This is the first time I've traded the coffee market. And wow... what a trade it has been!!
Thanks to Allen for bringing the coffee market to my attention. I've drunk a lot of the stuff over the years, but up until now, I had never actually traded it.
Well done also to my Road Map subscribers who requested a copy of my coffee chart and took the long trade. The trade set-up was magnificent. I know a few of you went long.
Now, the point of this article is not to brag. It is simply to demonstrate how you can make big money trading the bigger swings and by only taking a limited number of trades per year.
The key is getting the risk:reward right. Not of all your trades will be winners. And not all of your trades will go the way you expect them to. My short gold trade earlier in the year is a good example of that.
In that trade, I was sitting on a paper profit of over $100,000. Yet I watched that dwindle all the way back to $30k. The trade didn't go as I had planned it, and if I had been stubborn enough to hold on to my position and not recognise that the market was not going my way, I'd be suffering a massive loss right now as gold breaks into all-time record highs.
This is where my 'break even rule' comes into play. It will make you a much more profitable trader and increase the ratio of winning trades to losing trades. I talk about it in Trading with PRICE - volume 1. If you haven't got it, then grab a copy. It will be the best $49 you spend on trading education. My break even rule alone will save you thousands.
As you can see in the chart above, the next trade I'm looking for is a short in the S&P 500. I am taking this based off the indicators in my 2020 Road Map.
Again, even though my 2020 Road Map has been very accurate so far, if the market decides to take a different path, then I will listen to it and get out of this trade. Based on the market action so far, I expect this trade will give me a couple of false starts. Stop loss management will be important, and I may have to try several times to go short this market before the trade gets set.
I'm expecting a roller coast ride over the next couple of months. It's all laid out in my Road Map.
But back to coffee. The chart below shows the wonderful set-up for a long trade in mid-June. Those red and yellow markers are all "trading to Time" dates. It's the technique I talk about in Trading with TIME - vol. 2. You can see that in June and July, they gave us three buying opportunities to go long coffee.
I've also drawn in a couple of mini "Barillaro Boxes". This is a technique I have come up with over the years, which I talk about in Trading with PRICE - vol. 1. I find them very useful tools to add to positions whilst you're already in a trade, or alternatively, to give you some guidance on how high or lower counter moves can go during a trade set up.
In the example below, when gold moved back down from 104.70 to 96.30 (in that second Barillaro Box), it was one of those times where I saw a bunch of my initial paper profits dwindle again. With my Barillaro Box in place, I anticipated that we could see a move back around the 96 level me, and that gave me comfort to hold my nerve on the long trade.
In other words, those Barillaro Boxes allowed me to stay in a winning trade, when the market was getting a bit scary. (Note, if the market continued to move back below 96, then I would most likely have cut the trade).
So does this mean the long trade is over? Probably not. But we've approached 50.0% on the Fib retracement now, so for me that is a pretty good place to take profit off the table. I'm cashing out of this one. Build up the account and leave some fire power for the next trade.
Until next time...