Another newbie

[Fattony81]

Hi

I'm fairly new to trading and hopefully someone could help with my questions below

On 3rd November I stopped watching and started spread betting, roll on to the end of the month and I was £500 in profit, this week I made a couple of rushed decisions and have lost £200 of this but still in profit.

My questions

1) Where should you place your stop loss? Say you open a buy trade at 1900 but the share started dropping, at what point would you close the trade and start shorting, 10 points, 20 points or greater?

2) I made my profit on going against the trend so I waited for a drop and then opened a buy trade, am I better of with betting with the trend so as it rises I open a buy trade?

3) I understand the concept of spread betting but would I be better switching to cfd? I use city index to trade

4) Are there any tips for identifying opening points, I'm open to charting software if it's required.

As I said my gains were made going against the grain, I've made some money and lost some but overall I'm enjoying the trading and it gives me great pleasure to see my prediction was right and the financial gain is always a bonus as well

Appreciate any input and advice

 

[tomorton]

1) You need a rationale to go long, and good TA set-ups will suggest a stop level at the same time as the entry level. Place the stop where it will close the trade when the reason for entry is invalidated. Size your position so that if the stop is triggered the £ loss won't hurt your account too badly. And for a beginner, stop-and-reverse is a really aggressive reactive strategy I would recommend you leave alone until entry and stop are mastered. Don't be afraid to stay out until you get a good signal. Don't be afraid to use 1 entry signal only and go long only until you're able to do this in your sleep.

2) Trading with the trend is lower risk and shows probable incremental gains rather than unlikely dramatic windfalls. At this stage, protecting your capital is key, so as to allow you time to learn the game so low risk is the way to go.

3) There's no difference if you're just starting and learning to apply TA, so no reason to switch.

4) There are innumerable entry patterns, and you need to apply your chosen entry rules methodically so you're not tempted into action prematurely. But it is exits that pay the money so don't over-focus on entry patterns.

Don't think you can predict the market, you don't have to anyway. You can only anticipate what the market might do, and plan what you will do about it.

 

[aag100]

if your asking these questions then i dont think you should be live trading with real money.
go back to paper trading and develop your strategy until you know where your stops should be.no one else can tell you,not even warren buffet or maybe he could but they might not work for you.

 

[Fattony81]

Thanks for the input, my questions were trying to find out if the way I traded was normal / effective, for example I may put a stop loss in 50 points below but a majority may reduce this and say 50 points is too big.

Your spot on you can't predict the market and again with don't be afraid to not trade, I admit I've opened a few trades in haste and would have been better off waiting for a bigger drop.

Signals is what's got me guessing, I guess everyone has their own tatic and no one will say your is wrong?

So let's start with betting with the trend, looking at bkg this has had a strong buy for a few days now, if the price moved up in a very short space of time is that a good enough signal - I guess look back at the charts and see.

Staying with bkg my head is saying open a sell trade because the rise has been continuous I'm thinking this must start to drop soon but there I am trying to predict it

I guess I need some justification in my head that the decisions I've made aren't stupid ones!

Thanks again

 

[tomorton]

I never look at share charts, I'm forex only now, so this BKG is an interesting exercise.

Trend up to 10/08 but weak falling since then. Until this week - Monday started a strong price upswing and we had quite positive result and an enhanced dividend announcement today. Either some people did very clever analysis Monday morning or some news leaked out before the results, who am I to say?

What will happen next is hard to predict. Sufficient to say look what happened when the previous (likewise positive) results were released 17/06: the lesson is, good results don't always mean price will rise.

Personally I wouldn't take the risk on any share just before or just after results - normal market trading of this share is effectively suspended but will resume soon and that's where to make low-risk money. Some old hands are specialists at playing results trades, but its too risky for me these days as price can go the "wrong" way so fast.

 

[Fattony81]

I never look at share charts, I'm forex only now, so this BKG is an interesting exercise.

Trend up to 10/08 but weak falling since then. Until this week - Monday started a strong price upswing and we had quite positive result and an enhanced dividend announcement today. Either some people did very clever analysis Monday morning or some news leaked out before the results, who am I to say?

What will happen next is hard to predict. Sufficient to say look what happened when the previous (likewise positive) results were released 17/06: the lesson is, good results don't always mean price will rise.

Personally I wouldn't take the risk on any share just before or just after results - normal market trading of this share is effectively suspended but will resume soon and that's where to make low-risk money. Some old hands are specialists at playing results trades, but its too risky for me these days as price can go the "wrong" way so fast.

Completely agree, it's interesting so many people did well on Monday, news must have leaked, I've never seen a share rise so much so quickly - but I'm no expert!

I need to double check dates as I didn't realise until the end this morning the news was due

Cheers guys

 

[tomorton]

There's a strategy for every situation, if you can live with the risk. Apesh Patel published a results strategy years ago - if price on results day closes higher than the previous day's close, go long with a stop at the previous day's low: if it closes lower, go short with a stop at the previous day's high.

Statistically this will work but the drawdown can be too great to stomach. You have to be able to sleep at night with an open position.

 

[dbphoenix]

Hi

I'm fairly new to trading and hopefully someone could help with my questions below

On 3rd November I stopped watching and started spread betting, roll on to the end of the month and I was £500 in profit, this week I made a couple of rushed decisions and have lost £200 of this but still in profit.

My questions

1) Where should you place your stop loss? Say you open a buy trade at 1900 but the share started dropping, at what point would you close the trade and start shorting, 10 points, 20 points or greater?

You're asking the wrong questions, but you're a beginner, and that's to be expected. Your objective here is to get out when the trade is no longer good. Therefore, think about what makes the trade good, what you want to see as it unfolds. If you don't see it, get out of it. The "stop" is irrelevant, useful only if you tend to lose your internet connection and the end of the world is around the corner, in which case the loss will be the least of your worries.

2) I made my profit on going against the trend so I waited for a drop and then opened a buy trade, am I better of with betting with the trend so as it rises I open a buy trade?

Yes.

3) I understand the concept of spread betting but would I be better switching to cfd? I use city index to trade

Characterize both and trade whichever provides the greatest number of low-risk trading opportunities.

4) Are there any tips for identifying opening points, I'm open to charting software if it's required.

See the pdf posted to the first post in the thread linked to my signature, below (If You Can Draw A Straight Line).

As I said my gains were made going against the grain, I've made some money and lost some but overall I'm enjoying the trading and it gives me great pleasure to see my prediction was right and the financial gain is always a bonus as well

Everybody enjoys it at the beginning. Otherwise they wouldn't be doing it. If you want to keep enjoying it, though, you'll have to develop a thoroughly-tested and consistently-profitable trading plan. This will prevent you from shooting yourself in the foot.

Appreciate any input and advice

Good luck.

Db

 

[tomorton]

A couple of simple strategies for swing trading.

Google Marc Rivalland on swing trading. You can download a pdf of his approach from the Sharescope training zone so I won't go into the detail here. All entries are made via pre-placed orders, so this forces you into the discipline of planning ahead, and avoids screen-watching. Screen-watching is time-consuming but also encourages spontaneous entries with the momentum / emotion of the crowd.

Steven Primo's Strategy #4 - this is only the basis of a strategy but is ridiculously simple. For a long, look for a close which is in the top 25% of today's range: check the close was above the 50SMA: place a buy order for tomorrow just above today's high, with a stop just below today's low (reverse this for shorts). See Youtube for demonstration.

Both these do make money and you can add your own filters e.g. you only take trades in the direction of a much longer-term underlying trend etc. etc.

 

[Lúidín]

My questions

1) Where should you place your stop loss?

2) am I better of with betting with the trend so as it rises I open a buy trade?

3) I understand the concept of spread betting but would I be better switching to cfd?

4) Are there any tips for identifying opening points, I'm open to charting software if it's required.

Appreciate any input and advice

It is courteous to reply to what you asked, and not what one might think you asked.

1) My stop loss is twofold, assuming no gaps.
a) max loss based on %risk per trade of available trading capital
b) min loss based on what happens to price after I am filled.

2) Many can't even define a trend, let alone trade it, so the first step is to know a trend is in fact in place when you see it happening.

3) If you are serious about trading, and have adequate capital, then spreadbetting or cfd trading should be avoided, simply due to the additional spread costs associated with spreadbetting companies, and the "unprofessional" way they operate during highly volatile markets, which are now very common.

4) It all depends on what way you decide to trade, as in, day trading, swing trading or position trading. Each will have different setups, but, the one thing that is common to all of them is the ability to read charts, and I do not mean putting a load of lagging indicators on a chart to try and identify a change in trend direction.

You are welcome, and I hope it makes you think about what you are trying to do, as making a few hundred quid is nothing in this game, for you can lose it in a few seconds/minutes if you let your mind wander on needless things.

Lúidín

 

[Fattony81]

Thanks guys, appreciate the advice!

PSN is one I trade a little, its movement is quite good, if anything I have realised I need to look at better chart programs so suggestions welcome for this.

So PSN on Friday

Open: 1,920.00
High: 1,957.00
Low: 1,913.00
Close: 1,44.00

So I would be thinking placing a long trade at around 1,920 with a stop loss at around 1895 - is that too big a gap.

Sometimes my problem (which is noted in the straight line approach) is not giving up, at what point once you've placed a trade and its going the wrong way do you close it, and once closed do you reverse your trade?

Or in the example above would you allow the stop loss trigger and have another buy trade set up at around 1880

I like the 'look for the 25% drop approach and go long', its very simple and could be effective.

Does anyone on here make an actual living from trading or is it just a hobby?

Thanks

 

[dbphoenix]

Thanks guys, appreciate the advice!

PSN is one I trade a little, its movement is quite good, if anything I have realised I need to look at better chart programs so suggestions welcome for this.

So PSN on Friday

Open: 1,920.00
High: 1,957.00
Low: 1,913.00
Close: 1,44.00

So I would be thinking placing a long trade at around 1,920 with a stop loss at around 1895 - is that too big a gap.

Sometimes my problem (which is noted in the straight line approach) is not giving up, at what point once you've placed a trade and its going the wrong way do you close it, and once closed do you reverse your trade?

Or in the example above would you allow the stop loss trigger and have another buy trade set up at around 1880

I like the 'look for the 25% drop approach and go long', its very simple and could be effective.

Does anyone on here make an actual living from trading or is it just a hobby?

Thanks

All of this will vary according to the instrument you select to trade, but a "better" charting program won't make any difference as long as what you have is reasonably accurate.

Before you begin trading something, it is important that you invest at least a little time observing it, determining how it behaves (i.e., how those who trade it behave, particularly those who are trading in a longer timeframe as they are the traders who will engineer the moves you seem to want to see). Based on those observations, you will then come up with a trading plan, and what you think and feel and hope for will become irrelevant. All that will matter will be trading your plan. If it's throughly-tested and consistently-profitable, you'll make money. If it isn't, you won't.

This particular stock has been in a downtrend since September, confirmed in October (defining trend is not a problem if you can draw a straight line). It reached a climactic low at the end of November (whether or not it is the climactic low remains to be seen). That low is currently being tested. What you do now depends on your assessment of the risk and whether or not you're willing to assume that risk. If you assess the risk correctly and you assume that risk, it will be a successful trade. If you don't, it won't be.

Typically, a test will have a lower swing low than you see here (see June and August '14). But if longer-term traders are eager to buy this, then price will rally. If they aren't, it won't. If I were trading this, as the line of least resistance is down, I'd be looking to short, not buy. If I were to buy, I'd be looking for a lot more to confirm that stance than what I see here.

As to where you place your order to buy and where you place your stop, that will depend on what you expect to see if the trade is successful. As the price is already above 1920, that horse has already left the barn. As to whether not the gap between your stop and your entry price is too wide, that again will depend on what you expect to see. If you don't see it, there's no reason to remain in the trade. If you do see it, there's no reason to exit. If you don't know what to look for, then you're not ready to trade.

You're asking pretty much the same questions that most if not all beginners ask and you're getting pretty much the same answers. And yet the failure rate is pretty much the same as it's always been. The answers that will enable you to succeed are in the market, and those will be found via observation and testing and the development of a consistently-profitable trading plan which you will then be expected to follow without hesitation.

The line of least resistance here is down, but there is no certainty in the market, only probability, therefore the LOLR could change tomorrow, if and when price breaks its downward stride. As long as you're prepared for both, you'll succeed. If you're not, whatever success you enjoy, if any, will depend on luck. If you review the journals here and elsewhere of those who depend and have depended on luck, you'll have firsthand testimony as to the results. If that's enough, may your luck be good. If it isn't, then you have some studying and experimenting and practicing to do.

Db

 

[Fattony81]

All of this will vary according to the instrument you select to trade, but a "better" charting program won't make any difference as long as what you have is reasonably accurate.

Before you begin trading something, it is important that you invest at least a little time observing it, determining how it behaves (i.e., how those who trade it behave, particularly those who are trading in a longer timeframe as they are the traders who will engineer the moves you seem to want to see). Based on those observations, you will then come up with a trading plan, and what you think and feel and hope for will become irrelevant. All that will matter will be trading your plan. If it's throughly-tested and consistently-profitable, you'll make money. If it isn't, you won't.

This particular stock has been in a downtrend since September, confirmed in October (defining trend is not a problem if you can draw a straight line). It reached a climactic low at the end of November (whether or not it is the climactic low remains to be seen). That low is currently being tested. What you do now depends on your assessment of the risk and whether or not you're willing to assume that risk. If you assess the risk correctly and you assume that risk, it will be a successful trade. If you don't, it won't be.

Typically, a test will have a lower swing low than you see here (see June and August '14). But if longer-term traders are eager to buy this, then price will rally. If they aren't, it won't. If I were trading this, as the line of least resistance is down, I'd be looking to short, not buy. If I were to buy, I'd be looking for a lot more to confirm that stance than what I see here.

As to where you place your order to buy and where you place your stop, that will depend on what you expect to see if the trade is successful. As the price is already above 1920, that horse has already left the barn. As to whether not the gap between your stop and your entry price is too wide, that again will depend on what you expect to see. If you don't see it, there's no reason to remain in the trade. If you do see it, there's no reason to exit. If you don't know what to look for, then you're not ready to trade.

You're asking pretty much the same questions that most if not all beginners ask and you're getting pretty much the same answers. And yet the failure rate is pretty much the same as it's always been. The answers that will enable you to succeed are in the market, and those will be found via observation and testing and the development of a consistently-profitable trading plan which you will then be expected to follow without hesitation.

The line of least resistance here is down, but there is no certainty in the market, only probability, therefore the LOLR could change tomorrow, if and when price breaks its downward stride. As long as you're prepared for both, you'll succeed. If you're not, whatever success you enjoy, if any, will depend on luck. If you review the journals here and elsewhere of those who depend and have depended on luck, you'll have firsthand testimony as to the results. If that's enough, may your luck be good. If it isn't, then you have some studying and experimenting and practicing to do.

Db

Cracking post, and I do appreciate it!

I can see the downward trend from 2135 on 19th August, but historically thats easy to see?

I do think PSN will retrace but I looked at it at a possible start of an upward trend from 24th November but perhaps Im a little too early on that!

Each trade Ive placed have been short term, ie held for 1 - 3 days maximum looking for a 20 - 30 point gain - is that too short term as looking at PSN if a short was opened on 19th August you could have made 350 points by mid November

With regards to charting program, I mean is there anything I can use which will allow me to draw the straight lines over the graph, at the moment I just use the charts either on lse or iii, to be fair iii looks much better when comparing the 2

PSN tomorrow will be interesting, its closed just above the 50 SMA.

Thanks

 

[dbphoenix]

Cracking post, and I do appreciate it!

I can see the downward trend from 2135 on 19th August, but historically thats easy to see?

Yes. It's also easy for those who have the money to move price -- The Money -- to see. They can see it even if they don't use charts. It is therefore important. Arguing with The Money is not productive

I do think PSN will retrace but I looked at it at a possible start of an upward trend from 24th November but perhaps Im a little too early on that!

What you think is unimportant. What you see -- if you know what to look for -- will lead to profit, not what you think or how you feel.

Each trade Ive placed have been short term, ie held for 1 - 3 days maximum looking for a 20 - 30 point gain - is that too short term as looking at PSN if a short was opened on 19th August you could have made 350 points by mid November

Your timeframe is largely irrelevant. What matters is the timeframe in which The Money operates. Even if you're scalping, it is The Money that moves price. If you understand (a) what they're looking at and (b) what they intend to do with it, you can hitch a ride with them and profit. Otherwise you're making random trades and hoping for the best. You're not going to retire on that kind of approach. The CouldaWouldaShoulda is nothing more than a distraction unless you use it to develop a robust trading plan. Otherwise, it's just hopes and wishes and dreams.

With regards to charting program, I mean is there anything I can use which will allow me to draw the straight lines over the graph, at the moment I just use the charts either on lse or iii, to be fair iii looks much better when comparing the 2

The straight lines can be drawn using just about any online charting software (I'd say "all" but I don't know all online charting software), and given that this work must be done in advance in preparation for the trading window, whether or not you have a program that allows you to draw lines on the chart in real time is not particularly important. I like the charts at investors.com, but they may not have all the charts in which you're interested. But surely there are UK-based vendors who provide charts using real-time streaming data. It should be remembered, though, that while you're in the phase of developing a trading plan, it doesn't matter if the data is real-time or not.

PSN tomorrow will be interesting, its closed just above the 50 SMA.

The relationship between price and moving averages is irrelevant, particularly when so many of those who have the wherewithal to move price -- The Money -- don't even look at charts. Study and understand support and resistance (see my previous posts here and/or in my threads) and you'll be way ahead of those who focus on indicators.

Thanks

You're welcome.

Db

 

[tomorton]

Going long on PSN at present seems speculative, as it depends on a reversal (dbphoenix is right, this is a downtrend) so a buy now would be based on only a hunch. Not good.

Basically I don't sleep well when I'm long in a downtrend, even for a few days.

If this made lower daily ranges for at least another two days, it might become a buy as it bounces from a new swing low above 1800 or better yet if it breached the high of 03/12. But there's still 6 months' worth of overhead resistance.

 

[dbphoenix]

Here's a freebie, largely because it's Sunday and this is appears to be an example of a mean-reverting instrument.

Note on the weekly that price fell out of its channel, becoming "oversold" to pretty much the same extent that it was "overbought" throughout the summer. Price is now trying to re-enter that channel. Whether or not it succeeds in that attempt will be determined over the next few days. Currently you're in the middle of a "dog", i.e., price isn't doing what's expected. One would ordinarily expect a short last week given the overall weakness and the distribution on Tuesday through Thursday. But the weakness was not confirmed on Friday and the prudent short-seller would get the hell out given that price instead rallied. However, this strength has yet to be confirmed by a higher swing high. So the odds of drifting sideways are just as good as any other move given that you are at a cusp, a crossroads, where the second string must decide which way they want to go. The Money has been exiting the position they took at the bottom. Whether there are other forces willing and able to pick up the ball and run with it remains to be seen. The danger points for either side are last week's high and Friday's low. If the trader is not willing to assume the risk involved in taking either side, he should stand aside and wait for further clarity.

Db

 

[Fattony81]

I get your point on PSN, the price has spent too much time above your higher line which is used to work out the range so the time is not right.

Another one I look at is WOS (seems to be the construction industry!) this is the first time I've used the straight line strategy so bear with me.

I wonder if I'm reading this right, It looks like an upward trend and the range seems to be ok so its a matter of picking the entry price right, only thing I noticed is its quite a steep incline

Have a read that anywhere near right?

 

[Lúidín]

Thanks guys, appreciate the advice!

PSN is one I trade a little, its movement is quite good, if anything I have realised I need to look at better chart programs so suggestions welcome for this.

So PSN on Friday

Open: 1,920.00
High: 1,957.00
Low: 1,913.00
Close: 1,44.00

So I would be thinking placing a long trade at around 1,920 with a stop loss at around 1895 - is that too big a gap.

Sometimes my problem (which is noted in the straight line approach) is not giving up, at what point once you've placed a trade and its going the wrong way do you close it, and once closed do you reverse your trade?

Or in the example above would you allow the stop loss trigger and have another buy trade set up at around 1880

I like the 'look for the 25% drop approach and go long', its very simple and could be effective.

Does anyone on here make an actual living from trading or is it just a hobby?

Thanks

You should only worry about yourself, and not be too bothered about what others do or do not do.

I do not trade UK stocks, as I consider them to be too risky compared to trading US stocks, but if I was trading this stock then I would be looking for a long trade tomorrow when the market opens, and then trade it based on what actually happens, not on what I think might happen.

I will not tell you where to enter, place a stop, and a profit target, as that is your choice, but I know where I would get in and get out, depending on where price actually goes after the market opens.

Be very careful taking advice from anyone, including me, as it is your money, and your responsibility.

If you don't know what you are doing, then you should not trade with large risk until you do, and only risk a very small amount per trade until you can make money every week, or whatever time frame you set for yourself.

Lúidín

 

[Fattony81]

You should only worry about yourself, and not be too bothered about what others do or do not do.

I do not trade UK stocks, as I consider them to be too risky compared to trading US stocks, but if I was trading this stock then I would be looking for a long trade tomorrow when the market opens, and then trade it based on what actually happens, not on what I think might happen.

I will not tell you where to enter, place a stop, and a profit target, as that is your choice, but I know where I would get in and get out, depending on where price actually goes after the market opens.

Be very careful taking advice from anyone, including me, as it is your money, and your responsibility.

If you don't know what you are doing, then you should not trade with large risk until you do, and only risk a very small amount per trade until you can make money every week, or whatever time frame you set for yourself.

Lúidín

Thanks, I'm trading the profit I made in November at the moment trying to learn as much as I can from others more knowledgable, I wouldn't trade just on someone's say, that's just asking for trouble

I tend to slice from the top to be honest 20 points and I'm out or put a stop loss in to protect the profit

 

[Lúidín]

I get your point on PSN, the price has spent too much time above your higher line which is used to work out the range so the time is not right.

Another one I look at is WOS (seems to be the construction industry!) this is the first time I've used the straight line strategy so bear with me.

I wonder if I'm reading this right, It looks like an upward trend and the range seems to be ok so its a matter of picking the entry price right, only thing I noticed is its quite a steep incline

Have a read that anywhere near right?

TBH, I would not even comment on this stock, as it's average volume is only 889K. If you get serious about making money trading, then you have to go with the best risk/reward candidates, and, as mentioned, I believe them to be US blue chip stocks. Why would you want to trade anything that carries higher risk in relation to reward, and sticking with your own country is silly if the only reason is for loyalty.

I am Irish and I would not trade Irish stocks, for many reasons, but the main one as mentioned above. If you use your head correctly, then you have a good chance to outsmart those are outsmarting you all of your life, but you must put your own interests first, above all else.

You may not realize it, but you are looking for someone to tell you you are doing the right thing, which is the wrong thing to do if you want to make any real progress.

Trading will be as simple, or as complicated, as you make it yourself.

Lúidín