tactical trader

While doing some research into Canadian companies last week I discovered The Ethical Funds Company – “Canada’s first family of socially responsible mutual funds”.

At first I thought it was some kind of joke, after all ethical funds sounds like an oxymoron. Given that the financial industry revolves around money and money and ethics are strange bedfellows, I was intrigued as to how ethical investments would work and why people would choose them.

To quote from the website:

Is it important for you to know that your money supports civilian, and not military, industries? Do you care if the companies in your retirement portfolio treat their employees fairly? Does it matter whether or not corporations are working to reduce pollution?

It is interesting when looking at the guidelines that they do leave room for investment in companies that could compromise your ethics, for example:

Non-tobacco
The Ethical Funds Company invests in companies that do not derive a significant portion of their income from the production of tobacco products.

Non-military
The Ethical Funds Company invests in companies that provide products and services primarily for civilian, rather than military, purposes.

So if the Canadians are getting into ethical funds, what about the British? A quick Google search reveals that there are some ethical investors over here too. Ethical Investors Group provides a list of funds from many big name providers that you can invest in and satisfy your conscience at the same time.

I haven’t gone any further with my research so I have no idea how well ethical funds will perform when compared with other funds. I’m happy to be an un-ethical trader and I’ll use my ill-gotten gains to ease my conscience!

I have just been checking through various web based sources and just had to tell you about yet another nonsensical candlestick strategy I have come across. Believe it or not it revolves around Adam and Eve!

Here are some of the more amusing sections:

ADAM & EVE & ADAM

The Adam and Eve Reversal demonstrates the importance of the center peak in the formation of Double Bottoms. A very sharp and deep first bottom on high volume (Adam) forms this DB pattern. The stock then bounces high into the center retracement and develops a longer and more gentle, rolling second bottom (Eve) on relatively low volatility. Price action then constricts into a tight range and the stock breaks strongly to the upside. At times, the top of Eve is bound by a flat shelf that marks an excellent entry point when broken. And similar to many of these sub-patterns, shelf resistance is often located right along the top of the center retracement pivot. This illustrates that the most important focal point subsequent to any suspected double bottom is the relationship between this center pivot and current price.

Less common than the A&E is its cousin, the Eve and Adam pattern. Price first develops support near its low on relatively minor volume in the signature rounded Eve curve. The market attempts a rally, which then fails at common retracement levels. Fear ignites the crowd and price action shifts into a higher volatility state. A sharp and violent drop ensues, hurling the stock back toward its lows. A high volume Adam reversal-spike then prints, often with a price extreme just below Eve's bottom. The subsequent uptrend can skyrocket as the crowd sentiment shifts sharply back toward the positive.

Since DBs occur in downtrends, risk must be managed defensively. The greedy eye wants to believe bottoms and easily fools better judgement. Even spectacular reversals offer little profit if price can't ascend back out of the hole it found itself in. When choosing stop and exit points, violation of a prior low is the natural first choice. Make certain your entry permits you to exit for an acceptable loss at this location. And don't stick around long. Price will gather downside momentum quickly at broken lows as it searches for new support.

Successful bottom entry also takes a strong stomach. Even when all the technicals line up, sentiment will be highly negative at these turning points. The potential for short-term profit, though, is outstanding. In addition to other longs ready to speculate on a good upside move, high short interest will fuel explosive impulses off these points. Perhaps for this reason alone, serious traders can't ignore double bottom patterns.

Bottom Reversals

Eve's rounded bottom takes longer to form than the sharp Adam spike. Look for volume to decrease as the stock heals and prepares for a new uptrend. Adam and Eve formations aren't limited to bottoms. Watch for them at the end of parabolic rallies.

Eve and Adam formations rarely appear but are highly profitable when they do. The emotional shift within the crowd from extreme negative to extreme positive ignites fits of buying, powering a stock out of its bottom._

Pleease!

It never ceases to amaze me the lengths the chart pattern readers will go to when trying to justify their preoccupation with what is little more than tea leaf reading. In all the years I have done this job I have not come across one so called pattern that has absolute validity and reliability at the hard right hand edge, strangely enough they always look great in backwards time. I wonder why that is?

In my experience advanced chart patterns make far more money for those selling them than the poor suckers who pay out their hard earned cash to discover them.

If this offends you then the solution is simple, send me a pattern that works and the details of what it works with and I will trade it in real time with my own money. I will then gladly post the results here. I doubt there will be many takers.

My virtual warrant portfolio is looking good today with good gains coming from my Man Group (SB80) call which is up 31% and Rolls-Royce (SB90) call which is up 19% since they were bought last week, and Vodafone (SC29) call which is up 13% since they were bought on Monday.

I'm now looking to take profits on the Man Group position, with a limit order in place to sell half (5,000 warrants) if the price nudges a little higher today.

It is also interesting that the Vodafone SC29 call was one of my losers earlier this week too, it was down 5.36% on Monday.

Overall my portfolio, which currently has 18 open positions, is only down 1%. I'm now planning to take this trial run up to the end of the month before I start to refine the entry and exit strategies, and then of course move to using real money.

Last week I started using Société Générale’s (SG) Virtual Warrant Portfolio to develop a warrant trading idea into a proper strategy. The site is giving me the ability to paper trade all of SG’s Covered Warrants using real market prices with market and limit orders and a £10 virtual commission. You start the month with £10,000 in your virtual account and, for the competitive, there is a daily ranking system that shows the current performance of the top nine virtual traders.

At the moment I’m in the early stages with my strategy but using the Virtual Portfolio I’ve been able to get a really good feel for how the prices move in relation to the underlying instrument. So far I’ve been looking at FTSE 100 stocks as there are various put and call covered warrants available for 41 of them.

My ranking went as high as 6 last week, but is sadly down again today! I did have some good gains last week, including a huge 78.57% gain on a Standard Chartered (SB03) call and a more modest 18.90% on a Royal Bank of Scotland (SB87) call. There have been a few losers too, including 22.49% on a Tesco (SA67) put and 5.36% on a Vodafone SC29 call.

My next step is to devise a proper entry strategy and look at the optimum number of warrants to purchase in a trade (so far I've varied from 200 to 10,000) and maybe hit the number 1 spot in a few weeks time!

It’s incredible that we’re already in the second week of February before I’ve had chance to post or make any changes to the site. It certainly illustrates my commitment to focus on trading instead of the website :D. Contrary to the absurd ramblings of some traders on the forums, the aim is not to ‘kill off’ the site (if I wanted to do that I’d just pull the plug) but to primarily concentrate on something that makes money - preferably lots of it!

So with that out of the way, here are some of the more noticeable changes that have been made in this update which went live yesterday evening.

Emoticons

Forget articles, blogs or forums, the only thing that makes a trading site worth visiting is emoticons, or so I’m told! I’ve added a collection of 22 emoticons that can be used in forum posts or comments – the full list is available on the formatting help page. And like so many things these days, the images themselves were made in China

Revised blogs section

The blogs section of the site has been revised so that blog posts are shown immediately. It is now only necessary to open an individual blog post when making or reading comments.

Redesigned What’s New page

The What’s New page has been redesigned to make new items stand out more, with sections that have not been updated being shown in a “What’s Not New” section.

Links to other websites

In line with accessibility guidelines links to pages on other websites will not open in a new browser window. This gives you control over whether you want a new window (or tab) for the site by right clicking on the link.

To make it easier to identify links to other websites they will now be preceded by the following icon: . Similarly links that allow you to send an email (and will try and open your email software) will be preceded by this icon: .

At the present time these icons will only be visible in Mozilla compatible browsers, such as Firefox.

Del.icio.us bookmark links

As the social bookmarking service del.icio.us moves from the realm of cool kids into the mainstream, helped by the purchase by Yahoo! we’ve decided to join in by making it easy to bookmark articles, reviews, blog posts and forum topics. You will be able to click a link to add the page to your del.icio.us account whenever you see a bookmark link and icon: .

New Trader Locator post codes

I’ve added 24 new post codes to the geolocation database giving coverage for Guernsey (including Sark), Jersey and the Isle of Man. If you live in any of these places and want to make sure you are located correctly enter your post code and select United Kingdom as your country in your profile.

Loads of other stuff

There have been numerous other optimisations, updates, and one or two bug fixes in this release, many of which you probably won’t even notice as they effect the behind the scenes operation of the site.

Login hassle

The hardship of having to login in order to post to the forums was discussed ranted about this week. Over the past couple of days I have closely monitored the login system and have found no errors - the site is functioning as it should.

If you think you are being asked to login too much, check the following list of when you should need to login:

• when you first visit the site

• when you have logged in but haven’t accessed a page for more than 1 hour

• when you have logged in, exited your browser and then visit the site again in a fresh browser window

I have only had one report from somebody who claimed that they had to login “even after 1 minute” but this is from somebody who always has a problem with something. If you have having this kind of problem the only way I can help is if you provide more information.

As for auto-login, when I get around to it the site will have it, until then you’ll have to endure the whole 5 second process of logging in to post – oh the hardship

I have been away from my blogs for a while and for those of you who read them I apologise for this. I have been busy with my new book on Direct Access trading and have not had the time to write, be in the markets and catch up on blog posts.

The danger with blogs is that they can just be the senseless ramblings of someone with nothing better to do so to make sure this does not happen I have decided to use my blogs to report on various trials we carry out here at TT.

Those of you who know us will be well aware that we are traders and like most traders we are always on the lookout for ways to improve what we do. We are always keen to find alternative methods worthy of exploration and to try and separate the worthy from the rip offs.

Because of our public face we are often approached by various providers of systems, methods, services and so forth. Unlike certain other sites we are not prepared to promote any old rubbish in the interest of a quick buck from advertising, this is why the site is so remarkably free of countless irritating banners.

Instead I have decided to put these systems to the test by trading them in real time with my own money. I will tell you what the system is meant to do and the signals it gives along with a list of what happened. I will also let you know of my experiences in opening new accounts so I can trade these things (I want to keep them separate from my main accounts so they can be monitored discretely).

This is going to be well worth reading, I know of no other site that is prepared to do this to bring the providers of decent systems to the attention of people who might benefit from them. Conspiracy theorists please note that we are not taking any kick backs for this work, we are testing them out with complete independance and will tell it like it is, though it would of course be great to make a few pounds from the trades we place!

So, watch this space. I am just setting up a couple of these trials and will report progress soon.