How To Trade: Full Stop

[counter_violent]

What is the main thing that you would like to be able to do as a daytrader, in relation to daily trading, and I do not mean just being able to make money. I mean in relation to trading activity.

To place limit entry orders and limit take profit orders and walk away knowing that a certain profit will follow by the time of next visit to the P C .

Right ! What else do you want to know ?

 

[The Expert]

Again, this may be a stupid answer, but we need to maximise our profit opportunity. We have set a maximum risk, which is fine. But why should we have a profit target as well? If the market gives us more, surely we should allow the stock to go where it wants to go as long as it is not allowed to take our profits back?

PS. BTW, I still haven't been able to figure out the password.

I think I have just said that in my last post, so I agree with you.

If you do not have a profit target then you are trading blind. You can of course take more than your target if that happens, but you should never expect more as all important factors are already priced in.

If we know that we should maximize our profit target as best we can, what then is the best way that we can try to do this, knowing that it is impossible to tell the future?

 

[The Expert]

To place limit entry orders and limit take profit orders and walk away knowing that a certain profit will follow by the time of next visit to the P C .

Right ! What else do you want to know ?

In theory yes, but in practice this will not yield consistent profits and stop running can wipe out gains on a screen very quickly, for, I assume that you are using stops if you walk away from the screen

I agree that many traders might well do far better if they just took this approach, but again, it is all relative to what your objectives are.

 

[The Expert]

In no particular order:
1. Last day's range relative to average daily range.
2. I was going to say stocks that have seen a lot of recent activity, but then remembered you don't use volume.
3. Results anouncements, or other major news story
4. Large overnight gaps, whatever 'large' means.

Once we know we have a potential range to work with, we have our first box ticked, but that is only the first.

We have not yet mentioned the Futures market versus the Cash, for, we must always try and think of what is the driving force behind the stock price movements.

This is why RTA is, well, not very good to use for daytrading, as it will not tell you what is happening right now, for to see what is happening right now you need to see exactly what is going on, and not some mathematical representation of what has happened, and as for telling the future, well, it may be best to leave that to the fortune tellers.

News will always cause some reactions that are not the norm, so a different plan of action is required for such upcoming events, but I think everyone knows this. Gaps are more than likely news related.

 

[The Expert]

Its difficult to know how to improve odds without first knowing the reason why you selected the stocks in the first place.
I thought of scaling in too, but that complicates your calcs, and you may need to automate part of the process.

Since this is not TA; how about stocks that are near their quarterly earnings period, when they may be more susceptible to news? (my understanding is, US stocks have to declare earnings, and investors my be more sensitive to poor/good news near these times)

Somebody has already suggested strong/weak sectors of the stocks you're trading.

The only other clue may be, that if you're trading multiple stocks, maybe you look at the relationship between the stocks themselves. eg, if its a department store, you short one and buy the other, so you're hedging yourself, in some part. (I am sure this was covered somewhere, maybe TraderTom. spreads trading??)

this thread is becoming onerous to read with the extraneous stuff.

have you worked out the password?
I have tried "self indulgent", "dan brown" and "montgolfier" to no avail.

Well, the main reason I select a stock is because it is moving enough to allow me get in and out with a potential profit target. My potential loss is a different matter and will never be based on the reason I picked the stock.

I see no valid reason to worry about sectors once you have adequate range, as all factors are already priced in.

Now, scaling in, well, this is another big debate, and all I can say is that it will depend on how good you are, how much money you have, what your objectives are and what the market is actually doing at the time you enter a trade. I would more than likely not be putting on a 5K share trade if the TICK was at around +1200 for a certain time, at a certain time, as the odds of a reversal are high and my tight stop might be hit in a very short time, and bang, I just lost $1K in a flash.

No one has said that trading is easy, but, it can be easier if you do it a certain way.

I can see why you think this thread is getting a bit of a burden, as it requires one to question beliefs and habits, which, no one likes doing at all, but, which all must do if they want to fully understand what it is they are doing, and how they might do it better.

It really is that simple, but as ever, the simple things are always the hardest things to do.

 

[The Expert]

I am feeling a bit guilty, so I will give a password hint:cheesy:

2 words with a space in between

First word has _ _ _ _ letters

Second word has _ _ _ _ _ _ _ _ _ _ letters

Do not let this stress you out, just think of it as a challenge, like one of the many challenges you face as a daytrader.

 

[DionysusToast]

What is the main thing that you would like to be able to do as a daytrader, in relation to daily trading, and I do not mean just being able to make money. I mean in relation to trading activity.

Interesting question.

The ideal day trading day would work as follows:

1 - Spend a little time - 30 mins or so before the open to identify the stocks to trade
2 - When the market opens - assess if your chosen instruments are behaving as expected
3 - Put your positions on
4 - Follow your positions through to their exit
5 - Walk away and forget about trading until the next morning

 

[DionysusToast]

Ok then, time to cut all the crap and start talking serious.

There are many catalysts as you rightly point out, and many of these are beyond our control, no matter what we think or do.

However, you might have heard said that the price of a stock usually has all the important factors priced in, and I see no reason as to why this is not so.

Of course we will be wrong at times, for we are not able to tell the future, but, if we believe that the stock price has all the important factors priced in, then, we can form a plan that will allows us to trade accordingly.

Many traders make the big mistake of not seeing the big picture, and thus, end up not maximizing the profit potential on most trades.

If you are making money then fine, but if you are not, or not making enough, then you need to seriously look at the reasons and do something about it to change your circumstances.

I'd put myself in the 'not making from daytrading enough' category.

Interestingly, if you watch the earnings stocks and news stocks, the moves are quite often the 'polar opposite' of what you (well, me) would expect. Good news is often followed by a price drop and some say this is because of profit taking based on factors already priced in.

Last week (can't remember which), one company announced a major stock buyback program and shot up. The next day, another company did the same thing and the price shot down :-0

I have discussed this with a friend. I know accounting pretty well, I run a company. He asked me about what people saw in the earnings of a certain company for it to go down on great earnings. My answer was 'possibly nothing' - because too many people would need to study the minutae of the earnings AND interpret them correctly in order to all want out 20 minutes later. Perhaps this is what happens but to me it makes no sense and that is why I am still trying to make sense of such things.

 

[Studog]

Hmmm, the farcity of equities day trading. Clearly equity trading is better left to decisions based on fundamentals unless the stock is in play or the mkt is highly liquid.
Unless of course you are trading the mkt leaders and have an idea that news will drive the main indices in either a certain direction on which you can be part of the overall mkt movement.

 

[DionysusToast]

I am feeling a bit guilty, so I will give a password hint:cheesy:

2 words with a space in between

First word has _ _ _ _ letters

Second word has _ _ _ _ _ _ _ _ _ _ letters

Do not let this stress you out, just think of it as a challenge, like one of the many challenges you face as a daytrader.

Well - 'Anal Retentives' fits but it's not that

When I look at the PDF, I would say that this is more likely to be your screening method as opposed to everything you have on your list. Berkshire for instance looks like something you wouldn't bother with and at the other end of the extreme - Apple also looks a bit dubious.

I personally can't get along with stocks like Apple because they are going way too fast most of the time. I can't keep up with my current method/experience level.

 

[Studog]

Interesting. Now why the hell would you trade that?
I have seen you talking of risk elsewhere. I hate having capital exposed for long periods. I wonder what the chart prior to that looked like - if indeed you entered on the basis of techs.

 

[DionysusToast]

Studog - that is not a price chart.

 

[BSD]

Ok then, time to cut all the crap and start talking serious.

However, you might have heard said that the price of a stock usually has all the important factors priced in, and I see no reason as to why this is not so.

Of course we will be wrong at times, for we are not able to tell the future, but, if we believe that the stock price has all the important factors priced in, then, we can form a plan that will allows us to trade accordingly.

Many traders make the big mistake of not seeing the big picture, and thus, end up not maximizing the profit potential on most trades.

My-oh-my, how can one resist that.

Don't tell me that you and are actually starting to agree on some things.

 

[rathcoole_exile]

I am feeling a bit guilty, so I will give a password hint:cheesy:

2 words with a space in between

First word has _ _ _ _ letters

Second word has _ _ _ _ _ _ _ _ _ _ letters

Do not let this stress you out, just think of it as a challenge, like one of the many challenges you face as a daytrader.

how about "you're a gobshyte w@nk@ full of BS"
does that fit the bill ?

 

[The Expert]

As I keep saying, there are several ways to trade without using discount brokers and needing to have $25K+

This one is for the Irishman we had on a while ago:cheesy:

 

[morgan_edge]

As I keep saying, there are several ways to trade without using discount brokers and needing to have $25K+

Hi TE,
Is this something you can expand on without encrypted pdf files etc, considering its not to do with your method?
I know that there are offshore brokers that let you daytrade with only a few K, although they tend to kill you with expensice platform fees and big commissions.
There's also the prop trading route.

Are you referring to somthing other than them 2 things, and if so what?
thankyou.

ME

 

[Prawnsandwich]

I'd put myself in the 'not making from daytrading enough' category.

Interestingly, if you watch the earnings stocks and news stocks, the moves are quite often the 'polar opposite' of what you (well, me) would expect. Good news is often followed by a price drop and some say this is because of profit taking based on factors already priced in.

Last week (can't remember which), one company announced a major stock buyback program and shot up. The next day, another company did the same thing and the price shot down :-0

I have discussed this with a friend. I know accounting pretty well, I run a company. He asked me about what people saw in the earnings of a certain company for it to go down on great earnings. My answer was 'possibly nothing' - because too many people would need to study the minutae of the earnings AND interpret them correctly in order to all want out 20 minutes later. Perhaps this is what happens but to me it makes no sense and that is why I am still trying to make sense of such things.

Its called selling the news...so much for fundamentals.....

 

[Mr. Charts]

Earnings news/results are not normally viewed in absolute terms so much as against consensus expectations.
In addition, guidance going forward is often weighted more. Other information released at the same time often influences reaction too.
Richard

 

[The Expert]

Hi TE,
Is this something you can expand on without encrypted pdf files etc, considering its not to do with your method?
I know that there are offshore brokers that let you daytrade with only a few K, although they tend to kill you with expensice platform fees and big commissions.
There's also the prop trading route.

Are you referring to somthing other than them 2 things, and if so what?
thankyou.

ME

Certainly ME, all you need do is ask.

it is all relative to what your objective is, as in what profit target you have set yourself and in what time frame you try to achieve this objective.

If you want to make $2K in 3-4 hrs, then you must either make $2K in 1 trade, which is very possible, but the downside is trading larger size so the potential loss is greater. If the potential loss is high, then it might be best to trade smaller size and do more trades, or, if you like, do not put all of your eggs in the one basket.

So, if you buying and holding for a few days, with smaller size, then commissions are not really an issue, as you will prob be doing no more than 1-2 trades and using limit orders.

If you are doing smaller size more frequently then you will need cheaper commissions and better access to the minute details of order flow, i.e. Lev II & T&Sales. You will also need to monitor the Futures vs Cash as short term price fluctuations are greatly influenced by program trading and big institutional hedging.

Therefore, you might be better off to have several accounts and use the right one for the right job. You must weigh up all the pros and cons, for cheap comms with prop trading houses usually have drawbacks, like a % of your profit taken, monthly fees, inability to access your funds instantly by electronic means (this to me is the big drawback as i like to know my money is mine and I can get my hands on it when I want it), and make sure they are covered ny Gov Insurance schemes, as a lot of these shops close at an alarming rate.

As you are UK, you can of course use CFD account, which I think is brilliant and blows a lot of the US brokers out of the market. As we speak, I am in the process of setting up my third CFD account (I have actually closed one of my my IB accounts and another US broker I use as well), and this one is specifically for daytrading US stocks with small size but a lot of trades per day, it is something like Grey 1 was doing, on a smaller scale but not using TA, just my God given brain and my 2 eyes :cheesy: I am experimenting with CFD to see how it will work out with comms and leverage.

Remember, you must be willing to try out new things with your money, for "if you do what everyone else is doing, then expect to get what everyone else gets".

Money is used to make money, so make use of your money, but in the best and less risky way possible.

Hope this helps!

 

[D70]

As I keep saying, there are several ways to trade without using discount brokers and needing to have $25K+

This one is for the Irishman we had on a while ago:cheesy:

I thought this thread was about US stocks ?






.