Saturday, September 17, 2011

Meta-Trader - Low and Inside

Welcome back Meta-Traders.

All eyes were on the Euro zone this past week as world leaders worked to contain a potential financial contagion that would be triggered by a Greek default.

In an interview with CNBC's Jim Cramer on Tuesday, US Treasury Secretary Tim Geithner assured the world in the strongest possible terms that he and other leaders would work together to avoid the failure of Europe's public institutions. And work together they did, announcing on Thursday a huge combined "US dollar liquidity providing operation" between now and year end in combination with the US Federal Reserve, Bank of England, the Swiss National Bank and the Bank of Japan.

It's great to see bankers coming together to provide confidence and stability, even if they do what central bankers always do - create money out of nothing and throw it at the problem!

In any case equity markets loved it and we had a strong week with 5 straight up days. Checking the charts though, we have just rallied back to the top of the range. Problems in Europe - and the rest of the world for that matter - are far from over and its always good to keep the weekly chart in mind when looking at the daily chart action.

As for equities it was a tale of extremes. Tech giants Netflix (NFLX) and Research in Motion (RIMM) got crushed and slammed to the downside while Amazon (AMZN) and Apple (AAPL) stepped out to new all-time highs.

Amazon was the story of the week. On Wednesday, it quietly slipped above the strike of my short call contract at $220. On Thursday it took on the prior all-time high at $227.45, but stopped short of that number. On Friday it opened a hair above the prior all-time high and rocketed higher gaining a stunning +12.25 on the day! I was long the stock, but short the $220 call, so I sat - deer in the headlights - and watched it all happen. At this point, there's not much else left to do but wait for the premium to come out of the short call.

Speaking of short calls, my OIH October 130 call expired on Friday and on Monday I will collect $450 premium in each account - not bad for 2 weeks of doing nothing! But I sat and watched the shares gyrate around the strike on Friday. With less than a minute left in trading on Friday, I watched it move in tight fashion around the strike, hoping for a close just under $130 so I get to keep the stock. The close was at 130.10 which means I will probably get called away. Not a problem at all but somewhat less than optimum.

Its a feeling I came away with the entire week. Sort of like a pitch in baseball, low and inside and not worth a swing.

On the Forex side, it was a retracement week, where the USD gave back some of its gains from the prior week.

As for EUR/USD, it made a rally attempt back up to breakdown point of 1.3970, but petered out somewhat short of that target. Teyacanani took a longside trade toward the upper part of the range, and it occurred to me at the time that I would never take that trade since it looked like a rally right up to resistance. That trade didn't work out and EUR/USD rolled back over and closed the week at just south of 1.38.

As for the robots, Atipaq Full Portfolio gave back about 5% for the week after last week's monster gain.

Megadroid Live took a 15-pip winner on Thursday in a quiet week.

My own FX-Regression had a nearly perfect week except for a losing EUR trade on Monday which sent it to the bench for the remainder of the week. This system gained about 4% for the week and is now just short of positive for the year. I'm still convinced this system is a winner, but I don't blame you if you are a skeptic. I've been working on some improvements to FX-Regression, and i'll share them when the time is right.

Finally, I entered CNBC's Million Dollar Portfolio challenge contest which starts this coming week. I'm not sure if my results will be public, but i'll keep you posted. Its a good opportunity to sharpen my trading and investing game and includes both Equities and Currency.

That's all for now, enjoy your weekend.

Saturday, September 10, 2011

Meta-Trader - Forex en Fuego

Welcome back, Meta-Traders.

Summer gave way to fall this past week in North America and sent the kids back to school and brought the big money back from the beach. This simple change of season seemed to flip a switch which lit the forex markets on fire. And after a long and listless summer season full of drawdown, I say bring it on!

Speaking of fires, we had some massive wildfires in the state of Texas as shown in the photo on the left. Texas has had a brutal summer with months of 100+ plus temperatures and no rain. Meanwhile, we have had so much rain in New York, I need to drain the swimming pool. The weather, like financial markets, have been dominated by extremes lately.

Monday was the Labor Day holiday and I used a good part of the day to get migrated to a new laptop platform with all my live accounts on one laptop and demos setup on a separate machine. I also revisited the parameter settings for some portfolios and made a few minor adjustments.

Tuesday morning brought some shocking news that the Swiss National Bank decided to massively intervene to weaken the CHF. "With immediate effect (SNB) will no longer tolerate a EUR/CHF exchange rate below 1.20 CHF. The SNB will enforce this minimum rate with utmost determination and is prepared to buy currency in unlimited quantities."

This shocker caused massive moves in EUR/CHF and USD/CHF. Fortunately, Atipaq went long USD/CHF just an hour earlier in 3 separate accounts at about 0.79 with a take profit just under 0.80. When the news hit, USD/CHF gapped about 300 pips to the upside and I took profits at 0.82 in both Atipaq Full Portfolio and Atinalla #3. Interestingly, I got taken out of the same trade in Atinalla #4 at exactly the take profit of 0.80044!

The difference in this case was the broker. let me have the extra 200 pips, but FXDD took me out at exactly the TP. I went back to look at the FXDD trade history, and I found in nearly every case on winning trades, FXDD took me out exactly at the TP, with rarely any slippage in my direction. But for losing trades, there was nearly always some slippage against me, and rarely any slippage in my favor. Very interesting indeed and shows you why I will always have at least 2 different Forex brokers. Its also probably worth a chat with FXDD who seem to be taking a "heads I win, tales you lose" position on order handling.

Wednesday brought a nice rally in the equity markets and I took the opportunity to sell to open some September 130 calls in OIH for $4.5 against the position I entered last week in the low $129's. Come hell or high water, I'm going to book $450 in profit in each account next Friday. Sometimes writing options seems like taking candy from a baby, particularly if you are willing to assume the risks of a long stock ownership. Also, I'm coming to appreciate what a great trading vehicle OIH (Oil Service Holders) is. It is wonderfully volatile instrument with 11 points of range last week or about 8%. And its a pretty good bet that energy service companies underlying the ETF are not going out of business!

The rest of the week was all about the Euro which decisively broke out of a 4 month trading range to the downside. The breakout-based systems from Asirikuy handled it beautifully.

Atinalla #1 had a banner week rising about 8% with solid contributions from all 3 embedded systems. The best system of the 3 (Teyacanani) brought in a massive 445 pips on short EUR/USD position opened on Tuesday and closed on Friday.

Atinalla FE went on a tear last week and has now booked 7 straight profitable trades bringing in +453 pips. Recall this is a free expert advisor can be downloaded here Atinalla FE.

My own system FX-Regression took a string of profitable trades and gained about 4% for the week.

The only real bummer of the week was Megadroid Live which took a 6% loss on Monday evening. I also took a loss in a short AUD/NZD trade recommended by Andy Bush from CNBC's Money in Motion currency trading TV show.

Regarding demos, I have removed the demo accounts for COATL which I attempted to restart this past week, but ran into some technical problems. Also, I decided I don't really like the way COATL trades in the sense that it opens up many positions and keeps them open for days and weeks. I think sometimes causes it to get into position and less than optimal times and ties up capital for entries at better times, something Daniel calls "Startup time dependency."

Finally on Friday, the Equity Markets sank in a depressing fashion, losing nearly 3% for the day. At this point, I'm almost inured to the volatility. It seems like the market is pricing in a bad recession and accompanying drop in earnings. Yet is the end, its not clear that the earnings will suffer that badly. Also, bear in mind that the dividend yield on stocks will provide a support for good companies. So I'm continuing to bet equities will beat bonds and cash and expect I will be right if I keep I just wait out the volatility.

That's all for now, get some rest and enjoy your weekend.

Saturday, September 3, 2011

Meta-Trader - Dodged some bullets

Welcome back Meta-Traders.

Hurricane Irene came and went this past week trashing the Northeast USA and leaving thousands without power and billions in property damage. The winds didn't meet expectations but the rain was intense and we got about 8 inches of rain in less than 24 hours. That led to severe flooding in anything vaguely resembling a flood plain as shown in this photo posted by one of my Facebook friends. Fortunately, I came through with no property damage, no flooding an no loss of electricity. There's one bullet dodged.

As for the financial markets, we closed out the month of August which was particularly cruel to the Equity Markets. I was hit hard in that sell-off, but i'm trying to make the best of the volatility and produce some alpha using options.

Recall I went into last week long AMZN in both accounts and long a pair of AMZN September 190 calls. My August 110 call expired worthless at the bottom of the sell off which was a good thing. But I was deep in the hole on the AMZN stock and the pair of calls. Well AMZN had an amazing V-shaped recovery and rallied all the way from 180 to the low 200's as of last weekend.

As my calls came into the money, I sold one at $22 on Tuesday about a point above where I bought it, and held onto the other one for further gains. $210 seemed like a reasonable target since it was an earlier support area.

The rally continued as the week went on, and I was reminded from watching CNBC that this rally had the look of end-of-the-month window dressing, with money managers and hedge funds trying to repair their badly damaged portfolios for the monthly statement. I held onto the other call and sold it on Thursday for about $26, pulling in an extra 5 points as a bonus. Another bullet dodged.

AMZN continued to push higher on Thursday and I bought the September 200 call for about $17 not long after I sold the 190 call. This was not a particular smart move since I was in a nearly identical position just 10 minutes earlier. But there was a decent chance AMZN could fight its way up to the next strike at $220 and I wanted to be on board for that move.

Well that position didn't work out and I watched in the early afternoon as the market started to come apart. So I closed the September 200 call for about a $170 loss and turned around and sold to open the October $220 call for 9.6 bring in a healthy $960 of premium. With the stock at $213 that could translate into a 7% return if called, and a 4.5% return if the stock closed below the $220 strike at expiration. That turned out to be a good move and AMZN started to sell off and ended the week at $210.

Finally on Friday, I bought 100 shares of OIH, the Energy Services ETF at about 129 with the intention of selling the September 130 calls for $4.10. My limit order expired worthless, but I expect i'll have an opportunity to get into that position this coming week.

Netflix had a pretty good recovery during the week and traded as high as $241 during the week. Recall I sold last week at about $216 taking a hefty loss from my entry in the high 200's. On Thursday, a news story broke and NFLX gapped down sharply and close the week at about $213. I avoided getting sucked into the recovery rally. From experience, I've seen that once a growth stock goes bad, its best avoided on the long side. Another bullet dodged.

As for Forex Robots, we saw some improvement. Atinalla finally took home a winner after 9 consecutive losses. Atinalla FE took home a pair of winners after 5 consecutive losers, all of which were larger than these 2 gainers. Atipaq Full Portfolio had a pair of winners reversing a long series of losing trades. This portfolio was up over 50% just a few short months back.

Its been a long slide down for the robots portfolio after being up almost 23% for the year a few months back. I checked this morning, and i'm still up for the year just about 9%.

As for new developments, I started a demo of Sunqu, the new neural-network based Expert Advisor from Asirikuy. Its a topic I have some history with, and certainly worthy of a review. I've been unable to get a clean backtest, so stay tuned. But the demo account has been added, so check the right side of the blog for demo results.

That's it, have a great weekend, you earned it!