trading

As I have mentioned in this journal, my trading vehicle of choice is the US dollar futures and the US dollar has been very volatile this month (it is always volatile).  Even though the dollar is heavily news influenced and greatly effected by foreign currencies it trades very technically. For this reason alone I find it a rewarding vehicle. Simply buy and sell on past historic support and resistance levels. 

Also its fast dips and exploding breakouts can offer the trader a pretty good risk to reward ratio.  I often find myself capitalizing on the dollar's price swings or "inefficencies". When I see a huge pop or drop off in the dollar's price I wait for the stochastics to reach overbought or oversold levels on the 5 to 10 minute chart and get in on the opposite side of the tape. The panic buying or selling will fade and the moving averages and stochastics eventually turn over and retrace.  Don Miller presented this idea so well in his New York presentation you can find here. Don Miller's TV Channel

"Breakouts Lead to Trends
Trends lead to extremes
Extremes lead to backing and filling
Backing and filling lead to consolidation
Consolidation leads to breakouts
Wash - rinse - repeat" - Don Miller

New chart April 24 - 2010

If you click on the new chart I have posted on the right you can see that the yellow verticle bar shows the price move I was expecting in ATVI (You can also see that I was bullish in ATVI and charted this exact short term move before it transpired. Older post here and the chart is at the end of this post.) 

I often times sell out of a position before the move is over to lock in gains in a swing trade. A swing trade for me is a short 1 - 3 week (or even 2 - 3 day trade) so if I see profits and I am well within the majority of the move I take the trade off and look for other stocks to put my money.

I am posting this to illustrate that even though I have sold out of my swing positions in equities for my trading account I am still active in the market. I have no swing trades currently due to the overbought nature of the market. I expect a pull back and will not be buying any stocks on break outs. I buy pullbacks and we have not seen one in a long time.

However, there is always stuff to do in the market and I am trading commodity futures and the US dollar. Here is a screenshot of my last 24 hour swing trade in the dollar. The thinkorSwim ticker symbol is /DX.

I entered the trade yesterday overnight after a large drop in the price on Tuesday. Why did I take the trade? There looked to be a short-term bottoming pattern in the dollar. There is also a gap that formed on Sunday/Monday and I believe it will need to be filled between 80.80 -> 81.00.  So essentially I liked the risk reward so I purchased 2 contracts over the last couple trading sessions. (The green circles shows where I purchased the contracts).

What a week last week. We saw a huge reversal candlestick on the S&P on Thursday. I pulled the trigger on the last remaining swing trades I had in ATVI*, INTC, KAD and ETFC (Made very little in either of the last two).  But ATVI and INTC were nice quick trades. * I still think ATVI will go to the 12.50 - 13.00 range.  Click image to see my thoughts...

Going "all cash" in my trading account hardly happens with me, matter of fact it's the first time this year. My reason for going all cash? This market is so overbought and I thought that I should begin a new position. CASH. Yes folks, cash is a position. I do not have plans on shorting this raging bull of a market, but I do plan on sitting on my hands and my nice gains. (You can see my gains on the right side so far this year) I just need to see what the market does before I put on any more swing trades.

What will I do now?

Collect dividends in my Roth IRA. - Boring I know.
Add funds in IRA - Hope the market pulls back, I want to buy at cheaper  - Buying cheap is never boring.
Day trade quick daily scalps on the US dollar. (as usual)

How I allocate funds for Trading, Saving and Investing? Where do I put most of my money?

 These are rounded numbers, but you may get the point. I was suprised when I looked at the numbers and saw that I was sitting on half cash and half equities. It pretty much reflects my personal bias and uncertainty with the market right now. Let me explain.

Savings: The Fed is punishing those who save. You have to tie up your cash for 30 years to get a decent return on your money in a CD. No thanks. So for the immediate future I have very little sitting in my savings. Most of my money is being put to work in my day/swing trading account. Savings account is 10% of total assets.

I have just purchased a few shares of PFE for the long haul and will likely add more down the road. The above chart is a MONTLY chart.

I am plunking this stock into my IRA account and activating a DRIP program (Dividend Reinvestment Program).  If you qualify (and you probably do) then you seriously NEED a Roth IRA. You should at least look into it. It is after tax money that you deposit in your IRA account. The government (as of this blog post) does not tax capital gains or dividends in your roth. All gains such as dividends and profits from selling shares is yours to keep as long as you wait till the apropriate age or "seasoning period" to begin removing the funds for retirement.  Roth IRA info:

Note: By the way this is not an investment recommendation. You should do your own research and seek out a financial advisor before you invest any money in the stock market.