books about online stock trading, forex, futures, stock investing, market, trading systems
EXAMPLES OF PROFITUNITY PLANNED TRADING SWISS FRANC WEEKLY
Back to contents page

This is an example of longer-term trading, which has the advantage of little intensive monitoring of the market while cutting down the overhead spent on commission cost. A disadvantage is that the stops must be further away, with more risk. However, one can pinpoint the Point Zero, where there is a minimum of risk. This was the Profitunity Trading Group's first excursion into trading the weekly chart. Before then, our longest term of actual trading was based on the daily charts.

Notice the monthly chart in Figure 9-9. We used this chart to locate what we surmised to be the bottom of a wave 4 in May 1989. During June 1989, FNN (now CNBC-FNN) asked me to appear on a panel with five other traders, including two FNN staff members, to discuss the future direction of the American dollar. The other five panel members all agreed that the dollar was very bullish and should go up. I was the lone dissenter, basing my thinking on the wave count in the Swiss franc, Deutsche mark, and Japanese yen. I predicted that the Swiss franc would top 8000 in its next move. My statement generated snickers and outright laughter from the other panel members. At this point,' I knew I had made not only a financial commitment but also an ego commitment.

My trading plan was to apply Profitunity Planned Trading (PPT) to wave 5 on the monthly chart. My Point Zero on the weekly chart was the bottom of wave 4 on the monthly chart. Figure 9-10 is the weekly chart of the Swiss franc that we actually traded. Let's go through the exact trades and why they were placed where they were. Our trading schedule called for a maximum of ten contracts in this particular campaign.

Point Zero happened on May 22, 1989, and was evidenced by a clear five-wave sequence down on the smaller-time-frame daily chart plus a down fractal with a squat day on one of the three bottom bars.

It is important to emphasize that I assumed I was looking at a Point Zero. In the beginning stages of a PPT sequence, one never knows whether the correct point has been labeled as Point Zero. Therein lies the beauty of the PPT: there is always a

contingency plan if the count is incorrect. My Point Zero was followed, as expected, by a sharp upturn that ended at 6011 on June 5, 1989. By going to a smaller time frame (dailies and 60- minute charts), a complete five-wave sequence could be counted.

At this point, I calculated a 62 percent retracement and put in an order to buy three contracts at 5736 or better, with a stop and reverse to go short five contracts at Point Zero (5569). The total risk at this point was 167 points or $2,087.50 per contract (a total of $6,262.50 for the three contracts). The low of this pullback was 5630 or an exposure of $1,175 per contract.

The market then started up in a small-degree wave 3 and completed five waves up (much clearer on the daily chart) at 6320. Using a down fractal and the squat, I sold two of the three long contracts for a profit of 584 points per contract or a total closed-out profit of $14,600. This left me long one contract, in case this turned out to be an extended wave 1. The end of the fifth wave of a larger-degree wave 1 happened on July 31,1989. I then calculated a 62 percent retracement of this larger wave 1:

6320 - 5569 = 751 X .62 = 465

This result was subtracted from the high (6320), and I put in an order to buy five contracts at 5854. This order was hit on August 28, 1989. The market continued down to a low of 5778 on September 11,1989.

Then the market started moving up in earnest for a larger-degree wave 3. I was long six contracts (or 60 percent of my total position limit). The length of wave 1 was 751 points, so I added 10 percent to that total and added four more contracts, for a limit position of ten contracts at 6604. My stop at this point, for all ten, as 6320, or the top of wave 1.

My current positions were then:

Long one contract at 5736 Long five contracts at 5854 Long four contracts at 6604

If stopped out at the top of wave 1,1 would have the following results:

Long one contract at 5736 + $7,300 Long five contracts at 5834 + 29,125 Long four contracts at 6604 - 14,200

I had a closed-out profit of $14,600 from the first two contracts and a minimum profit of $22,225 from the other ten. Wave 3 turned out to be an extended wave 3 with no fractal reversals until November 19,1990. On that date, I took profits at approximately 100 points from the high at 7965 on seven of the ten long positions. I had the following closed-out profits (not counting commissions):

Long one contract at 5736 + $ 27,802.50

Long five contracts at 5854 + 131,937.50

Long one (of four) contracts at 6604 + 17,012.50

Plus the first closed-out trade + 22,225.00

Total closed out profit $198,977.50

I was still long three contracts from 6604. On the weekly chart, we seemed to be in a wave b test of wave 4.1 was awaiting a minimum of two down fractals and/or a pullback to the 6650-7200 area. Wave 3 was more than 1.62 times as long at wave 1, so I added only three more long contracts.

On April 29,1991, the Swiss franc retraced back to a low of 6666, which was almost exactly a 62 percent retracement. (Only one out of eight times will a wave 4 retrace more than 62 percent.) I also had what appeared to be a five-wave count for wave c of wave 4. Therefore, I bought three more contracts on April 29, on the first hourly up fractal, at 6711. My stop for all six contracts was 6630. On June 9,1 was stopped out at 6630 for a total loss on the six contracts of $4,125. Subtracting this amount from my previous profits gave me a total profit of $194,100 for this series of trades.

This may not be the mother of all trades, but two points are significant here. This entire series of trades could have been completed with a $10,000 account, without ever margining more than 50 percent of that account. Only five trades were placed in a period of approximately 18 months. This type of trading can be done by anyone, no matter what other professional and time obligations must be met. One literally could have placed a trade, gone on a cruise, returned to place another trade, and repeated that procedure five times while paying for the cruises from profits.

 Back to contents page