Covered in this months newsletter:

• A current market update
  
  
• GSLOs - what they are and how you can use them to guarantee your exits
  
  
• Watch a current trade progress that I recently opened
  

Recent Presentations

Thank you all to those that attended my recent presentations over the past month in Brisbane and Port Macquarie. I have received fantastic feedback about how much you enjoyed them and I am grateful to have been invited to your trading meetings, and to have had the opportunity to share my knowledge with those that were there.

Market Update

A lot has happened over the past month in the market with it moving to new lows. The market made a major move downwards two weeks ago, breaking through its support level of 3350 and past its last lows of November 2008, which is clear in the chart below.

Whilst this week it has rebounded back up from its break to the 3350 support level, it will be interesting to see if it now gets resistance at this price level and falls away again or can manage to break back above.

If it falls away from this price level then this confirms the downtrend is continuing. If it manages to break above and move back into its sideways trading range, then the market may be starting to form a base. The market will need some form of base before it can become healthy.

A base is when we see an equilibrium occurring in the market - there are no more new lows being made, but no new highs either. Bases can go on for some time and in order for the market to become healthy again it would need to break to new highs above the resistance level of the base. But there is a chance the market could break to new lows, it is a matter of waiting for clear direction during these times.

The Power of GSLOs

Last newsletter I showcased a short trade that I undertook on CBA and how I profited through the fall in this share using CFDs. If you missed this trade here is the chart of it again.

My exit was based on a Guaranteed Stop Loss Order (GSLO). Stop losses are one of the many keys to managing your risk in the market, but you cannot always control your actual exit price and sometimes slippage can occur if the share gaps through your stop price. Where GSLOs guarantee your exit no matter what happens. In this current volatile market they are a great way to manage your risk and ensure you don't incur slippage.

GSLOs cannot be undertaken with share trading and have only been made possible since the introduction of CFDs. But there are only a few CFD providers that offer them and the fee on average is usually 0.3% of the value of the stop. Which is a small price to pay compared to the slippage that you can incur in this volatile market.

Be aware that some of these providers only allow you to set them at the start of the trade and others charge you to change them. With the relationship I have with CMC Markets you now have the benefit of being able to change them for free on ASX share CFDs and you can set them up any time throughout a trade. So if you start to feel uncomfortable in a trade you can set one and there are no costs to change them with the Smart Trading Partner Profile.

In order to receive this feature as part of your CFD trading account, along with other features and reduced brokerage you will need to set-up a CFD account through "Smart Trading". This involves contacting the CMC Markets and mentioning "Smart Trading". They will be able to tell you all about the special features you will receive by doing this and you can assess if you want to set-up an account.

CMC Markets Asia Pacific
Toll Free Number: 1300 303 888
Click here to visit CMC Markets

Watch my Trade Progress

I had been keeping my eye on a share that had built up strong support at $9.00. As this CFD trade is still currently open and running I cannot name the share and I will call it XYZ share.

My trading system had started to give me signals on XYZ share in January, but it had very strong support at $9 which is clear in the weekly chart below. The $9 support level had been touched many times throughout 2008 and in the past in 2005. So far the stock could not break this support level and I knew that if it did I wanted to profit from the fall and short sell it.

I added this share to my watch list and instead of waiting for my system to bring it up again when it broke (which it did), I decided to set a market trigger order (or stop entry order) on it with my CMC Markets CFD account. I did this at the end of January when the share came up in my daily system scan (these signals are identified by the blue arrows in the daily chart below). I set a sell stop at $8.88 and linked this to an if-done buy stop at $10.02. Which meant that if the share fell to $8.88 or lower I would automatically sell this stock and a $10.02 buy stop would then activate in the market.

My trading rules will not allow me to trade a stock whilst there is immediate support or resistance. If one of these price levels breaks then I am free to trade it. Now with the availability of market trigger orders for Smart Trading CMC clients I am able to use this facility and set-up trades ready for breaks.

The share continued downwards further and my system gave me another signal on 16 February. At 3.30pm that day it was still trading above $9 and I knew it would either rebound tomorrow or break. If it broke then I would automatically be entered into the trade through the sell stop that I still had set in the market. The share broke the next day and I was automatically entered into the trade at $8.88. You can view my entry in the daily chart below.

This trade is still open and running and my stop loss is currently sitting just above $7, which you can see from the blue indicator line, which is my trailing stop loss indicator. I have no idea what will happen next with this trade and that is why I manage all my trades with a trailing stop loss strategy. I do know that at this stage I am in a nice profitable position and I will keep you updated on how this trade progresses in my next newsletter.

Stay tuned until then.....

Cheerio

Justine Pollard
Author, Private Trader & Trading Mentor
'Discover the Smarter way to trade'
www.smarttrading.com.au
justine@smarttrading.com.au

*The returns reported are provided for information purposes only. Results of past performance are no guarantee of future returns. No assurance is given that you will incur any profits or losses in your own trading and it should not be assumed that you will experience results comparable to those as reported. Any trade examples listed within this website or associated material are either ficticious or historical and in no way should be interpreted as a recommendation to invest in any particular stock, CFD or investment. Smart Trading Pty Ltd as Authorised Representative No.336312 of CDM Pacific Pty Ltd AFSL 223682 assumes no responsibility for your trading and investment decisions or subsequent results. There is a high degree of risk involved in trading and as such we always recommend that you seek independent financial advice by a licensed professional prior to making any investment decision.