666. This indicate start of another big move down. It is quite likely to see lows below 666 but worth assessing that scenario after nearest support point is reached.

- Medium term top has been formed by Head and Shoulder pattern which has been completed. The projection from current H&S pattern down are looking like 950 – 850 region which is also a point where bulls can regroup and attempt to take the markets higher.

- The index is below 200d and 50d MA and 50d MA is about to cross 200d MA which is usually a strong bearish signal.

It would seem appropriate to keep selling the rallies until the pips squeak.

BP set for a fall?

British Pound (6Bu0) not BP (Formerly British Petroleum)

One can clearly see in a long term chart for British Pounds against USD that it is in a prolonged bear market since November 2007 after hitting the headline grabbing 2.116. After bouncing from multi year double bottom at 1.35-1.37 region, GBP did bounce back strongly BUT it was merely a correction in the longer term picture. The correction was completed at 1.7042 level and since then GBP is falling in line with its longer term trend.

At current juncture (1.47-1.50 area), GBP seems to be setting up for another short with a possible target in the 1.36-1.34 region possibly setting up a triple bottom. At current price level, the price is near 50 dMA and also near key half way back resistance levels.

As per current analysis in the attached weekly bar chart, fall to 1.36-1.34 region would complete the down move started from 1.70 region but I do expect that the longer term trend would remain down and after some quick corrective bounces, GBP would start further legs down with possible culmination at 1.25 and in extreme case parity (1.00) level in long term. But at this time these extreme levels are just some mental targets to be refined as the move develops.

HOME WORKS (JUNE 2010)

General Markets

Finally, happy birthday to the Home work process and a very successful outcome thereof. During this one year, there was not a single losing month for homework trades. The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader.

May was a  very good month and the best month in the 12 month history with above average and above median return. This was 12th green month in a row for the homework book. Click here for HW Trades result so far. From swing/long term perspective also the month was good providing some key swings and great result. Looks like markets are making up their mind after all on direction. Volatility is coming back to the markets and may provide good trading opportunities.

Happy trading.

VS

HOME WORKS (MAY 2010)

General Markets

The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader.

April was a good month overall  though with below average but median return. However still a green month nevertheless for the homework book making it 11th green month in a row. Click here for HW Trades result so far. From swing/long term perspective also the month was good providing some key swings. Looks like markets are making up their mind after all on direction.

Happy trading.

VS

The Trade Plan Page

A collection of various trade plans and approaches

As suggested by Dee here is the page to record various trade plans/strategies and approaches. A good trade plan should address the key points about

• Entry and position building if applicable
• Exit
• Stop Loss & Money Management

The plans can be posted as comments, and further comments can be added as replies to those comments. As usual, the handy shortcut is on the right hand side box.

So here we go!

HOME WORKS (APRIL 2010)

General Markets

The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader.

March was also a sloppy month overall  with well below average and below median return but a green month nevertheless for the homework book making it 10th green month in a row. Click here for HW Trades result so far. I had some good trend/long term trades in March but found the daily market bit choppy and unfruitful. Let us see what Q2 brings.

Happy trading.

VS

Meats Up, Grains Down?

Commodities are confusing markets!

Animals eat grains, so when grains go down you expect the meat market to go down too! But when grains were going up, most of the meat market was languishing at the lows. May be common sense is not that common in these markets. The meats markets is an illiquid market and not for faint hearted, definitely not for day trading in my book. But these markets provide (sometimes) good trends for long term/swing basis. I have been going through some of these markets and they have had good up trend lately, having languished at the bottom for most of the commodities bull run. So something is going on in these markets.

HOME WORKS (March 2010)

General Markets

I was away for most of the good part of February and then it turned out to be a tough and tiring month to trade. I am still carrying the analysis that the markets appears to be on some critical point and we may witness some sharp moves in near future.

The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader.

February was  a sloppy month overall  with well below average and below median return but a green month nevertheless for the homework book making it 9th green month in a row. Click here for HW Trades result so far. I hope to be able to do some focused trading next month. Really enjoying the homework experiment. Good to note that many traders are now finding confidence in their own homework.

Happy trading.

VS

Spring time look at various markets

General Markets/Longer Term perspective

Grains

Rice (ZRk10)

Rice is an illiquid market in grains sector and runs on its own mind usually. Recently rice was breaking new highs but it was soon followed by a sharp correction. The current correction is appears to be in some sort of final stage but there is still some bearishness left in the chart which can be traded. The current chart is turned back down from the resistance zone (which provided some support on the upside). 89 dEMA has also provided resistance and a bear flag has formed which provides a projection of 13.00-12.90 upon down side breakout. Breach of the resistance zone will negate this analysis. Also interesting to note is that the downside projection will establish a head and shoulder pattern on the longer term chart and it would create the next set of interesting development in this market.

HOME WORKS (February 2010)

General Markets

So far so good – and stopped out. That can summarise the frustrating January 2010. The markets appears to be on some critical point trying to make up their mind for next herd move and the flip flops are chopping it all up.

The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader.

January was  a sloppy month overall  with well below median return and a barely green month for the homework book making it 8th green month in a row. Click here for HW Trades result so far. I will be away until good part of Feb 2010 but I hope it bring better returns for everyone.

Happy trading.

VS

HOME WORKS (January 2010)

General Markets

2000-2009 – Oh! what a decade it was and the 10 years which changed so many things but if you see the equities market from January 2000 – December 2009, we have not made any progress as the crow flies. So are the equities dead? Can we say that the thrill is gone from buy and hold? Who knows. We will look at it one day at a time on these home work pages.

The new homework page is here. The links have been updated on the site. Please remember to post your comments on this page. Also please remember to subscribe to comments via email on this page if you have been a passive follower. You can also subscribe to all comments on the site by adding http://feeds.feedburner.com/vs-trader-comments RSS feed to your favourite reader like Google reader.

December was a good month overall  with above median return and another green month for the homework book making it 7th green month in a row. Click here for HW Trades result so far. I look forward to this process to improve our trading performance and to teach us the discipline of planned emotion free trading.

Happy trading and welcome 2010 – bring it on!

VS