End of day 23-02-05 : Despite the expected pull-back in precious metals the TT club did profit today 23rd, against the background for PMs outlined above, in trades typified by this chart (too big to include in this page). Entry was indicated, after an initial pull-back that you can see on the day chart, by a proprietary machine assistant (also being tested by the TT club as a generator of advice for fee-paying clients around the globe) had identified PAAS as the first precious metal miner (of silver in this instance) to put in a double bottom, have 23 EMA cross 50EMA positively, and have +DI positively cross -DI supported by a strong ADX and other indicators all visible on this chart.

Next day 24th, to illustrate the near chaotic element of global markets, AAUK (Anglogold) is well down on yesterday's close since the publication of US unemployment numbers (can you believe it? they actually count their obese unemployed!) and is still falling pre-market at 0800 hrs NY time despite still positive money flow numbers - what's up?.... manipulation by a cartel of the big finance houses?... well all we can say for sure is that if it is then it's selective because PAAS is up pre-market on yesterdays close and still looking good - this was an illustration in real-time, of the decision-making processes of the appropriately trained brain ........ however, you should by now have a clear picture of the alternative to trend trading - it *is* possible and *can be* profitable, but more often than not, unless extraordinarily lucky or skilled, you can easily end up back at square one, or worse....... y'see, PAAS *did* plummet today and partly recover, etcetera.... what did the TT club do with their PAAS position? Well it was decided that the commitment had been small enough and the longer term trend appropriate to ride out the draw-down ('draw-down' is another important another topic to be covered later) due to volatility. Update Friday closing : the TT club elected to close the PAAS position for the weekend, because PAAS put in what's called a 'double top'   (prices: 17.133, 17.13. First 'top' 27 hours ago, second 'top' about 1 hr before close). Within minutes of TT club closing the position sure enough PAAS tanked through the 200 EMA. That means a lot of other traders made the same decsiion, or followed suit. Either way :

1. Being among the first out, paid a small profit;

2. it was a nice example of crowd/herd behaviour in real-time;

3. it was also a nice example of how NOT to conservatively trend trade. Until you can profitably 'do' trend trade transactions, over and over again, only a mug would dabble in the TT club game;

4. it was an example of decision-making freed from commission costs, that's given by an appropriate commission free CFD trading account - one of the significant operating costs especially to a micro trader, is a typical 10 $ or £ commission fee paid to the facilitating online broker for each transaction whether it involves 10 or 10 thousand shares. It's an insignificant cost on a 100 thousand $/£ transaction, but a significant one on a 200 £/$ or even 100 $/£ micro trader's transaction.

In this paper, the author tells about an aspect of brain development - another well researched one is the identified difference between a 'normal' brain and the brain of a London cab driver after years of 'doing the knowledge' (intensive focussed training). With training, the average human brain can develop to interpret numerous almost chaotic, simultaneous real-time signals generated by varying trade-related phenomena and semi-processed by computing technology. Action research is showing what big finance houses have known a long time, that that ability can be seriously enhanced by application of additional computing technology that can deal with the bottleneck imposed by the number of simultaneous or concurrent information streams that the human brain can cope with effectively. Computing technology can 'scan' and calculate at far greater speed and with far greater accuracy than the human brain. Finance houses have always relied on such systems, now because of recent progress, you can inexpensively use the technology too and we'll go into detail in a later paper.

However, if you and your sophisticated tools stand too close to the near 'chaos', you can both, jointly and severally lose ability to spot your friendly trend through the 'noise'. Better to take the longer term view. One time-scale is illustrated by these current charts.

What to do if you, with or without perception enhancing tool(s) can't *see* a trend? Then stay out of the market!

At the end of this first week of the trend-trading course, it may be difficult to 'see the wood for the trees' . Dealing with the confusion of new concepts and ideas is helped by studying each of the concepts highlighted by bold type or hyperlinkage over the weekend.

Update 28-02-05 : HA! HA! HA! 30 mins before main US markets open you'll be able to guess what the TTClub have done? Yep they've gone back into PAAS - d'you *now* see the advantage of taking a step back and trend trading at 'arms length' with a long enough time-scale as your 'window' of perception??? Me? I think AAUK 55% owner of AU an 'owner' of Asante minerals is going great guns - better than PAAS as a beneficiary of low operating costs and taxes.

Update 14-03-05 : On the other hand, though it's an aspect of trend trading (trading the within-trend volatility) that we haven't covered yet, let's watch this as a real-time example and see how it plays out : the TT club re-entered PAAS today after covering a short position for the duration of a small within-trend pull-back, that aggressive trader also covered some equally short-term short sold XAU  call option contracts at the same time (phew! and today 16th sold PAAS as VZZAD, an 2007 option contract bought 14th at 3.1, at 3.4 - hey! that's seat of the pants stuff, it is *not* trend trading - hang on, it gets better today the 16th, whoever was buying VZZAD earlier has dropped out and as one would expect, market makers are pulling underlying PAAS down for the contracts expiry date on Friday of this week, so the TT club have placed an order to buy back again at 3.1 - nice trading if you can get it, up, down, up, down, in again and up again when the Market Makers pull PAAS down for contracts expiry date the 19th, all done profitably in the same instrument in one week) but we inveterate trend traders and fledglings, in teaching/learning mode, are still watching that metal to miners ratio for an entry (to miners' stocks index XAU) signal. We got a positive cross of -DI and +DI, but ADX continued to trend southwards and sure enough XAU tanked temporarily in the nice kind of pullback that is a healthy indication that the uptrend is still in place.

The question in the air today 15th, is whether XAU, having reached this  uptrendline, will continue southwards to this one... in that chart, MACD suggests that it won't but chart of price relative to the metal shows that it easily could within the long-term uptrend. We shall see, and wait! A pull-back to lower support level would likely present us with the perfect entry point signal set. We'll see, and wait - this module is about conservative trend trading - not daytrade scalping, and this strand is about timing entry to a miners' stocks index (XAU) not the metal, though it should be noted that the metal is also at this time in healthy pull-back mode, as indeed is individual miner AAUK (majority owner of AngloGoldAshanti). Update 16th : we can expect miners to recover after options contracts expire Friday the 18th.

That's our provisional entry target date and we're not emulating the IT club, entry will be confirmed by the required signals, or else it won't happen, so watch this space. You can watch developments from this grandstand ('save' the page to your desktop and open it there, with java enabled and appropriately configured IE browser - if you normally use Firefox then open it with IE which you should also have installed for certain purposes).

Update on option contracts Expiration Date (the third Friday of the third month of every quarter) 18th : There aren't any options on AAUK so it's already been rebounding for the past three days, but 'big' mining stocks like NEM will be held down by Market Makers today and should take off next week - that in turn will drive our target instrument, XAU, but not today.

Getting back to 18-03-05  tuition - GLD (the metal ETF) is rising nicely now that it's relieved of pressure from MT's , that's a good indication of a positive week in metals and miners stocks. However, if markets were that easily predicted you wouldn't need developmental tuition/training, so wait for the right signals set for the markets segment we are watching - gold/silverminers index, XAU.

There is awareness that this 'howto' page has been neglected recently and is reproducing stuff from the real-time action research page here. This is being dealt with - probably by rewriting 'howto' when time (available to unpaid volunteer(s)) permits. This does NOT mean that free education is inferior education - quite the opposite, because unlike this kind of bought pseudo-education for example, it is free of both 'aid' and other corrupting pressures, meaning that within resource constraints your tutor prioritises *your* development above all else.... watch this space.

Update 21-03-05 : We are today seeing gold metal plunge $10 before recovering a little. This is a nice and timely illustration of the kind of volatility and drawdown you have to be able to survive as a trader. If in the market, you *might* have foreseen this outcome of large Asian currency players being out of the markets (and the knock-on $ effect on metal), and might have foreseen the the aggravating beginning of extended Easter vacation when many traders and money managers are out of the market because starting their Easter break - or you might not. In either event you have to have ability to survive this kind of draw-down built in to your trading strategies. Trend traders who are watertight in the face of draw-down, should take a day or two off for a fishing break until the noise subsides and we trend traders who are still watching the market for signals of optimal entry to miners' stocks index XAU, should stay focussed.

A few words on trend trading sub-strategies :

Major market cycles last weeks and months and you may see only one or two cycle changes in a year, therefore if you select a long term market 'window'/view, timing can be relatively easy. As soon as a long term cycle turns up, you can “cost average” in, and if different sectors are going up, then divide, if you wish, your funds equally in each sector. Cost average means buying over a period of time, depending on how big your account is. You might buy over a period of two to four weeks about 15 to 20% at a time. Investment vehicles should be an ETF. Individual stocks are not recommended unless you have some specialised/insider knowledge and/or unusual stocks picking skill. Exiting the markets is the same as entering - as soon as the cycle turns down, begin liquidation over the next two to four weeks.

Another few words on trading signals : signals trend trading is different from strategies trend trading, in the that the time-scale can be very much shorter (signals are typically detected by hourly charts) and the volatility will be more violent and unpredictable. During a major cycle, there could be many buy *and* sell signals. Such signals are beneficial to active/aggressive traders as they trade in and out for short term profits.

You can of course also do both - and profit or lose from accepting the challenge of short term trading. You can use some funds for tactical signals trend trading and some for strategic cycle trend trading.

23-02-05 : XAU Outlook: After the bloodbath since options expiry Friday (18th), hourly and daily charts show the miners' index oversold and weekly oscillation bullish. This is theoretically a good technical position to enter, though as always no guarantee (if it was that easy there wouldn't be a market because markets need buyers and sellers) that XAU or the metal have bottomed just yet. A panic gap down today/tomorrow to the uptrend line would provide the optimal entry. The following chart shows where we're at in graphical form:

You can see the ABC wave pattern along the uptrend line, see that 'A' is probably completed and 'B' probably completing (uncertainty is generated by the unusual speed with which the market was flipped over by one very large trade at 147k (commercial traders net shorts) in conjunction with low volume and Greenspan's contribution (all within two days). Given that this interpretation is correct, then you can also see that 'C' is always the biggest and fiercest wave - the one most worth surfing.

Since this page is about 'howto', if unlike the patient people at the real-time action-research page, you were already 'in' you would in the above circumstances, after a 'bloodbath' like the past few days (which you survived by intelligent money planning and avoidance of over-trading - topics we'll cover later), need an emergency :

Facts:

Strategy:

Summary:

You're probably down a small % right now - uncomfortable but manageable.

If we get a bounce, your risk will be diminished by exiting half and holding half.

If we go straight down from here, major trendlines will be busted, and cycle will turn down for sure - your loss using the above plan will likely be 5% to 10%. Not too bad a scenario and you preserve your capital for re-entry.