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Follow-my-trade-day-1

Welcome to Follow my trade. I’ve been meaning to do this for a while in order to try and showcase exactly how I go about my trading.

I get asked all the time what kind of process I go through and so I thought this would be the best way to do it.

What I'll do is post up trades at the end of the day or the day after I take them. The reason for this is that I do NOT give buying or selling recommendations.

What I want you to be able to get out of this post is a good understanding of the methods I use in my own trading.

Hopefully you'll get some insights into:

  • How I read and interpret the chart.
  • Where I'm looking to buy and why.
  • How i calculate whether the trade is worthwhile taking or not.
  • Why I take the trade, where I take it and my mindset at the time.
  • How I manage the trade once I am in it.
  • How and where to take profits.

Finally, once the trade is finalized I'll review what worked and what didn't and how things can be improved next time.

So with that all said, lets take a look at a trade I entered today. Its a stock on the ASX that I have followed and traded a number of times.

Billabong International Limited ASX:BBG

​Before I do anything I take a look at the larger time frame. So if I am looking to trade the Daily I'll look at the Weekly chart (below) first.

BBG-Weekly

There are 3 main criteria that I look for on the Weekly these are:

  • Change of trend - which we can see and is marked.
  • Confirmation of a new trend with a higher low (HL) and higher high (HH) in place.
  • High volume coming in at the bottom of the trend indicating a selling climax.

All of these criteria are seen on the weekly chart and that why this stock caught my interest. I had in fact been watching it for a while after seeing the high volume potential climactic action show up on a stock scan.

From the Weekly chart I moved to the Daily chart (below), to see what it was telling me.

BBG-Daily

Again on this chart we can clearly see the trend change and the Higher lows and higher highs in place. I've also marked in the key support and resistance levels and the the uppermost target price I would be aiming for at about $2.50.

Lets zoom in a bit and I'll explain further.

BBG-Dailyzoom

What caught my attention for taking this trade today was the fact that yesterdays bar had dipped down to touch and test support/resistance at $1.60 and its lowest point was very close to the demand line.

For me this is the safest place to take a trade and I calculated my position size based on a $1.57 stop loss (remember always put your stops on odd numbers).

My buy price was to be anything above $1.60 and my target for the trade short term would be $2.00 (the top of the current trend channel) and longer term about $2.50 (the previous highest level).

So I went to my position sizing calculator and input the figures to see if this trade would stack up and be worth taking based on its risk/reward profile. You can see this below.

Position sizing calculator

This is the calculation for a $2.00 target for this trade.

The risk on the trade is 2% of equity ($5000) which is $100.00. The potential profit is $514.29. The risk to reward or R-Multiple is therefore $514.29/$100 or 5.14.

If the R-multiple is 3 or more I'll generally take a trade. The R-multiple for the upper target of $2.50 is even better at 12.29, as you can see in the table below.

positons size modelling

So after calculating the risk reward and finding it favorable.  I could confidently take this trade and got in at $1.63 - $1.64.

confirmation note

So that was Day no 1 of this trade and it closed at $1.69. We shall see what happens from here and I'll provide updates in the Follow my Trade section of this site as the trade progresses.

If you have any questions or comments feel free to leave them in the comments section below. I'd be glad to hear your thoughts on this trade as well.

8 Comments… add one

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8 comments… add one
David March 31, 2016, 11:32

Thank you very much for posting the process of how you go about your trading. Looking forward to see how you manage the trade!

Peter March 31, 2016, 20:57

Thank you David, nice pushup today so we’ll see if it continues from here.

Brad March 31, 2016, 20:08

Excellent post Peter …BBG is one I follow also
really insightful on what you look for in your trade and putting your buy confirmation proves your TA skills are more than just words on a blog !

Your trades already looking comfortable. Well done and keep these coming

Peter March 31, 2016, 20:59

Thanks Brad, it was just too good and safe a trade not to take. Good pushup through resistance and well away from the danger point today, something I always like to see.

Angel April 1, 2016, 09:05

Hi Peter,

Very, very helpful and well seen. Do you use any kind of screener?
Thanks

Peter April 1, 2016, 09:42

Hi Angel, yes I screen weekly and look for low volume test bars on the Weekly chart. I tend to keep my watchlist to about 10 stocks at any one time. I’ll put a post up in the future about how I go about it. It’s a question I get asked quite a bit.

Harish Rupawala April 3, 2016, 12:44

Hi Peter,
Not everyone who teaches shows his trading set-ups. Even-though I do not trade on the ASE, I find your explanation simple and easy to understand and very applicable to most markets around the world. Thank you and always looking forward to your posts.
Happy and profitable trading always ! :))

Peter April 3, 2016, 17:00

Thank you Harish, I presonally just think it’s the best way to teach and show the principles that I have talked about in all my blogs and videos. Cheers!

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