FKLI Dec 2005 - No ID-NR4 Trade as price opened gapped-up

Trade Planning and Management

For more information of ID-NR4, please refer the following book:

December 12, 2005
1. If the price opens gapped-up or down, use Oops! entry.

2. Entry Strategy for Buy stop order
a. Option 1: The price opens higher than 890
i. Do nothing
ii. If the price near MOC is a whiplash, do nothing.
iii. If the price near MOC is higher the open, buy at MOC with risk <>
b. Option 2: The price opens lower than or equal to 890
i. Put a buy stop order at 890 after FKLI opens for the whole day.
ii. If the order is triggered, put a sell stop order at 884.
iii. If the price closes down below the entry price, cover your long.
c. Option 3 If the market does not appear what you expect, do not trade and stay side-lined to analyze.

3. Entry Strategy for Sell stop order
a. Option 1: The price opens lower than 884
i. Do nothing
ii. If the price near MOC is a whiplash, do nothing.
iii. If the price near MOC is lower than the open, sell at MOC with risk <>
b. Option 2: The price opens higher than 884
i. Put a sell stop order at 884 after FKLI opens for the whole day.
ii. If the order is triggered, put a buy stop order at 890
iii. If the price closes above your entry price, cover your short.
c. Option 3: If the market does not appear what you expect, do not trade and stay side-lined to analyze.

4. Pyramiding and Re-entry Strategy a. No Pyramiding and Re-entry Strategy

5. Trailing Stop
a. The protective stop cannot increase your risk (loss) and reduce your profit unless No 6 and 7 below.
b. The protective stop cannot give back more than 6 points of unrealized profit.
c. When the trade is profitable, move your protective stop to the breakeven point. Trail your stop.
d. Short Position: Move your stop to 1 tick above the open or high, whichever is lower, for sell stop but must be lower than your previous stop. Long Position: Move your stop to 1 tick below the open or low, whichever is higher, for buy stop but must be higher than your previous stop.
e. If the price moves in your favor, the trade is profitable and the prior day bar is a long bar (more than 8 points), move your stop 1 tick above or below the middle of the bar.
f. Short Position: If prior-day's bar is a long bar (8 points or more) and the today's open is higher than prior day's close but below the middle range of prior-day's range, put your stop at 1 tick above the middle of prior-day's range. Long Position: If prior-day's bar is a long bar (8 points or more) and the today's open is lower than prior day's close but above the middle of prior-day's range, put your stop 1 tick below the middle of prior day's range.
g. Short Position: If prior day bar is a long bar (8 points or more) and the today's open is lower than prior day's low, put your stop at 1 tick above the prior day's low. Long Position: If prior day bar is a long bar (8 points or more) and the today's open is higher than prior day's high, put your stop 1 tick below the prior day's high.
h. Short Position: If prior-day's bar is a long bar (8 points or more) and the today's open is higher than both prior day's close and middle range of prior-day's range, put your stop at 1 tick above the prior-day's high. Long Position: If prior-day's bar is a long bar (8 points or more) and the today's open is lower than both prior day's close and middle of prior-day's range, put your stop 1 tick below the prior day's low.
i. The maximum loss is 10 points or high/low of the next bar if the price gaps 6. Exit Strategy for Buy Stop Order a. If the price does not move up above your entry price and the trade is not stopped out for 3 trading days, get out at MOC on the third day. b. Let the trailing buy stop follow the price until it is taken out.

7. Exit Strategy for Sell Stop Order
a. If the price does not move up below your entry price and the trade is not stopped out for 3 trading days, get out at MOC on the third day.
b. Move stop order to breakeven point if the price moves in your favor.
c. Use trailing stop based on the chart’s support and resistance for trade management.
d. Get out of the trade when the price hit extreme and get in at different direction if the price gaps.

8. Today’s Entry strategy and Trade Management:
a. Call Apex at 8:45am to check the open. Then I will put in buy and sell stop orders if there is no gaps.
b. If either order is triggered, ask Apex to call you.
c. Move stop order to breakeven point if the price moves in your favor.
d. Use trailing stop based on the chart’s support and resistance for trade management.
e. If the price closes lower than the entry price for buy stop order, close the position at MOC. If the price closes higher than the entry price for sell stop order, close the position at MOC.
f. Get out of the trade when the price hit extreme and get in at different direction if the price gaps.
g. If the price does not move up or down fast in 3 days and the trade is not stopped out, get out at MOC (Market on Close) on the 3rd day.
h. I may close my position before 22nd of December because of the longer holiday and roll-over period.

9. My actual Entry Strategy and Trade Management
a. The price may open higher as DJIA gained 23.46 points overnight.
b. I called Apex at 8:45am to check the open for December contract. Foong of Apex told me that the price opened at 883.5, Low of 883.5 and High of 884.
c. I asked him whether the price opened gapped down. He is confused. I asked him again what was the price that December contract opened? He told me that 890. I said thanks to him.
d. I pondered for a while and decided to call Joanne of Apex for clarification and possible Oops entry.
e. Joanne called and informed that the December contract opened at 890 with high of 891 and low of 890.
f. I put my sell stop order at 889 for Oops! Sell

10. Trade executed according to plan? Yes

11. What I have done best:
a. I follow ID-NR4 trade management.
b. I ask for clarification for the Open, High and Low.
c. My trade execution is automatic.

12. What I need to improve:
a. I will continue to follow my trade management rules and discipline.

13. What I have learned:
a. The FKLI price will open gapped up with a 23-point gain of DJIA.