Last week as markets were tumbling I was saying that I’d like to see a decent one day collapse with an accompanying doom mongering headlines in the Evening Standard before I’d get interested in a snap rally. We didn’t perhaps get the almighty one-day capitulation I was looking for, but there were some interesting psychological ’round numbers’ that were hit last week.
There were some clear psychological levels in play, as markets fell to fresh multi year lows, before recovering in the second half of the week. The Dow hit 11,000 for the first time since July 2006, and the S&P 500 hit 1,200 for the first time since October 2005. The CAC came close to hitting 4,000 for the first time since May 2005, the Dax hit 6000 for the first time since October 2006, and the FTSE reached its lowest point for over three years. All these happened around the same time, which is quite rare so it got me interested.
So we had a drop, some big round numbers being hit across a range of markets and on Tuesday evening I saw my final sign for a potential snap rally. I was on my way to watch Kung Fu Panda with Mrs Market Maven (we have sophisticated tastes) when I spied the Evening Standard. I can’t remember what the headline was exactly, but it was something like “CRUNCH TIME”, with some accompanying bleak commentary. But there si still opportunities in trading: tips that I’ve learnt that you can employ when such a thing happens.
Trading tips – when the market tanks, look for contrarian buy signals
I’d been looking for contrarian buy signal (meaning to buy while everyone is selling) for a while, but these things usually seem to come at the most inconvenient times. Before entering the cinema I phoned my spread betting firm and placed a small long trade on the US S&P 500 with the intention of building on the position the next morning with one long contract emini S&P 500.
The day the S&Ps rallied sharply, I had my small long on, but kept on hesitating with my bigger futures position as the market went higher. I was looking for a better entry point or a pull back. As it happens, the market went up nearly 30 points on the day netting me around £100 with my small long position. Had I pulled my finger out and got the futures position on at the same time as my small spread bet, it would have been +$1,500. Coulda woulda shoulda.
It shows how frustrating this game can be sometimes. Even when you get it right, you have the tendency to regret that you didn’t make more. I will resist the urge to blame Kung Fu Panda, which was pretty good by the way.
It’s ironic that it’s the Western style raw greed that gets you into trading, but the Eastern style zen thought processes that allow you to trade better. Maybe I did learn something from Kung Fu Panda.
System Watch
I’m still getting a few enquiries and feedback about Concept FX and the picture does get a little murkier. I’m yet to hear back from anyone who’s actually purchased it, but I’m led to believe that it is being marketing by the same people who brought us TradeWin and Goldline Trading systems.
The people behind these also at one stage marketed a horse racing system (Selecta7?) and a golf betting system. Nothing wrong with that per se, but from what I’ve heard, these sports betting systems went belly up as it appears TradeWin has done. For £5,000 excluding exchange fees with no money back guarantee, I’d want to have more confidence in the history of the company promoting the product before I got involved.
I don’t think all these are outright scams, these systems all seemed to have worked at some point some of the time, but the question is are they robust enough to work in different, challenging market conditions. The question is yet to be answered.
Another system I’ve had lots of requests for feedback on is Forex Auto Pilot. Upon loading the site we get Robert popping up saying that he earns thousands of Dollars letting is Robots trade for him and doing all the work while he sleeps. Great promotion I’ve got to admit, it ticks all the boxes for what many people are looking for. 1. It’s easy, 2. It’s automated, 3. It supposedly makes loads of money.
I’ve taken a look at this and the system itself works ok in the demo mode I’ve been testing, but (there are some massive buts!)…
Firstly, demo mode doesn’t take into account spreads or commissions, which means that results in reality will not be as good as those stated. In fact by my estimations, they’re probably loss making.
The system does not use a stop loss, which is financial suicide. They say it works best without one which might be ok for some trades, but there will be one trade somewhere down the line that goes the wrong way and never comes back, completely wiping out your account. As Nassim Taleb said this would be akin to “picking up pennies in front of a steam roller”, one slip and you’re toast.
Finally, I’ve ready worrying reports that people buying FAP have received sales calls from another company they appear to have a joint venture with. These calls appear to result in some heavy pressure selling.
In all, one to avoid I think!
Elsewhere I’ve been having a look at some interesting websites.
The first is www.themarketmap.com, which purports to tell you the time of the day’s turning points in advance for the FTSE and other markets. Interesting concept and rather refreshingly there’s a 7 day free trial for you to test it out. The turning points might be a high or a low for the day depending on where the market is trading at that point.
According to the Market Map, the day’s turning points are as follows:
FTSE 3.30 PM
DAX 12.45 PM
DAX 3.00 PM
DOW 5.30 PM
I’ve been enjoying using The Wizard, but have also been examining a few other similar pieces of software. www.tradingmarkets.com offers US stock ratings of 0-9 with 9 being a potentially strong long case and 0 being a sign not to buy or to go short. I also like the look of www.fusioniqrank.com, which is again based on US stocks and combines fundamental and technical analysis.
This week’s hot trading buttons
After the volatility of the last seven days, thankfully the coming week is much quieter in comparison. The first top tier announcement of note is BOE governor Mervyn King speaking some times this morning, followed by FOMC member Plosser speaking around Midday. These speeches come ahead of the release of the minutes from the last FOMC meeting on Wednesday morning. UK rates policy is stuck between fighting inflation and helping the economy in difficult times. The minutes will be analysed extremely closely. Thursday brings UK retail sales, and US existing home sales. Friday is perhaps the busiest day of the week, with UK GDP figures, followed by US Core durable goods orders and new home sales in the afternoon.
