TUTORIALS IN APPLIED TECHNICAL ANALYSIS

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The Internet Trading Weekl !ith inde"endent anal #i#

5ee6ly for %aturday 7uly 6t,& 201! )ased on 2,ursday8s Close 2 pages 3dited by 'aryl Guppy (it, contributions from A $89alley
Guppy Trading Essentials Chart pak, Metastock , Ezy Charts & SuperCharts. Data from ustData, !aritech, CMC Markets, "lma# & the$e#t%ie&.

CONTENTS
5aiting /or A 'irectional )rea6out Pg1 Annual Case %tudy Portfolio Re:ie( Pg! Readers8 ;uestions< Case %tudy Portfolio %et=>p Pg10 2rade Gallery Pg11 Ne(sletter $utloo6< Pattern $f ?ndecision Pg22 Portfolio Case %tudies Pg2!

$%"" trader#&'o( i# no! on )a'e*ook+

WAITIN$ )OR A DIRECTIONAL ,REA-OUT

'y Daryl Guppy 2,e mar6et ,as de:eloped an e@uilateral triangle pattern+ 2,is may lead to a rapid brea6out& but t,e direction of t,e brea6out is not clear+ 2,is calls for cautious trading+ 2,is :olatility is one of t,e main reasons (e ,a:e been loo6ing at deri:ati:e trading met,ods+ 2,ese capture ma0imum returns in a s,ort time and so reduce t,e time ris6 element in t,e trade+ ?n t,e case study notes in recent (ee6s (e ,a:e s,o(n t,e (ay traders use deri:ati:e and (arrant trades to boost returns+ 2,is is nimble trading and t,ese met,ods (ill be applied in t,e rally mar6et+ 2,e c,oice of (arrants is more limited& but t,is also increases opportunity as acti:ity is more concentrated+ 2,is ne(s letter is designed to ,elp people trade most effecti:ely in t,e current mar6et conditions by e0amining t,e met,ods and tec,ni@ues t,at are been pro:en and (,ic, are used by ot,er traders+ Readers (,o purc,ased our CA2CA?NG 2A3 )$>NC3 and G99A 2R3N' B$LA2?L?2C 9ANAG393N2 'B's ,a:e an ad:antage in understanding and trading t,ese s,ort term :olatility bounces+ ,reako%t Trading 'y "le#ander ()Malley 2,e G// rally ,as not de:eloped as strongly as (e (ould of li6ed+ 2,e trading plan is still in effect t,oug, as t,ere (as no close belo( t,e do(ntrend line+ 2,e 10A2R is no( e@ual to t,e :alue of t,e trend line meaning it is no( our trailing stop loss+ Price appears to ,a:e rebounded off t,e trendline& t,e ris6 no( is price (ill use t,is do(n trend line as support and slip lo(er+ 2,e 10A2R line (ill protect us from t,at+ 5e are loo6ing for price to continue to rebound ,ig,er+ 7une 29& 201!

G// (as entering t,e day after t,e brea6out& spending D19&999 to ac@uire 2"&""" s,ares are D0+"2+ Currently our stop loss is set at D0+"0 putting D111+1 or 0+02"E of total trading capital at ris6+ G// is currently trading at D0+"2& putting t,is trade at brea6 e:en+

O"en In.itation fro( $%"" trader#

5e (ould li6e to offer an open in:itation to subscribers to send us e0amples of your personal trades to put into t,e ne(sletter+ 5e are loo6ing for subscribers to ,elp ot,er subscribers by s,o(ing (,at you are doing rig,t or (rong in t,e current mar6et so t,at ot,ers may learn from your success or mista6es+ Learning to trade is one of e0perience and seeing (,at ot,er people do+ 2,at is partly (,y you are subscribed to t,is ne(sletter& to see (,at 'aryl and ,is team are doing in t,e current mar6et+ 30amining your o(n trades also ,elps you to become a better trade+ 2,is can be done anonymously+ 5,at (e are loo6ing for is simply< 1+ A c,art of t,e trade 2+ Cour trading plan !+ 5,ere you entered and e0ited t,e trade + Ao( you found t,e stoc6 and (,at indicators you used+ 1+ ?f possible a s,ort (rite up F100=200 (ordsG about t,e trade egH (,at you learnt or ,o( you (ould of done t,ings differently in t,e future+ Cou can email your trades too support4guppytraders+com + CASE STUDY E/UITY CUR0E 2,e portfolio return is D1"9&26. or 1"9+26E for t,e period starting 7uly 1& 2012 and ending 7une !0& 201!+ 2rade siIe is generally 6ept constant at D20&000 in t,e case study portfolio so it is easier to compare t,e case study trades o:er t,is and ot,er years+

7une 29& 201!

SU,1ECT SU22ARY RE0ERSAL PATTERNS Re:ersal patterns are a collection of price relations,ips t,at appear at t,e top of ma*or trends+ 2,ese include ,ead and s,oulders patterns and rounding tops+ 2,ey also include spi6e ,ig,s& or blo( off tops+ %ometimes a long uptrend comes to a slo( end+ Prices mo:e side(ays& or slip into a long slo( slide+ %ome trends pea6 rapidly and dramatically+ Aere lo( :olume ,ig, price spi6es signal t,e bulls ,a:e deserted t,e trend+ 2,e patterns of price acti:ity are reliable guides to trend (ea6ness and decline+ 2,ey can be confirmed (it, ot,er indicators signals suc, as A'J and oscillator di:ergences+ Recognising t,ese patterns gi:es traders an opportunity to ta6e profits+

ANNUAL CASE STUDY PORT)OLIO RE0IEW 1%l 3453 6 1%ne 34578 59:&3; RETURN
'y Daryl Guppy
2,is year t,e case study portfolio included 21 personal trades or !1E of all trades+ 2,e best result came from a personal (arrant trade(it, /9G5$J & (it, a 9!E return on capital+ 2,e strong mar6et momentum called for a continuation of trend and deri:ati:e trading tactics in t,e second ,alf of t,e year+ %uc, as t,e met,ods co:ered in our N35 5ARRAN2 2RA'?NG 'B'+ 2,e number of trades ta6en increased& and t,e success rate of t,e trades returned to a:erage as tig,t stop loss conditions (ere applied+ 2,e second ,alf of t,e year ,ad a .1+21E success rate and included 16E of personal s,ort term trades t,at (ere included as case study e0amples+ 2,e ne( mar6et conditions re@uire closer attention to managing :olatility+ ?t also means using le:erage to get t,e best results so t,ere is an increased number of (arrant and C/' trades+ 2,e purpose of t,e ne(sletter is to model for readers t,e met,ods used by professional traders in all mar6et conditions+ $ur se:enteen year a:erage returns of 90+ E for t,e case study portfolio are testimony to t,e effecti:eness of t,is approac,+ 5e ma6e about 26 trades per year in t,e case study portfolio and t,is a:erage ,as remained unc,anged for more t,an a decade+ 2,is year (as ! trades because (e included more s,ort term opportunities+ ?t8s t,e primary ad:antage of pri:ate traders+ 5e trade only (,en t,e opportunities are at t,eir best+ $ur ob*ecti:e is to teac, readers t,e met,ods of success so readers can apply t,ese tec,ni@ues (it, confidence to ,elp boost t,eir trading returns+ LAST SI< 2ONTHS RE0IEW 7une 29& 201!

5e start t,is re:ie( of t,e last si0 mont,s of t,e case study notional portfolio (it, se:eral obser:ations+ /irst is our absolute a:ersion to losses+ 5e acted :ery @uic6ly to cut losses and t,is sa:ed t,e portfolio from considerable damage+ 2,is (as a normal acti:e trading period (it, 16 trades+ Normally t,e case study portfolio includes around 26 trades per year but t,is year t,ere is a total of ! trades++ 2,e success rate (as slig,tly abo:e our long term a:erage& (it, "6+ " E of trades turning into (inners+ 2,is included 9 personal trades+ 2,e (arrant trades return t,e ,ig,est profits+ %,ort term (arrant trades added more t,an D &000 to D &00 in profits+ 2,is is compared (it, lo( profits from trades in ordinary stoc6+ Return for t,e si0 mont, period is 116+9E+ 2,is added D116&991 to t,e case study portfolio+ 2rades (ere open for an a:erage of 16+1 days& or a little o:er ! (ee6s+ +

2,e second obser:ation is t,e integrity of t,e case study portfolio+ 5e are careful about t,e integrity of t,e case study portfolio results+ People are often @uic6 to point out trades t,at are fast mo:ing and (,ic, deli:er large profits are often some of t,e s,ort term trades+ 2,ey suggest t,at t,ese are some,o( manipulated& or carefully c,osen+ 2,e returns from some of t,e personal trades t,at (ere included as trading e0amples& including a ANK5$L call (arrant (it, 220EE profit& s,ould confirm t,at t,e (or6 (e do in t,e case study closely follo(s t,e met,ods (e apply to trading current mar6ets+ L $ur intention is to s,o( you t,e realistic operation of trading M (arts and all+ 2,e t,ird obser:ation is t,e fre@uency of trading+ 2,is is about t,e same as t,e first ,alf of t,e year+ ?t reflects t,e :olatility be,a:ior of t,e mar6et as t,e ne( uptrend de:eloped+ 5e used 16 trades open for an a:erage of 16+1 days+ ?n t,is si0 mont, period t,e (inNloss ratio (as .1+21E and t,e return (as 116EE on capital for t,e period+

7une 29& 201!

5e still see t,e common pattern of trading results (,ere t(o or t,ree trades contribute disproportionately to t,e o:erall portfolio results+ $ne of t,e ob*ecti:es in trade and portfolio management is to 6no( ,o( to most effecti:ely manage t,e trades t,at turn out to be big fis,+ ?n 201! t,is ,as meant de:eloping t,e s6ill re@uired to manage sustained trends but (it, t,e probability of a sudden drop+ Alt,oug, (e al(ays ,ope t,at e:ery trade (ill turn out to be t,e big one& t,e reality is t,at most of our trades are muc, smaller fis,+ All of t,e case study trades for t,e past si0 mont,s are included in t,e 2rade Gallery section of t,e ne(sletter+ 2,ese simply gi:e a summary of eac, trade+ Readers s,ould al(ays refer to t,e indi:idual issues of t,e ne(sletter for a more complete discussion of t,e management tec,ni@ues applied to eac, case study trade+ 2,e 2RA'3 $P3N date s,o(n refers to t,e ne(sletter issue in (,ic, t,e case study trade (as first opened+ ?t does not refer to t,e day t,e case study trade (as entered+ PORT)OLIO RE0IEW 2,e notional case study trade portfolio is an integral part of t,e ne(sletter because t,is is used to demonstrate& in contemporary time& t,e application of particular strategies+ Ao(e:er& (e also run a (ider mi0 of articles+ 2,ey include< Coac,ing style articles (,ere readers are as6ed to apply analysis and t,en compare t,eir notes (it, ours+ 'iscussions of trading strategies and approac,es t,at tac6le contemporary issues+ 2,is includes parabolic trends& trading bands and price spi6e analysis+ 2,ese articles pro:ide t,e tools necessary for a better understanding of mar6et acti:ity& alt,oug, (e do not generally include t,is in t,e notional case study e0amples+ Ne( indicators and re:ision of classic indicators+ 2,e ob*ecti:e is to understand ,o( to more effecti:ely apply t,e tools t,at appear in your c,arting programs+ Case study trades t,at s,o( selection& assessment& management and e0its steps+ 2,ese form t,e core of t,e notational case study portfolio+ $t,er articles s,o(ing ,o( indicators and trading strategies are applied to effecti:ely analyIe selected stoc6s+ 2o ensure t,ese retain t,eir educational function 7une 29& 201!

and do not become in:estment ad:ice& t,ese discussions are based on recent price c,arts+ %e:eral features s,ould be noted (,en e0amining t,e case study portfolio+ 2,ese returns in t,e case study trades (ere not t,e ma0imum returns a:ailable from t,ese trades+ 2,ey generally e0tracted about ,alf to t(o t,irds of t,e a:ailable price mo:e+ 2,e case study trades also illustrated some effecti:e (ays to deal (it, made mar6ets (,ere traders can use t,e mar6et ma6ers obligation as an additional tool to manage entries and e0its+ 2,ese tec,ni@ues are applied in t,ese trades in a falling mar6et& but t,ey apply e@ually to all (arrant trades+ 2,ese case study trades included se:eral personal trades+ >sually (e a:oid using t,is in case studies because of t,e potential for conflict of interest+ Ao(e:er& in t,ese e0amples& t,e personal trade (as completed before t,e ne(sletter containing t,e e0ample (as publis,ed+ 2,e tec,ni@ues (ere discussed in ad:ance& but t,e case study e0amples (ere ,istorical by t,e time traders found t,em in t,e ne(sletter+

2,e ne(sletter ,as also gro(n and c,anged o:er t,e past 1" years+ 2,e notional case study trade portfolio (ill remain an integral part of t,e ne(sletter because t,is is used to demonstrate& in contemporary time& t,e application of particular strategies+ Ao(e:er& (e ,a:e also included a (ider mi0 of articles+ 2,ey include< Case study trade management notes ,a:e c,anged format to s,o( ,o( t,e trading plan e:ol:es o:er time as t,e trade de:elops+ 2o ma6e it easier to read& ne( notes are ,ig,lig,ted so regular readers can *ust read t,e updates if t,ey (is,+ Coac,ing style articles (,ere readers are as6ed to apply analysis and t,en compare t,eir notes (it, ours+ 'iscussions of trading strategies and approac,es t,at tac6le contemporary issues+ 2,is includes trading C/'s& parabolic trends& trading bands& and price spi6e analysis+ 2,ese articles pro:ide t,e tools necessary for a better understanding of mar6et acti:ity& alt,oug, (e do not generally include t,is in t,e notional case study e0amples+ Ne( indicators& suc, as 2rend Bolume Analysis& different applications of standard indicators& suc, as t,e articles on /ibonacci and triangles& and re:ision of classic indicators+ 2,e ob*ecti:e is to understand ,o( to more effecti:ely apply t,e tools t,at appear in your c,arting programs+ Case study trades t,at s,o( selection& assessment& management and e0it steps+ 2,ese form t,e core of t,e notational case study portfolio+ $t,er articles s,o(ing ,o( indicators and trading strategies are applied to effecti:ely analyIe selected stoc6s+ 2o ensure t,ese retain t,eir educational function and do not become in:estment ad:ice& t,ese discussions are based on recent price c,arts+ 53 2ONTH ANNUAL RE0IEW RESULTS 5,en (e combine t,e most recent si0 mont,s of case study results (it, t,e first si0 mont,s in t,e financial year& (e get a better picture of t,e o:erall consistency of performance+ 2,is year t,e case study portfolio included 12 personal trades or !1E of all trades+L 5e made ! trades for t,e year& up on t,e fifteen year a:erage of 26 trades+ 2,e success rate is "6+ E (,ic, a result of entering (,en momentum is strong rat,er t,an ta6ing ,ig,er le:els of ris6 on brea6out trades+ 2,e is an application of t,e momentum minute style trading discussed in t,e G99A 2R3N' B$LA2?L?2C 9ANAG393N2 'B'+ 2,is means t,at around " out of 10 trading c,oices de:elop into profitable trades+ 2,is is slig,tly ,ig,er t,an t,e "0E a:erage (e aim for+ Ao(e:er& it is not t,e (inNloss ratio t,at leads to success+ 2,e real basis of success lies in t,e (ay t,at unsuccessful trades are ,andled+ 5e rode losses :ery tig,tly o:er t,is period& (it, most losses being under 2E of total trading capital+ 2,e largest loss (as D2&692 or 2+" E of total trading capital+ 2,is (as in a personal trade (it, a (arrant+ Generally losses (ere less t,an D100 or 0+01E of trading capital+ 2,is caution and tig,t ris6 management is reflected in t,e lo( dollar :alue of t,e loss in losing trades+

7une 29& 201!

2otal return for t,e period (as 1"9+2"E on capital+ 2,is is a realiIed profit of D1"9&2"0+ 2,is means (e started out (it, D100&000 and added D1"9&2"0 during t,e year+ 9ost e@uity trades (ere around D20&000+ Generally all C/' and (arrant trades (ere 6ept to around D10&000 as t,is is a means of managing ris6+ /ull detailed results for all pre:ious years are a:ailable on ,ttp<NN(((+guppytraders+comNgup11+,tm+ 2,e spreads,eet template (e use for t,ese summaries is also a:ailable free to ne(sletter subscribers+ Please email us at support4guppytraders+com if you (ould li6e a copy+ Please ,ead your email /R33 %PR3A'%A332+ Are t,ese still e0ceptional returnsO 2,is year t,e (arrant and C/' results boosted returned to a ,ig,er t,an e0pected le:el& but in general (e do not t,in6 t,e underlying results are e0ceptional+ 2,e L note at t,e end of t,is section e0plain t,is furt,er+ 2,e se:enteen year results s,o( a consistent le:el of return t,at is substantially better t,an t,e performance of t,e broad mar6et inde0+ $n an se:enteen year basis& (e can realistically aim for around a "1E return or more on capital or better from t,e mar6et+ ?t is ac,ie:ed by careful and disciplined ris6 management+ ?t is not ac,ie:ed by P,ot tips8 or by pretending t,at (e can select stoc6s more successfully t,an ot,ers+ 2,e single most important lesson t,at traders can learn from t,ese portfolio results is t,at success rests on t,e trader8s ability to cut losses @uic6ly+ 3:en if t,e stop loss e0it subse@uently turns out to be incorrect t,is does not destroy good trading results+

7une 29& 201!

"

2,is report s,eet includes all of t,e case study trades discussed during t,e last si0 mont,s+ 5e do not ,ide losing trades& or poor performers+ 5e do no con:eniently forget to include some trades in t,e ,ope t,at readers (ill ,a:e forgotten about t,em+ 2,ese results are ac,ie:able+ 2,ey can be duplicated+ Cou mig,t not ac,ie:e t,e same le:el of return& but t,e case study trades s,o( (,at is possible+ 2,ey are also a po(erful reason for not accepting poor trading results+

2EASURIN$ RETURNS 5e measure our returns by money in t,e ban6+ ?t is an old fas,ioned measure t,at gi:es t,e trader a realistic idea of *ust ,o( (ell ,e is doing+ 5e a:oid false measures of success+ 2,ere are four false measures+ Co%nting o"en "rofit# $pen profits are calculated by ta6ing t,e last traded price and turning t,is into a portfolio :alue+ 2,is can ma6e us all instant millionaires M on paper+ Readers (ill 6no( ,o( some sample trades ,a:e been :ery profitable& but ,a:e later been closed at a smaller profit because t,e e0it conditions are not triggered until muc, later+ Ann%ali=ed ret%rn# 2,is is t,e industry standard and (e belie:e it is misleading+ 2,e sample trade mig,t return .E in *ust one mont, of trading+ An annualised figure ta6es t,is realised return M t,e return t,at (as actually ban6ed M and calculates (,at it (ould ,a:e been for t,e t(el:e mont,s+ 2,is translates into a (,opping annualised return of 1"6E+ 2,is is an Pin your dreams8 return because t,e trade (ill not be at t,e same price in t(el:e mont,s as it (as (,en (e made t,e e0it+ Pretending lo##e# don>t 'o%nt

7une 29& 201!

5e ,a:e been disturbed by t,e trend (it, some mar6et commentators (,o pretend t,at losses do not count+ 2,is approac, ranges from t,e comment t,at in 10 years time& t,e %eptember 11 drop (ill s,o( as a minor blip to some (riters (,o include many stoc6 tips& but only trac6 t,ose t,at (or6 out+ 5e belie:e t,ese approac,es are misleading+ /ailed trades ,a:e a significant impact on trading results+ 5e get muc, better returns if (e e0clude t,e t,ree losing trades+ 5e also e0clude ,onesty if (e do t,is+ A''e"t "oor "erfor(an'e *e'a%#e of diffi'%lt (arket 'ondition# 2rading is about ma6ing t,e best possible use of your capital+ $ur capital gro(s by completing profitable trades and cutting losses @uic6ly+ ?n t,e case studies& (e demonstrate t,e difference t,at t,is approac, ma6es to trading results+ 5e are not prepared to accept t,at ,ig,ly trained and (ell paid professionals cannot do better t,an t,e broad mar6et (,en a consistent application of ris6 management s,o(s t,at better results are ac,ie:able+ Losing 1E (,en t,e mar6et falls "E is not a measure of success+ 5e use a true ,edge fund approac,& using Iero as t,e absolute benc,mar6& and using positi:e returns from t,e mar6et as a starting point against (,ic, (e measure our performance+ 2rading is about ma6ing our trading capital (or6 ,ard+ ?f you are able to a:erage a 10E return on eac, trade& t,en trading capital begins to build solidly+ 5,en you maintain t,at steady 10E return on D10&000& t,en D100&000& t,en D110&000 and so on& t,en your trading success is (ell establis,ed+ Consistent returns en,anced by money management are t,e ob*ecti:e of trading+ As a final note& please remember t,at some of t,ese trading e0amples are designed to fail because (e (ant to s,o( t,e ad:erse conse@uences of particular trading strategies+ 2,ere are many trading styles and many trading indicators+ Not all of t,em (or6 in Australian mar6ets& and not all of t,em (or6 in all mar6et conditions+ ?t is more instructi:e to s,o( ,o( t,ey fail to (or6 t,an it is to s,o( only successful strategies+ >nderstanding (,y strategies fail is an important step in building successful strategies+ 2,e information in t,e ne(sletter reflects t,ree influences+ 2,e first is my o(n trading strategies+ 2,e ne(sletter is effecti:ely largely a report on my ongoing analysis and researc, about t,e current mar6et+ %ome issues closely trac6 t,e e0act steps ? ,a:e ta6en in ma6ing a trading decision+ ?t is not al(ays somet,ing specially (ritten for ne(sletter readers+ 2,e second is influence from people (,o read t,e ne(sletter+ Alt,oug, ? (ill not comment on indi:idual @uestions about indi:idual stoc6s& some of t,e stoc6s included are in response to readers8 @uestions+ All of t,ese influences also go into t,e case study selection+ 2,e t,ird is from (riters (,o ,a:e contributed to t,e ne(sletter o:er t,e last year+ 2,ey illustrate many specialiIed tec,ni@ues and ne( approac,es+ 5e currently do not include t,ese in t,e sample trading portfolios+ 2,ese case study portfolio results do resemble real (orld results+ 2,e ne(sletter is designed to be a useful tool to ,elp you identify trading tec,ni@ues t,at (or6 and to use money management approac,es t,at en,ance your trading returns+ 2,e case study portfolio is used as a ,andy running reference for t,ese e0amples and s,o(s (,at is possible (it, good trading discipline and ris6 management+ 2,e same le:el of sample portfolio results can be ac,ie:ed by readers if t,ey de:elop t,e discipline to act consistently on stop loss conditions+ 2,is is per,aps t,e most important single message in t,e ne(sletter+ 2rading is about money management& not about prediction+ %uccess comes from discipline& not from a set of fancy or e0pensi:e indicators+ 30ceptional success comes from t,e confident application of t,e correct trading tec,ni@ue at t,e appropriate time supported by clear stop loss conditions designed to protect capital+ ?t is not al(ays easy& but if done properly& it is :ery profitable+ L5it, some reluctance (e included more personal trades in t,e case study portfolio in t,e last 12 mont,s partly to ans(er some of t,e uniformed emails (e get from trial readers t,at tell us t,e case study e0amples are manipulated+ ?ts ironic t,at t,ese allegations are made in relation to some of t,e personal trades included in t,e case studies+ Reluctant& because (e do not (ant to lea:e oursel:es open to t,e c,arge t,at (e ,a:e a conflict of interest (it, our readers+ Also& t,e case study portfolio is designed as an e0ample of strategy approac,es and is not intended to be in:estment or trading ad:ice+ RELATED TOPICS PORT)OLIO 2ANA$E2ENT AND RE0IEW 7une 29& 201!

3ac, trade is an island+ ?t s,ould stand alone& contributing profits& or small losses to t,e o:erall le:el of trading capital+ 5,en traders consider positions in a portfolio conte0t& t,ere is a tendency to sell t,e best performing stoc6s to ,elp compensate for t,e losses being incurred (it, t,e (ea6er portfolio stoc6s+ ?t is better trading practice to cut t,e (ea6est and continue to ride t,e profits (it, t,e strongest+ 2raditionally& C,ristmas and t,e end of t,e financial year are good times for a portfolio reassessment& but any time (,en you (ill be a(ay from t,e mar6ets for more t,an a fe( days also demands a portfolio re:ie(+ A trading re:ie( in:ol:es closing t,ose positions (,ic, could turn nasty (,ile you are a(ay+ A portfolio re:ie( means ta6ing a solid loo6 at t,e poor performing stoc6s you ,a:e fallen in lo:e (it,+ 'espite t,e personal pain& some do ,a:e to be put do(n+

READERS> /UESTIONS8 CASE STUDY PORT)OLIO SET-UP

'y Daryl Guppy At t,e end of eac, ne(sletter& (e include a list of notional case study trades and (e pro:ide a summary report e:ery si0 mont,s+ $ur returns ,a:e been e0cellent since 1996 and t,ey s,o( (,at is possible for pri:ate traders (,en trading discipline is consistently applied+ 2,e returns are also possible because of our trading siIe+ 2,e a:erage trade in our samples is D20&000+ ?nstitutional traders pay t,is in bro6erage alone on many trades+ $ur smaller trading siIe means (e can ta6e ad:antage of opportunities t,at larger traders a:oid+ ?t is t,ese returns& e:en in difficult mar6ets& t,at ma6e trading suc, a successful (ay to ma6e your capital (or6+ )y 6eeping eac, trading e0ample at t,e same dollar siIe& it ma6es it easier to compare t,e results of trading strategies and tec,ni@ues used o:er pre:ious years+ 2,ese notional case studies are monitored in real time and s,o( ,o( :arious trading strategies are implemented+ 2,e case study trac6ing money management section is intended to s,o( ,o( specific trading approac,es discussed in pre:ious tutorials ,a:e (or6ed out+ 2,is section is not a model portfolio& nor is it a collection of stoc6 tips+ ?t is a de:eloping e0ample of ,o( trading strategies are applied = and modified = ,o( losses are controlled and ,o( profitable e0its are made = (it,in t,e rules of t,e case study trade+ 2,e return on e@uity is a (ay of 6eeping score and does not represent t,e best possible returns+ /or t,is reason& profits are not added to trading e@uity+ 2,is fails to ta6e ad:antage of compound returns& but it is consistent (it, t,e tutorial nature of t,e ne(sletter+ 3ac, case study is selected because it is typical of trading patterns common in many stoc6s in t,e mar6et at t,at time+ 2,e contemporary e0amples s,o( t,e trading principles& and it is left to readers to apply t,ese principles to t,eir o(n stoc6s t,at are mo:ing in similar (ays+

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2,e date s,o(n is t,e date of t,e ne(sletter (,ere t,e full discussion of t,e trade construction and entry is included+ 2,is ma6es it easy to find t,e rele:ant ne(sletter issue+ ?t is not t,e date of t,e day t,e case study entry (as made+ 2,e sample notional trades are usually based around a single indicator or tec,ni@ue (,ic, sets up t,e entry conditions& t,e stop loss conditions and t,e e0it conditions for a profit+ 2rades are opened and closed according to t,ese rules& and in most cases ot,er indicators are ignored+ 2,is gi:es readers t,e opportunity to see ,o( a trade based on& for instance& mo:ing a:erage crosso:ers or a 2rend Bolume Analysis approac,& (or6 in reality+ Readers can see t,e real difficulties in deciding (,ic, entry signal is really a :alid trading signal& as (ell as t,e (ay using some indicators delay t,e entry or t,e e0it for too long+

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2,is often means t,e case study trade (ould ,a:e been more successful in real life because signals from ot,er indicators (ould ,a:e been used+ 5,en case study trades are closed& t,ey are discussed so readers can see ,o( t,e trade could ,a:e been better& or (,y it (as closed under particular circumstances+ ?n real life& traders use a :ariety of indicators and (ill ad*ust a profitable e0it according to t,e feel of t,e mar6et+ 2,e trades in t,e portfolio case study section e0amples s,o( t,e conse@uences of follo(ing a particular trading rule+ ?t does not s,o( t,e best trade possible+ SU,1ECT SU22ARY THE NEWSLETTER 2ONEY 2ANA$E2ENT PORT)OLIO 3ac, (ee6 different tec,nical analysis tools and trading approac,es are discussed+ %ome of t,ese e0amples are added to t,e 9oney 9anagement Portfolio+ 2,e ob*ecti:e is to assess ,o( successful& or unsuccessful& t,is trading approac, is& and to see ,o( ris6 management tools can be applied to limit losses+ 2,ey are notional e0amples of trading strategies+ 2,ey are not actual trades or are t,ey trading recommendations+ ?n using t,ese e0amples& (e are trying to model ,o( traders go about t,eir business of bot, protecting profits and limiting losses+

TRADE $ALLERY
2,ese are screen s,ots of e:ery case study trade discussed from 7an 1 201! to 7une !0& 201! s,o(ing entry and e0it points+ 2,e 7an 11& 201! issue included a trade gallery of all case study trades from 7uly 1 to 'ec !0& 2012 ,SL

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NEWSLETTER OUTLOO-8 PATTERN O) INDECISION

'y Daryl Guppy 2,e J7$ ,as de:eloped an e@uilateral triangle pattern+ 2,is is a pattern of indecision+ $n balance it is easier for t,e mar6et to fall as t,ere are no support le:els bet(een t,e current inde0 position and t,e pattern do(nside targets near 110+ Aistorical support is located a little ,ig,er near 1.0 so t,is suggests a spi6e lo( to 110 and a consolidation near 1.0+ $n t,e upside t,e pattern target pro*ection is near 10!0 M slig,tly abo:e ,istorical resistance near 1000+ 2o reac, t,is le:el t,e J7$ must mo:e completely t,roug, t,e long term G99A+ 2,e (idt, of t,ese bands tends to suggest momentum is slo(ed+ Additionally t,ere is ,istorical resistance near 920 and t,is ma6es it more difficult to reac, t,e 1000 target and ,ig,er+ + 2,is suggests t,e upside is limited+

2,e fall belo( "10 support le:el is e0tremely bearis, and t,e rebound rally does not rule out a retest of t,is support le:el+ A fall belo( t,e le:el ,as t,e ne0t support le:el near 1.0+ 2,is is not a mar6et in a reco:ery mode+ 2raders no( (atc, for signs of consolidation near support le:els+ 2,is is a signal to co:er s,orts+ Consolidation is not a signal to open long positions+ 7une 29& 201!

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SU,1ECT SU22ARY <1O INDE< 5e use t,e %QP A%J 200& or J7$& in t,ese notes because t,is is t,e benc,mar6 inde0 follo(ed by fund managers and institutions+ 2,e All $rdinaries is a popular ,eadline figure& but it is t,e J7$ t,at underpins professional assessment of t,e mar6et+ 3ac, (ee6 (e ma6e a c,oice about t,e material (e include and t,e sub*ects (e co:er+ 2,e selection is based on our outloo6 for t,e current and coming mar6et+ $ur ob*ecti:e is to illustrate effecti:e trading strategies t,at readers can apply to current mar6et conditions+ 5e do not identify recommended indi:idual stoc6s+ 5e identify opportunities and appropriate trading met,ods for t,em+ $ur outloo6 is not a forecast+ ?t is a probability frame(or6+ >se it as *ust one part of t,e ot,er information you are reading about t,e mar6et+ $ur summary outloo6 (ill be included eac, (ee6+

PORT)OLIO CASE STUDIES8 2ONEY 2ANA$E2ENT

%tarting cas, position D100&000 = no bro6erage or slippage 2E of ris6 R D2&000 N$23 3ntered date is t,e newsletter date (,ic, contains t,e case study discussion+

O0ERALL PRO)IT TO DATE 2,e portfolio return is D1"9&11 +62 or 1"9E for t,e period starting 7uly 1& 2012 and ending 7une !0& 201!+ 2rade siIe is generally 6ept constant at D20&000 in t,e case study portfolio so it is easier to compare t,e case study trades o:er t,is and ot,er years+
Profit 2011N2012 R 6"+1E return on trade e@uity+ Profit 2010N11 R 1 0+1E return on trade e@uity+ Profit 2009N10 R 92+!E return on trade e@uity+ Profit 200.N9 R 9"+0.E return on trade e@uity+ Profit 200"N0. R 116+"E return on trade e@uity+ Profit 2006N0" R 106+"E return on trade e@uity+ Profit 2001N06 R 9 +2E return on trade e@uity+ Profit 200 N01 R 10 +!E return on trade e@uity+ Profit 200!N0 R .+"E return on trade e@uity+ Profit 2002N0! R "1+9E return on trade e@uity+ Profit 2001N02 R "1+!E return on trade e@uity+ Profit 2000N01 R 19+2E return on trade e@uity+ Profit 99N00 R 111+2E return on trade e@uity+ Profit 9.N99 R 102E return on trade e@uity+ Profit 9"N9. R 9 E return on trade e@uity+ Profit 96N9" R 66+1E return on trade e@uity+ 'irect in:esting in t,e stoc6 mar6et can result in financial loss+ Aistorical results are no guarantee of future returns+ Results reflect absolute trading stop loss discipline+ Case study trades are monitored and managed in real time and management reports are deli:ered e:ery (ee6 in t,e ne(sletter+ 30cept (,ere noted& all case study trades and notional e0amples using reasonably attainable entry and e0it points+ >nli6e an actual performance record& simulated results do not represent actual trading+ Also& since t,e trades ,a:e not actually been e0ecuted& t,e results may ,a:e o:er or under compensated for impact& if any& of certain mar6et factors& suc, as lac6 of li@uidity+ No representation is being made t,at any account (ill or is li6ely to ac,ie:e profits or losses similar to t,ose s,o(n+ /ull trade summaries& (it, c,arts& are pro:ided e:ery si0 mont,s+

DISCLAI2ER AND COPYRI$HT Guppytraderscomsg Pte Ltd FCRN 200 09!"9#G Pte Ltd is not a licensed in:estment ad:isor+ 2,is publication& (,ic, is generally a:ailable to t,e public& falls under t,e %ingapore 9edia Ad:ice pro:isions+ The information pro*ided is for educational purposes only and does not constitute financial product ad*ice. 2,ese analysis notes are based on our e0perience of applying tec,nical analysis to t,e mar6et and are designed to be used as a tutorial s,o(ing ,o( tec,nical analysis can be applied to a c,art e0ample based on recent trading data+ 2,is ne(sletter is a tool to assist you in your personal *udgment+ ?t is not designed to replace your Licensed /inancial Consultant or your %toc6bro6er+ ?t ,as been

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prepared (it,out regard to any particular personSs in:estment ob*ecti:es& financial situation and particular needs because readers come from di:erse bac6grounds& (it, di:erse ob*ecti:es and financial situations+ 2,is information is of a general nature only so you s,ould see6 independent ad:ice from your bro6er or ot,er in:estment ad:isors as appropriate before ta6ing any action+ 2,e publication s,ould not be construed by any reader as Publis,erSs FiG solicitation to effect& or attempt to effect transactions in securities& or FiiG pro:ision of any in:estment related ad:ice or ser:ices tailored to any particular indi:idualSs financial situation or in:estment ob*ecti:eFsG+ Readers do not recei:e in:estment ad:isory& in:estment super:isory or in:estment management ser:ices& nor t,e initial or ongoing re:ie( or monitoring of t,e readerSs indi:idual in:estment portfolio or indi:idual particular needs+ 2,erefore& no reader s,ould assume t,at t,e Publis,er ser:es as a substitute for indi:idual personaliIed ad:ice from a licensed financial professional of t,e readerSs c,oosing+ 2,e decision to trade and t,e met,od of trading is for t,e reader alone to decide+ 2,e reader maintains absolute discretion as to (,et,er or not to follo( any portion of our content+ Publis,er does not offer or pro:ide any implementation ser:ices& nor does it offer or pro:ide initial or ongoing indi:idual personaliIed ad:ice+ ?t remains t,e readerSs e0clusi:e responsibility to re:ie( and e:aluate t,e content and to determine (,et,er to accept or re*ect any strategy and to correspondingly determine (,et,er any suc, strategy is appropriate for a readerSs indi:idual situation+ Publis,er e0presses no opinion as to (,et,er any of strategy contained on t,is publication is appropriate for a readerSs indi:idual situation+ 2,e aut,or and publis,er e0pressly disclaim all and any liability to any person& (,et,er t,e purc,ase of t,is publication or not& in respect of anyt,ing and of t,e conse@uences of any t,ing done or omitted to be done by any suc, person in reliance& (,et,er (,ole or partial& upon t,e (,ole or any part of t,e contents of t,is publication+ Neit,er Guppytraderscomsg Pte Limited nor its officers& employees and agents& (ill be liable for any loss or damage incurred by any person directly or indirectly as a result of reliance on t,e information contained in t,is publication+ 2,e information contained in t,is ne(sletter is copyrig,t and for t,e sole use of trial and prepaid readers+ ?t cannot be circulated to ot,er readers (it,out t,e permission of t,e publis,er+ 3ac, issue no( incorporates fingerprint protection t,at enables us to trac6 t,e original source of pirate copies+ ?f (e find t,at you are redistributing t,e ne(sletter t,en& at our discretion& (e (ill reduce t,e lengt, of your paid subscription by t,e :alue of t,e multiple copies (e belie:e you are circulating+ %,are (it, nine friends& and (e cut your subscription period by 90E+ Contributed materials reflect t,e personal opinion of t,e aut,ors and are not necessarily t,ose of t,e publis,er+ Articles accurately reflect t,e personal :ie(s of t,e aut,ors+ %toc6s ,eld by t,e aut,ors are mar6edL and are not to be ta6en as a trading recommendation+ This is not a ne&sletter of stock tips. Case study trades are notional and analysed in real time on a (ee6ly basis+ Any past in:estment=related performance referred to may not be indicati:e of future results& and t,erefore& no reader s,ould assume t,at t,e future performance of any specific in:estment& in:estment strategy (ill be suitable or profitable for a readerSs portfolio& or e@ual ,istorical or anticipated performance le:elFsG+ Guppytraderscomsg Pte Ltd does not recei:e any benefit or fee from any of t,e stoc6s re:ie(ed in t,e ne(sletter+ Guppytraderscomsg Pte Ltd is an independent international financial education organiIation and researc, is supported by subscription fees+ Please note t,at in t,e interest of timely publication of t,e ne(sletter& t,is document may be incompletely proofed+ $//?C3%H Guppytraderscomsg Pte Ltd Aead $ffice& Pent,ouse Le:el& %untec 2o(er 2,ree& . 2emase6 )oule:ard& Singa"ore& 22 Aibernia Crescent& )rin6in& Dar!inA A%#traliaA Room )101=A1"& No+1 & C,aoyangmen Nanda*ie& C,aoyang 'istrict& ,eiBingA ChinaA A Le:el !6& 9enara Citiban6& 161 7alan Ampang& -%ala L%("%rA 2ala #ia&

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