Ratios and Trading Plans

Today was one of those days when it pays to be prepared. If not, you probably got chopped up in that mess we called a tape.

As part of my post-market routine I put together a trading plan for the next day. It typically consists of a single page of hand-written notes that includes:

1. My bias for the day based on the forecast (i.e. long, short or neutral)
2. Important targets on the ES futures contract or SPX cash index
3. Important times whereby we may get an important inflection
4. A list of indicators and their respective readings
5. A check list of things to do the next morning

Here is an example of today's trading plan that I set up last night:

Trading Plan (2/17/10)


It's difficult to read, but I came into the day with a neutral/short bias based on everything I was looking at - forecast, ratios, indicators, etc. It's precisely because of this plan that I did not get chopped up in the tape today. In fact this is the one and only trade I executed...

2/17/10 Trade


The point is not to boast about a 4-point trade, but rather to stress how important it is to have a plan ahead of time. It can save you a lot of headache.

RATIOS

I've mentioned the GOLD/SILVER and JNK/TLT ratios 'a few' times now, but I would like to introduce another one I've been keeping a close eye on.

The gold market (both stocks and spot price) have led the market for past 1-2 years, and so it makes sense to consider them in your trading methodology. The ratio I would like to introduce is the GDX/GLD ratio.

Admittedly, I 'stole' it from a fellow who posted it on the Trading To Win blog so many thanks to that individual. As you clearly see it marked a significant bottom prior to the general market taking off.

GDX/GLD Ratio (Intraday)


I'm really looking forward to tracking it going forward.

ES FORECAST

As usual, here is the forecast...

Intraday ES Forecast


Intraday ES Forecast - 'What If'


While the forecast suggests we move up, I saw a lot of people capitulating at the end of the day thinking this was another ramp up. I would not be surprised at all if we see a down day tomorrow. I am flat overnight.

Do YOU Believe?

As most of you are aware, Vancouver is host to the 2010 Winter Olympics. So this weekend I decided to 'head to the city' to experience what many have dubbed as a 'one in a lifetime experience.' To put it succinctly, the vibe in Vancouver is nothing I have ever experienced in Canada. I was fortunate to have attended the 2006 World Cup in Germany which was probably the grandest of grand events I have ever experienced, but I have to admit that the Olympics rival my World Cup experience.

Vancouver is a completely different city now that the Olympics have rolled in. The streets which are typically quiet (even on a weekend night) are jam packed and full of people with Olympic paraphernalia to spare. Every restaurant in town is open until the sun comes up, there is music to be played and beer to be drunk pretty much everywhere, but most of all everyone is 110% behind the athletes and that's what I want to talk about...

FEAR IS NOT FAILING

There is so much one can learn from the experiences of an Olympic athlete. Take for instance Canada's first-ever at-home gold medalist Alexandre Bilodeau. This is a guy who 'failed' four years earlier in Torino, Italy by placing 11th after missing a landing near the end of the course. But he learned from his mistakes, used the experience of the so-called 'failure', trained hard for 4 years and is now revered amongst Canadians as symbol as to what one can accomplish if you put your mind to something despite the obstacles. And his story will be repeated many times I'm sure over the next several days....

The Olympics is a great example of how F.E.A.R can cripple hopes and dreams if it is not faced head on, and conversely, how it can yield amazing results if dealt with. Bilodeau could have quite easily succumbed to the fear of repeating the same 'mistake' again in 2010, but instead he practiced and practiced and practiced and practiced and practiced until he could see himself winning. Trading, of course, is no different.

You and I must both be able to fail in order succeed. You and I must learn to learn from our mistakes and apply those lessons forward. But it takes commitment, perseverance and above all ACTION.

I encourage you to watch the Olympics even if you don't like skiing, etc because there is so much to learn about the human experience and how we all - in some form - face the same psychological obstacles. It's only those who are committed to the process of learning and moving forward that truly win gold.

Been A Long Time

It's been quite some time between now and my last post. Going forward I suspect I'll be posting with less frequency than, say, last year. I love the social aspect of blogging but it also takes away from my trading and that's what's truly important right now. Hope you understand.

P.S. The video may not work for a few minutes as at the time of posting since YouTube may not have finished processing it. Just be patient if you happen to be checking the blog right after I post.

P.S.S. If you are interested in my day-to-day thoughts on the markets, send an e-mail at a.grant@ambgtrading.com if you'd like to be added to my mail list. I send out 3 updates a day - forecast included.

See you tomorrow.

EDIT: Crap, the video is a 1 minute longer than the maximum allowable (10min) and YouTube rejected it. I'll fix it tomorrow if I can parse the file (I'm using a different operating system now, so need to figure out how to do that). Stay tuned....

EDIT: There we go, had to re-record it....have a good weekend!

I'm Here!

I just wanted to touch base to let you know I'm still here. The number of posts have improved significantly over the December period but I know I could do better now that things have picked up for the better.

That being said, I am very, very involved in my own trading these days as I have very high hopes for 2010.

WEBINAR

At the beginning of the year - Changing Market Conditions - I talked about hosting regular webinars throughout the year. To get an idea of how many people would like to attend, could you please vote in the poll at the top right of the blog? Thanks.

FORECAST

If you would like to receive intraday updates with respect to the forecast send me an e-mail at a.grant@ambgtrading.com. I give my most up-to-date comments on the markets 3X per day in these updates (forecast charts included.)

Intraday ES Forecast