Ch1mp: Cutting my teeth real money

[Ch1mp]

So It's been just over a month since I started trading real money CFDs. Admittedly I've not ploughed my life savings into it, just some "learning money". I put more detail on interoduce yourself.

This month I've made some silly impulsive moves, learned not to fret too much on commissions (I had though the amount was coming off daily rather than showing how much in total they would take), tried to make trades on old news and attempted to swing things my way with positive thinking, sold at a loss to free up capital for a "better trade" - essentially many of the things that you shouldn't do, but do because you're a rookie. However, I've still come out with a profit... in fact not a bad one at 20% after commision etc at the start of the day.

Today's gone well though and and this is now at 29%. I made short-term gains on two trades Fresnillo (who I'd bought in fantasy land and ridden a large gain from 1500 to 1650) and Natural Gas (which I has been a consitent earner for me this last month). My auto-buys (sorry don't know tech term) kicked in this morning and with early rises this morning I set narrow in-profit stop losses, and both closed out before going lower than what I sold at (Fresnillo 1738-1780 Natural Gas 2.692 - 2.727)... making me feel like a big swinging dick day trader. Obviously I made some impulsive trades after to keep the action going, but they're proving less successful.

Looking through my trades is quite useful as I see mistake trends and on some instruments which I thought had been quite profitable actually being close to nutral or negative. Forex just hasn't liked me, but shorting Facebook and taking my profits sooner that I would normally do on Bullbearings has proved to be something worth updating my status about... OK, sorry, that was a bit lame.

My confidence is growing though, but I know I need to keep a lid firmly on simply gambling.

 

[redtag12]

Whats this sold at a loss to free up capital for a better trade?I think you have been very lucky not to have lost your shirt.How about an update on what you have been trading and why.

 

[Ch1mp]

Hi,
I know "selling at a loss to free up capital" sounds bad and I was admitting to some of the rookie mistakes I've made, but when more than 50% is tied up in a more expensive commodity which aren't going your way and you see an opportunity, like buying Apple stock a couple of weeks ago (which I stupidly didn't by the way).

However since my last update I did ride my old friend Fresnillo from 1769 to 1880, again exiting after I'd set steady in-profit stop loss amounts... it had hit 1900 earlier in the day - and then dropped lower after I'd exited. After buying it had gone down for a couple of days, but I held and profited.

I've also been successfully swing trading oil, selling high 90's exiting 95, buying low 90's and again exiting 95ish.

Trades that haven't gone so great selling Facebook at 20 as it's moved up to 23... but I've just sold more as I expect it to be a temporary rally.

With Facebook going up, Oil dipping lower than I bought at and Sky also dipping slightly after I've bought, my current in play trade profit levels aren't wonderful, but I'm confident that will change next week. Overall fund is now up 32% having reached a high of 39% early last week.

 

[redtag12]

Ok,but trading 50% of your capital is suicide you should risk no more than 2% however on some cases up to a max of 5% and no more.The idea being to slowly increase your trading balance,so as to be able to take the bigger trades.Why not capture a winning trade and a losing trade showing your stops and why you have taken the trade and put them on here so as we can see the charts some good advice may be forthcoming

 

[Ch1mp]

I'd definately agree that trading 50+% is suicidal... but as I'm shoe-string trading buying gold, platinum and many others end up like this - but they're really too hot for me.

Equally 2-5% fund trades aren't really an option with my current fund. I'm very new to this, so I wasn't aware that that was a good strategy. I've read about 12-20 diversification, but I admit that I may be confusing this.

Once my fund doubles I think I'll be ready to commit a considerably larger account.

 

[timsk]

Trades that haven't gone so great selling Facebook at 20 as it's moved up to 23... but I've just sold more as I expect it to be a temporary rally.

Hi Ch1mp,
I did that once and it ended up costing me 70% of my account on one trade!

Actually, contrary to the prevailing opinion on these forums, potentially I think this is a viable strategy, so long as you don't over commit yourself and you have an exit strategy if the stock just keeps going against you. Just make sure you don't end up sitting there, hoping and praying FB comes back to break even. When you do that, your trade plan has gone out of the window, you've lost control and, sure as eggs are eggs, the margin calls will start to pile up in your inbox!
Tim.

 

[Ch1mp]

Hi Ch1mp,
I did that once and it ended up costing me 70% of my account on one trade!

Actually, contrary to the prevailing opinion on these forums, potentially I think this is a viable strategy, so long as you don't over commit yourself and you have an exit strategy if the stock just keeps going against you. Just make sure you don't end up sitting there, hoping and praying FB comes back to break even. When you do that, your trade plan has gone out of the window, you've lost control and, sure as eggs are eggs, the margin calls will start to pile up in your inbox!
Tim.

Oooof, 70% is pretty rough! I have my stop set at 25 on the first FB trade as that's -22% and the more recent trade is set at -20%. It does feel a little like chasing, but I'd rather try these things at this stage and I'm not naive enough to think just because something has worked once or in the past it will always work.

 

[timsk]

Oooof, 70% is pretty rough! I have my stop set at 25 on the first FB trade as that's -22% and the more recent trade is set at -20%. It does feel a little like chasing, but I'd rather try these things at this stage and I'm not naive enough to think just because something has worked once or in the past it will always work.

Hi Ch1mp,
If the -22% and -20% respectively refers to the percentage of capital in your account that you'll lose if the stops are hit - I'd suggest these are on the high side. If you're spread betting with £100 account, you'll lose £42.00 - no big deal. You can brush it off. But if it's £4k+ of a £10k account - will you remain quite so calm?

If you could set the same wide stops but only risk losing 5% or less of your account, that's going to be a whole lot easier on your emotions and you're more likely to remain calm and make sensible decisions. Admittedly, I'm generalizing here as, obviously, I don't know you from Adam. Maybe you're a much cooler customer than the average T2W member and won't be phased when you have trades that go seriously offside.

One thing's for sure. If you're prepared to take hits that big when trades don't work out, you'll need to have similar profits on the winning trades. I've lost count of the number of members who have strategies that win 90%, 95% of the time and sometimes more - but the wins are all tiny compared to the huge losses incurred on the few losing trades.
Tim.

 

[Ch1mp]

Hi Tim,

I prefer to concentrate on percentages rather than monetary sums because it takes the emotion out of it... to some losing £20 is a horrific idea, other people wouldn't fret over £2m being wiped off their share price - it all depends on what size fund you're dealing with.

I don't like losing but I'm prepared to lose 100% of my fund... but I'm not prepared to lose 101% of what I can afford. Obviously I'm seeking strategies that will help me improve the odds of my calculated risks - but I'm aware of the risks.

All that said 20% margins are wider than my preferred 5-10%.

I'm "playing" with £550 initially... but with Gold requiring securities of £872.87, that's more than my entire fund! But sticking with the earlier FB trades:


Current rate: $22.89
Opening rate: $20.72
40 shares with required securities: £ 51.51
Close at profit - when rate is 17.51 Profit:£79.00 15.4923 %
Close at loss - when rate is 25.27 Loss:£-111.97 -21.9595 %

&

Current rate: $22.89
Opening rate: $22.78
120 shares with required securities: £ 169.85
Close at profit - when rate is 19.67 Profit:£229.61 13.6523 % (although I would probably only get rid of half the shares)
Close at loss - when rate is 27.19 Loss:£-325.58 -19.3591 %

So Facebook could burn me quite badly, and while it's £377, that's about 47% of my current fund.

 

[Ch1mp]

So far today's been pretty good (overall fund up 18% to 41%) and I'm most of the way through my Trading Plan.