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geosing

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Reply with quote  #1 

Has gold bottomed? Don't know, don't care. My long time boss, personal humility trainer and trading associate finds trading futures the way I do very stressful. She wanted some stocks to trade. I told her that I am now a Dunnigan student and will offer suggestions. Among her candidates is GG, a gold miner. Here is the DOW (Dunnigan One Way) view of the stock.

 

 

The objective is to try to catch bottoms and tops without catching a falling knife or standing in front of a locomotive. So we wait for the stock to bottom and show signs of reversal and demand.  By closing over two previous swing tops, T-1 and T-2, GG has given us a PBS - Preliminary Buy Signal. Now we wait for a downswing and then buy the first thrust upwards. If the tentative Maintrend Bottom is taken out, we start all over. Simple, eh? Though why anyone would want to "trade" stocks is beyond my comprehension.

 

CPR =  Closing Price Reversal (nullified in the above example by lower close)

P2T = Penetration of previous 2 Tops

PBS = Preliminary Buy Signal

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geosing

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Reply with quote  #2 

GG has kindly consented to start a downleg. This could be just a one day downleg, so we will watch the action just before close on Monday. If it looks like a thrust move up with a higher low (higher than 23.30), then we have the first reversal buy for the first lot. Or if downleg continues, then nothing to do but wait for the market to tell us something.

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geosing

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Reply with quote  #3 

Thanks, Doug. I intend to update this thread and see how this method works.

 

Re your question about trading futures - I don't know if it is "easier", but it is no more difficult than trading stocks. Here are the advantages.

 

1. Very small universe - it can even be just one - like Dow, Crude, Soybeans or whatever.

 

2. Huge leverage as compared to stocks (trade and money management important here) and returns vis-a-vis capital employed far superior to stocks (assuming profitability - a big assumption, eh?)

 

So why fool with having to review 100's of charts, live with sell side analyst shenanigans and float related price quirks, uptick rules and "borrowing" limitations for short selling and so forth.

 

Take daytrading for example. And YM. With my daytrading broker, the margin is $500/contract (Not saying that you can trade with a $1000 account, mind you). Consistently winning 10 to 15 Dow points is not all that hard, although it is not easy. But it is simple. That is 10% to 15% per trade! For the same margin, you can position trade CBOT grains, say Corn or Soybeans. I am starting to do this - currently trading December Corn, as these contracts are now trading electronically side by side with the pit.

 

With your chart skills, I am sure you can achieve great returns. I am assuming that you have not tried trading futures yet.

 

Geo

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geosing

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Reply with quote  #4 

Hi Doug,

 

Thanks for the charts. boy, you are observant and fast learner. If you are planning on trying futures, I would strongly recommend that you avoid trading index futures. Most stock traders gravitate towards ES because they are more comfortable with something related to stocks. I believe it is a lot easier and less expensive to learn trading futures by trading commodities - especially grains. If, as you say, you find good setups in stocks, then why not try Single Stock Futures. These are offered in liquid stocks. While the futures themselves are not too liquid, for position trading it should not matter much.

 

http://onechicago.com/030000_products/oc_030101.html

 

e.g. instead of tying up money trading AMGN, you can trade AMGN1C instead. It is like trading options with the leverage, but without the time decay disadvantage. You can even use them to hedge your stock positions and there are no problems going short. There are distinct tax advantages too both in the rates and paperwork iinvolved. (Consult your tax advisor). Instead of pages of Sched D, you just have one line item for the whole tax year for all the trades.

 

Just an idea. I don't trade SSF, so I don't know if there are any gotchas. But may be a worth a few trades to find out in a stock you are familar with such as AMGN.

 

Also there is no need to trade without stops if you are not around to watch the market. Set your parameters - entry, stop loss and profit target. Let the trading platform handle it while you work or sleep or do other things. Just for fun, I trade the YM night session this way with 11 point stops and 15 point targets. I win a good percentage of trades while I sleep. Most days trades are done when I get up, but some days no trades, other days trade still open. Range is 30 to 35 points average. No reason why this cannot be done, during market hours.

 

Geo

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geosing

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Reply with quote  #5 

Ah, finally there is someone who does not even know what ES is... I use Interactive Brokers primarily. My backup brokers are PFG and Spike Trading. IB gets most of my commissions though. I wrote my own software to trade brackets during the night. But there are excellent trading tools which work very well with IB datafeed and trading platform.

 

http://www.interactivebrokers.com

http://www.pfgbest.com/

 

Examples are:

Bracket Trader - http://www.bracket-trader.com/

I have used this before I wrote my own. Very inexpensive. Free even.

 

NinjaTrader - http://www.ninjatrader.com/

I have tried this one. Excellent piece of software. But for my reluctance to anything that requires a subscription, I would probably be using this.

 

There are others also. But these two I have personally used.

 

You can open a paper trading account with IB or PFG and actually try things out with real time trades, but without your money on the line.

 

ES is the S&P500 Emini. ESZ6 is the December contract. If there are still traders who don't know what ES is, I think it is time to short CME.

 

Geo

 

 

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jmicou

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Reply with quote  #6 
geosing,

I'm glad you're doing this thread and look forward to updates.

Thanks,

jmicou

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geosing

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Reply with quote  #7 

It is interesting to note that the previous Reversal Signal for GG was a sell at 28.00 or so. DOW would be currently short. Dunnigan, the tenacious trader that he was, would not cover the short, even though a Prelim Buy Signal has been generated. Only when a new reversal buy is issued, shorts will be covered and you go long. However, one can have flexible operating plans. My plan is to have a LT position and a ST position. The LT position will be pyramided at each repeat signal. But the ST position will be liquidated - profit taking criteria might be a percentage profit and/or price/volume patterns. I hate to give up too much profits, but I found out from my corn trade, it will be gainful to have at least one piece till a reversal is generated. We shall see.

 

Geo

 

 

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geosing

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Reply with quote  #8 

jmicou, Thanks. If you are expecting the kind of awesome chartwork you post, you will be disappointed. I am just amazed at the data views folks like you and Randy can generate out of a bunch of numbers. Feel free to jump in and comment.

 

Geo

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geosing

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Reply with quote  #9 

GG continues the downswing. Even though today is an outside day, only a session with higher high AND higher low will qualify to reverse the swing. We have  P2T PBS, so we only wait for a thrust upwards. This could be a BR and a Thrust bar which makes a higher high and higher low. For a BR, the bottom bar must close higher than the previous day. P2T will be nullified, if GG trades completely below the MainTrend Low bar's range. i.e. the high of the day should be below 21.63. If this happens, PBS is nullified and we start with a new Maintrend Low and will await another PBS via an ASC or P2T.

 

Geo


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geosing

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Reply with quote  #10 

I am working on backtesting the One Way, as my cursory examination of a few charts shows promise. Perhaps it is even possible to automate this method and let the software handle EOD decisions and place the orders. So I have revamped the charting, as part of the development process.

 

Blue & Yellow bars are Dunnigan actionable bars. The white ones are don't care bars unless they make a top or bottom. Work in progress ....

 

 

 

 


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geosing

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Reply with quote  #11 

Ok, throw those gold bars in the trash. Perhaps you can use them as door stops? GG gapped down and closed lower than the maintrend low and B0 Signal Bottom. So now the PBS generated by the P2T has been nullified, essentially by a P2B and poor close. My boss and disciplinarian is duly impressed that I advised her not to buy because "the stock is acting well". May be Mr Dunnigan has helped me to get some respect round here.

 

I marvel also at Mr D's wisdom in not covering the shorts despite the P2T rally. Nothing further to report on GG till there is a PBS.

 

Geo

 


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geosing

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Reply with quote  #12 

Since the DOW's claim is that it is as near to a mechanical system as practically possible, I intend to apply the rules (so easy to do on hypothetical paper trade). So we did have P2T PBS on GG. The downswing from the P2T top went a bit far, but apparently not too far.

 

"A Preliminary Buy Signal is nullified, if before a Reversal Buy Signal is given, the range of the low week of any Downswing is entirely below the Bottom which gave the ASC or P2T." - William Dunnigan

 

The circled B0 gave us the P2T PBS. Even though B1 Bottom took out the low and even closed below the close of B0, it did not trade entirely below the B0 bar. (Mr D worked with weekly charts for stocks, hence the weekly reference in the quote above.) Therefore the PBS is alive and well. So B1 is merely a TOB and the next upday gave us an RB and we are reluctantly long GG @ 22.09

 

Lot L1 @ 22.09 on 10/5/2006 and now under water slightly. Perhaps a stop below B1 low will preserve capital, if we are wrong. Now only a reversal signal or money management stop will take us out of this trade.

 

Geo

Abbreviation

Meaning

ASC Ascending Bottom
BR Bottom Reversal
CPR Closing Price Reversal
PBS Preliminary Buy Signal
P2T Penetration of 2 Tops
RB Reversal Buy
TOB Test of Bottom

 


 

 

 

 

 

 

 

 

 

 


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geosing

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Reply with quote  #13 

Last night as I was walking my canine kids under a glorious moon, singing praises of the almighty sun, a chart I have seen posted by Claud Baruch popped in my mind. (Oh the feeble mind - forever flitting hither and thither).

When I got back, I decided to see if gold traders were indeed moonstruck. I recall seeing a chart also by Mr Tom McClellan (if I remember right. That feeble mind again).

 

The May gold top was marked by the fullmoon. Ever since, every sell would have been profitable. If rallying, it at least retraced a bit or it was an outright pivot or acceleration of a downmove. So my GG DOW trade is in trouble, methinks.

 

Geo

PS: Mr Claud Baruch posts charts every week without much commentary. I find the charts very educational. A chart by an accomplished trader - Fib, for example among many others over here - is perhaps worth volumes of commentary.

 

Claud's Charts usually updated every weekend.

 

 


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geosing

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Reply with quote  #14 

Doug, you are another chartman I learn from. Sorry to sweep you under "among others". I see what you mean about the legends. I am very much a novice and I will develop this as I go along. My intention  is to come up finally with a table of definitions and trading rules and refine them as I continue to actually trade the method. I did not have the discipline to follow the rules in actual trades I have made and am still making - due to windfall profits - which I am prone to take rather prematurely. Now that I have booked good profits in corn and some YM contacts, I intend to risk all that just to trade this method.

 

FYI - A PBS can only be ASC or P2T. And conversely, a PSS can only be DES or P2B (Decending Top or Penetration of 2 Bottoms). There are only two Reversal Signals to initiate a trade and close prior trades in the opposite direction. (e.g. Cover GG short from 28 and initiate long). There are only 3 repeat signals for buys - ASC, BR and TOB and thrust. Opposite for sells. So essentially just 4 patterns on each side to monitor for and trade off of and essentially one nullification rule. Hence my decision to try and automate trading, once I figure out how to set stops.

 

Geo

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geosing

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Reply with quote  #15 

Doug,

 

Fib does post some trades in the main section, when there is significant events in the internals - sometimes it is nonspecific like "added to core" and such. I suspect this site exists to "watch the technicals", especially "the internals". Actual trades may not of much importance to folks here. Aim is to learn to get on the right side of the market at the right time.

 

You actively trade in and out. Me, I am a blue collar trader. If I don't trade and take home a paypacket, there is no food on the table ... so to speak. So we may be in the minority here.

 

In my opinion, posting trades is not much use. Posting trade prospects may be of some benefit, but talking about methodologies or trade ideas is of great value ... imo.

 

Geo

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geosing

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Reply with quote  #16 

GG did go lower today, but finished higher. May be the lunar influence is over. Per DOW rules, we do not add here. Till GG trades entirely under B1 Bottom, we will give the stock some room. Once a purchase is made after a PBS, one needs to be a bit lenient.

 

Lot L-1 is still under water, but only a wee bit. Any further buys must come ony when this lot turns a profit. One of the best aspects of this system.

 

As I compare the results of futures trading vs stock trading, it is highly doubtful I will continue this exercise for too long. Things happen too slowly; capital required is too high for the rewards. Even with 4X gearing for daytrading, leverage is paltry. Strictly my opinion.

 

Geo

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geosing

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Reply with quote  #17 

Now that Lot L1 is in profit, we buy the first up after TOB of Bottom B1. We will note that the B1 is a significant low and will form the basis for any further repeat signals such as ASC. This is because the range of B1 is larger than that of our signal generating bottom B0. B1 low could indeed be the new Maintrend Low, thus really starting the signal generating process. Since we had a PBS at B0, we will stick to the operating plan and start taking all the Repeat Signals. So we get Lot L-2 at yesterdays close, gap and all.

Lot-L2 @ 22.73 on 10/14/2006

 

Geo

 


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geosing

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Reply with quote  #18 

After a short downswing which prepares us for a repeat buy signal from NYSE:GG, we got one today with a thrust up after the ASC which printed couple of sessions ago and a higher close. Yesterday's bar started the upswing, but it was not actionable as it closed below the prior day's close (the ASC bottom) - B3.

 

Lot-L3 Long @ 23.83 on 10/19/2006. Per rules, our previous two lots are showing paper gains. L3 and other future repeat buys will be for short term trades for quick profits.

 

Geo

 


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geosing

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Reply with quote  #19 

Not sure if it is prudent or not. But rule rules. After a TOB, a nice thrust up today, which gets us Lot L4. L3 and L4 are for short term quick profits. We have a full line in this campaign.

 

Geo

 


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geosing

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Reply with quote  #20 

GG Update: 10/30/2006

Booked some gains by liquidating ST lots L3 and L4. After 5 days higher highs and a narrow range day today, perhaps a downswing can be anticipated. We still have L1 and L2 showing good gains and now have some more ST funds, should there be more repeat buy signals after the anticipated downswing.

 

Geo

 

 


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geosing

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Reply with quote  #21 

Expected downswing did not materialize. Instead GG rocketed up with a big range outside bar. On hindsight, should have kept one ST lot for such an eventuality, but the LT lots are enjoying good gains. Still I think a downswing is overdue. TWT.

 

We will either await repeat buy signal or a reversal potential to close out long positions.

 

Geo

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geosing

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Reply with quote  #22 

GG continues its upwardly ways, powered by the metal, I presume - giving us seller's remorse for getting rid of both the ST lots. Since there is no downswing to speak of, no repeat buy signal to get back in...

 

Geo

 


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geosing

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Reply with quote  #23 

GG posting some inside days. Nothing much happening... may be a downswing is coming, but nothing to report. I am also closing all stock positions as of this Friday. So nothing further on Dunnigan One Way as far as stocks are concerned.

 

Geo

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geosing

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Reply with quote  #24 

Sold remaining lots at 28.10 average. Adios, amigos.

 

Geo

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