A profitable end to my FTSE trade

John C Burford concludes his live FTSE 100 trade with a profit.

Last time I left you in suspense with my FTSE trade

The market had completed the move to my initial target at my lower tramline and had just broken chart support at 5,955. So far, so good.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

But late last night, the market failed to continue the decline and instead rallied, albeit from oversold momentum readings.

That gave me pause to believe that the market could stage a relief rally, rather than continue its way down right away.

Advertisement - Article continues below

I had thought of adding to positions, but I will decline for now. I will just see what the market produces the next morning.

I decided to keep my protect-profit stop at 6,005 overnight.

Friday 7:45am I see the market has bounced off the congestion zone surrounding the 5,990 area and is drifting lower.

Here is the hourly chart:


(Click on the chart for a larger version)

The overnight rally has carried to the Fibonacci 50% retrace of the move down and is backing off.

Advertisement - Article continues below

But when I go to my 30-minute chart, I see that this morning's dip has carried to the Fibonacci 62% retrace of the overnight rally.


(Click on the chart for a larger version)

It is always a good idea to apply the Fibonacci tool (available on your spread betting platform) to the various waves that the market makes, especially to the most recent ones. The retracement levels can often give you points of support or resistance in advance.

2:45pm The rest of the trading day could be a little wild and woolly as we move into the close.

This is Friday and also stock index options expiration day. Many traders square their books and of course, adjustments are made for the options expiring.

All in all, I think I will pocket my profit and take a look next week.

Advertisement - Article continues below

I hope this has helped you to understand a bit better how using Fibonacci, Elliott wave and tramlines actually works when you're involved in a trade.

NB: Don't miss my next trading insight. To receive all my spread betting blog posts by email, as soon as I've written them, just sign up here.


Most Popular

Personal finance

How much the state pension will rise by this year

While Boris Johnson promised to hold a full budget within 100 days of his election victory, many of the details of next year’s state pension increases…
10 Jan 2020

Currency Corner: how high can the pound go against the euro in 2020?

In the month in which we should finally leave the European Union, Dominic Frisby takes a look at the pound vs the euro and asks just how high sterling…
13 Jan 2020

Where will markets be in 2030? Here are 20 forecasts for the 2020s

A lot has changed in the last ten years – stockmarkets soared, technology transformed our lives and politics has changed beyond measure. Here, Dominic…
14 Jan 2020
Investment strategy

Running with the crowd is bad for your finances – here’s how to resist it

To be a good contrarian investor, you have to avoid being swayed by the crowd. John Stepek explains how to go about it.
3 Jan 2020