B
Bacchus85
Hi All,
I have been daytrading the FTSE 100 index for several months now with a reasonable net profit to show for it thus far. However, my trading experiences & record amply demonstrate to me that profitability could be higher. To this end I'd appreciate anyone's suggestions for improvements to my method. In return I can offer a description of my system and a willingness to answer all queries:
1. The method daytrades the FTSE 100 index, chosen for reasons of familiarity (for me) & low costs, but I don't think the market selection is a vital factor in and of itself as long as there is sufficient volatility and low costs.
2. It is essentially a breakout-from-consolidation method that looks to follow the immediate trend in the market. All trades are short term (generally measured in minutes rather than hours) and trading times are daily from the 8.00am open to around 12.00 noon London time each day. This half day window is deliberate to allow focus without fatigue and to avoid playing in Wall Street's shadow in the afternoon (I'd sooner trade a US index directly in that case).
3. Trading is off a real time tick chart and is 100% technical with no fundamental input as my belief is that price moves before the news gets to me. Equally, however, I have not found any technical indicators which appear to work ("work" defined as beating random entry) reliably in all market conditions so trading is 100% based on price action alone.
4. Entry is discretionary, based on observing a breakout from consolidation. Generally, I like to use the breakout as a setup and watch it extend some distance first so as to reduce the chance of being trapped by a small false move, actual entry being on a retracement back towards the extreme of the consolidation range.
5. The initial hard stop is placed where the market should not retrace to if the breakout is valid, generally the other side of the consolidation range. This stop is always adhered to and is never moved further away.
6. The initial target is set so as to offer a 1:1 risk:reward profile for the trade based on the initial hard stop. This is to ensure the target is not too greedy and should have a high probability of being reached if the breakout is indeed valid.
7. The actual achieved risk:reward profile is nearer 1.5 : 1 as the initial stop is moved up on a trailing basis if the trade moves favourably. Also, the target is flexible and will be allowed to run a little further if the move being played seems to have energy left it in once the initial target point is reached. Both elements contribute to the improvement in the achieved risk:reward profile but the trailing stop adjustment is currently the main contributor.
8. The achieved success rate, i.e. wins vs. losses, hovers around 50% so the system edge is coming exclusively at present from the achieved risk:reward profile.
9. Money management is essentially to risk 1% of the account at the initial hard stop. Trades are fully opened and closed in one go with no subsequent adding to position, averaging down, or scaling out applied.
10. The system typically trades 1 or 2 times per day with the average initial stop being about 20 FTSE points from the entry point.
That's about it for the system description. Please say if anything needs further clarification.
I'd welcome all comments and suggestions, especially any relating to improving the success rate, running & taking profits, and reducing trading stress.
Many Thanks
I have been daytrading the FTSE 100 index for several months now with a reasonable net profit to show for it thus far. However, my trading experiences & record amply demonstrate to me that profitability could be higher. To this end I'd appreciate anyone's suggestions for improvements to my method. In return I can offer a description of my system and a willingness to answer all queries:
1. The method daytrades the FTSE 100 index, chosen for reasons of familiarity (for me) & low costs, but I don't think the market selection is a vital factor in and of itself as long as there is sufficient volatility and low costs.
2. It is essentially a breakout-from-consolidation method that looks to follow the immediate trend in the market. All trades are short term (generally measured in minutes rather than hours) and trading times are daily from the 8.00am open to around 12.00 noon London time each day. This half day window is deliberate to allow focus without fatigue and to avoid playing in Wall Street's shadow in the afternoon (I'd sooner trade a US index directly in that case).
3. Trading is off a real time tick chart and is 100% technical with no fundamental input as my belief is that price moves before the news gets to me. Equally, however, I have not found any technical indicators which appear to work ("work" defined as beating random entry) reliably in all market conditions so trading is 100% based on price action alone.
4. Entry is discretionary, based on observing a breakout from consolidation. Generally, I like to use the breakout as a setup and watch it extend some distance first so as to reduce the chance of being trapped by a small false move, actual entry being on a retracement back towards the extreme of the consolidation range.
5. The initial hard stop is placed where the market should not retrace to if the breakout is valid, generally the other side of the consolidation range. This stop is always adhered to and is never moved further away.
6. The initial target is set so as to offer a 1:1 risk:reward profile for the trade based on the initial hard stop. This is to ensure the target is not too greedy and should have a high probability of being reached if the breakout is indeed valid.
7. The actual achieved risk:reward profile is nearer 1.5 : 1 as the initial stop is moved up on a trailing basis if the trade moves favourably. Also, the target is flexible and will be allowed to run a little further if the move being played seems to have energy left it in once the initial target point is reached. Both elements contribute to the improvement in the achieved risk:reward profile but the trailing stop adjustment is currently the main contributor.
8. The achieved success rate, i.e. wins vs. losses, hovers around 50% so the system edge is coming exclusively at present from the achieved risk:reward profile.
9. Money management is essentially to risk 1% of the account at the initial hard stop. Trades are fully opened and closed in one go with no subsequent adding to position, averaging down, or scaling out applied.
10. The system typically trades 1 or 2 times per day with the average initial stop being about 20 FTSE points from the entry point.
That's about it for the system description. Please say if anything needs further clarification.
I'd welcome all comments and suggestions, especially any relating to improving the success rate, running & taking profits, and reducing trading stress.
Many Thanks
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