SPECULATIVE TRADE FAILUREThe FUT transfer market aka FIFA Ultimate Team transfer market is a place to buy and sell digital cards of individual international football players. These

December 7th 2019 A publication of Algobot Pte Ltd CRN201604500D. Copyright © 2019

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Weekly for Saturday December 7th, 2019. Based on Thursday’s Close

CONTENTS

SPECULATIVE TRADE FAILURE pg1 BLACK FRIDAY MARKET CRASH pg6 SHORT TRADE PATTERN DEVELOPMENT pg8

DOW STRENGTH pg11 MORE FOREIGN INFLUENCE pg12

NEWSLETTER OUTLOOK: BREAK A LEG pg14 PORTFOLIO CASE STUDIES: MONEY MANAGEMENT pg15

SPECULATIVE TRADE FAILURE By Daryl Guppy

Some trades simply do not work out as anticipated. We had high hopes and

they were dashed. This was a speculative trade built around a particular product and news stories. ID8* produces software that can ‘bolt onto’ legacy bank systems and produce reports that are compliant with AUSTRAC requirements. On a fundamental

level this seemed a good fit for the Westpac story. The specifics of the news links are not as important as the trading methods that

were illustrated in this example. This type of trade is not indemnified as a result of a technical analysis search. They are first identified as a result of a major news event.

But first, a recap of the trade plans.


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The first step is to identify support at $0.38 and the potential upside target

near $0.50. The first target is the previous high. This offers a 22.5% return. The second target near $0.59 is the previous high, and this offers a 47.5% return.

The potential trade is attractive based on an entry near to the support level.

This acts as a strop loss trigger. The trade may consolidate, moving sideways along the support level before a new rally develops.

Entry depended on analysis of the order line as the market opens on Friday. Strong buying confirms the entry signal. Strong selling tells us the trade is not worth

taking. Strong buying or selling is determined by the balance in the order line.

This was the order line structure prior to the open and it showed strong buying. The trade was entered near $0.41 and this price did hold for some time. However, by

the end of the day price closed below the support level. This is a snapshot of the order line at a particular point in time. This is used as

a guide for trade management. It is not definitive although it is often very useful. In

this particular example, the buying pressure disappeared as the day developed.


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This signalled the trade had failed. The exit is signalled for the next day. The objective is to get the best possible exit price. For case study purposes this is taken at

$0.39. This gives a loss of $975.61 or 4.88%. Some readers may have regarded this trade example as a gamble, and in some

ways it was. It was very much a speculative trade example, and although it didn’t

develop as expected, the impact on the overall portfolio is very small. This management of risk is the essential foundation for this type of trade.

You can download the ATR indicator for MT4 at

https://www.mql5.com/en/market/product/29683 Use this to improve your trade risk management.

https://www.mql5.com/en/market/product/29683

https://www.mql5.com/en/market/product/29683


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CASE STUDY EQUITY CURVE

The case study trade with ID8 is closed for a loss of $975.61 or 4.88%. The

case study portfolio return is $50,450 or 50.45% for the period starting July 1, 2019 and ending June 30, 2020.

For the year starting July 1, 2018 – 2019 the case study portfolio return is $91,794 or 91.79%.

For the year starting July 1, 2017-2018, the case study portfolio return is

$115,330 or 115.3%. For the year starting July 1, 2016-2017, the case study portfolio return is $92,464.15 or 92.5%. For the year starting July 1, 2015- 2016, the

case study portfolio return is $156,450 or 156.45%. Equity trade size is generally kept constant at $20,000 in the case study

portfolio so it is easier to compare the case study trades over this and other years.

Unless otherwise noted in the trade management notes, all equity case study trades are managed on an end of day basis, with the exit taken at the best reasonable price

on the day after the stop loss is triggered. Warrant and CFD trades are generally kept constant at $10,000. Warrant and

CFD trades are closed on an intraday basis using a guaranteed stop loss as this is a

primary method of managing derivative risk. FX trades are generally kept constant at $5000. Stops are managed intraday.

This capital allocation reflects the risk in each of these asset classes.


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Go to: http://www.guppytraders.com/2019Xmas/

http://www.guppytraders.com/2019Xmas/


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BLACK FRIDAY MARKET CRASH By Karen Wong

You may have missed the Black Market Crash at the end of November this year.

Prices dropped, some over 50% leading up to the crash. It sounds like an event relating to stocks in the share market but it wasn’t.

The reason you might have missed it was because this crash happened in the FIFA 20 trading player market also known as the FUT transfer market. Not to be confused with the FTSE. Completely different.

In the Black Market Crash it wasn’t the price of CSL plummeting. It was the prices of player cards like Wissam Ben Yedder falling by around 90% from its high.

The chart looked like this.

The FUT transfer market aka FIFA Ultimate Team transfer market is a place to

buy and sell digital cards of individual international football players. These cards are used to make your ultimate football team to play the online football simulation game FIFA 20. Each time you win a FIFA 20 game, you get 500 coins. A virtual economy of

FIFA coins exists to buy and sell FUT cards. Want Ronaldo on your team? His FUT card costs about 1.3 million coins.

Comparing the FUT transfer market with the Australian Stock Market is like comparing chalk and cheese. The complexity of the ins and outs of the FUT transfer market are beyond the scope of this article. Despite the differences in the 2 markets

the principles of trading are exactly the same. There are real lessons to be learnt from the participants trading cards in the

FIFA 20 card market. A trading guide I found online on how to trade the FUT market reminded me of the trading principles we see applicable to any market in the world.

The following recent trade on Baby Bunting Group Ltd - BBN will be used to

demonstrate some of the principles found in the FUT trading guide.


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Figure 1.1

Buying a Stock

FUT market traders are encouraged to ask themselves what the reasons are for

buying a player. For technical traders the reasons could be one or more indicators giving a buy signal to enter a trade. On the Daily chart of BBN, Figure 1.1, we are

looking at the Guppy Multiple Moving Averages to determine whether we will enter the trade or not. The wide separation of the lines in the Long Term GMMA means there is strong support from investors of the uptrend in place. Leading up to the marked

Entry, the Short Term GMMA is sitting above the Long Term GMMA, compressed slightly but beginning to turn up and fan out again. The Short Term GMMA represents

the activity of traders and it shows traders are quite active in this stock. Price was highly likely to rise in line with the prevailing uptrend.

Buy Low and Sell High

FUT market traders like to buy at a low price then sell at a higher price to maximize profit.

The problems faced by the FUT market traders mirror those experienced by technical traders.

(1) Selling too early and missing out on further profit as the price continues up. The price of BBN rose after initial entry then retraced back towards the Long Term

GMMA closing not below but on the line of the 2*ATR Stop Loss. If the BBN trade was closed the next day we would have missed the rise to the high of $4.03.

(2) Holding on too long and watching price go down along with your profits. The BBN trade remained open and a new Count Back Line Long Stop Loss was used

to ensure the trailing stop loss remained close to the price movements. The Count Back Line Long Stop Loss was triggered a few days after the high. This

was the time to close the trade. This trade was not closed when price was at $4.03, only $0.04 away from our Target Profit. Price was heading south and profits were going down as a result of holding the trade open for longer.


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Focus on the Now

According to the guide, some FUT market traders avoid selling too early for fear

of missing out. Instead of appreciating the great profit in front of them the focus and concern is on the imagined profit they could make going into the future. Technical

traders are susceptible to the same kind of thinking. The key to our decisions should always be from the chart.

Selling Early

Selling early has the advantage of locking in a definite profit for the FUT market traders. The advantage is one for technical traders too as it releases your cash to channel into another better trade. Constant profits are possible as a result of

withdrawing from one trade into another trade with the potential for a stronger move.

Stick to Target Goals

FUT market traders are encouraged to always stick to their target goals by

setting a buy price and a sell price. For technical traders this is incorporated into the trading plan by setting an Entry price, Exit price and Target Profit price. In the BBN

trade an Entry was made at $3.55 with a 2*ATR Stop Loss of $3.13 and a Target Profit of $4.07.

Selling on Time

Sell when you have to according to your plan. In the FUT transfer market the perfect time to sell is also the worst time as huge volumes of sellers enter the market

to drive price downwards immediately. From the high of $4.03 on the BBN chart we see the effect of sellers in the market as price eventually fell to $3.19 at the right side of the chart.

Limiting Losses

FUT market traders should acknowledge if a trade fails, they should sell and

move on. A small loss now can become a bigger loss in a few days. If the BBN trade

was sold at $3.38, that is when price closed on the 2*ATR line then a small loss of 4% would have been the result. Not acknowledging the 2*ATR stop loss and holding the

trade open until the right side of the chart results in an open loss at $3.19. A much larger loss of 10%.

Whether it is in the stock, FX or commodities market, even the FUT transfer

market, we can consider these simple trading principles for better trading in the future.

SHORT TRADE PATTERN DEVELOPMENT By Daryl Guppy

This is a pattern trade. Its built around continuing bad news for the underlying stock – WBC* – but at heart it’s a pattern trade with an equilateral triangle. It’s the news the provides traders with the clue to the direction of the breakout.

The base of the pattern is measured and projected downwards to give a target near $23.63. This projection is measured from the point where the price moves below

the trend line. The trade solution is built around these pattern price projections.


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The trade is still in the money so there is no great concern about the current rally. A 3 period 1*ATR is applied as a stop loss. This value is selected simply because it places the stop closest to the current price action. This method is useful for

managing momentum news-based trades.

Traders applying pattern analysis to the WBC* chart will use a move below the lower edge of the equilateral triangle pattern is an entry signal for a short trade. The


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base of the triangle pattern is measured and used to project the downside target near $23.63.

For tutorial purposes we have added a CFD trade in WBC* using this pattern. Entry is near $24.74. The upper edge of the triangle pattern is used as the stop loss. The projected downside target is shown. This is an example of news based and

pattern based trading. *The image shows a saxophone player and a woman’s face.

http://www.metastock.com/singapore2020


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DOW STRENGTH By Daryl Guppy

The pullback in the DOW represents a buying opportunity. The conclusion rests

on two different types of analysis. The first analysis method looks at trend strength. We use the Guppy Multiple Average (GMMA) indicator to assess trend strength.

The GMMA consist of two groups of moving averages. The short-term upper group provides a guide to the way traders are thinking. The long-term lower group does the same for investors. The long-term group is widely separated and moving

steadily upwards. This suggests good support for the trend. When a selloff occurs the downwards

pressure is absorbed by the long-term group – the investors – as they come into the market as buyers. This consistent reaction is seen at points A, B and C. This shows trend resilience.

The note of caution is given by the narrow degree of separation between the long- and short-term groups of averages. This is in contrast to the November 216 to

December 2018 period where the separation between the two groups of moving averages was much wider and this showed a much stronger trend.

The current relationship shows a steady trend that is frequently tested. This

adds a further note of caution because these types of tests with rapid retreats and rebounds usually end up breaking the uptrend. It like a jackhammer gradually

weakening a concrete beam with continuous sharp attacks. There is certainly no signal to short the DOW, but traders will recognise

diminished trend strength.

The second analysis method is built around the trading band because this is used to set potential upside targets. The trading band is a combination of support

and resistance levels. The upper resistance level is near 26,600. The lower support level is near 23,500. This lower level was broken with a major market dip in December 2018, so the trading band is applied with a degree of caution. This means

the target projection is used as a guide rather than as a definite target.

http://www.metastock.com/sydney2020


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The width of the band is measured and this value projected upwards. It gives

an upside target near 29,700.

MORE FOREIGN INFLUENCE By Daryl Guppy

The Australian index follows the DOW as discussed in the XJO notes. However,

the Australian market is also buffeted by the Shanghai Index. This has added a gloomy background to the DOW collapse.

The Shanghai Index continues to move slowly down towards support near

2830. This is a slow and steady decline with the index clustering along the lower edges of the short-term Guppy Multiple Moving Average. There is no indication of

trend reversal or rally behaviour. However, the decline is slow and steady, and this shows no evidence of panic

selling with a fast fall or large intraday dips. This restrained trend movement

increases the probability of good support developing near 2830 because the down pressure is not very volatile.

The GMMA is used to assess the strength of the trend. The long term GMMA is showing steady separation. The upper edge of the long term GMMA is near to the value of the central support resistance level near 2920.


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The short term GMMA indicates the way traders are thinking. This group is also

steadily and consistently separated. There is no evidence of compression, so this suggests steady selling. Traders are waiting for the test of support near 2830 before

they enter the market in anticipation of a trend change. This steady separation suggests any rally will be short-lived.

The separation between the two groups of averages is also consistent. This

consistent separation is the characteristic of a steady and well-established trend. The key future event bis the strength of the support behaviour when the index reaches

2830. A successful consolidation and rebound require three main features to develop

before a new uptrend can be established. The first bullish feature for any rebound from support is a change in the

relationships between the Guppy Multiple Moving averages. The short-term group of

averages must compress, turn upwards and move above the upper edge of the long term GMMA. This confirms a bullish environment.

The second feature is the support and resistance level near 2920. The index must be able to move above this level and use this level as a support level before any new uptrend can develop.

The third resistance feature is the value of the down sloping trend line. The value of this downtrend line will act as a resistance level for any rally above the 2920

level. The current trend line value is near 2975. The combination of the downtrend line and the horizonal support level near

2920 creates a down sloping triangle pattern. A downside target is calculated by

measuring the height of the base of the triangle and projecting this value downwards. The 2800 target level is below the value of the lower edge of the long-term

support level near 2830. This suggests that in any strong market fall that the Shanghai Index may dip to the 2800 level before rebounding and developing a consolidation near 2830.


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NEWSLETTER OUTLOOK: BREAK A LEG By Daryl Guppy

We noted over recent weeks that this is a market lacking courage and commitment. The economy simply doesn’t have the strength to go its own

way, so the market is always at the beck and call of foreign influence. After the failure of GMMA support and support near 6650, the downside

target is support near 6480.

This is a market that is too weak to develop its own direction, so it decided to follow the DOW higher and then dramatically lower, smashing

through the support features. The much-lauded new highs were not highs made with any degree of confidence. As we noted, this result was be easily shaken by external events and this exposes a worrying weakness in the

trend so many treated the rally as a short-term trading opportunity. The evidence of suspicion of trend strength comes from the GMMA

relationships and this has been confirmed with the rapid collapse. The long term GMMA is not widely separated. It has been constantly tested and tested and this usually indicates trend weakness. Compare the separation to the

GMMA separation between February and August 2019. The wide separation in this period shows a strong trend. The current narrow separation shows a

weak trend, with frequent tests of the lower edge of the long term GMMA.


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These tests are like a jackhammer smashing its way through a block of concrete. Each hammer blow weakens the concrete- each test of GMMA support weakness the trend.

This is a complex structured chart with a continuous interplay between the values of the trading band and the trading channel.

It does not have strong momentum and relies almost exclusively on external leads from the US or China. The upside target is the value of the upper edge of the trade band shown as line D. Beyond this resistance comes from the upper edge of the

trading channel. The XJO is also dominated by trading bands and trading channels and this gives

multiple target calculations. Unlike a trading band, the target for the trading channel breakout continues to move. The target is always the upper edge of the trading channel which forms a resistance point.

Just like a trading band, the activity in a trading channel is often a rally and retreat behaviour within the limits of the parallel bands or trend lines.

The behaviour of the XJO is set with GMMA analysis. The targets for the XJO are set using trading band and trading channel analysis.

PORTFOLIO CASE STUDIES: MONEY MANAGEMENT

Starting cash position $100,000 - no brokerage or slippage 2% of risk = $2,000 NOTE Entered date is the newsletter date which contains the case study discussion.

OVERALL PROFIT TO DATE

The case study trade with ID8 is closed for a loss of $975.61 or 4.88%. The case study portfolio return is $50,450 or 50.45% for the period starting July 1, 2019

and ending June 30, 2020. For the year starting July 1, 2018 – 2019 the case study portfolio return is

$91,794 or 91.79%.

The case study portfolio return is $156,450 or 156.45% for the period starting July 1, 2016-2017. Note that this includes 6 to 21 trade results. The case study

portfolio return is $92,464.15 or 92.5% for the period starting July 1, 2015- 2016. Equity trade size is generally kept constant at $20,000 in the case study portfolio so it is easier to compare the case study trades over this and other years. Unless otherwise

noted in the trade management notes, all equity case study trades are managed on an end of day basis, with the exit taken at the best reasonable price on the day after

the stop loss is triggered.

CUSTOMER CAUTION NOTICE AND COPYRIGHT Algobot Pte Ltd (CRN 201604500D) Pte Ltd is not a licensed investment advisor. This publication, which is generally available to the public, falls under the Singapore Media Advice provisions. The information provided is for educational purposes only and does not constitute financial product advice. These analysis notes are based on our experience of applying technical analysis to the market and are designed to be

used as a tutorial showing how technical analysis can be applied to a chart example based on recent trading data. This newsletter is a tool to assist you in your personal judgment. It is not designed to replace your Licensed Financial Consultant or your Stockbroker. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs because readers come from diverse backgrounds, with diverse objectives and financial situations. This information is of a general nature only so you should seek independent advice from your broker or other investment advisors as appropriate before taking any action. The publication should not be construed by any reader

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individual investment portfolio or individual particular needs. Therefore, no reader should assume that the Publisher serves as a substitute for individual personalized advice from a licensed financial professional of the reader's choosing. The decision to trade and the method of trading is for the reader alone to decide. The reader maintains absolute discretion as to whether or not to follow any portion of

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authors are marked* and are not to be taken as a trading recommendation. This is not a newsletter of stock tips. Case study trades are notional and analysed in real time on a weekly basis. Any past investment-related performance . referred to may not be indicative of future results, and therefore, no reader should assume that the future performance of any specific investment, investment strategy will be suitable or profitable for a

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Documents

SPECULATIVE TRADE FAILUREThe FUT transfer market aka FIFA Ultimate Team transfer market is a place to buy and sell digital cards of individual international football players. These