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.

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!

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.

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.

ZS-TMR : Thirty Minute Rule (Opening Range Play) Analysis : Now it is time for grains!!

My Development as a Commodities Trader: Thirty Minute Rule (Opening Range Play) AnalysisThere may be more meal in Grains TMR - especially in this volatile environment!

Few weeks back I did some preliminary analysis work on past 1 month data on Allan's TMR (Thirty Minute Rule - Opening Range Play) which was mainly based on trading E-Mini S&P500 during the opening range. Since then we are taking TMR trades on ES every day and it seems to generate good results and a profitable outcome. The discussions and results are summarised in the link above.

Taking on from that, I started investigating TMR on grains once I saw another smart fellow trader Quin talking about it. The results were astounding (**** past performance is no guarantee of future results ****) on past data analysis. Soybean has been very volatile lately and my analysis indicated that it would be quite profitable to apply TMR rules to Soybeans and other grains markets.

Traditionally Grains and Commodities, Bonds and Currency markets suit better for breakout plays (breakouts are not always fake-out - reserved for a future post sometime) and therefore it would seem logical that TMR might play better on Grains.

A word of caution here that Soybean has been very volatile lately and therefore the results could be bit exaggerated. However as commented on the original TMR post I have modified strategy which gives best possible Profit objective for 5 pt stop based upon past data. So I believe as volatility reduced, the profit objective will start reducing as well. Also I noted that it

could be best on Soybean markets to leave a runner on with trailing stops OR a fib/ATR based target in line of breakout. So by applying some of the "refinement techniques" the results from ZS-TMR can be enhanced further. I leave those to the individual trader's skills.

Results:

--------

a) Best results were achieved for 12pt Profit Objective 5 Pt Stop resulting in 45.7 pts per month with 43% success rate.

b) For a low pain quick trades, 3/5 generated good returns of 29.5 pts per month (with 81% success rate).

As always, TMR trading is bit boring and requires a lot of discipline. The reported results do not include slippage and commission which will eat into the profits and increase the loss. For

successful TMR strategy the platform should be fast to avoid slippage and commission should be lowest possible.

ZS TMR						Max P&L
Date	Open	30 Min High	30 Min Low	30 Min Range	TMR	5 PT	BEST EXIT
20-May	1182	1189.5	1176	13.5	S	16.00	1,160.00
21-May	1157	1172.75	1155.25	17.5	L	1.00	1,173.75
22-May	1184	1184	1170.75	13.25	S	6.75	1,164.00
26-May	1164	1167.25	1156.25	11	L	20.25	1,187.50
27-May	1195	1199.5	1189.5	10	L	1.25	1,200.75
28-May	1186	1195.5	1184.25	11.25	L	2.00	1,197.50
29-May	1192	1193	1185.75	7.25	S	10.50	1,175.25
01-Jun	1203.5	1219.75	1202.5	17.25	L	7.25	1,227.00
02-Jun	1215	1215	1209	6	S	8.50	1,200.50
04-Jun	1195	1199.75	1193	6.75	L	32.25	1,232.00
05-Jun	1213	1229.25	1211.5	17.75	L	4.50	1,233.75
08-Jun	1221.5	1235	1217	18	L	4.50	1,239.50
09-Jun	1241.5	1245.5	1232.5	13	L	3.50	1,249.00
10-Jun	1243.5	1254	1238.75	15.25	L	1.50	1,255.50
11-Jun	1260	1266.5	1256.75	9.75	L	24.75	1,291.25
12-Jun	1262	1262	1246.5	15.5	L	3.25	1,265.25
15-Jun	1221.5	1228	1213.5	14.5	S	16.50	1,197.00
16-Jun	1217	1219	1206.5	12.5	S	19.00	1,187.50
17-Jun	1197	1201.25	1188	13.25	L	13.75	1,215.00
18-Jun	1207	1213.25	1202	11.25	L	12.75	1,226.00
19-Jun	1219.75	1222	1201.75	20.25	S	26.25	1,175.50

WIN % 5 PT	PO	P&L 20 D 5 PT
24%	17	4.8
33%	16	40.0
33%	15	33.3
33%	14	26.7
38%	13	37.1
43%	12	45.7
43%	11	37.1
48%	10	42.9
48%	9	33.3
52%	8	36.2
57%	7	37.1
62%	6	36.2
62%	5	23.8
71%	4	28.6
81%	3	29.5
86%	2	20.0