FCPO May 2006 – Bullish Reversal & Bearish Divergence Trade 2 – Closed with Net Gain of RM765

Trade Planning and Management

FCPO 3rd March Chart as at Feb 28 2006

Date Contract Open High Low Close
Feb 28 06 May 06 1506 1518 1503 1507
Feb 28 06 Jun 06 1516 1522 1508 1512

Reason for Entry
- There is an evening shooting star with blow-off volume of 7445 after a long white candle with blow-off volume of 7071.
- The shorts covered and the longs go in after the price broke 1500
- There is a bearish divergence with price hit new high but %K is lower then the recent high.
- The price formed a descending triangle for the last intra-day session.
- The price felt to hit the up-trend line with low volume and rebounded.
- The price may open higher or gapped-up as CBOT Soy Oil May gained 60 points overnight.

March 1, 2005

Entry Strategy for Bullish Reversal:
a. Option 1: If the price opens gapped up, do nothing
b. Option 2: If the price opens flat or lower than prior day’s low, put a sell stop at 1511, 4 points above the previous close.
c. Option 3: If the price opens higher, sell at market open
d. Option 4: If the price opens gapped down, do nothing.
Adding more contracts
a. No.

Trailing Stops
a. If the stop order is triggered, put a stop order as the initial trailing stop at 1420 or 10 –tick stop loss.

Exits
a. When your initial stop order is triggered
b. Exit on MOC if the price closed higher than your sell price.
c. When the projected Bullish Reversal target of 1447 is hit.
d. Let the trailing buy stop follow the price until it is taken out.

Today’s Entry strategy:
a. Call Apex at 10:27am to get the pre-quote. If Soy oil closes higher, instruct Apex to sell at Open if the price opens higher.
b. Call Apex at 10:30am to check the opening price. Put in your sell stop order if the price opens lower or flat.
c. If the stop order is triggered, put a buy stop order at 1520 or 10-tick stop loss.
d. Exit on MOC if the price closed higher than your sell price.

My actual Entry strategy:
a. I called Apex at 10:25am to check the pre-quote. The pre-open match is 1510, 3 ticks higher than previous day’s close.
b. I informed Joanne that I would like to sell at the open according to my plan. Joann informed me that she will call me when CPO opens. I agreed.
c. Joann called to informed me the open is 1510. The quote is sell at 1511 and buy at 1510.
d. I immediately put in a sell order at 1511. It is done instantly.
e. After minutes later and after seeing the price dropping to 1518, I called to put my buy stop at 1521, 10 ticks above my sell price.
f. I knew that the price will rebound. That’s why I put my stop far from the rebound. I was tempted to put my buy stop at 1512, 1 tick above the intra-day high.
g. The price hit 1503, the previous day’s low, and rebounded. The price formed ascending triangle breakout to hit 1514. This has caught some of the short-term traders.
h. The price then moved down to hit1507 and closed for the morning session at 1509.
i. The price then moved at the range of 1509 and 1507. Then the supply came after 3:30pm to sell down to 1500. It did hit the low of 1497 before rebounding to 1504 as 1500 is the strong support. Most players have liked to buy at round number of 1500.
j. I know that the price will move back above 1500 the next day. I will however tighten my stop to 1519, 1 tick above the recent high.

Trade executed according to plan? Yes and well executed.

March 2, 2005
Today’s Trade Management:
a. Check the price at 10:30am for the open and put in the protective buy stop order.
b. Initial Trailing Stop:
i. Option 1: If the price opens gapped up, close the position at the previous day’s high.
ii. Option 2: If the price opens flat or lower than prior day’s low, put a sell stop at 1519, one tick above recent high.
iii. Option 3: If the price opens higher, one tick above recent high.
iv. Option 4: If the price opens gapped-down, put my stop ay 1519, one tick above recent high or 1 tick above the mid-point of previous day bar if the bar is more than 12 points in length.

c. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. When your initial stop order is triggered
iv. When the projected Bullish Reversal target of 1447 is hit.
v. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
vi. Use Fibonacci 161.8% as a target if it is trend-following Oops!
d. Subsequent Trailing Stop:
i. 1515, if the price breaks 1497, the previous day’s low.
ii. 1506, 1 tick above the mid-point of the entry day bar, if the price breaks 1483.
iii. 1501, if the price breaks 1472, one of the previous day’s low.

Adding more contracts
a. Add one contract if the price opens gapped-up during the down-trend using Oops! Sell strategy.

Actual Entry strategy:
a. I called Apex at 10:32:25am to put in my stop. I did not tighten my stop. I still put it at 1520-level. I am worried for a rebound to hit my lower stoip pre-maturely.
b. The price opened flat at 1500 and moved down to 1493 and moved higher to 1495 for the morning session in a quiet session.
c. In the afternoon, the price moved to hit 1497 and moved back to 1494 and 1495 level for the rest of the afternoon session
d. At 17:55pm, there is a heavy selling to push the price to close at 1490 at the low.
e. I will tighten my stop tomorrow at 1419.

Trade executed according to plan? No. A bit different. I want to make sure my stop is far from being stopped out pre-maturely.

March 3, 2005
Today’s Trade Management:
a. Check the price at 10:30am for the open and put in the protective buy stop order.
b. Initial Trailing Stop:
i. Option 1: If the price opens gapped up, close the position at the previous day’s high.
ii. Option 2: If the price opens flat or lower than prior day’s low, put a sell stop at 1519, one tick above recent high.
iii. Option 3: If the price opens higher, one tick above recent high.
iv. Option 4: If the price opens gapped-down, put my stop ay 1519, one tick above recent high or 1 tick above the mid-point of previous day bar if the bar is more than 12 points in length.

c. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. When your initial stop order is triggered
iv. When the projected Bullish Reversal target of 1447 is hit.
v. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
vi. Use Fibonacci 161.8% or 61.8% as a target if it is trend-following Oops!
d. Subsequent Trailing Stop:
i. 1515, if the price breaks 1497, the previous day’s low.
ii. 1506, 1 tick above the mid-point of the entry day bar, if the price breaks 1483.
iii. 1501, if the price breaks 1472, one of the previous day’s low.

Adding more contracts
a. Add one contract if the price opens gapped-up during the down-trend using Oops! Sell strategy.

Actual Entry strategy:
a. I called Apex at 10:32am to put in my stop. I tightened my stop at 1519, 1 tick above recent high.
b. The price opened higher at 1498 and hit high of 1502 before moving down to 1493. It moved between 1494 and 1495 for the rest of the morning.
c. The price then moved side-way between 1494 and 1495.
d. The price then moved down a few minutes before closing to close at 1488 after hitting 1487 with higher volume.

Trade executed according to plan? Yes

March 6 2005
Today’s Trade Management:
a. Check the price at 10:30am for the open and put in the protective buy stop order.
b. Initial Trailing Stop:
i. Option 1: If the price opens gapped up, put a sell stop at 1519, one tick above recent high.
ii. Option 2: If the price opens flat or lower than prior day’s low, put a sell stop at 1519, one tick above recent high.
iii. Option 3: If the price opens higher, put a sell stop at 1519, one tick above recent high.
iv. Option 4: If the price opens gapped-down, put my stop ay 1519, one tick above recent high or 1 tick above the mid-point of previous day bar if the bar is more than 12 points in length.

c. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. When your initial stop order is triggered
iv. When the projected Bullish Reversal target of 1447 is hit.
v. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
vi. Use Fibonacci 161.8% or 61.8% as a target if it is trend-following Oops!
d. Subsequent Trailing Stop:
i. 1515, if the price breaks 1497, the previous day’s low.
ii. 1506, 1 tick above the mid-point of the entry day bar, if the price breaks 1483.
iii. 1501, if the price breaks 1472, one of the previous day’s low.

Adding more contracts
a. Add one contract if the price opens gapped-up during the down-trend using Oops! Sell strategy.

Actual Entry strategy:
a. I called Apex at 10:32am to put in my stop. I put my stop at 1519, 1 tick above recent high.
b. The price opened flat at 1488 and is moving down to 1484 for the morning session
c. The price then moved side-way between 1484 and 1495.
d. The price then moved down a few minutes before closing to close at 1474 with lower volume.
e. I need to tighten my stop tomorrow.

Trade executed according to plan? Yes

March 7 2005
Today’s Trade Management:
a. Check the price at 10:30am for the open and put in the protective buy stop order.
b. Initial Trailing Stop:
i. Option 1: If the price opens gapped up, put a sell stop at 1515, one tick above recent high.
ii. Option 2: If the price opens flat or lower than prior day’s low, put a sell stop at 1515, one tick above recent high.
iii. Option 3: If the price opens higher, put a sell stop at 1515, one tick above recent high.
iv. Option 4: If the price opens gapped-down, put my stop ay 1515, one tick above recent high or 1 tick above the mid-point of previous day bar if the bar is more than 12 points in length.

c. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. When your initial stop order is triggered
iv. When the projected Bullish Reversal target of 1447 is hit.
v. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
vi. Use Fibonacci 161.8% or 61.8% as a target if it is trend-following Oops!
d. Subsequent Trailing Stop:
i. 1515, if the price breaks 1497, the previous day’s low.
ii. 1506, 1 tick above the mid-point of the entry day bar, if the price breaks 1483.
iii. 1501, if the price breaks 1472, one of the previous day’s low.

Adding more contracts
a. Add one contract if the price opens gapped-up during the down-trend using Oops! Sell strategy.

Actual Entry strategy:
a. Joann of Apex called at 10:30 to inform that FCPO May opened at 1475. I almost forgot to put my stop.
b. I called Apex at 10:45am to put my stop at 1515, 1 tick above the entry’s day high
c. The price then moved up to 1481 and stayed at 1478 in the morning.
d. The critical up-trend line has been broken. There should be some profit taking.
e. The price then hit 1471 low and hit 1483 high before closing at 1472.
f. It is a whipsaw day.
g. I will lower my stop to break-even point of 1508 tomorrow.
h. I did not lower my stop so much as I expect a rebound and sell-down again.

Trade executed according to plan? Yes

March 8 2005
Today’s Trade Management:
a. Check the price at 10:30am for the open and put in the protective buy stop order.
b. Initial Trailing Stop:
i. Option 1: If the price opens gapped up, put a sell stop at 1505, 1 tick above the high of the day after the entry day.
ii. Option 2: If the price opens flat or lower than prior day’s low, put a sell stop at 1505, 1 tick above the high of the day after the entry day.
iii. Option 3: If the price opens higher, put a sell stop at 1505, 1 tick above the high of the day after the entry day.
iv. Option 4: If the price opens gapped-down, put my stop at 1505, 1 tick above the high of the day after the entry day.
c. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. When your initial stop order is triggered
iv. When the projected Bullish Reversal target of 1447 is hit.
v. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
vi. Use Fibonacci 161.8% or 61.8% as a target if it is trend-following Oops! It is 1438 based on 1518 and 1380.
d. Subsequent Trailing Stop:
i. 1508, the breakeven-point.
ii. 1506, 1 tick above the mid-point of the entry day bar, if the price breaks 1483.
iii. 1501, if the price breaks 1472, one of the previous day’s low.

Adding more contracts
a. Add one contract if the price opens gapped-up during the down-trend using Oops! Sell strategy.

Actual Entry strategy:
a. I have the following data to ask me close my position:
i. If the price broke 1467, there are sellers coming in. I would take profit because the breakdown on the 1st occasion is usually the failed one in FCPO.
ii. 10th of March is coming. It is also Friday. This is the day where the export and production figures will announce.
iii. I may the fund.
iv. I may have a FKLI trade tomorrow.
v. The OI for May contract is decreasing in a bear market.

b. Joann of Apex called at 10:30 to inform that FCPO May opened gapped-down at 1469. It hit low of 1464 and now is 1470. I immediately put my buy stop order at 1505, 1 tick above the high of the day after the entry day.
c. I wanted to take profit at 1467 or below but the price did not hit it.
d. The price then moved up to 1472 and hit high of 1475 before moving down to 1472 during noon.
e. The price then moved down in the quiet afternoon.
f. It then moved to hit 1467 before closing at 1469.
g. I did not take profit because those reasons are not real. I should take profit based on charts without emotions. I may not be right but I should follow the chart for profit taking.

Trade executed according to plan? Yes based on chart. No based on market information and intuition.

March 9 2005
Today’s Trade Management:
a. Check the price at 10:30am for the open and put in the protective buy stop order.
b. Initial Trailing Stop:
i. Option 1: If the price opens gapped up, put a sell stop at 1505, 1 tick above the high of the day after the entry day.
ii. Option 2: If the price opens flat or lower than prior day’s low, put a sell stop at 1505, 1 tick above the high of the day after the entry day.
iii. Option 3: If the price opens higher, put a sell stop at 1505, 1 tick above the high of the day after the entry day.
iv. Option 4: If the price opens gapped-down, put my stop at 1505, 1 tick above the high of the day after the entry day.
c. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. When your initial stop order is triggered
iv. When the projected Bullish Reversal target of 1447 is hit.
v. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
vi. Use Fibonacci 161.8% or 61.8% as a target if it is trend-following Oops! It is 1438 based on 1518 and 1380.
d. Subsequent Trailing Stop:
i. 1508, the breakeven-point.
ii. 1506, 1 tick above the mid-point of the entry day bar, if the price breaks 1483.
iii. 1505, 1 tick above the high of the day after the entry day.
iv. 1501, if the price breaks 1472, one of the previous day’s low.

Adding more contracts
b. Add one contract if the price opens gapped-up during the down-trend using Oops! Sell strategy.

Actual Entry strategy:
a. I called Apex at 10:29am to check the pre-quote. It is matched at 1470 even Soy Oil was down 36 points.
b. The price opened at 1471 and moved up to 1474.
c. It then broke 1475 before 11am to hit 1478.
d. I decided to close the position at market price because:
i. The price moved according to the morning star movement.
ii. Tomorrow is Friday and 10th of the month e\export and production figure release.
iii. The OI is decreasing as the bear is starting to take profit.
e. It is done at 1478.
f. The price then moved down to hit 1472 and closed at 1474 for the morning session with higher volume of 1200
g. The price then moved down in the afternoon to hit 1468. It then moved side-way at 1468 and 1471.
h. It then moved down to 1464 and closed at 1464 with high volume.

Trade executed according to plan? Yes based on chart.

What are my exit options:

a. I should have exited yesterday when the price opened gapped-down because of the following data and my intuition:
i. If the price broke 1467, there are sellers coming in. I would take profit because the breakdown on the 1st occasion is usually the failed one in FCPO.
ii. 10th of March is coming. It is also Friday. This is the day where the export and production figures will announce.
iii. I may the fund.
iv. I may have a FKLI trade tomorrow.
v. The OI for May contract is decreasing in a bear market.

Since the Soy oil closed 48 points down, the open may gap down. I can check the pre-quote to know whether the price will open gapped-down

I have two options to exit:
· Exit at the open price or market price
· Exit at the price 2 ticks below the open at 1467
· Exit at the price 1 tick below the current strong support at 1466. Most crowds will short below 1466.
b. I should exit after 11:30am to day based on morning star setup. However, I may loss more profit if the price keeps shooting up.

c. I should exit based on my trailing stop loss point at 1501

What I have done best:
a. I follow the bullish reversal and bearish divergence trade signal.
b. I executed the trade as plan with all the market information leading to the reversal.
c. I did my best to putting my stop away from the price.

What I need to improve:
a. I must less monitor the price.
b. I should not monitor the price in the 1st hour after the market starts.

What I have learned:
I have to wait for the trade to come. Waiting is part of trading.
I learned something in every breakout. This time:
i. If the trend is up, there is a tendency for it to continue until something changes.
ii. Initial correction of a trend is healthy. This allows price to move higher.
iii. Initial correction to the up-trend line with low volume will see price rebound and make new high or low. If there is a gap against the trend, trade with the trend with Oops! for new position or adding new contract.
iv. I need to trade on each fractal breakout. I need to go against my emotion on this. I know that I will get it right as the price moves lower and lower or higher and higher.
v. The historical chart pattern may repeat. I will study the historical chart to find any trading opportunity.