UFFICIO ANALISI TECNICA OK, LET’S PRACTISE WITH TRADING FIB30: HOW TO DEAL WITH IT
UFFICIO ANALISI TECNICA But, first, have a look to some “MONEY MANAGEMENT” RULES The trend is your friend: never fight the trend Do not “average”. Never have loyalty to a position. Bad trades should not become long term “investments” Plan your trade, trade your plan. Predetermine your exit points, i.e. STOP-LOSS, before getting into a trade STOP TRAILING: the best way to let your profits run
UFFICIO ANALISI TECNICA MONEY MANAGEMENT RULES Avoid thin markets; avoid high volatility (if you can) Identify and eliminate stress. Keep FEAR, GREED and HOPE under control Never risk more than 1% or 2% of your capital on any trade. Never hold large position if you can’t hedge them Save money for a rainy day Do not overtrade DISCIPLINE. It’s a prerequisite to maintain effective risk control. You need discipline to apply your method and your trading plan
UFFICIO ANALISI TECNICA MONEY MANAGEMENT RULES Live long enough and you will eventually be wrong about everything... The only sure thing in the long run is that we all be dead...... going to dismiss all this stuff as obvious clichés? Indeed, few things are easier to ignore than trading advice... trading advice... Consider for example the rule “Do Not Average”, i.e. “Cut your losses short”. How many times did you ignore it? What happened then?
UFFICIO ANALISI TECNICA Good friends for a Fib30 trader: Pivot Points A projection of the two market dimensions: Volatility & Directionality Second Resistance = Pivot + (H-L) First Resistance = (2 * Pivot) - L Pivot Point = (H + L + C) / 3 First Support = (2 * Pivot) - H Second Support = Pivot – (H-L)
UFFICIO ANALISI TECNICA Good friends for a Fib30 trader: Pivot Points - example FIB 30 – 09 JUN 2003 what happened Open: 24.180 High: 24.300 Low: 23.995 Close (Official Price): 24.255
UFFICIO ANALISI TECNICA Fib30 trading: a real example FIB 30 – 09 JUN 2003 what happened Open: 24.180 High: 24.300 Low: 23.995 Close: 24.255 Long at: 23.910-23.950, s/l 23.770, t/p 24.080-24.120, s/l EP if 24.025 reached Short at: 24.380-24.420, s/l 24.615, t/p 24.180-24.220, s/l EP if 24.270 reached Report published on: 09 Jun 2003, h: 3.20 pm (update of report published at 9.30 am)
UFFICIO ANALISI TECNICA Summing up: the equity line
TECHNICAL ANALYSIS UFFICIO ANALISI TECNICA “Technical analysis … has been shown to generate statistically significant profits, despite its incompatibility with most economists’ notions of ‘efficient markets’.“ Federal Reserve Bank of New York, C. L. Osler and P.H. Kevin Chang, Staff Report, No. 4, August 1995 Common sense is not so common. Voltaire Who are we to argue with the Fed?
Suggested Bibliography UFFICIO ANALISI TECNICA For a general introduction to Technical Analysis, we would suggest: Murphy, J. J., Technical Analysis of The Futures Markets, New York Institute of Finance, New York, 1986 PAGES: 542; PRICE: USD 70.00 For an in-depth introduction to Japanese Candlesticks, two of the most diffused reference books are: Nison, S., Japanese Candlestick Charting Techniques – 2 nd edition, New York Institute of Finance, New York, 2002 PAGES: 300; PRICE: USD 80.00 Morris G. L., Candlestick Charting Explained, McGraw Hill, New York, 1995 PAGES: 300; PRICE: USD 86.00
UFFICIO ANALISI TECNICA This presentation was given by: Maurizio Milano, Office Manager, Maurizio Milano, Office Manager, MAURIZIO.MILANO@sella.it Giorgio Sogliani, Giorgio Sogliani, GIORGIO.SOGLIANI@sella.it The other members of our team: Romano De Bortoli, Deputy Office Manager, Romano De Bortoli, Deputy Office Manager, ROMANO.DEBORTOLI@sella.it Giuliano Sarricchio, Giuliano Sarricchio, GIULIANO.SARRICCHIO@sella.it Tel. +39 015 35018047 Free reports available at: www.sella.it Page: Analisi&Ricerche Technical Analysis Department