Hello Jon,
No need to apologise about butting in. Afterall, the purpose of bb’s is to share info & experiences!!!
😆
Interesting point about Fibonacci Retracements. In your experience are there any specific type of shares which perform better with regard to these retracement levels compared to others. Ie. Those which trade with high volume, or have low volatility, etc, etc.
On Money Management you said
“i think of it in two ways - firstly, the level where i will exit to protect and secure my capital (i close half position when i've got one to one - ie: if stop loss is 10 points the first exit is a 10 points + costs)”
Is it possible for you to clarify what you mean as I seem to be a little confused with your approach. For instance, using your example of 10 points for both your stop and your first exit, if the price initially moved in your favour to say just below this first exit level ie. 8-9 points but then fell 20+ points, your position would be stopped out at a loss, even though you were initially in profit.
However, if on the otherhand the price continued to move in your favour (rather than fall back) then after 10 points, 50% of your position would be closed off which seems a bit of a waste as ideally we want to let our profits run!!
PS. Please don’t think I’m criticising your approach though as that’s not my intention!!
In my approach I use a stepped strategy as follows.
1 Initially, I place my stop at a level which if breached confirms that my decisions for entering the trade were incorrect. This is probably the same for most people.
2 If the price moves in my favour then I move my stop to my Break Even point (which allows for the spread cost for entering the trade). If the price then moves against me below this level, I am stopped out but lose no capital… but equally make no profit!
3 If the price moves further in my favour I then move my stop to a level where I am happy to take profit should the price reverse and I get stopped out. This varies but normally its around 2-3 times my stop distance. I believe where possible a risk:reward ratio of 1:3 should be used but that’s only my opinion.
If the price continues to move in my favour without my stop being activated (remember I normally only trade stocks with solid underlying trends) then I have 2 choices.
Either (i) I move my stop further up to lock in more profit if I feel that the move has run out of momentum and may suddenly reverse or (ii) if I feel that the trend is still intact but a slight pullback is possible I then modify my original stop to 50% of my original open position and then add a new stop (again 50% of my open position) at a point very near to the current price.
With regard to indicators I have also recently started using the Accumulation / Distribution line but currently not sure how useful it is. Unfortunately, I am unable to back test so have to rely on what happening now to confirm the reliability of a new indicator.
Therefore I’d be interested in your views & experience about this one.
All the best,
Chorlton
barjon said:
hi chorlton - 'scuse me butting in :cheesy:
so far as fibs are concerned lots of people use them and it's surprising how often the price at least shudders if not reverses at the fib levels (particularly, in my experience, fib50%). i don't use them as a primary tool but i do take note of them.
on money management]: in my opinion "target" always sounds a bit to precise for my taste. i think of it in two ways - firstly, the level where i will exit to protect and secure my capital (i close half position when i've got one to one - ie: if stop loss is 10 points the first exit is a 10 points + costs) - secondly, the level i will close the rest (usually associated with earlier support/resistance levels).
in your open sky break out scenario there will be no earlier s/r for guidance - i don't trade these so your guess is as good as mine. 😉
my stoploss is variable and associated with signal price bar and i won't enter if the first "target" does not have clear water. ie) no s/r in the way.
so far as indicators are concerned i keep my eye on 15 day sma and accummulation/distribution but neither represent a primary condition for entry in my rules. for me, price action rules ok 🙂
just what i do, not what should be done - if you see what i mean
good trading
jon
