Trading Thoughts For The Week Ahead  - Sunday 27th June

This week's guest is Mr Euro and gives his own thoughts on the week ahead and a personal view on his trading strategy in the US Markets with explanations of some of the Technical terms for those new to them. If anyone else would like to be the guest next week please let us know by emailing mike@moneyam.com

Monday 28 June Interims Beale - Near the end of March, the retailer announced sales for the first 20 weeks were 5.1% below the previous year, and that all indications were that the rest of 2004 would remain challenging. High costs and low retail inflation are to blame.Finals Northgate Information Solutions - In May Northgate announced results were expected to exceed market forecasts. The software outsourcers Rebus HR Group acquisition has performed better than expected, and the group should meet consensus pre-tax profits of around million.Tuesday 29 June Finals Carpetright - The second half of the carpet retailers financial year saw a sales increase of 8.6% compared with the same period last year. Like-for-like sales increased by 4.2%. Carpetright is now trading from 364 stores, as well as the 38 carpet concessions within Allders, the rollout of which was completed in March.Finals International Greetings - In June the greetings products manufacturer acquired Krakajack, one of the leading suppliers of crackers to the Irish market. The deal is forecast to contribute illion to turnover and facilitate IGs entry into the lucrative catering market. Expect news on further acquisition plans today.Wednesday 30 June Finals HMV - The music retailer enjoyed a strong Christmas, which continued through to its April year-end. Management expects profits to be at the top end of expectations, the market consensus being million. Cash generation has been stronger and net borrowings should be better than forecast.Ex-dividend Workspace Group - A year of strong growth saw the flexible accommodation provider raise its total dividend by 10.3% to 31p. The groups focus on managed workspace properties has continued to generate capital growth, with net asset per share rising by a healthy 22.1%. Pre-tax profits rose 12.7% to 1 million.Thursday 1 July AGM - Scottish Mortgage Inv.Trust - The trusts net asset value grew by 33.6% in 2003/04 after increasing its exposure to Emerging Markets and Asia. SMIT has assets of billion and aims to maximise return and dividend growth through investment in UK and international markets.Economics - Productivity Q1 - Just how hard do we work in the UK? These ONS statistics give details of output per job, output per hour and unit wage costs for the whole economy of the UK. Read the report at www.statistics.gov.uk/productivity.Friday 2 July AGM - Incepta - Inceptas May results reported a greater sense of optimism among clients, but can the same be said for its shareholders? The PR group suffered a 33% dive in pre-tax profits and admitted recovery would be patchy. Expect some positive forecasting combined with hard facts.AGM - Vitesse Media - The aim-quoted print and on-line publisher reported some encouraging results in April. Operating losses fell from ,000 to 000 in exceptionally difficult market conditions. Analysts forecast pre-tax profits of ,000 this year. The group has cash in the bank and is on the acquisition trail.ThoughtsA personal insight into trading the US markets Rather than providing trading thoughts for this week, I thought it might be an idea to share my trading style with you. Its a bit different to what you would normally read on a Sunday evening and probably a different trading style too. I do hope you find something that takes your interest and that it doesnt bore you to death! I have been trading for over 10 years now, got involved with the early ESI BB where I had the misfortune to meet a number of the characters still around today. Unfortunately less that about 5% remain, that tells you how difficult this trading business is. You only need to look at how people come and go on Crocs Traders Thread for confirmation of this. More by luck than judgement, I stumbled across a method of trading that makes me reasonable money and has enabled me to continue in this game. I have traded everything, from Dils (a well known Welsh maverick) dartboard method to pork bellies. I found trading futures unprofitable but was quick enough to recognise this and accept I wasnt good enough. Equally I find it difficult identifying decent opportunities in the UK, so I trade the US, specifically the NASD. If you are good enough to make money in the UK then making money in the US will be like taking candy of a baby. So how do I trade and whats my set-up? My data feeds come primarily from e-signal ($400/month) & MoneyAM and I trade through DA brokers (Direct Access, a method of placing trades directly into the order book via an electronic exchange). Stock Exchange rules require a minimum balance of $25k if you are going to trade more than 4 times a week this is known as a pattern trading (day trading to us). If this is beyond your means there are ways around this i.e. DA CFDs (Contracts For Differences a method for gearing your trading i.e. allows you to trade up to 10 times your account size) but I wouldnt bother with spread betting companies. In my experience, they will use every dirty trick in the book to stop you making money in this way - beating the market is difficult enough without trying to beat the crooks too. I have been banned from 2 such companies and another refused to open an account for me when I described my trading style. I have 5 different scanners (scanners identify stocks based on a given criteria) that run in more or less real time, which aim to pick up on momentum, be it up or down. This doesnt have to be a chart breakout but can be based on heavy buying from market movers. These opportunities arise from between 45-90 minutes after market open and also from 8pm CET. Here is an example of a trade from last week picked up using the scanner method: I normally deal in 500 share lots with this method but in 1-2000 shares for the method described below. In my experience, these opportunities earn you money 20% of the time (depending on market state (trending/range bound). This isnt to say the remaining 80% are losers, perhaps half are flat but the secret, for me at least, is to get out the moment the market goes against you. This method alone is not enough and is not even my primary source of income; my main trading takes place during the first 30 minutes of the market opening. Many advocate avoiding the first hours trading, institutions generally wont touch it and some trainee traders are not allowed to trade during this period. For the stupid, brave or skilled operator its a gold mine. Volatility is tremendous with stocks moving a $ (or 100 points) - sometimes without hitting a trade all in the blink of an eye. But surely this is just gambling? No, its the easiest way I know to make money legally. My entry & exit points are based 95% on L2 (level 2 enables you to look into a stocks order book i.e. who is buying and who is selling). Charts can be useful for general support/resistance and to know where the technical traders will enter based on Fibonnacci levels or pivot points (technical trader indicators) but not much else. By studying the L2 book you learn to recognise patterns and can predict the move. NASD L2 is very different from the UK and for me at least tells me everything I need to know about a market. You see the action before it gets to any chart. Its not easy and it takes a lot of time to feel comfortable but the rewards warrant the investment IMHO. An easy way to get started for the novice L2 trader is to simply view the book for a couple of days and note the number of times you can see a gap (the market on one side supported by only one Market Maker with a large gap to the next) about to appear before it actually does. Its not uncommon for 30c gaps to appear and I have seen a 50c gap filled in a few seconds. Liquidity can be a problem in such cases so be careful. One of my personal favourites: I derive 80-90% of my profits through this method and could pack up for the day by 4pm CET, but the truth is I cant. I love the markets too much and probably like many of us, sit around staring into L2 books, my scanners and entering trades that arent there. This weeks trading was difficult, or at least Monday and Tuesday were like watching paint dry and even more painful than watching the England Rugby team. I counted myself lucky to only be 300 down by Tuesday; it could have been 10-20 times that given market conditions, but my momentum trades of the week helped: I was in and out more times than England score points against Wales at Twickers well over 50. I try to stay in the market for no longer than 10 minutes or so a day (when not playing momentum), yes I miss out on opportunities but I cut down on risk. When playing momentum, as mentioned above, I scale down on size and will let them run a bit longer. There are individuals that will coach you to trade in this way. They charge 1000+ per day and I am sure they are good value. Whilst I am not going to give away all my trade secrets on an open forum I hope I have given you a flavour of what works for me.

Mr Euro

A special thanks to Haystack and Martini for their editing contribution and I have to say, Martini has gone well beyond the call of duty top man.

All the above comments are purely a personal opinion and no investment advice is intended. Please do your own research