Special Notices for George IV - 2007
Practically all elements of the system were present in today's market action, yet they were not aligned properly, so no trade was taken. This lack of alignment lead to the pullback that stopped right around the LMA for it lost its strength there completely. What ensued was a very strong 15:30 reversal, breaking through the SMA. A good entry, outside the system, but quite reasonable considering the presence of the system elements and the weakening of the pullback would have been on the breakout of the SMA when the price hit the PSAR. This would have given us 10 pts while risking no more than 5 pts. Yes, hindsight is always 20/20, but it makes sense to pay attention to situations like that and learn from them.
We got very close to a very good trade in either the basic entry or strong open entry category. So close that I am going to modify the system slightly to allow trades like that in future. It was a case as borderline as they possibly can get and a smart trader would have definitely taken advantage of this opportunity. In fact, it would have been "criminally negligent" not to do this. Taking this trade would have given us an easy 10 pt. Expect an update/upgrade to the system that allows situations like that in future. Of course, I am not counting this trade towards the proper results of the system.
There was no trade proper today, meaning no trade called by the system interpreted strictly, but the action in the market was very suggestive of the setup that gives rise to the trades in the strong open entry category and it is for this reason that I am bringing this up here. Just for your learning experience. If taken according to the system rules, this trade would have given us about 2 pts of profit. One more evidence that the ideas behind the system are pretty sound.
Again, a somewhat similar situation to what happened on 12/14/07 except that now we are talking about a different category of trades, the one with basic entries. Just one condition was not met for us to take a trade that would have given us an easy 10 pts. Or even 15 pts had you decided to hold your position till 4 PM or so. An aggressive and thinking trader should have taken that trade as the most he would reasonably have to risk was less than 5 pts with the profit 2-3 times greater than the risk. Incidentally, the condition in question was met later on, it was met about the time of the entry and was firmly met later on. I am pointing this out just to demonstrate that the system is based on very sound ideas that do work although sometimes it is recommended to think not just in terms of black and white, but allow some gray as well. That's what makes good traders great ones, and the same works for poker players as well.
Today we came very close to a picture perfect entry for a trade in one of the additional categories. A bit more expansion in the morning and all of the conditions for a trade like that would have been met giving rise to an easy 10 pt profit. An aggressive trader would have still entertained that trade, but we don't count it here, just point out how much more can sometimes be done by merely relaxing only one of the elements of the system.
The system did not call any trade today, but later during the day two important elements of the system suggested taking a long position. One of these elements was the proper SMA-LMA configuration reinforced by a growing separation between these lines. Notice a nice pullback towards the LMA that is pretty elaborate and culminates in a double well from which the market surged for another 10 pts or so. Notice that the pullback while elaborate is rather shallow as the price does not even touch the LMA. This indicates a strong trend which is also confirmed by a rather flat shape of the SMA at the same time. While the PSAR is not where one would like to have it (that is before the SMA), this is due to the shallowness of the pullback and can be excused. The strong surge from the pullback and its shallowness are signs that the upward trend is likely to continue which indeed was the case. Entering the long position on the price hitting the SMA would have give us a spectacular trade. As you see, you don't really need very complicated indicators to position yourself for profitable trades, but you need the right ones and you need to know how to look at them and how to interpret what they are telling you.
Things started well today, but we did not get a momentum strong enough to take a position per the rules of the system. Yet, the very same system indicated a pretty strong short bias that could have been exploited in more than one way. The first good entry would have been at the LMA, the other at the P, and yet another after the price bounced off the P and hit the SMA. Notice the shape of the SMA. It looks cuplike, doesn't it? This kind of shape indicates a good trading opportunity when going against the SMA that serves as a trend line. We anticipate its breakdown, which indeed happened today, and often does in such situations as long as the SMA is NOT about to cross the LMA. An even better entry would have been on the PSAR crossing before the price hit the SMA. Notice that this crossing is not obstructed by the SMA. These are all non-standard entries, BUT, even if you had used the standard entry, as suggested by the system, you still would have made money. About $100 per contract. If you want to know how John Schwab played it, see this screenshot. His entry was at the P. Yes, luck helps quite a bit in trading, but I think that John is smarter than luckier.
Today, there was another opportunity to take position in the market based on the elements of the George IV strategy, though no trade was called by the system proper. Notice that just as yesterday the market hit P and advanced clearly beyond it, its trend in this direction confirmed by a higher high and the SMA crossing P to the upside. All this being accompanied by the SMA-LMA reversal gives a clear signal that the market can take yet another leg up. And it did attempt it. The long entry on the PSAR crossing would not have been good or even recommended as the access to the PSAR was blocked by the SMA. It is much better to use the PSAR when it is between the SMA and the LMA as it was the case yesterday. The good and aggressive entry would have been on the price hitting the LMA and the same could have been entertained yesterday as well. Notice how nicely the price bounces off of the LMA. Same, almost to perfection, happened yesterday. You will see this more often if you follow this kind of pullback. After the bounce, a new high of the day is made, but only barely, which indicates that the upward trend is weakening. Notice that yesterday the new low of the day was more than 2 pts below the previous one. At least 1 pt of advance past the previous high/low of the day is necessary to have any confidence in the new leg, 2 pts is much better. Since the market is clearly weakening, it is wise to exit it at this point, at the latest on the PSAR being hit in the reverse direction. A few good points could have been made this way. Notice the shape of the SMA. It's different from the shape of LMA a day earlier. This is so because yesterday the pullback was longer, more elaborate, meaning that more traders joined it. Because of that (more traders on one side equals a heavier bias on that side) when the price finally snapped back in the opposite direction it went down quite a bit before it stopped its advance, and it did stop it practically only when the daily session closed. Today, the pullback was much less elaborate, not as well prepared, rather swift, and so it did not produce a solid leg up. Also the trend was stronger yesterday too. All this gets reflected in the shape of the SMA and you will learn to recognize things like that if you continue observing the SMA and its interplay with the LMA, the strength of the trend, and the kind of the pullback formed (elaborate, swift). There is more to this strategy than just the results published on this site.
Today, the market opened with a wide separation between the LMA and the SMA suggesting the market was up for a good trend down which indeed started right after the first hour breakout. Notice that during the first hour, the separation between them did not change much at all and after the first hour breakout it clearly increased. In cases like that it is often profitable to wait for the pullback towards the LMA and then go with the market trend as long as during the pullback the SMA does not turn strongly against the trend. Today, it remained rather flat and during the pullback the price barely touched the LMA. These were very good conditions for a short position that could have been initiated when the PSAR was hit following the pullback. An alternative entry could have been exercised when a very short term moving average (say 10 period) crossed the SMA and the price retraced to it. As long as the price does not advance too much after a crossing like that, the pullback towards the SMA can often be used for a good entry point. This would have indeed been the case today. Whichever entry could have been used, 18 pts was possible. Notice also that before the pullback the price and even the SMA itself advanced below P indicating that the market might take another leg down.
Disclaimer: HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS UNLIKE AN ACTUAL PERFORMANCE RECORD. SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
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