Support and Resistance Trading
Simple Strategies for Short Funded Traders

Traders Helping Traders E-zine for the week 10-01-2006 - Test Drive Edition


Question: Do you ONLY cover one or two markets??

Answer: NO!! We cover all markets in all sectors - wherever there's a good trade, we'll cover it!

This is only the TEST DRIVE Edition. Our Subscribers get the whole thing.

For a detailed analysis of ALL the markets Erich and Tom cover along with explicit charts, entries, exits, stops, risk/reward ratio, potential profit, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

 

Part One - Erich's Trades

Lesson du Jour

Here's a little something I picked up while surfing the web. Some of it might not be new to you, but it's all true – in life as well as trading.

Rules for Life

You will receive a body. You may like it or hate it, but it will be yours for as long as you live. How you take care of it or fail to take care of it can make an enormous difference in the quality of your life.

You will learn lessons. You are enrolled in a full-time school called Life. Each day you will be presented with opportunities to learn what you need to know. The lessons presented are often completely different from those you THINK you need to know.

There are no mistakes -- only lessons. Growth is a process of trial and error and experimentation. You can learn as much from failure as you can from success.

A lesson is repeated until it is learned. A lesson will be presented to you in various forms until you have learned it. When you have learned it (as evidenced by a change in your attitude and behaviour), then you can go on to the next lesson.

Learning lessons does not end. There is no stage of life that does not contain some lessons. As long as you live, there will be something more to learn.

"There" is no better than "here". When you "there" has become another "here", you will obtain another "there" that will again look better than your "here". Don't be fooled by believing that the unattainable is better than what you have.

Others are merely mirrors of you. You cannot love or hate something about another person unless it mirrors something you love or hate about yourself. When tempted to criticize others, ask yourself why you feel so strongly.

What you make of your life is up to you. You have all the tools and resources you need. Remember that through desire, goal-setting and unflagging effort you can have whatever you want. Persistence is the key to success.

The answers lie within you. The solutions to all life's problems lie within your grasp. All you need to do is ask, look, listen, and trust.

You will forget all of this. Unless you consistently stay focused on the goals you have set for yourself, everything you just read won't mean a thing.

Anonymous

Got a question that needs answering like an itch you can't scratch? Send it along to me at Erich@tradershelpingtraders.net and I'll be happy to try and clear things up for you.
 

A Sampling of the Markets we're covering this week...


Energies Market Overview

The Energy complex spent last week in consolidation mode. While the ranges look like anything but consolidations, the fact is that the markets stalled after the big decline from the previous weeks. I still believe that we still have more room to the downside in this sector; however the ranges are a little too choppy right now just to take a stab at a trade.

RSI is "normalizing" and nearing the 50% level on the indicator, which is just as good (and neutral) as a 50% Fibonacci retracement. While this might be enough to send prices lower, the strong weekly support that we're trading at, combined with the tendency for markets to retrace a bit after a large move in either direction, makes a bounce seem more likely for this week.

At least that's my thinking for the moment. If we see prices tighten up a bit, and/or define a resistance area, then I might try a trade early.

FLAT Energy Complex

Financials/Indices Market Overview

A strong week in the Stock market as all three stock indices rallied higher. We only traded the Dow last week as it had the strongest setup, and our trade netted us a little over $400 per contract before the weekend. While I think that we're going to see the mindices push higher for the long term, over the next week I think we'll see a bit of a pullback and possible test of the RSI trendline.

The pullback will be welcome as it will allow us to buy back into the market at a better price. Keep watching for the RSI test, as well as trendline support, for clues as to when to put on a trade.

The Eurodollar continued to rally last week in spite of our best attempts to short it. The trend is reasonably strong and it is obvious that rates are still in pullback mode, which means that we could see a run to the 95000 resistance after all.

Eurodollar

[Note that this week we've moved into the September 2007 Eurodollar contract.]

The Eurodollar seems determined to head higher for the short term, at least according to DMI which shows the market in a reasonably strong uptrend. It looks as though the market might be in a short term pullback after reacting to the resistance at 95230 earlier in the week. While the pullback might not be complete, I'll set up an order to buy the market with the trend when/if it reverses and heads higher.

Friday's range highlights the resistance at 95170 as a definite barrier to higher rates; even so I think I'll wait until prices break the 95230 line before buying in. I'm doing this because RSI is not hooking at the testpoint, and as a result we could see a little flailing by the ED before it's ready to head higher. Entering above the stronger resistance at 95230 (which is also near the 50% retracement) will help keep us on the right side of the trade.

You could cover the trade under the 95170 resistance; however the better support area is at 95140 – 95150. This will leave just over $200 at risk for the trade. The first profit target is resistance at 95500, or just shy of it. Things begin getting a little iffy as early as 95450, so be wary when/if rates continue to rally.

Looking at the spec's you'll see that the trade isn't a 3:1 reward/risk trade. I left the trade "as is" because I couldn't justify making it any tighter than it already is. Making the trade abnormally tight would only serve to get us whipsawed. Using the correct stops, gives us a better chance of hanging in long enough to make a profit. The reason I'm leaving the trade like this is because I expect the ED to continue lower, and this is a "just-in-case" type of trade. If the ED falls off a bit we should be able to sweeten the trade enough to give us our usual 3:1 return.

BUY September (07) Eurodollar at 95.235
Exit Order: 95.145
Approximate Risk Exposure: $225 per contract
Profit Target: 95.495
Approximate Potential Profit: $650 per contract
RRR: 2 1/2:1
Degree of Risk: Moderate

eurodollar chart

The charts in this publication are all made using Gecko's Track 'n Trade charting software. You can get a demo for free here.

Wheat

Wheat came just 3/4 of a cent short of our profit target on Friday. Unfortunately this session was also a gap 'n fade day (seems to have been Friday's theme) and as a result we might see prices push lower on Monday. RSI is slightly "off" but DMI still shows the market in a good uptrend. I suspect we'll see prices continue to rally for the longer term, but for the short term we could see a reaction to the resistance at 455.

Technically the "best" stop placement is below Thursday's low at 429; however it doesn't make much sense to risk nearly $600 in accumulated profit just for the hope of riding the market higher. With this much profit at stake I would be more inclined to place the stops below Friday's low and exit on the first sign of a reversal. Barring any gaps, this would allow us to protect just over $800 in profit while still giving the market a chance to head higher. Next stop is the contract highs at 463.

CONTINUATION of Long December Wheat at 424 1/4
Exit Order: 440 3/4
Approximate Risk Exposure: $0 per contract
Profit Target: 453 3/4 (followed by 463)
Approximate Potential Profit: $1475 per contract
RRR: n/a
Degree of Risk: Moderate to HIGH

wheat chart

The charts in this publication are all made using Gecko's Track 'n Trade charting software. You can get a demo for free here. The rest of the Markets in all sectors are covered in the Subscriber Edition.

This is only a small sample of the markets we cover!

For a detailed analysis of ALL of the markets, with explicit charts, entries, exits, stops, risk/reward ratio, potential profit, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

If you have any questions at all about any of these chart lessons, please feel free to ask at the futures trading forum or click here to email us. You can also chat with Erich and Tom live every Wednesday evening at 9:30pm eastern in the HotComm webinar room. Click the link for details about the Support and Resistance Trading Webinars.

Erich's Updates for Tuesday - watch the blog:
To Follow

Tom's Updates for Tuesday - watch the blog:
To Follow

Erich's Updates for Wednesday - watch the blog:
To Follow

Tom's Updates for Wednesday - watch the blog:
To Follow

Erich's Updates for Thursday - watch the blog:
To Follow

Tom's Update for Thursday - watch the blog:
To Follow

Erich's Update for Friday - watch the blog:
To Follow.

Tom's Update for Friday - watch the blog:
To Follow.

For a detailed analysis of ALL of the markets, with explicit charts, entries, exits, stops, risk/reward ratio, potential profit, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

Take care, and good trades to you for the coming week!

The charts in this publication are all made using Gecko's Track 'n Trade charting software. You can get a demo for free here.
 

The Scorecard

The purpose of this section is to give you a feel for which markets might be worth trading and which you might pass on given your own set of circumstances. The figures quoted are based on the price levels outlined in the ezine, trading single contracts and do not accurately account for slippage, commissions or other trading related fees. The Score Card is updated monthly.

Summary for the Month of July 2006

Date Pos. Market In Out Profit/Loss
July 3 – 6 Buy August Feeder Cattle 115.75  116.15  187 profit
July 5 – 6 Buy August Heating Oil 207 .10 204.95 903 loss
July 5 – 7 Buy August Crude 75.20 75.75 550 profit
July 5 – 7 Buy September OJ 169.65 170.70 157 profit
July 7 – 11 Sell December Cotton 5285 5250 175 profit
July 13 – 18 Sell September EuroFX 127.27 126.11 1450 profit
July 13 – 17 Buy September Unleaded 227.05 230.70 1533 profit
July 13 – 17 Buy September Crude 7710 7815 1050 profit
July 13 – 17 Buy August Feeder Cattle 114.52 113.70 412 loss
July 14 – 10 Buy September Rice 946.5 939.5 140 loss
July 14 – 17 Buy September Cocoa 1707 1690 170 loss
July 17 – 24 Sell September Soy Meal 172.3 169.5 280 profit
July 17 Buy September Wheat 402 ¼ 395 ¾ 325 loss
July 18 – 21 Buy September Mexican Peso 91.025 91.500 237 profit
July 18 – 19 Sell March Eurodollar 94.415 94.460 112 loss
July 18 Sell September mini-NAS 1459.5 1475.5 340 loss
July 19 – 24 Buy August Feeder Cattle 114.52 114.00 262 loss
July 20 – Aug 1 Buy September Aus Dollar 7527 7616 890 profit
July 21 – 24 Sell September mini-S&P 1249.50 1255.50 300 loss
July 25 – 26 Sell September Japanese Yen 8607 8653 575 loss
July 26 – 31 Sell September Corn 237 ¼ 240 ¼ 150 loss
July 27 – 28 Buy September Heating Oil 206.05 204.95 462 loss
July 27 – Aug 2 Sell September Soy Meal 168.3 165.7 260 profit
July 31 – Aug 10 Buy September British Pound 187.03 190.47 2150 profit
July 31 – August 1 Sell September US $ Index 8497 8523 260 loss
  Gross Profit: $8750 per contract Gross Loss: $4411 per contract


Net Profit per contract: $4339
 before commissions and fees!
 

* NOTE!!! Trading commodities is RISKY!!!! These figures are estimates in the interests of tracking the trades. Erich may or may not have a real money position in any market covered at any given time. This Score Card does NOT apply to Tom's Trades. This is neither a solicitation to trade nor a recommendation of any strategy. Always consult your broker or advisor before attempting any trade. Commodity trading involves substantial risk of loss. See full disclaimers at the bottom of this email.


 

Homework

Question:

Rob, a very experienced and successful trader, began an interesting thread at the forum http://www.supportandresistance.com/cgi-bin/webbbs/webbbs_config.pl/read/9044
In these posts Rob divulges some real trading gems – stuff that will help you become a more successful trader! There are at least three gems in the series of posts. Can you find them?
 
 

 
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Pick of the Letter


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Futures Trading is Risky! Never trade with money you cannot afford to lose!


Nothing in this publication is either a solicitation to trade or a recommendation of any strategy. Always consult your broker or advisor before attempting any trade. Commodity trading involves substantial risk of loss.

THE DATA CONTAINED HERE IN ARE BELIEVED TO BE RELIABLE BUT CANNOT BE GUARANTEED AS TO RELIABILITY, ACCURACY OR COMPLETENESS; AND AS SUCH ARE SUBJECT TO CHANGE WITHOUT NOTICE. TRADERS HELPING TRADERS AND IT'S ASSOCIATES WILL NOT BE RESPONSIBLE FOR ANYTHING WHICH MAY RESULT FROM RELIANCE ON THIS DATA OR THE OPINIONS EXPRESSED HEREIN.

DISCLOSURE OF RISK: THE RISK OF LOSS IN TRADING FUTURES AND OPTIONS CAN BE SUBSTANTIAL; THEREFORE, ONLY GENUINE RISK FUNDS SHOULD BE USED. FUTURES AND OPTIONS MAY NOT BE SUITABLE INVESTMENTS FOR ALL INDIVIDUALS, AND INDIVIDUALS SHOULD CAREFULLY CONSIDER THEIR FINANCIAL CONDITION IN DECIDING WHETHER TO TRADE. OPTION TRADERS SHOULD BE AWARE THAT THE EXERCISE OF A LONG OPTION WOULD RESULT IN A FUTURES POSITION.

NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO, ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM, IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS, IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
 

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