I’m sorry I didn’t update over the weekend like I said I was going to but the misses came home after being away for a week and a half so I spent some time with her instead. It’s going to be a while before I get this blog up to speed with everything I want to add about strategies and technical analysis but I promise it will get done. I struggle alot with getting time to do it, with work and currently in the process of moving house so it may be a few months before it’s all up to speed. I’ll keep posting my trades with explinations so you’ll have something to keep you going untill I get the rest up an running.

I have just placed one order for today. The order is for Beazley Group. I placed a £1 per point buy order at 109 with a stop set at 100. If you take a look at the chart below Beazley is currently in an uptrend. ADX(14) > 30, DI+ > DI-, MA(20) > MA(50), MA(50) > MA(200). The stock has been pulling back from a recent high of 115.8 on 24th Feb. The stock made a recent low on 8th Feb of 101.8.(see red crosses on chart below)

As I may have mentioned I am currently reading Technical Analysis Explained: The Successful Investor’s Guide to Spotting Investment Trends and Turning Points. In here it details many things. On of which is that a trend will typically retrace 1/3 to 2/3 of the previous price movement. Therefore the previous price movement of Beazley was from 101.8 to 115.8. This is a move of 14pts. Therefore the price should fall back to anywhere between 106.5 and 111.1. These values are worked out as follows:

115.8-101.8 = 14
14 * 1/3 = 4.66
14 * 2/3 = 9.33

115.8 – 4.66 = 111.1
115.8 – 9.33 = 106.5

A typical place for the retracement to get to can be 50%. This would be 108.8. This is why I have placed my buy at 109. If the price retraces to 50% of the previous price move then there is a good chance that the retracement is nearly over and the price should start to rise again. I have set my stop at 100. There are two reasons for this. 1 it is way below the 2/3 retracement of 106.5, 2 it is below the recent low of 101.8. If the price continues to fall this far then it is no longer a retracement of the previous price and I no longer want to be in the trade.

This fits with my 1% risk strategy. I like to try for a 3:1 reward to risk ratio so I would be aiming to make 27 points from this trade. This would mean a I am aiming for a price of 136. The ATR(14) is 2.44 So once the stock starts to move into profit I will trail my stop by 3*ATR so 7.5. I have placed the order all I have to do is wait and see if it gets executed. I highly doubt the trade will execute today but I expect it to execute tomorrow or wednesday. I’ll keep you updated.

Disclaimer: Don’t take my posting of these trades as a recommendation that you should make the same trades!

If you want to join any of the spread betting firms I am currently with please e-mail me. I am going to e-mail them to enquire about their refer a friend policies which will mean cash incentives for me and you.

March 1, 2010 by Harry
Category: blog