Some considerations (and a small essay)
...sorry, i am slightly new to this. i was going to open a position on the dow september contract (just in case it all goes horribly wrong). probably £2 per point, sell at 13520.
Hi free4440273. Thank you for your reply. I think it would help all of us if you could post your the following:
<> your reason for using the September future. The current front month is June. You are likely to experience less liquidity on a distant contract. You should trade the front month unless you have a good reason not to. (you say just in case it goes horribly wrong. My advice would be that if a trade goes horribly wrong, exit it, preferably at a predetermined loss level. I would not recommend holding it for another 4 months!) The market can always come back, but it can take years, or it may never happen. Consider if you had bought near the top of the dot-com bubble. If you had a Buffet sized bank account and wanted to hold, you'd be exiting at breakeven about now, 5 years or so on!
<> It is good you have a price level in mind. Why this price? Why a short? What combination of indicators, oscillators, tape reading, price action, volume, fundamentals, gut instinct, logic and hope led you to that decision.
<> Why £2pp? Is this because you have a stoploss X pips away, and your maximum risk per trade is 2X? Do you intend to add to your position if the market moves in your favour? Will you exit your position at once, or scale out buy buying £1pp at differing prices (to lock in profits).
<>Where is your stoploss and why? Will you move it to breakeven? Will you use a trailing stop?
<>Under what conditions will you exit - a fixed profit, trailing stop, a hunch, break of a trendline, indicator setting
<> If you know your profit target and stoploss, calculate your risk:reward. Is it favourable to you? Why?
This looks like a lot, but I would respectfully suggest that it is imperative to know this (and write it down in plain sight) before entering a trade. If you are new to trading, the following may also apply
<>Why spreadbetting?
<>Why the Dow?
<>How long will you hold a position?
<>What is your risk tolerance.
<>How much do you know and understand about the Dow.
A final warning. You may well catch a good short. However, we appear to be in a bull exhaustion phase right now, and it is not a good time to be short. I have been burned badly being short, and many more experienced traders than I have booked a few hundred pips loss being on the wrong side of this move. I'm going to post a chart I sent in the other night.
(link to it, I don't have the original) You will notice that price respects these trendlines, and the trendlines have been effective for around a month on the 1 hour bar. I would not consider a short until a 2 hour bar closes below the lower trendline, but that is my opinion.
I would consider that a move north, a new high, and perhaps contact with the upper trendline in the channel is more likely than a short based on the phase of the market, some economic fundamentals, and the technical analysis. Again, it is your decision, but if this post makes you question your reasoning to the extent you can explain fully to yourself why you are taking this trade, I will be quite happy.
Welcome to T2W, and I wish you all the best with your trading. I hope I've not bombarded you with too many suggestions and unsolicited advice. I am a new trader myself (6 months, SB, index futures), and have made many mistakes. I would hope to be able to point new traders in a better direction so as not to repeat my mistakes.
Cheers
Lurker
I suspect the paying subscribers will have made up for his loss
