Best Thread How To Make Money Trading The Markets.

[Mr. Charts]

tar,
I don't use "proscreener" so can't advise you.

bfirth,
Excellent post, thank you
Richard

 

[Mr. Charts]

Here's the MEE trade I mentioned the other day.
Entry on the red X hairs as usual, exit at time of screen shot.
The rush of buying had died and the sellers looked as if they might take over so I exited without waiting for the bottom of the previous candle to be taken out.
+50c per share

 

[Mr. Charts]

I always address maximum risk first, reward usually takes care of itself.
ATR 15
Bottom of candle 8c away.
Maximum risk 15c.
In this example let's say the person trading it had a personal maximum risk of $100 on the trade.
That's 666 shares, rounded to nearest hundred is a 700 share position size.
Maximum risk $105
Profit of 50c means that person would make a profit of $350 on the trade.
Richard

 

[Sam2018]

Excellent thread Mr Charts/Richard.

I take your point about the likelihood of the equivalent SB deals being unprofitable due to the bid/offer spreads etc etc. However surely you're losing 40%+ of your income to the inland revenue whereas the spread bet trader is dealing tax free, so he can be less profitable and still end up with as much cash in his pocket.

True or over-simplistic? Would appreciate your comments.........

Sam

 

[timsk]

True or over-simplistic? Would appreciate your comments.........

Hi Sam,
I'll try and answer your question so that Richard can focus on the nitty gritty of the thread. SB is fine for longer term plays - e.g. swing trading, possibly even intra day swing trading where the trader holds positions for hours at a time. True, there are traders who successfully use SB firms for short term day trading - but there aren't that many of them. Fewer still will day trade U.S. stocks. There are good reasons for this:

1. The spread. The tax that Richard and other direct access traders pay to Mr. Darling - the SB trader pays to the SB firm. Mr. Darling then taxes the SB firm so, either way, your money ends up in Darling's pocket. You pay tax regardless of how you trade, it's just a question of who collects it. Mr. Darling loves SB companies because he collects a whole chunk more tax from them than he does from direct access players like Richard.

2. Direct access players have greater control over their orders and executions. SB clients are at the mercy of the SB firm who make their own prices. If he so chooses, Richard can play the Market Makers game and buy on the bid and sell on the ask, thereby capturing the spread. Try doing that with a SB firm. (NB. don't ask Richard how he does this - he won't want to answer that Q on this thread.)

3. Very tight stops. SB Co's tend not to allow you to have tight stop loss orders which (most) day traders require. Even if they do, once they're in place, the person on the other side of your trade (i.e. the SB Co.) can see exactly where your stop is because your using their platform to trade with! If it's tight enough and they want to - they'll take it out and you'll be stopped out for a loss.

4. Psychology. Day trading major stock indices via SB firms is one thing as most offer 1 or 2 point spreads these days. Stocks are a very different matter - especially U.S. ones. Richard rarely trades stocks with a spread wider than 3-4 cents, many are less than this. You'll struggle to find many U.S. stocks quoted by the SB firms with spreads this tight. Most will be 3, 4 or even 5 times as wide as the underlying. When Richard enters a trade via Direct Access, he's usually in profit within a minute or two. With a SB firm, you'll start every single trade with a loss and have to wait much longer for it to come into profit - if it ever does. This will mess with your head big time! If price falters and you lose your nerve, you'll close out with a loss. If Richard is in the same trade and loses his nerve (tehe!), he'll close out with a small profit or maybe at break even at worst. Trading via direct access will help to reduce the psychological pressures and enable the trader to make stress free decisions and trade well. You'll struggle to do this with a SB firm for the reasons given.

The list goes on, but this should give you a flavour as to why day trading U.S. stocks via a SB platform erodes your edge rather than supports it.
Tim.

 

[Sam2018]

Hi Sam,
I'll try and answer your question............................

..............this should give you a flavour as to why day trading U.S. stocks via a SB platform erodes your edge rather than supports it.
Tim.

Thanks Tim - everything you say makes sense. One way or other you pay the tax, so why not have control of your own trades with no "SB middleman"!

By the way, under UK tax law, does profit from this type of short term trading come under the income tax rules or capital gain tax rules? (.......I'm assuming that a UK citizen trading US stocks from the UK will be taxed under UK tax laws rather than US?)

 

[timsk]

By the way, under UK tax law, does profit from this type of short term trading come under the income tax rules or capital gain tax rules? (.......I'm assuming that a UK citizen trading US stocks from the UK will be taxed under UK tax laws rather than US?)

Hi Sam,
Bit of a grey area, but I'd go with CGT. I explain why here (post #8, P1):
http://www.trade2win.com/boards/tax...n-active-traders-benefit-new-18-cgt-rate.html
Check out the 'Taxation & Accounting' forum for loads more discussion on this subject.
Tim.

 

[Mr. Charts]

Hi Sam,
I'll try and answer your question so that Richard can focus on the nitty gritty of the thread. SB is fine for longer term plays - e.g. swing trading, possibly even intra day swing trading where the trader holds positions for hours at a time. True, there are traders who successfully use SB firms for short term day trading - but there aren't that many of them. Fewer still will day trade U.S. stocks. There are good reasons for this:

1. The spread. The tax that Richard and other direct access traders pay to Mr. Darling - the SB trader pays to the SB firm. Mr. Darling then taxes the SB firm so, either way, your money ends up in Darling's pocket. You pay tax regardless of how you trade, it's just a question of who collects it. Mr. Darling loves SB companies because he collects a whole chunk more tax from them than he does from direct access players like Richard.

2. Direct access players have greater control over their orders and executions. SB clients are at the mercy of the SB firm who make their own prices. If he so chooses, Richard can play the Market Makers game and buy on the bid and sell on the ask, thereby capturing the spread. Try doing that with a SB firm. (NB. don't ask Richard how he does this - he won't want to answer that Q on this thread.)

3. Very tight stops. SB Co's tend not to allow you to have tight stop loss orders which (most) day traders require. Even if they do, once they're in place, the person on the other side of your trade (i.e. the SB Co.) can see exactly where your stop is because your using their platform to trade with! If it's tight enough and they want to - they'll take it out and you'll be stopped out for a loss.

4. Psychology. Day trading major stock indices via SB firms is one thing as most offer 1 or 2 point spreads these days. Stocks are a very different matter - especially U.S. ones. Richard rarely trades stocks with a spread wider than 3-4 cents, many are less than this. You'll struggle to find many U.S. stocks quoted by the SB firms with spreads this tight. Most will be 3, 4 or even 5 times as wide as the underlying. When Richard enters a trade via Direct Access, he's usually in profit within a minute or two. With a SB firm, you'll start every single trade with a loss and have to wait much longer for it to come into profit - if it ever does. This will mess with your head big time! If price falters and you lose your nerve, you'll close out with a loss. If Richard is in the same trade and loses his nerve (tehe!), he'll close out with a small profit or maybe at break even at worst. Trading via direct access will help to reduce the psychological pressures and enable the trader to make stress free decisions and trade well. You'll struggle to do this with a SB firm for the reasons given.

The list goes on, but this should give you a flavour as to why day trading U.S. stocks via a SB platform erodes your edge rather than supports it.
Tim.

Great post, Tim.
Thank you very much
Richard

PS Some spreadbetters, cfd traders make money using this method on longer term moves (3 min candles rather than 1 min); "scalping" is much more difficult.

 

[Sam2018]

Mr Charts,
Are you using eSignal's live streamed data? (i.e. approx $100 per month) - seems like a lot per month but I guess the accuracy of live data is invaluable when you're doing short term trades (.......& if you're making money it more than pays for itself)

Is the Turbo Scanner included in this monthly fee or do you need to buy it seperately?

Thanks,
S

 

[Mr. Charts]

sam2018,
I use eSignal - no problems - cost is totally insignificant when you are trading for a living. No business is without its costs. No-one trades using inaccurate data - at least not knowingly, whether they are in a trade for 7 minutes or 7 hours.
Check out the eSignal site for yourself for their charges.

 

[Serenity]

Mr Charts. This is a fantastic thread and one that would be very beneficial for slightly more than newbies... your style has a lot of merit... thanks for posting... it's also encouraging to know there are others out there fighting on out there everyday and making it by applying simple and consistent setups (for those "bad" days when one loses discipline and balance).

It is a great thread and just wanted to thank you for taking the time.

 

[Serenity]

Dont open a business and expect no overheads...

Not to sound arrogant or condescending = but $100 per month really is not a lot of money...think about it as a business... if you have a retail outlet you would have lots of different "necessary" overheads in order to have the shop running well... No one would even think about opening a retail outlet with no Staff or no Telephone... so if you run a trading "business" then $100 per month for live data seems quite necessary. Especially in Mr Chart's case of trading 1 minute bars !!!

Mr Charts,
Are you using eSignal's live streamed data? (i.e. approx $100 per month) - seems like a lot per month but I guess the accuracy of live data is invaluable when you're doing short term trades (.......& if you're making money it more than pays for itself)

Is the Turbo Scanner included in this monthly fee or do you need to buy it seperately?

Thanks,
S

 

[Serenity]

They are always there, these set-ups, even on quiet days.
+43c bread and butter trade
I exited because I could see a rush of buying on level 2 and T&S.
As usual, red X hairs on the entry and image taken at time of exit.
Richard

Hi Mr Charts,
Re: your Post#316 and its chart
This is an interesting example... It looks like on the chart before the gap lower, it was already trending down and there was a period of a few lower highs as the candles sank lower... There would seem to be 2-3 other spots where one would be taking a short position earlier than when you posted... was that possible/true ?

I understand that its not always that we catch the setups = sometimes we only look at a stock after something highlighted it... this question is more to do with... whether I am reading your thread correctly and analysing this chart... it would look like just before the gap a setup presented itself, and also after the gap lower at one point it also trailed off lower for a short... before the point where you actually took that short trade. Am I correct, in locating possible setups ?

Rgds.

 

[bfirth]

serenity, your thoughts are the same as mine, ie. the 6th last bar the previous day could be a short, way too close to the close tho,
or the 13th bar and the 17th bar, as you can see the 13th and 17th entry's are a lot choppier than richards entry,this might have been obvious on LII as support, or not
Bry.

 

[Mr. Charts]

I don't open positions in the last 5 mins before market close.
I don't hold positions overnight because I would not be in control.
Because a stock falls in the last few minutes before close does not mean it will gap down the following day.
I enter a trade when the move is smooth and readable, not when it's choppy.

 

[Mr. Charts]

PS
Serenity, thanks for your kind words,
Richard

 

[Sam2018]

Mr Charts (& others),
Thanks for your replies - sound advice! I've signed up with eSignal - looks good!
- just a couple of quick questions:

1. Where do you get your ATR figures - can't see it as an option anywhere in eSignal? (but I'm not too familiar with it yet)

2. Why do you not use eSignal for everything i.e. including placing orders (rather than using IB)? - or is IB much superior as a trading platform?

Thanks,
S

 

[Mr. Charts]

Sam,
Create a chart - click on it - click on advanced charts - basic studies - ATR
You have to have a link - a plug in - to your broker, which has to be one supported by eSignal. It's all on their site.
Richard

 

[neil]

Evening trades DOW 5 Minute Chart

Just an example of a trade if you wait for last two hours of Dow ( and first two hours)
and consolidation areas (Doesn't work all the time).

 

[Sam2018]

This is the LEH trade I mentioned in post #73 on Tuesday.
Again the pattern is the same.
This move was for a very satisfactory $2.69 per share
Again X hairs on the entry and screenshot at the time of exit.
It looked like a potential volume blow off, so I was alert to that, although they can go on longer than you think and in any case this is about trading what you see.
Although it's not visible on the chart, the buys and sells became erratic and wide ranging on the bid and ask sides and sometimes that increased instability indicates a posssible imminent reversal. Time to take profits whilst they are still there.
Richard

Great result - but this chart has a pretty high ATR and most of your earlier charts have ATR's quite a bit higher than your ideal of 5c (which you discussed on post 43) - if I'm reading the charts correctly. Having looked through some scans and charts it seems that stocks with very low ATRs are also least likely to move enough to make a trade worthwhile. How do you weigh up the pros/cons of whether a higher ATR is worth the risk?

(This may be complete bo***cks, so pls don't shoot down a rookie in flames - just trying to learn!) :innocent:
Thanks,
S