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Chris Vermeulen
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Chris Vermeulen the founder of AlgoTrades.net Algorithmic Trading Systems. This automated investing system is designed for individual investors and traders. He is also the editor of the TheGoldAndOilGuy newsletter which is designed for gold market traders providing quality ETF Trade Alerts,... More
My company:
AlgoTrades Algorithmic Trading Systems
My blog:
TheGoldAndOilGuy - Gold Market Traders
My book:
Technical Trading Mastery - 7 Steps To Win With Logic
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  • Algorithmic Trading With Market Sentiment

    Algorithmic trading which is also known as automated trading has changed the way I trade and invest dramatically. As you know trading is extremely difficult to be consistently profitable in. The #1 reason individuals fail is because they struggle with their emotions and end up trading with the general market sentiment. While the herd mentality/feeling can and most of the time feels like the proper (logical) way to look at the market, trading with the "herd mentality" is the silent killer.

    I am going to teach you how to read market sentiment so you can swing trade and profit consistently from emotional traders to earn 1% - 3% per month trading the SP500 index. If you want to make money, you need to trade against the herd (masses) at key support and resistance levels in the market. Plus you should have a robot (algorithmic trading system) execute these trades for you. Because, you need to completely remove your emotions from the game, and because it's not rocket science to identify key levels where you should be entering and exiting the market with your money.

    You start by looking at the market completely backwards. Focus on buying positions during heavy volume sell-offs (panic) and sell your positions during heavy volume rallies (greed). This was a very tough transition for me and I still get nervous and emotional during these times when my system enters and exits positions. This strategy feels completely wrong at the beginning but the profits speak for themselves!

    One Of My Algorithmic Trading Strategies

    This trading strategy is my favorite because I know the masses are panicking out of positions, sweating, and having heart burn, while my automated trading system is entering a high probability position against them. This analysis may seem basic at first glance, and that is because it is, but when you combine the analysis of each indicator explained below, you end up with a highly effective trading strategy. I took things on step further and converted into an automated trading strategy. This is one of nine automated trading strategies I use.

    SP500 - 5 Minute Chart - Algorithmic Trading Strategy #1

    This SP500 chart shows where a high probability short trade should be executed based on the algorithm tradingindicator. It is important to know that over the past 6 years the SP500 has provided a 1.25% profit on average each time one of these extreme sentiment readings occur on the charts. While that may not sound like much of a return, know this happens several times each month and better yet, if you trade the ES mini futures, you get a lot more leverage. ES trading turns a 1.25% index gain into roughly a 10% gain based on futures margin requirements for one contract.

    Anyways, the red indicator on the chart is a simple volume based indicator which measures fear and greed in the market. It is very accurate at picking market tops and bottoms. And I calculate it by taking the NYSE up volume and dividing it by the down volume. When you see this indicator start to rise it tells us the majority of traders (the herd) are buying (greedy) and we should start looking for a short entry.

    (click to enlarge)

    Let me show you how to find the trade using the market sentiment…

    The NYSE advance/ decline line Algorithm Trading Strategy #2

    How to use the NYSE advance decline indicator. It's simple really, when there are 1500+ stocks trading up on the day then the market is getting overbought. Meaning too many stocks have moved up in a short period of time and traders will most likely start taking profits. When the other two indicators talked about in this article are confirming a short sell signal the odds highly favor a selloff in the stock market that should last 1-3 days.

    (click to enlarge)

    Last algorithmic trading strategy #3 is the put/call ratio

    The put call trading algorithm can be a little tougher to use at times because when the market is trending down the ratio tends to fluctuate near the top. It stays near the bottom of the chart when the market is trending up but it is just the extreme spikes we are looking for.

    When the broad market bounces and we see the put/call ratio drop into the lower band it's telling me the majority of traders have finally become bullish. This tends to happen once a previous high is broken as it triggers short covering and breakout traders start to buy within a false rally during a down trending market.

    (click to enlarge)

    Algorithmic Trading Strategies Conclusion:

    If all you do is use these three indicators, focus on the 5 or 10 minute charts, trade only with trend of the daily charts 20 day moving average, and take partial profits at 1%, again at 2%, while keeping a small position open as a trend trade, you will become a more consistent trader and be able to profit from a falling stock market.

    My proven algorithmic trading strategy running live but this is in a rising market… $3200 in profits made quickly, with low stress and 100% hands-free, what else can you ask for…?

    algorithmic-trading-4

    It is critical that once you take partial profits at a 1% gain, you start moving your protective stop into the money to lock in a profit for the balance of the position. All three indicators need to reach the extreme levels at the same time for a trade to be triggered. Know that I have seen the market continue a trend during extremely oversold market conditions which lasted for months at times. Do not try to bet against the market just because you think its oversold and should not be shorted, just ride the trend for all its worth. Eventually your last trade will lose as the trend reverses, but wait for it, and expect to lose a trade from time to time,

    Final thoughts, this strategy works just as well during a bull market. There are some minor changes required on each of the indicators which I will cover in another automated trading strategy article soon, so stay tuned for more logical trading tips.

    Have My Bull & Bear Market Strategies Automatically Traded For You: www.AlgoTrades.net

    Chris Vermeulen

    Tags: SPY, DIA, IWM, QQQ
    Jul 23 6:23 PM | Link | Comment!
  • Gold Option Trade – Will Gold Continue To Consolidate?

    Until recently, the world has forgotten about gold and gold futures prices it would seem. A few years ago, all we heard about was gold and silver futures making new highs on the back of the Federal Reserve's constant money printing schemes. However, after a dramatic selloff the world of precious metals it became very quiet.

    Gold prices have been in a giant basing or consolidation pattern for more than one year. As can clearly be seen below, gold futures prices have traded in a range between roughly 1,175 and 1,430 since June of 2013.

    (click to enlarge)

    The past few weeks we have heard more about gold prices as we have seen a five week rally since late May. I would also draw your attention to the fact that gold futures also made a slightly higher low which is typically a bullish signal. GLD, SLV, GDX,GDXJ,SIL,NUGT, DUST

    At this point in time, it appears quite likely that a possible test of the upper end of the channel is possible in the next few weeks / months. If price can push above 1,430 on the spot gold futures price a breakout could transpire that could see $150 or more added to the spot gold price.

    Clearly there are a variety of ways that a trader could consider higher prices in gold futures. However, a basic option strategy can pay handsome rewards that will profit from a continued consolidation. The trade strategy is profitable as long as price stays within a range for a specified period of time. Ultimately this type of trade strategy involves the use of options and capitalizes on the passage of time.

    The strategy is called an Iron Condor Strategy, however in order to make this trade worth while we would consider widening out the strikes to increase our profitability while simultaneously increasing our overall risk per spread. Consider the chart of GLD below which has highlighted the price range that would be profitable to the August monthly option expiration on August 15th.

    (click to enlarge)

    As long as price stays in the range shown above, the GLD August Iron Condor Spread would be profitable. Clearly this strategy involves patience and the expectation that gold prices will continue to consolidate. This trade has the profit potential of $37 per spread, or a total potential return based on maximum possible risk of 13.62%. The probability based on today's implied volatility in GLD options for this spread to be profitable at expiration (August 15) is roughly 80%.

    Our new option service specializes in identifying these types of consolidation setups and helps investors capitalize on consolidating chart patterns, volatility collapse, and profiting from the passage of time. And if you Advanced options trades are not your thing, we also provide Simple options where we buy either a call or put option based on the SP500 and VIX. The nice thing about buying calls and puts is that you can trade with an account as little as $2,500.

    If You Want Daily Options Trades, Join Technical Traders Options Alerts: www.TheTechnicalTraders.com/options

    Chris Vermeulen

    Jul 04 12:57 PM | Link | Comment!
  • If You Miss The Breakout In Gold Stocks You Need To Do This…
    Back in the day when I was a newbie trader and investor I used to follow several stocks, sectors and commodities that had a setup chart patterns. I would draw all over them and then wait to catch the day of the breakout.

    Unfortunately I would miss a good chunk of the trades because they would breakout when I want not watching the chart forcing me to miss some unbelievable momentum and swing trading opportunities. I used to get rather frustrated with trading to put it kindly.

    But I eventually learned that there are several ways to avoid this from happening and each of these options work much better than watching the charts like a hawk waiting for that breakout that may or may not happen.

    The beauty of my trading system is that it allows me to buy on the breakout whenever a strong breakout happens without me, I have methods that will automatically enter me into a long position on the first pullback after a confirmed trend reversal.

    The positive trade-off of buying a pullback that follows a trend reversal or chart pattern is that buying pullbacks is often lower risk than buying breakouts because there is a lower risk of the breakout failing.

    Before I get into those details let me update you on what gold stocks just did and what I expect them to do in the near future.

    Recently we have seen big money move into gold stocks. Gold and silver stocks are popping on high volume which is great to see. While it is exciting gold stocks are not yet in the clear from further selling or sideways trading.

    If you are familiar with Stan Weinstein or have followed my work for a while you likely understand the four stages the market goes through (same on all time frames). Looking at the chart below its clear that the gold stock index HUI has completed a stage 4 decline and appears to be in the second half of an accumulation stage 1.

    The stages in this chart I am talking about are big picture trends which last a year or two, more of an investors 35,000 foot view on the market. I breakout and rally above the $280 level will be very bullish, any pause or pullback after that will provide a low-risk opportunity to get involved.

    I will let you in on a little secret of mine, and almost never buy an upside breakout, I actually wait for the first pullback. And on the flip side, I always short on the breakdown, and if I miss it, I will then get short on the first bounce.

    If you have not read my report on the next countries to start bull markets then checkout it out here: Click Here

    (click to enlarge)

    In my next article I am going to tell you exactly how to avoid missing the breakdowns and how to be entered automatically into these trades when the market has its first pullback for 100% Hands-Free Trading.

    Find This Article Educational? Delivered To Your Inbox Free Here www.GoldAndOilGuy.com

    Chris Vermeulen

    Jun 27 2:51 PM | Link | 1 Comment
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