Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading_10

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Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading_10April 1, the advance sliced through a possible four-weekchannel serving as the right shoulder of a four-monthinverted H&S bottom pattern. I established a long on April 1of one mini contract per trading unit. The H&S bottom was completed on April 7. I added tomy position using the Last Day Rule at 1133.1 as the basisfor the stop on my entire position. This four-month H&S hasa target of 1230, a test of the December high.FIGURE 9.27 An H&S Bottom in Gold Resolves PreviousUncertainty. The objective of 1350 remains from the October 2009completion of the inverted weekly chart H&S (presented inthe Case Study section). Time will tell if this will finally bethe pattern that works, or if this pattern, too, will becomepart of something bigger. I will report on the outcome of thistrade in Chapter 12. GBP/JPY: A Small Triangle Established the Final High of a Larger Triangle Signal Type: Major Anticipatory Signal Figure 9.28 displays a textbook example of the type ofsignal for which I seek to become pre-positioned during thelate stages of a major chartFIGURE 9.28 A Possible Descending Triangle Forms inGBP/JPY. pattern. Dating back to late September, the GBP/JPYhad formed a possible right-angled descending triangle. On January 21, the market completed a three-weeksymmetrical triangle. As is often the case, a small dailychart pattern formed at the tail end of a major weekly chartpattern. The target of the trade was the lower boundary ofthe major descending triangle. I took profits at the target onFebruary 4.March Copper: A Small Horn and Trend- Line Violation Are Quickly Reversed Types: Major Breakout Signal, Signal Miscellaneous Trade The decline on January 27, as seen in Figure 9.29,completed a three-week horn or sloping top. While this wasa relatively short pattern, the decline also sliced through a10-month channel boundary. This qualified the signal forconsideration to the 2010 Best Dressed List. The risk wassubstantial, so I traded only one contract per $400,000 ofcapital.FIGURE 9.29 Three-Month Horn in Copper. This was a terribly mismanaged trade in a number ofrespects. First, I had a strong instinct that this market wouldthrust hard to the downside with very little ability to bounce. I should have used more leverage and a tighter moneymanagement stop point. Second, the initial target of 290was reached on February 4. I did not ring the cash register!Third, the Trailing Stop Rule was triggered early in the dayon February 11 at around 302.20. I waited until late in theday and covered at 311.60. I have emphasized in this book that the profit or loss of atrade tells only a small part of the story. It is possible toexecute a trade poorly and make money. Similarly, it ispossible to execute a trade well and lose money. Thecopper trade was an example of the former. I made 12cents on the first trade, but walked away in defeat. This market situation is also an example of how onemisstep can easily lead to the next misstep. Errors have away of becoming compounded. It is easy for a trader tothink that a particular market owes him or her something.Markets owe us nothing! My mismanagement of the initial copper trade led to thenext misstep in the market. After being stopped out, Iwatched the market continue to rally. On February 19, themarket retested the boundary of the major trend line thathad been clearly violated on January 28. On February 22 and 23, the market turned back down. Isold the close on February 23 (trade #2). This was anemotional trade. I was still thinking that the copper marketowed me money because I had left so much on the tablefrom the earlier trade. Sanity returned, and within a day or two I realized that theFebruary 23 short was not the smartest trade. I have foundthat mistakes should be covered immediately. Noquestions asked! I exited the trade on February 26. GBP/USD: Using a Candlestick Pattern to Make a Trade Signal Type: Minor Continuation Signal I was bearish on GBP/USD throughout January based onthe potential double top on the weekly chart. I wanted to beshort. On January 29, I shorted 30,000 British pounds pertrading unit. I entered the trade based on the hikkake setupon January 27 and 28 (see Figure 9.30).FIGURE 9.30 Another Hikkake Pattern in GBP/USD. Hikkake patterns do not provide specific price targets. Itook profits on February 4, believing that the ice line of thedouble top would provide support. I also knew that if the iceline gave way, I could immediately return to a short position. Chapter 10 will pick back up the saga of the GBP/USD. SummaryFinancially, I had a pretty decent January, the best month ina while. I entered 16 trades in 11 different ...