Wednesday, September 19, 2012


I think at this point the two markets that probably get the most attention are Gold and Crude Oil. In spite of all the opinions and conjecture about why a certain price move happens, you still see the good ole tools occasionally find an acorn. For those of you who are struggling going from one complex method to the next, trying to find a way to trade well, just look at the above chart. We had a fundamental condition, significant COT selling. We then had a false breakout to a new high that reversed the very next day. That reversal day also broke the up trend line from the lows.

This is about as good of a sell setup as you can get. I pointed out the other day how similar I thought the chart pattern was to the last big turn down in Heating Oil. These are the types of things I will be writing about every month in my newsletter. We will also send out special bulletins when we see something like this setting up. You should not expect one every week, they do not set up this well that often. However, when they do we will let you know. I will still be doing my commentary in here every day, but I will not be able to always point out everything all the time. Further, the exact timing of these setups is important. It is helpful to know they are here, but it is another thing to be able to take action at the appropriate time.

There are a number of ways to trade, and this type of trade does take a larger stop, and a different approach than most others. Here we are trying to get into a trade with a large potential move that can be held for a bit. It requires a different mindset. Most people can't stand the sight of a few thousand dollars profit in their accounts, and will not be able to catch these big moves. I can tell you that you will never get rich trading without catching some big moves. All this stuff about scalping $50 at a time on a 75 tick chart, is just that "stuff." Even for the rare few who can do it, it is incredibly draining to trade like that glued to every tick on the screen. I know I have been there.

If you do decide to read my newsletter, and elect to trade some of these types of things me and my partner Mike write about, please please, do not watch intraday charts once the trades are on. You will never catch a multi - week move watching a 30 min chart or any other short term chart for that matter. Net net here, we had a great fundamental setup, I pointed it out, and down we are going.

The ES is starting to feel a bit heavy to me here, perhaps the September swoon may still happen. All my short term signals are still buys there, so if we see this night weakness reverses, I will be pulled into some long side positions.

Here is a small little trade I made today in Soybean Oil. I had mentioned that Soybeans should be exited if Tuesday's high was taken out. I had some patterns that were bullish in Bean Oil, so when the Soybean trade was about to get stopped out, I went long in Bean Oil and exited at the close for a quick 50 points there. Bean Oil had held up the best of the bean complex, so it made sense to me to take a buy there if I was going to be exiting my short in the weak one.This was kind of a goofy little trade, but it made some money.

I am still looking at shorting this rally, so this was basically a day type of trade. However, I never looked at a single intraday chart. I do not even have any intraday charts in my work spaces. You can trade short term without being a slave to the machine. I put these orders in including an exit a couple of minutes before the close on a contingent order, and went off to do something else. I checked in at 3 pm to see how I did. It does not need to be more complicated than that. If it is try something else. I have been looking at web sites on trading, and I don't see any where the people say they actually take the trades they teach. It seems they hype what great teachers they are and how they can help, but don't show any proof they make money themselves. Whether it is me or someone else, don't take instruction from someone who is not using the techniques they are teaching you themselves. If what they are teaching you is so great, they should be using it themselves to make money. I talk to people all the time about trading, and I don't like what I hear about the paths they are going down. 


I read the trustee's website, and it does appear from the motion in the court he filed that we might have to fill out claim forms. Once the motion is approved, if that is the determination of the court, I will post that information here. I would assume if there is one the process of getting us some money is going to be slowed down considerably. There are 17,000 people getting money in the first distribution. That ought to be good for another 50 - 100 large for the trustee ( $50,000 - $100,000).

Think about how messed up that is, we are paying them probably at least $100,000 to a process a claim form that results in us only getting back 30% or our money. Bankruptcy is a great business if you are a vulture apparently. The longer things can be dragged out the more re-distribution can take place. Sound familiar, politics ring a bell?

Now that I have had time to digest the law suit by Jr against US Bank I have one thought. I think it is legal maneuvering. However, even with that being the case, do make these allegations he must have something somewhere to base them on. This case could be so quickly dismissed otherwise. Further he does set himself up for further attacks and humiliation. He has made his life a lot tougher by doing this. Perhaps he is nuts or maybe he just thinks "well I am bankrupt anyway so why not take a shot." However, even with either of those states of mind being possible, it seems there still has to be some merit or the suit would go nowhere. It will be interesting to see what comes out. The bank's response means nothing., but if they are guilty they are going to be in very big trouble. Aside from the recovery for us, I would expect a monster fine, if it can be proven they had a hand in this fraud. They were grossly negligent in this situation, even if they are not guilty of what Jr. is alleging.

My gut is that it goes nowhere, but I hope I am wrong.

Most of my looks tomorrow are on the long side, so if we roll over here I am going to be watching from the sidelines, and trying to finish up the web site.

Good Trading


Anonymous said...

Hi, Chris. I read about your Soybean Oil trade (ZLZ2). I did a similar trade which was LONG 55.73. I entered using stop limit order and my initial stop loss was at below 54.72. I am not sure about your stoploss. However, I risk over 1.01 and I think it is "irrational" to take 0.50 profits by risking $1.01. I just doesn't make sense if we think in the long term. Till now, still maintain my stop at 54.72.

I think this applies to to your gold trade weeks ago. you exited the trade with a huge profit by the end of Friday closing. However, Gold went higher in the next few sessions. In fact it was still relatively higher than the price you exited. My argument is easy, keep the one that show you profits and cut those that show losses, as fast as possible.

What is your take?

Bobby from Malaysia.

Chris Johnston said...

Bobby, this is a very good point. I would agree in general with what you have stated. However, I have different strategies that have different exit parameters. Some methods I use like the Bond System win more than 80% of the time. These methods often have the average loss a little more than the average win, but they profit by having mostly winning trades. Both of the trades you reference were from that method. Had they been what I am calling a swing trade in my trading service that I am launching, I would have held them. The Soybean trade short I pointed out was a Swing trade, which is why the stop was kept where it was.

I am pretty organized about how I approach this business, and I am willing to live with what my methods bring me. In both Gold and BO, I just followed my rules without any opinion or subjectivity. In the case of Gold and also RB which I was long at the same time, had I held them a little longer I would have made more. I don't try to be perfect, I try to follow my rules. I will be covering this in great detail over time in my newsletter.

Since the BO long was not a swing trade it had a quick exit parameter.

Hope that makes sense

Anonymous said...

are you still long feeder cattle from a while back?

Chris Johnston said...

no I am not in that feeder cattle trade anymore

Anonymous said...

Hi, Chris. I see your logic as:-
Expectation = (%win* average profits)-(%lose*average losses)
It is either high %win or high average profits that determine one has positive expectation.

I am interested in your approach on both methods you have just described. If you don't mind, please share more, probably on the time frame you use, etc...

I always held high respect for full time traders because trading is probably one of the toughest job out there. Therefore, I am planning to read your entire blog from the very first posting to know more about you and your approach.

Thanks and cheers.

Bobby from Malaysia.

Chris Johnston said...

Bobby that is such a long answer it is beyond what I can do here. You are going to have to sign up for my newsletter to get those answers. I will cover those in great detail. It is only $125 a year so it is not real expensive. I think water boarding might be better than reading all my posts going back in time!

The net of it is that there are different types of edges for trading depending on the time frames. Although I think we need to make things as simple as we can, to answer your question is complex.

Generally, if you want high win % you are going to have to trade off average win to average loss. If you want high ratio of average win to average loss, you will have to trade off winning percentage.

There is no right or wrong way to trade, it is a matter of preference and just understanding what you get with each approach.