18th April 2006

We'restill in a consolidation here. The recent rise close to 100 shows an attempto break out, but there's no trading signal yet. It doesn't look like we'llhavea trade for about another week, but I will be looking at the chart daily now in orderto be ready. That doesn't mean that I'llposy here daily as mostof what happens over thenext few dys willprobably be fairly insignificant.

3rd April

By now I believe that I've proven myself correct. The consolidation has been in full swing for a while now. I'm just on the lookout for a sign that the market is moving. I'll post as soon as something catches my eye. In the mean time there really isn't very much to report as we are in the equivalent of the eye of the storm.

24th March

There's not really much to say today, the consolidation seems to be in full swing now. At the end of today we had a determined move to push the price up, closing at 6036. We'll have to see what Monday brings.

22nd March

Since I've been talking about candlesticks alot lately I though I should provide a link (some of the page on doji's was written by me) and to an explanation of this charting technique. Unfortunately it is only possible to learn the basics online, but any of Steve Nison's books are very good if you want to go into any more depth.

However, we now get back to the point. yesturdays action created a dragonfly doji with the high below 6000. normally this would be a bullish signal, however, as we are currently near the recent highs I wouldn't see this as a trading signal, insead it signals that support exists a short way below 6000. This hints that we may be in for a consolidation rather than retracement. This is good news for any bulls out there as it signals a market wanting to move forward. However, it's not nessesarily such good news in terms of a trading signal. It's difficult to get a definite signal from a consolidation as opposed to a retracement, however, it does give us a good zone of support to place a stop.

The market has fought back today to get above 6000, however we have now been left with another inverted hammer. So once again we are being fed with the theme of consolidation as the market shows strength below 6000 but weakness above it.

21st March

Since my last post we've broken the 6000 barrier, so that means that I was wrong about the consolidation before 6000. As usual, the market tends to react in the same ways over and over, in this case, it looks like the market will breach the barrier before consolidating. Anybody looking at the chart on the 16th would have seen a very strong market ready to push higher, however, the next couple of days show exactly what I had been anticipating.

There is a general principle that prices tend consolidate aound areas of resistance and support, 6000 is definately one of these areas for the FTSE, so consolidation is expected, I would have expected this to happen before breaking the resistance, however, it appears as though it may happen after. The last two days have shown very long upper wicks, both stretching around 40 points above 6000, however, on both days the price has ended the day below 6000, this leaves us with two inverted hammers, as we saw in the intraday action before, these occur in areas of weakness. So with this as a signal, I would expect to see the market either stagnate or make a retracement. Before this happens, I do not think it would be correct to go long. The market is as always a tricky beast, and moving at the wrong time is usually more destructive than not moving at all. So for the moment I'm going to sit here like Jesse Livermore and hold on to my money a bit longer watching the ticker tape for a solid sign that the market is ready.

Day One

Today the FTSE 100 sits at 5935, it looks likely to pierce the 6000 barrier anytime within the next 30 days. Before it does so, it is likely to make a consolidation of the gains of the last four and a half months. It is at this point that I am going to start out with my aim to make £10,000 out of £400 from trading the FTSE 100.

I do not intend this blog to simply be a diary, I also hope that it will contain the daily aspects of trading the financial markets that simply cannot be explained in a book. I will try to post in this blog daily, although I will only make trades at most about once a week. Each day I will post comments on the days actions in the FTSE 100 and how thse fit into the bigger picture. The methods I will use to analyse the action will be explained as fully as possible without breaching copywrite.

To start, here's a brakdown of todays action:

For the daily analysis I will be using 5 minute candlesticks. The day opened around 5923, it gained ground to a high of 5940 and then stayed fairly still until about 13:30. The quiet morning doesn't really give a direction for the rest of the day, but it does set a nice breakout area. The locals (now also trading electronically) will love this type of small choppy range bound action, it allows them to capitalise on the small spreads and very two way trading, when the market breaks out of this range however, the locals will run for the hills, they will reverse any positions oposite to the breakout which will inflate the move, this is why a breakout will usually be sucessful trade. It is possible however for locals to set a fake breakout trap, so caution is certainly warranted. However, the breakout did occur, at 13:30 the market broke out at 5942 and climed steadily to a high of 5958. at 15:05 the high of 5956 was proceeded by three black crows, a pattern of three down candles. This is a bearish signal and was a clear warning to any long poitions at this point. It would certainly have been worth taking a partial profit at this point. The market did rise again, however with shaven bottoms and long upper wicks, this contiued the theme of weakness. At this point a careful trader would have moved a stop for their position to just below 5951 giving a profit of 9 points on the origonal position. The candle at 16:00 brought the high to 5958, but by 16:05 was a clear inverted hammer, if not fully out of the position by now, I would have been preparing to exit the position, although I would have probably waited for my stop to be hit. Sure enough the market crashed at this point to a low of 5938. The market did correct most of this move, but only a fool would have reinitiated a long position right now, the action for the rest of the day was choppy offering nothing in the way of a real signal to trade, finally closing at around 5935.

In the bigger picture, today posted a high not seen in a very long time. The upper wick was quite long however, and so I will be watching for the consolidation or retracement in order to initiate a long position in order to ride the 6000 barrier madness.