I still have no new spread bets to declare but I have pyramided an existing one. At the moment I am quite happy to be in waiting mode. As you know I’m re-assessing my spread betting situation while I try to hone my approach.
The new trade was in Amlin. The price has retraced from it’s most recent high of 365 and I deemed that 345 would be a good place to pyramid my position. Amlin has started to trend quite nicely and I keep moving my stop inline with my super trend strategy. Hopefully the trend continues for some time yet and I can ride the trend until the ‘bend at the end’.
Pyramiding when price retraces from a previous high is also known as buying dips which is a strategy that Malcolm Pryor suggests in his Financial Spread Betting handbook. It’s a part of my strategy that I have yet to perfect but Alexander Elders book, come into my trading room has given me an idea. One of the indicators that he analyses in his book is the 22 period EMA(Exponential moving average). He also analyses a channel of that moving average and suggest that if the moving average is pointing up and we buy at the moving average price that represents good value and when it reaches the top of the channel it represents poor value to buy. When Amlin hit 365 this penetrated my 2xATR 22 period channel and therefore has sparked a round of selling for people taking profits. I did not take this as an exit signal as that is covered by my stop. It did however alert to me a potential pyramiding opportunity. I decided to wait until the price fell to near the 22 day EMA (currently 338) and placed a buy order for 345. My stop level is set to the super trend price 333 so I have a new 12 point risk on this position. Where the price will go from here, well that’s anyones guess but I am happy that I may have brought the dip. We just need to wait and see if it’s actually a dip.
Until next time,
“May the markets be with you!”
Harry,
The Spread Betting Beginner
