The January EUR/USD Effect
Preface: For a number of years, Factor LLC has issued an annual update of “The January EUR/USD Effect” (previously titled The January FX Effect)
The Public Blog site
The Monthly | Blog Edition | November 2021
A glimpse inside the Factor Member Portal
From the just-completed month
November Numbers
- Private Member Tweets: 122
- Posts on the Member site: 5
- Videos/interviews: 1
Snippets from Thoughts on a Weekend Afternoon
Peter’s thoughts on the finished week and the week ahead | Issued most weekends
Draw-downs are a fact of life for a market speculator (Dec 5, 2021 Report)
I have posted numerous Tweets on the Members’ Community Twitter stream the past week or so about trading during adversity. Why? Because, as I have stated, December is NOT the month to try to make up for the entire year gone by. Over the years I have known several traders who went bust by doubling or tripling down to catch up during December in order to resurrect a year that was not successful. December is typically a choppy month.
I have been open about my intent to get as flat as possible into December. Obviously, the big news this past week has been the large decline in equities and the cryptos. Where do these markets go from here? I am clueless, but my hunch (unsupported by any positions) is that following a struggling rally we should see equity prices further erode and that BTC and ETH could be in for several months of broad trading ranges. Time will tell.
I am looking past the current volatility in equities and cryptos and thinking about 2022.
________________
Commentary on open trade equity | unrealized profits (November 21, 2021 Report)
Unrealized profits are taken into account when calculating futures and forex trading profits for tax liability. Also, hedge fund managers calculate their performance based on closed trades in addition to changes in open equity (OTE) from one reporting period to the next.
Many traders monitor their asset balances, including unrealized profits/losses. While I report unrealized gains/losses in my annual tax statements, I ignore open trade equity in monitoring my Net Asset Value in real time. Open profits do not belong to me so why would I treat them as belong to me. The only Net Asset Value that I care about is Closed Trade Net Asset Value.
One of the tables/graphs I update regularly is my Closed Trade Net Asset Value – I have this figure going back to 1981 on a monthly basis and back to 2014 on a sequential closed trade basis. In my opinion, how a trader considers open profits can GREATLY impact their emotional state – which can impact their trading disposition. A couple of examples – one hypothetical and one real time – illustrate this.
• Hypothetical: This morning you had a $20,000 open profit in a futures contract but your trailing stop got hit, erasing $10,000 of the profit. In your mind do you think/feel that you lost $10,000 or that you made $10,000?
• Realtime: I would have to figure out the exact amount, but I ended the week with less equity in my Prop Account than I had at the beginning of the week. Yet, closed trades this past week had a composite profit of 80 basis points. So, who cares how much in open profits slipped through the cracks?
My focus (MY GOAL) is to keep advancing my Sequential Closed Trade NAV. The graph shown is for 2021 Futures/Forex/Crypto closed trades. For the purpose of this discussion the numeric values of the “Y” axis are unimportant. Of paramount importance to me is avoiding big losses so that the NAV curve is no more than a few good trades from a new ATH. Even right now I am in trades that based on current stop levels will push the NAV curve into a new ATH. In a nutshell, that’s my goal. I operate on the assumption which has proven itself to me that if I take care of losses, then winners will take care of themselves. Trading is about managing capital and risk. That I need to enter and close trades is simply the plumbing by which that occurs. It is the big losses (for me this is any loss greater than 30 BP per tranche) that screw up the calculus of trading.
Factor Member Private Twitter
Top Six Tweets
Recommended Reading
Contains an affiliate link to our Amazon Store
Become a Factor Member
Members receive:
- Trading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print book
- The Weekend: Thoughts on a Sunday (Weekend) Afternoon
- The Monthly: Issued monthly, will provide an overview of the completed month and highlighted member content
- Private Twitter Page: Real-time alerts on interesting charts and observations, member dialog, the process of trading, the human aspect of trading, and risk/trade management (streamed on the member site as well)
- Webinars: Periodic member-only webinars where Peter speaks about current conditions and fields member questions
- Knowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of trading content
- Automatic notifications: Email and social media notifications are sent out when new content is published
- Factor Report Educational Papers: Periodic educational and instructional documents
View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work. My goal is to shoot straight on what trading is all about.
I hope you will consider joining the Factor community.
The Monthly | Blog Edition | October 2021
A glimpse inside the Factor Member Portal
From the just-completed month
October Numbers
- Private Member Tweets: 127
- Posts on the Member site: 9
- Videos/interviews: 1
Snippets from Thoughts on a Weekend Afternoon
Peter’s thoughts on the finished week and the week ahead | Issued most weekends
An introduction on Risk Management (Oct 17th Report)
“Also fortunate, I suffered paper cuts and avoided any gashes. It is the gashes that can take a trader out of the game. I closed 10 tranches this past week at an average loss of 18 basis points or a total loss of 181 BPs (1.8% of total capital). Interestingly, minus 18 is my average tranche loss dating back to the start of the Factor Service in 2014.
An interesting irony exists. My observation is that most novice/aspiring traders hate taking small losses out of worry that the markets in which they are stopped will turn around and go their way. Yet, an unwillingness to accept many small losses actually leads to some really big losses – and it is the big losses that badly end a trading venture.
Taking my pick between taking many small losses only to be flat when some anticipated moves occur on one hand and taking a few inevitable huge losses on one hand and my choice is easy – I will take the small losses even if it means missing some big moves because I was stopped out prematurely.
Factor members, your policy on taking losses – BIG or small – is the most important decision you must make regarding your trading operations. “
Some Chart/Trade Ideas shared with Members (Oct 24th Report)
Factor Member Private Twitter
Top Five Tweets
Recommended Reading
Contains an affiliate link to our Amazon Store
Become a Factor Member
Members receive:
- Trading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print book
- The Weekend: Thoughts on a Sunday (Weekend) Afternoon
- The Monthly: Issued monthly, will provide an overview of the completed month and highlighted member content
- Private Twitter Page: Real-time alerts on interesting charts and observations, member dialog, the process of trading, the human aspect of trading, and risk/trade management (streamed on the member site as well)
- Webinars: Periodic member-only webinars where Peter speaks about current conditions and fields member questions
- Knowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of trading content
- Automatic notifications: Email and social media notifications are sent out when new content is published
- Factor Report Educational Papers: Periodic educational and instructional documents
View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work. My goal is to shoot straight on what trading is all about.
I hope you will consider joining the Factor community.
Apple (AAPL) — Head and Shoulders History
Apple has a long history of forming the Head and Shoulders chart pattern.
The monthly chart below shows the historical timing of the H&S patterns (yellow boxes).
The daily charts of each H&S pattern indicate the price targets, including the H&S top just completed on Sep 18, 2020. In most cases price far exceeded the chart target.
The point is this – pay attention when a H&S pattern is completed in AAPL.
Completed Sep 18, 2020
Completed Apr 30, 2020
Completed Jan 30, 2019
Nov 2, 2018
Completed Mar 1, 2016
Completed Aug 5, 2013
Completed Oct 12, 2012
Completed Mar 23, 2009
Completed Mar 24, 2008
Feb 6, 2006
plb
The Monthly – June 2020 – Public Access
Markets on the radar screen as previously issued or pending Special Situation Reports (SSRs).
Other Charts of Interest (as of this date) that might offer swing trading opportunities.
Currency Review
(This is a short excerpt from the past weekend premium member report published Friday the 28th)
Read More
GBP/JPY (spot)
A continuation rectangle was completed on Friday. I missed this trade. I did not get the order in.
Read More
2019 Best Dressed List – Public
Each year I publish the Best Dressed List showcasing the best examples of classical charting principles from the just-completed year.
2019 Best Dressed List
Panning for Opportunity
(This is a short excerpt from the past weekend premium member report published Friday the 7th)
Silver (NYMEX)
Silver is forming a broad-based double bottom. I am monitoring the daily charts for a buying opportunity.
Gold (NYMEX)
The daily chart could be forming a continuation symmetrical triangle.
GOLD (NASDAQ)
The daily chart of Barrick Gold Corp. could be forming a continuation H&S wherein the head is a rounding pattern.
GDXJ
The daily graph is forming a saucer or scalping bottom pattern. Factor is flat –but interested. I will lose interest in this chart if the $39.60 level is penetrated on a closing basis.
Factor Membership
.
Peter Brandt is a 40+ year veteran of trading. Through his Factor Service, members receive:
Trading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print bookAlerts: Detailed information on specific charts as unique opportunities present themselvesMarket Commentaries: Communications on specific topics regarding market speculation and trading distributed periodicallyWebinars: Monthly member-only webinars where Peter speaks about current conditions and fields member questionsKnowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of contentAutomatic notifications: Email and social media notifications are sent out when new content is published.
View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work.
Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about.
I hope you will consider joining the Factor community.
###
Asian Interest
(This is a short excerpt from the past weekend premium member report published Friday morning the 6th)
Osaka Dow (TSE)
The quarterly chart of the Nikkei Dow speaks for itself. Of course, there are some macro reasons why Japanese equities remain well under the late highs made in late 1980s. The daily chart is attempting to complete a small continuation pennant. Factor is long, having bought an anticipatory position on Thursday.
China A50 (SSG)
The daily chart is forming a possible ascending triangle. Factor is flat, but interested.
Factor Membership
.
Peter Brandt is a 40+ year veteran of trading. Through his Factor Service, members receive:
Trading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print bookWeekend Update: 10-16 pages full of in-depth chart analysis and charting commentaryAlerts: Detailed information on specific charts as unique opportunities present themselvesMarket Commentaries: Communications on specific topics regarding market speculation and trading distributed periodicallyWebinars: Monthly member-only webinars where Peter speaks about current conditions and fields member questionsKnowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of contentAutomatic notifications: Email and social media notifications are sent out when new content is published.
View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work.
Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about. For more information watch my 30 minute webinar where we cover the Factor service in depth.
I hope you will consider joining the Factor community.
###
U.S. mid cap and small cap stocks have taken over leadership
Building a trade to profit from this momentum shift
Note: Members of the Factor Service have already been made aware of the ideas presented herein — many Factor members have already taken action.
It appears that the bull trend in U.S. equities is now spilling over to mid caps and small caps. These stock indexes have substantial room to play catch-up and offer attractive profit potential for futures and ETF traders.
Futures traders
The Russell 2000 is attempting to breakout from a 9-month classical charting rectangle. This rectangle has targets of 1784 and 1929. Traders can choose from the mini Russell (CME) which carries a value of $50 for each point of price change or the micro Russell (CME) which carries a value of $5 for each point of price change. For example, an advance by the mini Russell from the present price of 1626 to the target of 1784 would represent a profit of $7,900 per futures contract. Each futures contract requires a margin deposit of $3,300. This interpretation of the chart will be null and void if the Russell declines below 1579. A decisive close above 1640 is required to confirm the upside breakout.
ETFs
Futures contracts offer a much more efficient way to utilize trading capital and maximize profits — but also with commensurate risks. The Russelll ETF (IWM) is also attempting to breakout. I use a 2% breakout rule for ETFs. Thus, a close above 163.84 would constitute a price breakout. A close below 157.23 would negate a bullish breakout. With a profit target of 178.07, a purchase of 100 shares (cost of $16,384 at the breakout level) would offer a profit at the target of $1,423. The risk (using the 157.23 negation level) would be approximately $660 based on a 100-share purchase.
Obviously, futures trading is only for those traders with appropriate risk capital and temperaments. Yet, I hope the above example provides an excellent example of the benefits of trading futures vs. ETFs. While the ETF trade as laid out provides a 9% return of the capital used to buy the ETF, a futures contract offers a profit potential of more than 200% of the capital used to margin the trade.
While the profit potentials listed above are in relationship to the capital used to control the trades presented, the Factor Service believes that risk must always be measured against the total capital held in a trading account.
plb
###
Peter Brandt’s Charting Tool
Peter’s Crypto Coverage
