My trade continued... 27th July 2013

The price appears to be falling against a downwards sloping support line if not a price channel. If it is forming a channel hopefully it's not breaking out of it at the moment.

As the articles, systems & strategies on this website say, the edge on stock market indices comes from support & resistance / mean reversion. Basically, from speculators driving the market up and down as they aim to buy low and sell high.

Looking to exit this long trade as soon as the price moves back towards the downwards slopping support line...

Here's the chart -

New S&P500 CFD Trade - 2nd June 2013

Well as I suspected the market has broken the upward sloping support line and has not yet broken about it. Here is a five day chart of the S&P500 at last nights closing -

As you can see, the market has broken a the upward sloping support line and this support line is now acting as resistance. Now might be a good time for me to go short.

It is only just after 10am here in the UK and the US market won't be open for hours but CFDs on the S&P500 with UK brokers are available, here is the chart -

My Trade is short @ 1,616.98

CFD Trading, Weekly Review Sunday 30th June

The market definitely appears to have broken its up trend I will look for an ideal price to go short at next week if the price continues to show a short-term downwards bias.

Here is the chart -

27th June 2013

I said this morning that I would close today's trade if the market rises, it has and so I'm closing at 1.615.10. I went long at 1,602.83 so that is 12.27 points profit. Not a huge profit but OK nevertheless. The upward sloping resistance has not broken yet and I *might* consider taking a short position when it does because I'm no longer convinced that the directional bias upwards is as strong as it once appeared to be given that we actually saw the market below 1,600.00 for a while...

Here's the chart -

It's 10:15am UK time on the 27th of June now and the US markets won't be open until the afternoon now.

The market closed at 1,603.26 yesterday so my trade closed in profit.

This trade hasn't been great so I will look to exit when the American markets open this afternoon providing the price continue to rise.

Here is a five day chart of how the market closed yesterday -

25th June 2013

The market closed up 0.95% (or 14.94 points) today after more falls yesterday. Friday's recovery was not the market breaking out of a falling channel, rather, it looks like it was mostly just a move from the bottom of a descending channel towards the top of a descending channel although the larger channel was still broken and then re-tested. Not so good, but not so terrible either. I will post today's 5 day chart as it was at the market's close this evening. If I wasn't already long I would go long now at today's closing price of 1,588.03.

23/06/2013 - a recap of the previous weeks trade.

It's Sunday the 23^rd of June and the market will bring whatever it brings tomorrow, but for now I just wanted to quickly recap where we are at with the trade we took early in the S&P 500 session on Thursday.

On Thursday I basically wrote that I may have taken too much of a risk by betting that the support at 1,600.00 would hold as it had not been tested properly at that point, but that I was going to do it anyway as support and resistance tended to be stronger at, or around, round numbers such as 1,500.00 or 1,600.00 etc...

Well the support has not held and the market dipped just below 1,580.00 although it closed on the Friday higher at 1,592.43. I hope the support and resistance is at where I have drawn the lines below but only time will tell if I am reading the charts correctly or not. There is also the additional problem that, having fallen below the highly symbolic level of 1,600.00, the market may now experience a bit of resistance at that level and struggle to rise above it although I still think this is quite unlikely.

The lines on the price chart below are where I believe the support and resistance currently lies at -

 

20/06/2013 @ 4:50pm UK time

We're not to long into the American S&P 500 session now and the market has fallen again, and is currently sitting at 1,602.32 after bouncing at around 1,600.00

 

 

 

I am going long @ 1,602.32 now. I am probably taking a bit of a risk doing this as the support hasn't been tested enough to say it will hold but support (and resistance too) that occurs at round numbers like 1,600.00 is usually stronger.

 

Long @ 1,602.32 stop loss at 1,541.00

19/06/2013

Well as luck would have it, it turns out I am lucky to have closed the long position already, the market fell 1.39% today closing at 1,628.93. The market initially bounced off of the rising channel then broke through the resistance and, as is often the case when support is broken, it moved down very violently. When support or resistance is broken the movement is often sharp and sudden.

If we get more falls tomorrow then I will be looking for a buying opportunity, especially if I get a sign that a new support level has formed and is holding firm.

Thanks for reading.

18th June 2013

It's the 18th of June and the market has continued to rise, it is now around 8:20pm here it the UK and the S&P 500 index will be closing soon and it is currently sitting at 1,652.32 near the top of the price channel. If the trade were still on I'd exit now. Unfortunately however I exited for a much smaller profit yesterday, like around half as much.

With a mean reversion system, which is what this blog is about, one would usually seek to exit a long trade near the top of a price channel and buy on a dip. Have I made the classic mistake of grabbing a small profit when I saw it rather than exiting at a rational price level? I will let the reader decide...

17/06/2013 S&P 500 Trade

The underlying S&P500 index is now closed but the CFD market isn't. The trade has not gone as planned and I'm now going to exit for a small profit which is at least better than a loss. I'm going to exit the trade @ 1,641.09.

Here is the actual underlying market over the last 5 trading days -

The market is now relatively high and the ascending channel isn't so step. I'm not confident that the support will hold, if there is another downward correction then I'll go long again.

S&P 500 Trade 11th June 2013

I have decided to go long again,we have had a small drop today and a bit of a price recovery since.

Long @ 1,630.05 Stop Loss @ 1,592.00

S&P 500 Continued...

The market has closed at 1,642.81 today, or 0.03% less than on Friday. Essentially it has barely moved at all. I am therefore still waiting for a price correction before I consider taking another long trade.

S&P 500, continued

S&P 500 - Weekly Review -

Well the market is closed for the weekend now, lets review what actually happened this week. The market was just indeed making a correction, albeit a larger one than I anticipated. The market also did indeed breakout of a descending channel.

Had my stop-loss been larger my trade would be over 10 points in profit by now. But I took the decision that I did and was stopped out. Small stop-losses will almost always degrade the performance of any trading strategy, but when trading using large amounts of leverage a stop-loss is always necessary. If one were to let losing trades run and run in the hope that they would turnaround (and they usually do) and grab a small profit whenever it arrived, then most trades (including the one I just lost on) would be winners, but yet they wouldn't survive as a trader doing this as one day it would be inevitable that a bad trade would go so far against them that they would almost certainly be wiped out.

My view on the state of the market is therefore unchanged and I will be looking for another dip to take a long position.

Thanks for reading.

- David.

S&P500 Trade, Stopped Out

Stopped Out -

The market made a new low today and took out my stop loss @ 1,614.00 - that's a loss of 17.65. This correction is most likely much bigger than most or a reversal of the long-term bullish bias. I think it is the former but the only thing to do when burnt like this is stay out the market and let it settle for a while until there is more clarity.

- David.

S&P 500 4th June 2013

Correction - Mean Reversion Expected -

The descending channel on the image below best explains how I see the S&P 500 index. The index certainly seems to be bullish in the longer term to me. I therefore see a bull market having just exited from a descending tunnel which was part of its recent correction. To add to that the market has also not fallen below its previous lows so I think it probably won't. Now therefore seems like a good time to go long.

Call: Long @ 1,631.65 stop loss @ 1,614.00