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Oct 03

Trend Following Update – Entering Long 30yr, 10yr

This wasn’t a big surprise, as we knew when we cut our short 10yr position over a week ago, and took our profit on our short 30yr position Monday night, that both looked as if they could generate a long signal with just a modest consolidation and resumption. Both have done exactly that, triggering entry signals for tonight’s open.

Going into Friday we will now be LONG S&P, NASDAQ, 30yr, 10yr, Euro, Pound, Gold, and SHORT Dollar.

Here are the new signals:-

Long 30yr ($ZB_F) 10/4 +$0.00 per contract

The 30yr has stayed remarkably resilient in the last week. It limped across our stop for our long-time short position, and has now triggered a follow through signal to go long. The consolidation following a swift advance off the lows, and holding above the 20 and 50 MA’s which have since crossed over, is very constructive price action. Getting a signal following a lengthy trend in the opposite direction is always a difficult trade to take. Psychologically it’s much harder than taking a trade that’s a continuation of a trend you’ve already benefited from. Initially, it’s also a less attractive risk/reward. If you’re going long here, what makes you wrong? It can only be a new low. There’s no other way around it. There’s nothing wrong with that, but it makes it a trade that initially requires a wide stop, down at new lows. In reality an ATR stop could trigger before then, and as the trade gets older the trail will make the risk/reward more favorable and hopefully even provide us with an opportunity to add with another consolidation and advance higher up, but as I have stressed many times before, we always have to think in terms of possibilities not probabilities when it comes to placement of stops and position size.

AlphaCapture

 

Long 10yr ($ZN_F) 10/4 +$0.00 per contract

The rally in the 10yr has been even more pronounced and may even see some short-term consolidation here above the MA’s, but the uptrend is clear. Initially the risk/reward is the same as per the comments for the 30yr, but a shallow consolidation or further advance could see a trailing stop move up to that 124-125 zone fairly quickly.

AlphaCapture

 

Our existing positions are as follows:-

EQUITIES

Long S&P ($ES_F) 9/18 -$1,587.50 per contract

Long NASDAQ ($NQ_F) 7/18 +$2,640.00 per contract

CURRENCIES

Short Dollar ($DX_F) 9/19 +$410.00 per contract

Long Euro ($6E_F) 9/19 +$1,350.00 per contract

Long Pound ($6B_F) 9/12 +$2,081.25 per contract

COMMODITIES

Long Gold ($GC_F) 8/16 -$4,870.00 per contract

 

 

 

2 comments

  1. Adam

    As a trend follower, do you ever consider delaying an entry on a futures signal like this until there’s a clear stop closer to entry, or otherwise what appears to be a more attractive risk reward?

    You mentioned “as the trade gets older the trail will make the risk/reward more favorable and hopefully even provide us with an opportunity to add”. Does that mean you start with 1R for position size to then add (potentially) 1R later, or something like 1/2R to add 1/2R later?

    Thanks for all you write on this and the way you put yourself out there.

    1. Jon Boorman

      The delaying an entry thing is a slippery slope. I get it. I hate how sometimes my entries mark a short-term top or bottom, but you really can never know, and there are just as many examples where it just sliced through to your enormous benefit immediately after entering. Once you don’t take a signal, when will you take it? What if it doesn’t pull back and just keeps on going and going and going, what if that trade turns out to be like the short gold or short yen trade, the one that pays for all those losers? Now you’ve still got all the losers but you missed the winner. A slippery slope.

      Always start with 1R, can add after consolidation and resumption, where stop is now likely in that vicinity.

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