Covered in this months newsletter:

• Current market update
  
  
• Is it safe to enter the market?
  
  
• Trade update – all details disclosed now trade is closed
  
  
• Details of a new trade opened
  

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Market Update

The market has continued its strong upward move, rising another 5% since my last newsletter to you. Bringing its rise from mid July to 21%. My trading account has certainly benefited from this rise and if you were part of my Smart Trader Teleconference Program, you saw how I increased my CFD account by 262%* in a four month period, with the largest gain being made in mid August. If you missed out on this program and you would like to hear all about it you can purchase the recordings and notes from the program. Click on the link below to find out more about it:

www.smarttrading.com.au/index.php?q=teleconference_program.html


To date the market has risen a total of 44% from its lows of March 2009. All the signs are now healthy in the market with the 30 week moving average rising and the share price above it. You can see the market trends from the chart below.

As you can see from this chart, it took 16 months for the market to fall 54% from its November 2007 highs to its March 2009 lows. During the last bull market of mid 2003 to 2007, it took four years for the market to rise this same distance. How long will it take this time - that I don’t know. No one knows. To date it has managed to power up by 44% in six months from its lows and it has another 2,200 points to go to get back to its highs of 2007, which is a rise of 48% from its current value.

Now I don’t know if it can continue at this same speed or what the market will do next. There is no way of predicting. I do know that my trading system will always tell me what to do. While the signals continue to flow I continue to trade. When any of my stop losses are hit I get out or if I am in that nice position of windfall profits I take action and sell.

When trading the stock market we are trading the unknown. Just like life, we don’t always know what tomorrow will present. We might have a vague idea, but things can change in an instant. What we can know is how we will react when certain things do occur and this should all be covered in your trading plan. As a trader you have to be comfortable with uncertainty and trading the unknown.

Is it safe to enter the market now?

Is now a good time to get back into the market? For me the signs of health are in the market and I have seen some shares already rise more than 100% since their market lows and others that are just starting to trend now.

My weekly long-term share trading system got switched back on when the market made new highs in July and my mid-term CFD trading system has benefited strongly through trading both long and short over the past year and a half. So at times when one system is switched off another may still be running. At other times they may both be running. That is what I love about trading multiple systems with different time frames.

If you are new to trading or feeling stage fright after seeing the market fall strongly over the past and to afraid to pull the trigger. Take a step back and assess things. Maybe you don’t have a clear and concise trading plan. Maybe you have taken large losses and just don’t know if you can handle another bear market. Either way it is time to ensure you have a trading plan with clear money management and exit rules before you even consider dipping your toe back into the market.

My goal as a trading educator is to assist traders in developing their own personal trading plan. I have been doing this now for over 8 years. Some traders have put their plans together after reading my book Smart Trading Plans (which you can buy in any major bookstore or through my website www.smarttrading.com.au).

While other traders, who like my style, have undertaken further training with me and invested in the Smart Trading Plan & System Development Online Course in which I share all my trading strategies and secrets, as well as providing all my mechanical system codes and trading rules. You can read all the testimonials about this course and how it has benefited traders from my website by clicking here.

I have shown through publicly trading the CMC Markets 2007 CFD trading competition (with an 82%* return in eight weeks), sharing a trading diary in 2008 (with a 300%* return in six weeks during the bear market) and running a four month teleconference program just recently (with a 262* return in four months), how I have continued to profit in the market by following my trading my plan. Anytime I make any changes to my plan I share this with my Mastermind Members. I don’t believe in keeping secrets. We all need mentors and people to guide us and my goal is to teach and share everything I do through my courses.

If you have not been trading in the past and you are sitting on the sidelines, not sure what to do, don’t do anything until you have spent the time writing and developing your trading plan. You need to consider all possible market scenarios and how you will handle them. Those that have spent the time to write the plan will now be benefiting from the market. They were the ones that also benefited during the bear market too. Which for me was a wonderfully profitable trading period. It was a time when I focused on short selling with my mid-term daily system. And now is the time when I turn back on my long-term system and run it along side my mid-term system.

I can’t stress enough the importance of a trading plan. Kel Butcher even included a chapter on this in his new book - 20 Most Common Trading Mistakes, in which he interviewed me about this topic in Chapter 3. It was clearly a repeated mistake by most of the world renowned traders included in the book.

That is all we can do as traders is trade our plans. There will be times when you will take losses – that I can guarantee and you have to be prepared for this. There are other times when you make wonderful profits and this makes up for all those trading losses.

Trade Update

I have now exited XYZ trade and can disclose that this share is Aquila Resources (AQA).

I entered this trade back on 29 May after my daily system had identified it and I entered after a pull back. I stuck with it and added to the trade, buying more on 11 August. The share had risen past my pyramid signal, which is my signal to buy more and add to an already profitable position.

I exited on 17 August making a return of 29%* on the total trade size and 290%* on the CFD margin outlay of the trade. I held the trade for a total of 80 days and returned three times my risk value (3R). When I talk about three times my risk value, this is my R multiple. If you have read Van Tharp’s book, 'Trade Your Way to Financial Freedom', you will be familiar with this. R refers to risk. When I open a trade I decide up front how much I am prepared to lose on that trade and this determines how many shares I can buy. This amount is a set percentage of my trading capital which is referred to as my risk, or 1R. My goal is to make multiples of this risk value on my top winning trades, and I made three times this risk value on this trade.

My plan as a trader is to stay with trades and continue to move my trailing stop up as they move my way, then exit if this is hit or sell partially if other things occur, such as a strong technical reversal pattern or windfall profits. Now this individual trade did not have any of these things occur. So why did I exit this trade?

If you participated in my four month Smart Trader Teleconference Program, you already understand why I exited the trade. If not, the reason is due to a Total CFD Account Windfall Profit. Let me explain.

Anytime my CMC Markets account balance increases sharply, and it is not due to one particular trade, such as nearly doubling or tripling in size in a period of a few weeks it is time for me to consider taking some windfall profits. This involves shutting down the majority of my trades and taking my profits.

This occurs a few times a year and this is when I make my largest returns of all. It is a new strategy that I am implementing in this financial year after seeing large profits occur in a short space of time in the past and then having them wiped out very quickly a day or two later.

To give you an idea of the sharp increase in my CFD account. I watched my account balance double in two months from June to August. This was nice and slow. Then it rose sharply from 1 August to 14 August doubling again. Whenever I witness a sharp rise in a short space of time like this, it is usually followed by a large drop and a lot of my stops being hit. Instead of watching all my open profits disappear I have now introduced a strategy of exiting multiple trades.

On 17 August that is exactly what I did and this Aquila Resources trade was one that I exited on this day. I exited a total of 12 CFD trades on that day. Nine of which would have proceeded to hit their stop losses over the next few days to a week and this would have resulted in a large drop in my CMC Markets account if I had not of taken action.

There was only three trades that did not hit their stops, one of which I have since re-entered and the other two, (which includes this trade on AQA) have not moved any higher since.

Below is the trade I have re-entered and I will continue to share in my next newsletters. This share I will call MNO share. I originally entered this share on 31 July when it came up in my daily trading system and it, had a nice break of resistance and met all my trading rules. I bought in that day at 44.5c and exited on 17 August as part of my Total CFD Account Windfall Profit action. I made a return of 40%* on the total trade size and 399%* on the CFD margin. I held the trade for a total of 17 days and made two times my risk value on this trade.

As it turns out after I exited, this share touched its resistance level and rejected the higher prices with the large wick of its candle that day, which usually signifies a reversal. It then fell back, but was able to hold 50c and has since moved higher, giving me a signal to re-enter the share.

I re-entered on 8 September when it broke to new highs above its resistance level and my daily system gave me a buy signal. So I am now back in this trade and will continue to update you on its progress in the coming newsletters.

Until next time, enjoy, learn, grow and prosper and take the time to write or update your trading plan :-)

Cheerio

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

Smart Trading Pty Ltd is a Corporate Authorised Representative of CDM Pacific Pty Ltd AFSL 223682

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.