Sell USD, buy anything else. Mon June 1

The weakness in the US dollar continues and commodities are the beneficiary, at least in US dollar terms. For example, gold was up close to 2% on Friday night but the Australian dollar also rallied by about that much so in local terms there was no real gain. Nevertheless, after some early indecision the market seems to have decided to buy the commodity sector. Financials are more mixed with the exception of Macquarie which is up strongly.

I've only adjusted my positions slightly. As Mqg rallied, my hedge which was 1 stock to 2 puts created a long position. The equivalent value of the puts in terms of short stock reduced as they became more and more out of the money. Now the hedge would be more like 1 stock to 3 puts so I've started to sell out some of the extra stock for a small windfall profit. My selling price for this stock is 3390 (v 3160), a gain of 230 - or 115 per put based on the initial hedge - while the puts have dropped by about 90c.

Cba was my only short and is the strongest of the big 4 banks after having been mixed early. I'm close to hedging this. The recent swing high is 3587 - if it broke this it would be strong confirmation that the trading range was intact and I would try to fine tune a hedge.

12 pm My longs are in pretty good shape, with Ncm the best performer, up 78 at 3374. I had bought a few extra stock to go with my June 3282 calls which I sold out earlier at 3338 (v 3280) and I've just sold some Wpl at 3367 (v 3335) for the same reason as I already have June 4400 calls.

I've been re-reading Trading in the Zone by Mark Douglas. I enjoyed it last time around but this time I think I got it. A lot of the issues I'm grappling with are dealt with intelligently in the book. One thing he stresses is to take the tension out of trading by understanding and acting in the knowledge that you're constantly looking for your edge or set up and while each event can easily go against you, with a big enough sample size you will consistently make money. Now, most traders understand this intellectually, but to actually believe it so that you're consistent in your approach is another challenge altogether. I think I'm most of the way there as I had years as an option market maker where the whole approach is to work with a consistent edge and I know just how profitable and enjoyable it can be.

2 pm Mqg has pushed as high at 3510, it's 3487 now. I've sold out half of my stock hedge as the amount I need diminishes, with the profit on this adding up to 66c per option. The options are down about 120 today but the profit on the rest of the hedge is 83c per option as it stands. Cba has recently breached my stop level and once again I'd prefer to hedge as I think there's a good chance the stock can now push through to the top of the range or make a new high. I suspect it might have topped out for the day though so I'm waiting for a better opportunity.

2.15 I've been unsure about Bhp and Rio, our two biggest resource stocks, as they've been giving mixed signals for a little while. They both look bullish now. I like Rio slightly more but Bhp has cheaper options and a more liquid market so I'm leaning to a long position there.

I often like to get in on the first up day if I think there's a trend but since I was undecided I've been waiting for a break of the 3576 high from early May. That just happened so I've bought June 3600 calls at 118. The stock is extended on the day so I've put on half my position. The intraday chart is stalling so a late pull back could give me an opportunity to buy the rest at better levels.

2.45 Hedged my Cba now at 3599 as it's well and truly cleared the resistance level.

3.10 Reading the Trading in the Zone book, one of the points the author makes is that taking profits is one of the hardest things to get right. This was encouraging as I do find it quite tricky. He recommends an approach which is very similar to the Joe Ross approach. Take a third of your position off early when you see a small profit because most losing trades are up at some point; take another third off at a target level; and try to run the last third, perhaps looking for an obvious level or using a trailing stop. It's actually something I've been doing but perhaps not thoroughly enough.

Right now, I'm long Bhp, Ipl, Lgl, Ncm and Wpl and square Cba, Mqg and Qbe with no short positions; reflecting the recent strength. I've sold out the balance of my stock in Wpl at 4396 and I've just sold some more Ipl September 264 calls at 34 (v 16) as it has another good day. The resistance level should be January's high of 296 and I'll sell out the rest around there if it makes it. I'm also trying to define some targets for my longs to take off part of the positions.

3.33 Thinking about profit taking...I've sold out the extra stock I'd bought in Ncm and Wpl. I've just sold some extra stock in Lgl at 332 (v 328) along with the Ipl calls while Bhp is a new position - so I'm happy with that for the moment. Ncm actually looks quite explosive.I like the way it's rallying off a strong base from mid April and it's starting to gap up without really going wild.

3.51 Bought Mre at 72 - it's one I mentioned last week - as the resource stocks firm.

4.11 The market has closed with a gain of 2%. I'm long now, basically all in resources. More tomorrow.