Historical Simulator Plug-in
Okay, here we are, we're ready to trade! Let's start doing some analysis and decide whether we're going to make any money this month on these charts or not.
We're going to start off here, first thing we want to do is look at our Corn contract, and let's do some analysis. What do we think about this chart? First thing I see is that this thing is in a nice long downtrend. Not perfectly straight, makes a little crook right there, and then maybe another one right in here. Looks like it has a nice little trend right in the bottom. Now, see how all these areas of support are coming across the bottom, right there and then it broke through the area of support on the bottom.
What about the top, here? We have kind of a little narrow type of a thing happening here, across the top. Is there anything in there that makes you want to buy, or sell, or do anything? I don't see anything in particular that makes me want to jump into this market right now. You know, maybe what we're looking at here is a new annual low. We're always watching for new annual lows. Maybe that's a 123 bottom formation. Because an annual low is always considered a 1 point, so that would be a number 1 point, right there. I guess the best we can do at this point is just wait and see if a 123 formation comes out of this.
So, you I know, we could go through and look at a number of these different tools, maybe we could come through and run a Gann Fan on this. We could put a Gann Fan, on maybe this peak here and see if this is a strong trend. We have to of course, square our Gann Fan. That's such a long trend right there and we have to keep the Gann Fan perfectly at 45 degrees as we pull it down through all of these squares so that our 1 to 1 ratio always stays. So, we have 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 squares compared to 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 so we're perfectly squared there. That should tell us now that that fan coming off of that point right there whether that trend is strong or if it's fading. Now, it looks like a strong trend, it's staying pretty high. A normal trend would come right down the 45 degree angle. So, we're kind of coming backward, losing a little bit of our downward energy out of this trend according to our Gann Fan. So, we might want to consider that when we're trading this market. But for right now, I'm just going to watch it come down this trend, and we're looking for 123 bottom formation.
Let's go on to Feeder Cattle. Feeder Cattle, we have a nice little top up here. Look at this this, nice little top, it came down to this bottom and then look at that, it came right back and made a nice, beautiful 50% retracement. Boy, couldn't get any better- you could use that in a manual. That's perfect, a perfect retracement.
I'm going to drop this down here a little bit, so we have a little bit more room to see. Then it started kind of going sideways, here. It hasn't really done much since then. So, do you see any trading opportunities, here? Maybe a little bit, you know, there's kind of a trend coming across the top here, what do you think of that? Look at that, all of those, 1, 2, 3, 4, 5, times it hit that top. That little area of resistance, but it never did break through. But then look down here we had a pretty nice little area of support, right in there.
Looks like probably, you know, I would call that little area of support right there. We would probably go up a nice little wedge formation and it dropped out of the wedge formation a couple weeks ago. But it looks like, you know, if we wanted to trade that wedge formation, we had missed our opportunity hadn't we? So, I don't see anything happening here, we have kind of missed our opportunity on Feeder Cattle, it looks like on that wedge formation. Of course we missed it on the retracement or that 50%, drops right now I don't know, it's kind of going sideways, not a lot happening. You know, this market is not too exciting to me today, maybe we'll just have to wait and see what happens. Nothing really happening there..So, let's go onto the next one.
Let's go onto Gold, what do you see here in Gold? Well, maybe Gold has something going on, here. We have a couple little highs there, little double tops, you know- how far back has it been since it's been that high? A lot for the looks of this contract, so those being tops, of course so this would be annual highs, and that top one there would be our number 1 point, and it look like this would be a nice little number 2 point, a nice number 3 point. So you know, are you excited about that? You want to trade that little 123 top formation? What would we look for on that?
Let's look at a 50% retracement, and figure out if we want to trade that. That thing has already dropped back down to it's 50% level, the number 2 point was the 50% level.
Now, remember, you know, in our studies we've learned that a 123 formation is a reversal of a trend. There's not much of a trend here. It jumped up quite hard, turned around came back down, you know, we really have to decide if we want to take that risk.
One tool that we have here to make that decision would be our risk reward tool. If we wanted to place our stop loss order behind the number 3 point and an order to enter on a break below the number 2 point, we would be risking about $1,000.00- for how much potential profit. Well, it depends on how far the market is going to go. What if that market goes and breaks past this point here or at least meets it. That's an $840.00 profit. What if it comes down and makes maybe a 50% retracement of this move right here? We could expect it to come down, you know, not any profit on the dropping of the bottom side. But maybe if it dropped down here and just went back half way between the bottom level and where it drops through. Maybe this could be a good target for us, a $940.00 profit.
So, are you willing to risk $1,000.00, roughly on a potential gain of maybe $1,000.00? $940.00 to $840.00 going up the other side of the top side. You have to decide, that's one of the decisions you have to make, is that a good risk for you? I would say no, most people would say no. But you know, we may decide to trade this one.
Let's go onto Lean Hogs. What do we see in Lean Hogs?That's a nice uptrend, look at this uptrend... right up there. You know, it's a pretty sweet uptrend right there. It's come down and it's hit that 1, 2, 3, 4, 5, 6, 7, 8 times. Now it's gone on the other side, though so maybe if we were looking at- here again, maybe a- this is an annual high. Okay, so maybe this would be a 123 top formation here as well. 1, 2, 3..maybe we want to trade that one, I don't know. You know what it looks like more to me? Rather than an annual high, it looks more like a- maybe we could call this one here a head and shoulders.
Head and shoulders formation is very similar to a 123 formation. But notice how this, this line is coming across here. We touch on these bottoms right here, these areas of support, and look at that, we have 1, 2, 3 of them touch this area right here of support right here. So, if this broke down here passed this, what we call the neckline here on the head and shoulders, that would be a sell signal.
Now, I'm liking my odds on that one. I like head and shoulders formations, they're pretty nice. I'm a little weak on the 123 formations, but I like head and shoulders a little better, because of this left shoulder out here, it gives me another point of reference to decide whether I want to get in or out of this market on a nice area of- a nice trending area of resistance to break through.
Then, let's look on this one, we have a nice little 50% retracement level would take us back to this point, here. Let's run a risk/reward, if we dropped in a Stop Loss Order behind the right shoulder; sold a contract on a break below that trendline, right there, or the neckline, then got out down here at 633.44, right in that area or 50% retracement of that last move- could be about $1,000.00 profit.
You have to- there again, you have to decide if a $600.00 risk is worth a $1,000.00 profit. A lot of people will tell you they want that to be twice. So, you would have to look at a $1,200.00 risk for a $1,000.00 profit. We're close, we're there, we're in the ball park. So, let's take a look at that one.
Let's go on to Live Cattle- what we have happening here in Live Cattle, again, we're looking back here, we're seeing a nice 50% retracement. This is very similar to our Feeder Cattle. This is what we call our family trade. Where you have Feeder Cattle and Live Cattle, which are basically the same thing, so they're going to travel very similar. But don't get caught up in that, because sometimes I can show you an example after example where they broke apart and went totally opposite directions. But for the most part, keep in mind that because they are a family they're going to travel very similar. So, Feeder Cattle Live Cattle are going to travel very similar. Soybeans and Soy Meal are going to travel very similar. Wheat and Oats are going to travel very similar. Silver and Gold are going to travel very similar. So, you have your families- but every time you, just when you think you're comfortable knowing that these things are going to travel together and because one did it, the other one is going to do it. That's when they break apart and take all your money. So, you always have to watch each one individually as it is its own entity. But yet, rely on others as types of indicators, to kind of help you know which direction you're going.
For example Feeder Cattle, will go ahead of live Cattle, sometimes. So, if Feeder Cattle makes a move, Live Cattle will follow, or vice versa. Sometimes Live Cattle will make a move and then Feeder Cattle will follow. So, you want to look at them and see what happens, you know, sometimes Wheat will make a move, and then Oats will follow. Or Oats will make a move and then Wheat will follow. So, you'll want to look back and forth in these families and see which ones are the dominant family member. Like in Gold and Silver, Gold is generally the dominant. Gold will move first and Silver will follow. So, keep that in mind.
We're looking at this Live Cattle Contract and what we're seeing here is a nice little rounded top. But what I'm seeing here is a little head and shoulders formation, again. We have a nice little head and shoulders formation happening, right in here. You know, something like that. This again, would be a break below that trending line, and if we look back, look at that line trend all the way back this direction, as well. We have kind of a nice little area of resistance, or area of support all the way across that neckline, right there. So that neckline, to me is quite a strong area of resistance, and if that market breaks passed that area of resistance, that would be a good indication that it might continue down. Where we've already looked at the Live or the Feeder Cattle market, maybe that's something we want to look at.
Here's- here we're doing the same thing. We have a 50% retracement back to here, that's not a very far drop. Actually it's not there, because we're going off the wrong top, we need to go off this top here. So, that's where we would be back to is those target points. So, we're risking $640.00 for about a $690.00 profit. There again, are you willing to risk the same amount of money that you have potential profit for? I don't know, you'll have to decide.
Most people, again say that should be a $1,280.00 reward area for a $640.00 risk. It's your style of trading, you have to decide. Of course, if you're looking for that much of a profit potential you're going to limit yourself out of a lot of opportunities to trade. But of course that could be good, in limiting yourself out of those opportunities to trade, you also limit yourself from losing on something that may not be a good trade for you.
Let's go to Oats and take a look. Now, what do we see in Oats, here? A nice big, long uptrend in Oats. If I look at that, I see Oats has been doing some pretty crazy stuff here. It's been going into pretty nice little triangle formation. Of course, we already popped out of the top of that triangle formation. You know, look at this little triangle formation back here. Where is something else, maybe this one. This one is further back but still, another little triangle formation that it's made here. A nice little triangle. A wedge there. You know, there are little pennants coming in here. Little triangle formation coming in here, consolidation period. It just keeps jumping out of the tops of these things.
Here's another one that's..well, it looks like it's forming in here. I don't know, do we want to trade that? The thing is, you don't want it, you don't want to lose your opportunity- if you see something like this, you think, oh, that's a little pennant, or a little flag, I might want to trade that. You don't want to wait too many days, because then it might take off and go without you, and you don't like chasing markets. It's not so good. Once the market breaks and runs, you know then you start chasing markets, you really don't have as good of an opportunity as you do as if you can catch it in the beginning. So, it's not recommended that you chase a market, but you don't want to miss an opportunity either; you also don't want to jump in too quickly.
Let's go to Silver. Now, this Silver contract is one that looks like something should be happening, I mean, this thing is beautiful. Look at that uptrend, my goodness sake, you could write a manual on this one. That's the most perfect little beautiful uptrend that you could ever find, that you could ever hope to find; it's picture perfect. Then it came up, it made it's nice little perfect retracement level. Back- broke to the 50% level. But now it's just kind of going sideways. So, what kind of opportunities do you see here in Silver, anything? Well, it looks like maybe trying to make a little triangle formation here, you know, maybe there's something there. A triangle formation, I don't know. Let's watch that one..
Now, we're down here in Wheat. What is Wheat doing for us? Look at this Wheat contract, this has got to be one of the most amazing things I've ever seen. Look at this Wheat contract. I'm just going to come right over here, and I'm going to draw a few formations for you. Look at this.. beautiful little head and shoulders, right there. Break above that neckline. Then look what it did right over here, another beautiful little head and shoulders. Look at that- break above the neckline, take off.
Look at this one, another little head and shoulders. Of course, that one broke across the neckline. It retraced on us back, but then continued on down that long formation. Heck, maybe we'll just call this the neckline, it's hard to tell after the fact. But you know, what you would've done at the time, without seeing the whole chart. In hindsight, you can look at these things, and say: Wow, look at that- head and shoulders, head and shoulders; one, two, three of them right in a row.
What's happening here, now.. this just kind of dropped down into this little downtrend, almost a little triangle, or a little flag right there. See, it dropped out the bottom of that flag pretty hard. It generally does, when things drop out of triangles and flags, they go quite hard. Now, we're coming back up a little bit, now tracing down.
Any opportunities here in Wheat, you want to jump in with an order anywhere? That's it, that's the first day! Now, we need to- we've gone through and we've a little bit of analysis. We haven't done a whole bunch of analysis.
We haven't used all of these neat tools we have here. We haven't used Fibonacci Rules, and retracements, we haven't looked at our day and arc calculators and our time zones, and all of that stuff. But we have gone through and we've done- we've looked for some reoccurring price patterns. That's the first step in doing our orders, we want to find our reoccurring price patterns. We're going to stop here, and we'll go on to the next order, in the next file.