|S Roche, Tyro Trader|
You may see the family resemblance:
|S Procheimian, This Writer|
Now to work:
Here is the gold chart in question as it first appeared. It was drawn early Dec, 2012:
and here it is again as notated by Roche in real-time showing his trading decisions:
Some commentary is called for: Roche is an idiot. His claims of kinship will have to be investigated thoroughly. Three good trades saw his trading account rise by over 300% during this December/January period. He gave most of that back by trading the same size regardless of where the price was within the channel. At the extremes the signal is clear and the price adjustment swift (1). Near the median line the market is uncertain, the price signals provide a lot of noise and the intelligent trader will reduce their trade size accordingly (2), if indeed they must trade in the noise band at all rather than wait for the next fat pitch.
If Roche had bothered to read The Hour Between Dog and Wolf he would have known that the exhilaration of his successful trades caused chemical changes in his body that adversely affected his trading ability (3). It was either that or the celebratory excessive drinking whilst trading.
Now, you are looking at the above charts and no doubt thinking this is all well and good but how did Roche, with his obviously short attention span, make these trading decisions in real time? The answer lies in the works of Benoit Mandelbrot explaining the fractal nature of markets. Median Line Analysis, or Andrew's Pitchforks, work as well (4) on all time frames and the channel above is reproducible on the four-hour chart, seemingly providing much greater clarity:
Roche noticed a channel (red) within the channel and produced this next chart in late December:
You will note that during this last week the gold price broke out of the red channel resistance, re-tested it (on the Comex open at 08.20am, then fully fledged selling set in at 08.30 with the release of the better than anticipated Initial Claims report). The price at the red upper channel support was then strongly rejected.
To bring us fully up to date on his week's trading is this final 4 hour spot gold chart with the addition of three more aids to timing: Fibonacci Fans (Orange), Fibonacci Retracements (Blue) and the Relative Strength Index (RSI in lower panel):
In addition to all the above Roche relies on Monthly, Weekly and Daily charts showing Moving Averages of various durations, Relative Strength Index (RSI) on all durations, Market Profile(tm) Analysis provided by Bell Curve Trading, Lance Lewis's Daily Market Summary for gold sentiment indices (presently suicidal) as well as general market commentary and upcoming events, and then of course, there is Roche's successful trader pal who shares tips with him out of a rare and misguided sense of pity.
Apart from all that, Roche is ultimately relying on Malcolm Gladwell's concept of expertise, The 10,000 Hour Rule, in Outliers. Roche is about 6,000 hours into his trading adventure.
This Week's Performance: +32.73%
This Week's Quotes:
(1) "TIME: realize how fast the market moves away from the high or the low" - Paul Tudor Jones
(2) "Traders need to stay within volatility adjusted unit sizes & learn to regulate risk thru time if wealth accumulation is to occur" – PTJ
(3) "My biggest hits have always come after I had a great period and I started to think I knew something" PTJ
(4) "Just when you think you have got the keys to the market they change the locks" Anon Wall St Trader
You can follow S Roche on Twitter @srochetrading. He doesn't Tweet much.