Hello .....

[robicat]

Hi,

Wanted to introduce myself. My names Rob, interested in psychotherapy, poker and of course trading - which is a new exploration and one that i find facinating and frustrating.

I am new to trading, and paper trading at the moment. I am trying to develop a strategy that will let me dip my toe into the waters with about $1000, which is about all I can easily lose without too much angst. After some initial success I am losing lots of trades. This is happening now that I have wound right back the risk per deal to practice protecting a small account. I'm not planning to go with real money till i have something consistant and workable sorted.

What I am interested in is in is advice on money management, entry selection, and when to close out. Also what instruments might be bests to trade on this micro level. ($1000 account) I am playing with ASX and FTSE, CFDs though having a little look at ForEx as well.

At the moment I am working on setting a stop 10-20 pips out as a backstop, but closing out if I lose the spread (say 2) plus 4 and trying to get 12-15 points out of the winners. The strategy is not working as I am getting caught with 10-12 pip loses occasionally and am also losing too many of my deals. I have no idea it seems about entry selection - though I am using stops and resistance points, and some indicators to help. It seem that every time I take a position the market moves the other way lol.

Anyhow - I really want to get up this learning curve, and plan to do some training, for now any tips and advice for a keen noob would be valued and appreciated.

Cheers

Robi

 

[Masquerade]

Hi Rob,

I like poker too

Losing lots of trades is not a problem if your losses are small and you win big on the winning trades. You should keep your risk/trade a fixed % and not change from it. Once you get scared and start scaling it down it turns your hill into a mountain (I'm cringing at this analogy )

I read about your stop of 10-20 and taking winners of 12-15. This is wrong. You should be looking to take 20 or more on your average winning trades in order to be profitable in the long run. Unless you have some significant edge where you can afford to take small profits then you're going to have to start maxing out those profitable positions.

What's your mentality like? Are you going to be able to sit in front of a computer all day trading and are you happy to be in and out of things every few minutes or would you prefer to be a bit more relaxed about it and hold a position for hours/days?

 

[tomorton]

Hi Robi and Welcome -

Reading between the lines I suspect you're daytrading. I'm not sure that is viable with 1000 anythings as capital, but I don't daytrade anyway myself so I stand to be corrected.

It would be good to read Alex Elder on money management. He recommends (from memory) that you set your stoploss (mandatory on every trade) so that you will lose not more than 1% of your capital if the stop is triggered. Some people stretch this to 2%. With just $1000 (paper) that is $20 only so I suppose that you are using your whole account on each trade, otherwise how would it be worth the effort and risk? Of course, the best place to put a stop is derived from TA, support/resistance etc., not just a notional position x% below your entry. This is going to severely limit your trade opportunities: but in a way, that's the point. The idea is to survive long enough to make some money.

Stay with paper or tiny trades until your risk/reward amounts per trade are in your favour and you win/lose ratio likewise. Don't rush it and don't overtrade.

Keep us informed how things going.

 

[ad3000]

Hi
I am in a similar position - new to trading, having just studied it and read about it for a month or so. I am planning to invest around £2000 next week, day trading a FTSE 100 CFD. I am considering using resistance/support lines/ MACD and Volume as indicators/overlays. Would you recommened any other key indicators or strategic ideas? Any help most welcome. Thanks

 

[robicat]

Thanks for the advice and encouragement.

Im here 3-4 hours a night in AUS, so the Euro markets are logical to trade.

I can also keep an eye of a screen through the day for a few hours while i am doing housework cooking garden etc.

The exercise i'm gonna do is start the session with 1000 points, and see if i can improve on it in the session. I will make no more than three trades on ASX200, and three on FTSE.

When I can do it regularly, THEN ill stump up my cash.

As far as quantam goes I am trying to limit risk to less than 20 a deal (ie 2% of 1000) as an outside
stop, but basically close out if it moves 3 pips against me most of the time. Average loss say 7.

I'll stretch my target to 20, and limit trades accordingly.

 

[Masquerade]

To be honest, I don't like what you plan to do with the stops. I've tried something along those lines and you've got to be so disciplined and quick too. Both of which I fear will fail you if you're starting off. If you're going to risk 7 use a stop of 7, if you're willing to risk 3 - then put a stop to accommodate 3 movement. But I think you'll get filled badly and you'll be out before the market proves you right. I'd advise you be a little more generous in your stop size and give the trade a chance.

 

[shadowninja]

I am planning to burn around £2000 next week,

EFA.

Never use the word "invest" on a trading site. Good luck. Remember risk 1%, no more.

 

[ad3000]

EFA.

Never use the word "invest" on a trading site. Good luck. Remember risk 1%, no more.

I thought that as soon as I posted. Hopefully it won't be 'burning' though either. I'm thinking maybe 'dip in £2000' instead.

 

[robicat]

To be honest, I don't like what you plan to do with the stops. I've tried something along those lines and you've got to be so disciplined and quick too. Both of which I fear will fail you if you're starting off. If you're going to risk 7 use a stop of 7, if you're willing to risk 3 - then put a stop to accommodate 3 movement. But I think you'll get filled badly and you'll be out before the market proves you right. I'd advise you be a little more generous in your stop size and give the trade a chance.

Nkay.....

I understand what your saying.... also watching 7-8 point deals stop out and then come back may well throw me off the system psychologically, and having the stops further out gives me discretion within the deal that I will just use to create spills and reckless adventures.

My main priority is getting risk down to sub-1% per deal, which is a miserly 10 points.
I want to have so little at risk on each deal that when i launch with my $1000 I don't have problems getting away from deals that turn sour.

Anyhow if I could get say 50 pts a day seven out of ten days, and only drop 50 on the bad days I would be very happy with the results. Like in no limit poker it seems like the big big learning curve is in the psychology of not spilling.

So I'll set stops at min or 7 pips - or min whichever is higher, and look for deals with realistic exits 20-25 points out. Thanks for the advice.

Now to spent the weekend looking for a good buy setup and a good sell setup on the ASX FTSE to use in the experiment.

Cheers

robi

Any advice on what time frame to look at?

 

[shadowninja]

I thought that as soon as I posted. Hopefully it won't be 'burning' though either. I'm thinking maybe 'dip in £2000' instead.

How would you feel if you lost the lot?

 

[Masquerade]

My main priority is getting risk down to sub-1% per deal, which is a miserly 10 points.I want to have so little at risk on each deal that when i launch with my $1000 I don't have problems getting away from deals that turn sour.

Anyhow if I could get say 50 pts a day seven out of ten days, and only drop 50 on the bad days I would be very happy with the results. Like in no limit poker it seems like the big big learning curve is in the psychology of not spilling.

So I'll set stops at min or 7 pips - or min whichever is higher, and look for deals with realistic exits 20-25 points out. Thanks for the advice.

Now to spent the weekend looking for a good buy setup and a good sell setup on the ASX FTSE to use in the experiment.

Cheers

robi

Any advice on what time frame to look at?

Why do you want to go with so little risk and why is risk minimisation your main priority? As someone looking to move into trading your main priority should be to make profit and nothing else. If you can't do that it doesn't matter if you lose a lot quickly or a little over a long time - the end result will be the same. You're never going to make much return at 1% trade unless you start with a lot of money. If you want to take things seriously i'd suggest you re-consider your %.

I don't think many would argue with a 500% return on their trade/stake a day, but it's going to be quite tough I think you'll find. I like your idea of a 3:1 return, but be aware that you may get quite a few losers on this strategy unless you perceive you obtain a great edge - so don't be put off by losing trades.

Going back to your point about poker - that's only half the story, the other half is when you have a strong hand you max it out and get as much value out of it to compensate for the other hands you'll be mucking or losing on. The same goes for trading, you may take loads of small losses over numerous trades and then hit a big trade and then max it out to compensate for all the losers and still have some change left.

Time frame depends on what style of trading you're going for. But if you're going for 7 pip stops then i'd suggest looking at the daily and 4 hour chart to get a view of things. Then look at hourly, 15 min, and 5 min to get a greater understanding of what's going on and trade off the short time frames. I personally would probably just use 2 min charts and take a look at longer time frames for some major support/resistance points.

 

[robicat]

Thanks for the advice on time frames and risk.

The risk thing is so i don't bust out and lose money. I'm not really concerned with how much i make at the moment, i am more wanting to develop a methodology and skills. Anyhow we'll see how it goes.

My idea is that keeping the risk low means that I wont feel stressed about little losses. Also the fine margin for error will force me to be really selective.

Actually knowing that I will be journaling my learning errors make it all a bit more exciting lol. Adds some bite into the paper trading.

I feel so excited starting out on this new project!!!

Cheers

Rob

 

[MrGecko]

Robi,

Having read the comments so far, it strikes me that you are deciding on what you aim to achieve from what is possible, not at all what is probable. Added to that the differing views on position sizes, fixed stops, timeframes and instruments, leaves a cobweb of issues to untangle yourself from (you may have noticed, everyone, including me is an expert ).

My humble advice to you is to disregrard everything that is possible, and concern yourself solely with the probable. I would also suggest you pick one market to concentrate on, as they do behave differently - specifically, your fixed 7 pip stop will lead to "death by a thousand cuts" if you choose to trade a volatile product, such as Crude or the Dax (a European Index).

Given your account size, you will be trading through a Spreadbetter. This creates certain restrictions, IMO, on what you can trade, and how. Frankly, having chosen a 3 (!) or 7 pip stop arbitrarily (or, rather,based on your own propensity for risk), and then to trade intra-day through a SB account seems absurd to me. Of course it is possible to trade this way successfully, but it is certainly improbable.

You do well to consider the risk management aspect of your trading in advance, but might I suggest an alternative approach. Instead of fixed stop-loss sizes, try adapting your position size to suit. So, you take your X%, determine where a sensible place to put your stop is (e.g. below support), and adjust your position size ($$ per pip) in order that the maximum lose is this same X%. It will often mean eccentric position sizes, such as $0.7658 per pip. It is possible to trade positions similar to this through some brokers.

As for timeframes, I will gently encourage you to move away from the sub 1Hr scale. Suitable timeframes are product specific, but I would consider anything under an hour as crazy for a beginner, indepedent of chosen markets. Contrary to popular belief, lower timeframes do not necessarily create more opportunities - they are just an opportunity to "see" something that isn't really there, and lose sight of the wood for the trees. On paper, it is wholly possible to trade with 7 pip stops on a 5 min timeframe - again, I'll state that there is a gulf of difference between what is possible and what is probable. Of course these timeframes can be traded, but only on certain products, in certain markets, by professionals with top class systems and technology. As such, you would do well to erase any images of high octane, fast paced trading from your mind. Given your resources and experience, the only chance you have to survive is if you slow things down.

Lastly, in terms of markets, I suggest you take a look at FX. As you will be fitting trading around your regular routine, I think the currency market will lend itself to your schedule, rather than fixed trading sessions of intense activity. Trying to do the housework, and trading indices from 5 min timeframes, are mutually exclusive IMO. Added to that, there is a raft of information here on T2W re: currency markets, you can be sure there is a discussion about a pair going on somewhere here all the time. You may also find that currency brokers are more open to custom deal sizes ($0.7658 per pip) than some of the other markets.

Can we ask about your particular approach? Technical, mechanical, and so on?

Best of luck to you, welcome to the forum.