This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I traded live today, but with only 0.5% position size rather than my usual 1% risk. I decided to trade 1 time, and if it was a loss, I was done. The first two broke even, so I kept going (just one more). I took only three trades, two for very slight profits and one for +1.56R, for a total of +1.68R for the day. This puts me back above the initial funding level of my account, which is important to me, psychologically. Big day for me. :)

Anyway, here’s the trades:

Gold Fields Limited (ADR) (NYSE: GFI) Short, 5′

I traded this on the 5 minute chart. I applied fibs as inspired by 00NR7. I’m not really trading his system, I’m feeling out one of my own, but I am borrowing from his excellent ideas (Thanks, 00NR7!) I wanted the fibs to capture the swing high and low of the morning as the opening range. This can tend to be imprecise, so it’s more of an art. I went short as the 10:00 candle closed below the 0% fib, and closed weak. I missed that there was no volume uptick on this entry bar, which I think is important.

This was the bottom tick for quite a while! I HATE it when I take a trade that immediately goes in the red. The next half an hour was nerve-racking, as you can see. I covered half the position after the 10:25 rally failed–I was not proven correct, so I lightened the position when I was given the chance. For all I knew we were going back up. There was a lot of support at the 16.44 level, and when the ask dropped that low, nobody was selling. I thought for sure I would lose -1R after my entry, but I got a break and the trade moved in my favor. After price stalled out at the -19.1% fib, I covered on a reaction to 16.39, which was the point at where I would still show a profit on the position. With all the difficulty getting there, I thought this was a gift and I should just bail. Then the floor dropped out, and went on to way pass the -38% fib target! Almost made $16. I would have handled this trade better if my entry hadn’t been off so much, but at least I walked away in the black. Important for me right now. +0.1R

GigaMedia Limited (NASDAQ: GIGM) Long, 15′

I saw Zoomie point this out on Wallstreak, and I liked the setup–a Trader-X OR breakout. I placed Trader-X fibs as prescribed. When we broke the OR high, I watched. I didn’t like the upper tail on the 12:00 bar, but I entered on the next one anyway as we went above the close of that bar. Then sideways in the red, again. Crap. Well, after the 12:45 bar failed to take out the high of the day, and retraced way back down, I sold half at 15.36 for a 0.03 loss. Like on GFI, I was not proven correct, and I was back underwater again, and I didn’t want to take a full -1R loss on the position. Then we popped, but that too had problems. I sold the rest at 15.45 to offset my loss on the first half. GIGM should have been taking off, as the QQQQ’s were rallying hard at this time. So I just bailed, and in retrospect, that was the best thing to do for me. So another trade, another “profit”: +0.03R

Apple Inc. (NASDAQ: AAPL) Long, 10′

I was watching AAPL go sideways on declining volume. I actually thought it looked like a bear pause before another leg down, and I expected it to break down. At exactly that point, we had up movement on a volume uptick, so I changed my mind and looked long. Sloth on Wallstreak was talking about it as well, so I went long as we had a strong close above the 38% fib level, and also a pivot point from two days ago. My target was the 100% level at $137. This trade was in the black right from my entry. Much better to bite your nails over a profit and whether you should stay than to do the same thing over a loss! We pushed for 137, then pulled back and got stuck at 136.50. I sold half there, thinking we would likely fall back to my entry point, and I wouldn’t suffer any movement below that level, so I wanted to book some profit. Well, more buyers came in and pushed us up to $137, and I sold the rest there. There was another $1.00 to be had, but I’ll take what I got. :) Never buy at the bottom and always sell too soon, and you can’t help but make money, as Baron Rothschild once said. Trade PnL: +1.56R

So in conclusion, trading with these fibs imposes structure on the market for me. I don’t try to feel what the direction is, or where to enter–I let the fibs guide me. I traded similar setups to my paper-trades on Thursday. I’m surprised that I’m doing well with AAPL, as I have tended to get whipsawed pretty bad in it in the past. When I use a proper structure and stop, I do better than when I press and trade too big with a stop that’s too tight. Basically, I think I threw away that 30% profit I had by trying to trade inside of the noise of the market. Bad idea. I’ve been thinking about changing my stop rules to use either a candle-based method or some multiple of the average true range over the last few bars, whichever is bigger. I bet that this would have saved me a lot of money in August. I’ve noticed that lots of NR7’s are getting broken out of both sides on the next candle. Maybe when market volatility is high, narrow range candles aren’t good ways to pick stops. Just a few of my scattered thoughts.

Stocks Mentioned In This Article
Stock	Links
GFI	| |
GIGM	| |
AAPL	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com