How do you select your trades and other advice please

[DaveGos]

Gordon 8

I have been trading for a year and so I'm not so very far from where you are but what I have learnt is:

1) Whatever system you use for determining when and how you trade keep it simple and keep to it.

2) The most important part of trading is risk and trade management, I swing trade and at any one time will have up to a dozen open positions some long some short, every one of those has a minimum risk to reward ratio of 3:1 and every one a strict stop. What this means is that I can be wrong three times out of five and still make a good profit. Also once in a trade keep to your exit plan.

3) The most important part of a trading system is yourself, before I traded I thought of myself as fairly level headed and diciplined and couldn't immagine that my emotions would overcome my common sense. I was wrong and I still find it difficult to discipline myself at times. You will be amazed at how much trading will teach you about yourself.

 

[ColinRiche]

If you wanna trade UK stocks you did well to get Sharescope

You can make trading as simple or as complex as you like

If you look at Sharescope - inside each candle is an intra-day chart and some people can trade it while others just regard it as noise

Swing and position traders will look at intra-day to refine there entry and exit and of course if theres a quick profit to take it

But you really need to be looking at the bigger picture first and formost and your find that with Sharescope

Dont waste too much time on Indicators - a lot of people try them and bin them

Create a watch list of high volume stocks - track 50 and focus on 10

Look for support and resistance levels, and draw your own trend lines on the chart

Finally choose a SB company where the spreads are tight.

Hope this helps

Colin

 

[Gordon8]

This is all very encouraging! - wish I had time right now to 'play' with some of the ideas you have suggested and see which suit me best but work/paying the mortgage calls for the moment!

Just a couple of questions:

Davegos - you mentioned a minimum risk to reward ratio of 3:1. How on earth do I calculate that please?

Colin Richie - Sorry to be so thick (blame it on my parents!) but what is an SB company?

 

[ColinRiche]

SB = Speadbetting company

I'd recommend cmc deal4free

 

[temporarilylight]

SB - SpreadBet company E.G DEAL4FREE.COM OR FINSPREADS.COM

 

[ZigZag]

GORDON 8....... I also use Sharescope but only for its T.A. function. With the combination of free intraday prices/charts its more than suitable for swing trading. As I dont want to bore the pants off fellow members on how I use Sharescope, use the sites private message facility and contact me. Out of interest is there any other members using Sharescope. Regards Norman.

 

[stevet]

find out what full time professional traders trade with - they have to make a cash profit every day, day in, day out - if they use software like sharescope and spread betting companies - great - if they don't - there may be a clue in there for you!

 

[Newtron Bomb]

Gordon8
the risk verses the reward you are prepared to pay (R/R ratio) is quite simple :cheesy:

If you are prepared to risk say 30 points (on a index, exchange points for pence or cents etc. depending on what you are trading) and you have calculated that you expect a reward of 90 points this is three times as much as your loss and gives you a R/R ratio of 3:1

it is calculated by dividing the reward by the risk

Reward 90 divided by Risk 30 = 3 hence a 3:1 ratio

I think most of your questions will be answered in FTSE Beaters thread. Failing that they most likely will have already been asked so go to "Discussion>search for a post" on the title bar above and type your key word in and it will bring up all the related topics... ie a search for this example type in "risk reward ratio"

Hope this helps

edit:
You expected reward is taken from a target calculation... again this is in FTSE Beater thread.... there is also some stuff on targets quite regularly in the trading the dow jones and related threads

 

[Gordon8]

Stevet

I am intrigued! - What do you trade with?

 

[Newtron Bomb]

Stevet
Professional is the term used as some one who specialises in something for a living like a sports person who plays full time is a professional. A lot of people on this board trade full time but not for a company.

The context i thing youare referring to is that of someone who trades for a bank, hedge fund etc.
These people IMO play a different game to that of the private trader or investor, they have a significantly larger amount of money to play with and therefore the strategies they use will differ as a result.

another opinion is what makes these professionals better at managing your money than doing it yourself? the answer is nothing. one day they are a university graduate the next day and after a short training period they have a half a million to do something with... they are still as inexperienced as someone who decides to try their hand at trading/investing their own money.

How someone else trade is no indication of how you will trade

My comments ar meant constructively please take them as such

 

[Gordon8]

Newtron.Bomb

I am still trying to get my head around the reward risk ratio of 3:1 - I think this is a very important factor in trading.

I have figured out how to calculate the risk bit but how do you calculate what the reward might be? Wouldn't it be a guess?

Unfrotunately forecasting is not my strong point - I always lied when I worked for a company!

Thanks again for your help

Alex

 

[Finlayson]

simplest way ( daytrading for me anyhow) just place an exit limit 3 x of what your initial risk is, so if your stop is at say -10 set a limit exit for +30 points (index e.g DAX)

this will vary for different people & their methods, but this is it in it's simplest form.........just dont feel remorse if the market steams on past, be happy with your +30

jay

 

[stevet]

Newtron Bomb

i did try to add the definition of my version of what i mean by professional - but i mean someone who earns their income each day by trading markets and has to be/ or is cash positive each day - they could work for themselves, for a proprietary trading company etc, but they are more than likely trading their own money, or are just on a split of profits and dont have a basic - so on the average i dont mean someone who sits in an investment bank etc where there main job in trading might be to do with controling risk or just be one of a team who gets the bank in and out of positions - i mean someone whose livliehood is totally dependent each day on their trading decisions - and these are definetly the type of people u want to replicate if u want to be a trader

 

[DaveGos]

Gordon 8

Re the risk reward the most important part is the risk, this is where you will lose your hard earned money, if the risk is to high, the figure usually quoted is no more than 1% of your capital at risk in any one trade then don't take it.
Also always set a stop loss and stick to it no matter how much it hurts. The number one aim of the trader is to preserve capital and this is what the stop loss does, you do not want to see a small loss become a large one. While this is important at any stage it is vital when you start trading because you will lose a lot of times and almost certainly your capital will decline even with good risk and trade management. Just think of it as the price you have to pay to the market to learn.

 

[stevet]

Gordon8

my expertise ( by expertise, assume i mean that i know more about that than anything else, not that i am an expert!) is in intraday trading US futures indexes, and options ( the options are effectivly used to trade US stocks), but do have their own quirks , and also a little bit of bonds as well

and re trading - if u end up relying on stops to trade - in the end u will get burned regardless of the risk reward ratio - if u r trading with the trend - as you should - the trend will protect your position - you just need to get out if the trend looks like it is changing or getting exhausted - but if you are scalping - you definelty need stops and to use a risk reward ratio - but that sounds fine in print - but as u spotted - no matter how logical your risk reward basis - no matter how sure u r of your support or resistance points - no one can be sure - so a 3 to 1 ratio is fine if u win 50% of the time - but a few losers in a row will soon mean you are just fighting to get back to zero

 

[Newtron Bomb]

stevet glad we are talking fromteh same page

gordon8
in the edit part of my post i mentioned that the "reward" part is calculated from "targets" these can be found on FTSE Beater's (FB) thread as they can take many forms some and can also be tradable patterns... some example for you are triangles and support and resitance levels again these are all on FB's thread

 

[Halfbutt]

This is a really good thread to read. Sorry to show my ignorance in public , but what is the definition of a Swing trader.
I really like that no matter how much you dont know, there are kind people who advise rather make fun of the virgins.

And STEVET, i loved you comment below, and thats why im still morgaged up even though i bought my house at 20, thanks Sun Alliance twits

- and that cut is what pays them nice fat salaries - seeing as they have thrown away most peoples hard earned money on "safe long term strategies"

 

[Newtron Bomb]

A swing trader takes advantage of short term upswings and downswings in a market or a share price.... this can be done in many time frames most people associate swing trading with overnight positions to a few days to a few weeks, as i believe it was originally intended but there is no specific definition

there are a few good books on the subject.. i however dont trade this way so am very limited. am sure someone else will be able to give you a better description of swing trading

 

[Halfbutt]

Thanks Newtron, really appreciate you taking the time to answer begginers questions like these. Now i can catagorise myself, but i only swing both ways on the FTSE.

Gordon8, great to read im not the only new one here,
good luck

HB

 

[mma]

madasafish ,

I hear what you say , but what size of stop loss would you use on the dax future ?