Foreign Exchange Idea’s on Watch
(This is an excerpt from the past weekend premium member report published last Friday morning the 22nd)
The Public Blog site
Stocks Keep On
(This is an excerpt from the past weekend premium member report published last Friday morning the 1st)
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S&P 500 (CME)
The S&P Index is attempting to penetrate the neckline of a 22-month continuation inverted H&S pattern. Note that a 15-week ascending triangle has been completed on the daily chart of the Dec contract. Perhaps this triangle will serve as the launching pad to complete the larger H&S configuration. Factor is long.
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Down in Latin America
(This is an excerpt from the past weekend premium member report published last Friday morning the 27th)
Mexican Peso futures
Peso futures have been in a bear trend during my entire trading career. The decline on the long-term charts has taken the form of repeated symmetrical triangles. The weekly futures chart is coiling. There are two caveats to a short side trade: Symmetrical triangles that continue past the 70% market toward the apex should not be trusted and this is an extremely negative carry trade with each successive futures contract priced at a lower price. The G6M-066 chart shows that traders constantly long the nearby Peso contracts and rolling at expiration have a positive return since early 2017. I will monitor this market but prefer the Brazilian Real.
Brazilian Real futures
I have a greater interest in the Real than in the Peso. The weekly chart displays a massive descending triangle on the futures chart, traded in terms of the USD value of the Real (and a Cup and Handle on the spot graph, traded in terms of the number of Real per one USD). Based on CME settlement data as of Sep 26, the theoretical negative carry is approximately -300 BPs annualized.
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.
###
Equities Show Promise
(This is an excerpt from the past weekend premium member report published last Friday morning the 6th)
Global Equity Markets
The S&P cumulative A/D line has posted a new high. The major indexes (DJIA, S&P 500 and NASDAQ) should be next to post ATHs.
S&P 500 (CME)
I bought the completion of a rectangle on Thursday – and did so with hesitation knowing how frustrated I have been buying strength (over and over and over again) during 2019. The possible inverted H&S pattern has an up-slanted neckline.
China A50 (SGX)
The monthly chart exhibits a possible 4-year ascending triangle. The daily chart is attempting to complete a continuation symmetrical triangle. Factor is long – note the small 2-week pennant on the daily graph (boxed). I have an interest in pyramiding this trade. A close above 13995 is needed to confirm the daily chart triangle.
DAX (Eurex)
The advance on Aug 30 completed a small, but well-defined, inverted H&S bottom. Factor is long. The Sep 3 low is my pivot for protection. I will look to jam stops if the market approaches the 12462 target.
DJIA (CBOT)
I view the weekly chart as a 17-month inverted H&S with a premature breakout in Jul.
TSM (NYSE)
Two weekly charts are shown to display the massive 17-month inverted continuation H&S pattern. The total- return chart is on the right. The prices on this chart include previous dividend payments. The chart on the left is ex-dividend (prices have been reduced by previous dividends). Factor is flat. I will buy a breakout.
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.
###
Precious Metals Trying to Break Free
Precious Metals
(This is an excerpt from the past weekend premium member report published last Friday morning the 19th)
Gold (NYMEX)
Perhaps we are finally involved in trade with a proper follow-through. Time will tell. The dominant chart construction in Gold is the completion of a 6-year inverted H&S bottom pattern wherein the right shoulder is a 3-year symmetrical triangle, as shown on the closing price chart.
This continuation H&S pattern can be seen as part of a historic bull trend as seen on the yearly line and monthly candlestick charts. This pattern has a target of 1800, although a retest of the ATH at 1920 is logical. A further P&F target exists at 2637.
The advance on Thursday completed a possible 3-week continuation pennant. If this is a half-mast pattern, the target is 1547, as shown with the grey arrows. I am interested in buying a retest of the pennant if it occurs within the next couple of trading days.
Silver (NYMEX)
The advance this past week completed a possible 13- month “W” or double bottom on the weekly chart.
Platinum (NYMEX)
A 9-week horn bottom has been completed on the daily chart of the Oct futures contract.
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.
###
Interesting Equity Markets
Interesting Equity Markets
(This is an excerpt from the past weekend premium member report)
The cumulative A/D line for the S&P 500 remains close to a new high. I continue to view the S&P breadth to be positive for U.S. equities.
DJIA (CBOT)
The DJIA has been unable to make a new high for the past 18 months. This is also true for the S&P 500. My thinking is that a decisive new high by these two indexes confirmed by a new high in the S&P A/D is required to put the cyclic bull trend back on track. The Factor Tracking Account is long the micro Dow Index.
S&Ps (CME)
A decisive close above 3021 would be a breakout on the S&P chart. Such a close would establish a target of 3640. Factor is flat. I will buy S&Ps if it breaks out before Dow futures. I would not wait for 3021 before acting.
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.
###
Forex Plays
EURUSD (spot)
This Forex pair once again completed an 11-month falling wedge (a diagonal pattern). Factor established a long position on Friday. I have low expectations for this trade – that could be a good sign. There is the potential for a significant bull trend based on the long-term chart.
Canadian Dollars (CME)
This discussion will bring Factor members back to Jun 2017. The advance in Mar 2016 violated a multi-year parabola. Following the initial rally from the violated parabola, the market corrected in the form of a 13-month channel. The completion of this channel in Jun 2016 produced a 785 BP trading profit for the Factor Tracking Account.
Another channel is forming in the C$. This is a diagonal pattern, so I am cautious. Keep in mind that long CAD futures (the value of the CAD expressed in USD) is the same trade as short spot USD/CAD (the number of CAD that can be purchased by one USD). See the daily chart of futures and spot.
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.
###
Global Equity Markets
Global Equity Markets
(Excerpt from last Friday’s Premium Report)
The S&P cumulative A/D line is rolling over – the type of rollover experienced in the 4th quarter of 2018 is still not visible. Most Global Equity Markets are in strong down-trends or completed significant top patterns this past week.
S&P 500 (CME)
The daily chart has completed a H&S top pattern with a target of 2632.
NY Composite Index
NYA has completed a H&S top. Note that my charting style ignores the early Mar decline. I make no attempt to include this price action as part of the H&S top. I always prefer a horizontal neckline to a slanted neckline.
NASDAQ (CME)
The decline on through the neckline of an H&S top on the daily graph, thus providing a sell signal. Factor is short. All major U.S equity indexes as well as many global indexes displayed clearly defined bearish chart patterns – as a result I extended my sizing on this trade relative to many recent trades, still remaining well under 100 BPs for a risk level. I already began squeezing out risk by the close on Friday by advancing stop protection.
Nikkei Dow (CME)
Perhaps the cleanest H&S breakdown belongs to the Nikkei Dow. The CME contract is shown, although I typically trade the Nikkei at the Osaka Stock Exchange.
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.
###
Who is More Precious
An excerpt from the past weekend member report.
Gold (NYMEX)
The possibility of a massive inverted H&S pattern on the monthly graph is noted once again. The daily chart displays a small H&S top pattern. A completion of this H&S top would do some damage to the near-term bullish case.
Platinum (NYMEX)
The WBB advance on Thursday completed a 7- month ascending triangle on the daily chart. Support should exist at the 881 level. The target is 1001. The breakout of this pattern occurred during my nighttime hours and Platinum is a market in which I do not use overnight entry stops.
Factor is flat in the futures market. Instead I bought PPLT, the Platinum ETF as a means to more precisely control sizing. The target on the PPLT daily chart is 92.14.
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.
###
Understanding Trading Outcomes
Understanding trading outcomes through the lens of probability theory
Reviewing trades offers the opportunity to unpack the impact of random probability upon a sequence of trading events. An extremely simplified view of probability theory relative to trading goes something like this:
- A prolonged sequence of futures (or FX, equities, cryptos – pick your poison) trades with a fixed $1000 profit target and a fixed risk of $1000 (normalized for underlying trends) should produce profits in 50% of the trades. A net loss would occur over time due to trading fees.
- A prolonged sequence of futures trades with a fixed $2000 profit target and fixed risk of $1000 risk (normalized for underlying trends) should produce profits in approximately 33% of the
trades. I would have a “killer” trading program if I could achieve a 50% win rate with a 2:1 win-size/loss-size ratio. - A prolonged sequence of futures trades with a fixed $4000 profit target and fixed risk of $1000 risk (normalized for underlying trends) should produce profits in approximately 20% of the
trades. Just imagine how profitable this profile would be if only 1/3rd of trades scored a win.
Many traders only enter trades with a profit/risk ratio of 3:1. I understand the concept behind this – although I do not pay much attention to profit-potential/risk ratios in my own trading because I move my stop aggressively even though I may hold fast to a target.
Active and aggressive trade management DRAMATICALLY alters the probability calculus. While the math
is complex, think of it this way:
- My five year ratio of avg. profit size to avg. loss size is 3.8 to 1
- My five year Profit Factor (PF) is 5.1
IMO, the PF is a better metric to reflect the projected ratio of win-size/loss-size for the purpose of understanding the impact of random probability. A 5.1 metric is the rough equivalent of rolling the number 1 on a six-sided die (the probability is 1/6 or 16.6%). It is interesting to note that this percentage figure is similar to the percent of trading events that tend to put in my bottom line in most years. Coincidence? No.
Random probability theory applies best to the “law of large numbers.” Over a shorter series of events just about anything can happen. The point of this discussion is that thinking of trading in terms of “win-rate” over an extended period of time is a meaningless metric. I encourage traders to investigate a deeper understanding of the calculus of trading.
My three “take-aways” from this discussion are:
1. Avoid using simplistic performance metrics such as “win-rate” to understand the dynamics of a trading approach/program.
2. Trade identification (the “signal”) is far less important than risk and trade management.
3. Protecting one’s pile of chips is job #1. All approaches to market speculation run into losing streaks. Things will eventually get sorted out as long as the pile of chips remains mostly intact.
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.
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Peter Brandt’s Charting Tool
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