Payneg01
Thanks for your comments.
Fluke/Lambchops
The last thing I will say on this is that I find it best to trade the first few hours of the UK open because the FTSE appears to trend more. The best trades come during this time and when you get an early morning reversal it tends to be the first main trend of the session as in the case on Friday. (Having said that just remember to keep an open mind because what may happen most times may not happen this time).
That trade and the next trend change are going to be the best one's because of simple retracement theory (30%, 50% and 60% of original move - known as pull backs and other names, which can be waves in there own right - but you need to speak to someone like Bonsai about that as my knowledge of EW is very basic). When there has been a good trend in force for a while then I like to get into a new trend early if I can because at that point the sentiment between sellers and buyers is changing and my belief is that if you can get into this new sentiment you have more chance of making a short term profit than spending to much time making a decision. This is especially the case if considering following a trend change that would be against the trend of the day. Once the price has moved against the main trend the longer you hold or the later you enter the chance that the momentum may run out of steam increases.
When I enter against the existing trend I always look to see how much the price moved in the last fall or rise to establish (as a guide only), where the retracement levels may reach. My first target as I have previously stated is 5 points . My reasoning is that there are enough of these deals that another will present itself and I am now holding a new profit. I find especially when placing a deal against the trend not to expect to much from it because the original trend may continue even if the trend line has been breached. Taking 5 points may mean you get out to early but some days there are 15 - 20 so that's a nice return and 10 on a poor day which still produces 50 points. I try to get around this problem by trading 2 methods another way round this would be to place a larger deal and when 5 points or your given first target is reached to close half, whichever suits your own style and financial circumstances.
((On that point here is a little risk assessment of such a style. If you place your deal with the view of taking out half when an early small target is reached, in this example 5 points then at that point you now have a profit banked. Not as in many cases a paper profit that disappears as quickly as it arrived. At this point for your remaining deal to return a loss it has to work twice as hard to become a loss. In other words for your complete deal to lose it must give back the 5 points you currently hold and then another 6 to become an overall loss of 1 point. Should the price continue in your favour your remaining deal is still working and if it becomes a strong trend you can also consider increasing your deal size back to its original size for another small gain, and so on until the trend changes.
Compare this to your original position of holding a paper profit of 5 points, you hope it will go further but it retraces, it only has to go negative and straight away you move into loss unlike the first method. Setting a very small target it becomes very easy to obtain, just imagine how many deals you could make if you decided to set that first target of 2 points. I would expect you would get a very high return of winning deals against your losses, even though your overall gain would not be high in terms of points. However your winning deals would I suspect be better than normal intraday trading because of those deals that do not currently work in your favour. That is why I set as a guide 5 points as a first target because it is easy to get, what happens afterward's is nice if it keeps going and as a result my overall deals produce less failures than I use to when I relied on all my stake to take the profit in one process. I offer this just as an alternative and food for thought as it works well for me and spreads the risk. Obviously, if you had kept your original deal size and the price continued in your favour then you would have made more than you will with my approach but I find as in any cases of safety or risk management there is an element of payback but I feel the risk reward element is worth it.))
I also consider the previous price moves in a trend to establish a sequence as we may have a flag appearing and so we should get the same sort of price move from the new momentum. While these judgment's can be made do not fall into the trap that the price will make these targets or for that matter stop rising when the level is reached. Just keep monitoring the trading plan.
Sometimes if I am in a good paper profit and get to over 20 in a move I know that often the FTSE will not continuously rise or fall without some pull back and will on occasion set up a 1 min chart with the 2 SMA to watch if this indicator appears to turn against my position. This is also helpful when you maybe faced with several price bars on the 1 or 2 or in some cases 5 min chart where the price and bars give no indication where it maybe going. This tends to be a very short term period of indecision yet if the SMA keeps facing your way then stay in until this changes.
You can see from the charts I have attached that the strategy can work on any time frame but for intraday purposes I would advise that it is best during trending periods rather than choppy times and this is where the pivots can help you especially during the US open. This can be traded but does require some strict rules to be followed as often the trend will not appear until there has been quite a choppy period. Profits can be made during this time but trend following can be difficult or unclear as in the case of Friday afternoon, just when you think you have a nice downtrend forming (as I explained in a previous post) it will turn so stick to the system and if you are to trade during this period, within the trend changes or against the main trend of the day THEN BE PREPARED TO REACT and that will ensure your trading remains both clinical and disciplined. One last thing be prepared to accept losses if you go for these trades as they will not work out all of the time but most of the time. If you are trading Futures through IB I strongly recommend the use of TSim as it is easy to use and places a stop for you I am currently trying out 4 points at the moment.
I mention this because when you look at charts after the event it always appears so clear and easy but when you are trading for real and the chart is being produced before your very eyes it can be a very different thing. You can become fixated with your deal and hold on far to long and then gradually accept you are not going to win from this one and by the time you decide this you are holding a much larger loss than you needed to. In addition you have missed the opportunity to react to the change and so you have most likely missed the next deal that came along. I know because that is what I used to do. I found myself getting several profitable deals one after the other and then when one would not work out I would stick with it not wishing to believe it would not work causing unnecessary suffering. Since I have applied a stop loss such deals have not caused the problems they once did. Unlike many traders I need to keep things simple so that I do react to a change so if the price does cross the line I know I must close if I have not already done so. I use a very tight stop because I am letting the stop make the decision for me rather than sit here and say well I am 4 down now lets see what happens when its at 8 and so on. I still work on trying to close a lost cause earlier than my stop if I can and sometimes run a rolling stop loss but the main thing is to react to the chart and this ensures I do not have many problems. At the end of the day for my main intraday deals I know my loss will not be greater than 4 points from any one deal and that is easy to recover.
Sorry for going on but this has been one of my main problems in the past so I hope by mentioning it here others who maybe suffering this problem will see it for what it is and try to get out of such a habit as I have. This really applies to the fast deals and less so to the trend change deals apart from one against the main trend as you maybe holding when the original trend has just continued. I am sure someone else could put this down better than I. I wish that this sort of information had been available to me at the start describing specific situations you may face in simple terms dealing with your own feelings is possibly the hardest part of trading. They appear out of the blue when yoou are about to make a trade, when your in a trade and when yu close and then there is the second guessing have I done the right thing. By applying a specific trading system you can iron out these feelings of doubt uncertanity and greed, and take greater control of your trading. To help me with intraday matters I took a look at a number of US sites and picked up a few tips along the way.
Best of luck - I have been rambling again so sorry for those who trade differently and would find this of no use whatsoever. I promise I am finished now, LOL. But please remember this is all in my humble opinion please do your own research and testing of this or any system before trading.
Kevin
Thanks for your comments.
Fluke/Lambchops
The last thing I will say on this is that I find it best to trade the first few hours of the UK open because the FTSE appears to trend more. The best trades come during this time and when you get an early morning reversal it tends to be the first main trend of the session as in the case on Friday. (Having said that just remember to keep an open mind because what may happen most times may not happen this time).
That trade and the next trend change are going to be the best one's because of simple retracement theory (30%, 50% and 60% of original move - known as pull backs and other names, which can be waves in there own right - but you need to speak to someone like Bonsai about that as my knowledge of EW is very basic). When there has been a good trend in force for a while then I like to get into a new trend early if I can because at that point the sentiment between sellers and buyers is changing and my belief is that if you can get into this new sentiment you have more chance of making a short term profit than spending to much time making a decision. This is especially the case if considering following a trend change that would be against the trend of the day. Once the price has moved against the main trend the longer you hold or the later you enter the chance that the momentum may run out of steam increases.
When I enter against the existing trend I always look to see how much the price moved in the last fall or rise to establish (as a guide only), where the retracement levels may reach. My first target as I have previously stated is 5 points . My reasoning is that there are enough of these deals that another will present itself and I am now holding a new profit. I find especially when placing a deal against the trend not to expect to much from it because the original trend may continue even if the trend line has been breached. Taking 5 points may mean you get out to early but some days there are 15 - 20 so that's a nice return and 10 on a poor day which still produces 50 points. I try to get around this problem by trading 2 methods another way round this would be to place a larger deal and when 5 points or your given first target is reached to close half, whichever suits your own style and financial circumstances.
((On that point here is a little risk assessment of such a style. If you place your deal with the view of taking out half when an early small target is reached, in this example 5 points then at that point you now have a profit banked. Not as in many cases a paper profit that disappears as quickly as it arrived. At this point for your remaining deal to return a loss it has to work twice as hard to become a loss. In other words for your complete deal to lose it must give back the 5 points you currently hold and then another 6 to become an overall loss of 1 point. Should the price continue in your favour your remaining deal is still working and if it becomes a strong trend you can also consider increasing your deal size back to its original size for another small gain, and so on until the trend changes.
Compare this to your original position of holding a paper profit of 5 points, you hope it will go further but it retraces, it only has to go negative and straight away you move into loss unlike the first method. Setting a very small target it becomes very easy to obtain, just imagine how many deals you could make if you decided to set that first target of 2 points. I would expect you would get a very high return of winning deals against your losses, even though your overall gain would not be high in terms of points. However your winning deals would I suspect be better than normal intraday trading because of those deals that do not currently work in your favour. That is why I set as a guide 5 points as a first target because it is easy to get, what happens afterward's is nice if it keeps going and as a result my overall deals produce less failures than I use to when I relied on all my stake to take the profit in one process. I offer this just as an alternative and food for thought as it works well for me and spreads the risk. Obviously, if you had kept your original deal size and the price continued in your favour then you would have made more than you will with my approach but I find as in any cases of safety or risk management there is an element of payback but I feel the risk reward element is worth it.))
I also consider the previous price moves in a trend to establish a sequence as we may have a flag appearing and so we should get the same sort of price move from the new momentum. While these judgment's can be made do not fall into the trap that the price will make these targets or for that matter stop rising when the level is reached. Just keep monitoring the trading plan.
Sometimes if I am in a good paper profit and get to over 20 in a move I know that often the FTSE will not continuously rise or fall without some pull back and will on occasion set up a 1 min chart with the 2 SMA to watch if this indicator appears to turn against my position. This is also helpful when you maybe faced with several price bars on the 1 or 2 or in some cases 5 min chart where the price and bars give no indication where it maybe going. This tends to be a very short term period of indecision yet if the SMA keeps facing your way then stay in until this changes.
You can see from the charts I have attached that the strategy can work on any time frame but for intraday purposes I would advise that it is best during trending periods rather than choppy times and this is where the pivots can help you especially during the US open. This can be traded but does require some strict rules to be followed as often the trend will not appear until there has been quite a choppy period. Profits can be made during this time but trend following can be difficult or unclear as in the case of Friday afternoon, just when you think you have a nice downtrend forming (as I explained in a previous post) it will turn so stick to the system and if you are to trade during this period, within the trend changes or against the main trend of the day THEN BE PREPARED TO REACT and that will ensure your trading remains both clinical and disciplined. One last thing be prepared to accept losses if you go for these trades as they will not work out all of the time but most of the time. If you are trading Futures through IB I strongly recommend the use of TSim as it is easy to use and places a stop for you I am currently trying out 4 points at the moment.
I mention this because when you look at charts after the event it always appears so clear and easy but when you are trading for real and the chart is being produced before your very eyes it can be a very different thing. You can become fixated with your deal and hold on far to long and then gradually accept you are not going to win from this one and by the time you decide this you are holding a much larger loss than you needed to. In addition you have missed the opportunity to react to the change and so you have most likely missed the next deal that came along. I know because that is what I used to do. I found myself getting several profitable deals one after the other and then when one would not work out I would stick with it not wishing to believe it would not work causing unnecessary suffering. Since I have applied a stop loss such deals have not caused the problems they once did. Unlike many traders I need to keep things simple so that I do react to a change so if the price does cross the line I know I must close if I have not already done so. I use a very tight stop because I am letting the stop make the decision for me rather than sit here and say well I am 4 down now lets see what happens when its at 8 and so on. I still work on trying to close a lost cause earlier than my stop if I can and sometimes run a rolling stop loss but the main thing is to react to the chart and this ensures I do not have many problems. At the end of the day for my main intraday deals I know my loss will not be greater than 4 points from any one deal and that is easy to recover.
Sorry for going on but this has been one of my main problems in the past so I hope by mentioning it here others who maybe suffering this problem will see it for what it is and try to get out of such a habit as I have. This really applies to the fast deals and less so to the trend change deals apart from one against the main trend as you maybe holding when the original trend has just continued. I am sure someone else could put this down better than I. I wish that this sort of information had been available to me at the start describing specific situations you may face in simple terms dealing with your own feelings is possibly the hardest part of trading. They appear out of the blue when yoou are about to make a trade, when your in a trade and when yu close and then there is the second guessing have I done the right thing. By applying a specific trading system you can iron out these feelings of doubt uncertanity and greed, and take greater control of your trading. To help me with intraday matters I took a look at a number of US sites and picked up a few tips along the way.
Best of luck - I have been rambling again so sorry for those who trade differently and would find this of no use whatsoever. I promise I am finished now, LOL. But please remember this is all in my humble opinion please do your own research and testing of this or any system before trading.
Kevin
