I have so many questions...

[elliot.baker.eb]

I really want to get into spread betting and I'm desperate to talk to someone about it. I'm just going to list my questions/observations here and people can answer if they wish...I've read some books, awareness of the basics etc, started demo trading about a week/2 weeks ago.

1. Do chart patterns like triangles, support/resistance lines etc. apply equally validly to all types of instruments, e.g. forex/stocks etc.? If so, why would anyone care what they were trading/betting on? If all that matters is the pattern on the screen, who cares if it's Microsoft or GBP/EUR or Soy beans? Discuss.

2. Are there statistics out there about the historical success rates of trading purely on chart patterns such as triangles, breaking through support etc.? Presumably they can't be more than 51% correct otherwise someone would just trade purely on patterns and have all the money in the world now?

3. What do you call the different time scales of trading?
Do most people stick to one time scale, e.g. intra-day (sub 4 hours), around a day - 2 days, a week, a few weeks, weeks - months? I can see pro's and cons to all time scales - can anyone recommend a particular book which might discuss time scales specifically?
Do different time scale traders have different pip targets? e.g. 10-100 in day trade? 500-1000 in a month long movement?

That's all for now. Any advice/book recommendations welcome.

Many thanks to anyone who takes their time to respond.

 

[tomorton]

1. In theory, all patterns mean the same thing in any market, as all patterns are formed from the profit-seeking actions and psychological motivations of market participants. Although, in practice, there is not likely to be any on-going research results to prove this in every market we could find. Beware of old old research, possibly from other types of market in other countries which is extrapolated to apply to all trading.

2. See http://thepatternsite.com/index.html or Thomas Bulkowski's excellent books on patterns etc.

3. Time scale's a very individual choice, partly based on aptitudes, partly on availability to trade this or that market when it is at its most active. Some people can vary this but I would recommend specialising in one only to any beginner until you've proved you can either do it or you can't.
I think pip targets (and pips themselves) are a misleading waste of effort and a source of stress. Degree of compliance with your own trade strategy's rational rules is much more profitable long-term. (strictly speaking, pips have no meaning in spreadbetting, they are for people who don't understand percentages)

 

[barjon]

Eb

Some people swear by patterns, some regard them as codswallop. In any event different instruments often have different characteristics. People who do trade patterns won't necessarily trade in the same way so it's difficult to determine any success statistics. For example, different traders may well have a different definitions of what constitutes "breaking through support" - 1 point, 1%, 2 points, closing price etc etc.

Same with time scales. Day traders are normally reluctant to hold trades overnight. They are able to work with low risk (stops can be fairly tight) but their reward tends to be commensurately lower, too.

You ask in another post whether your plan is feasible - well it's extremely difficult to make money betting at £1pp with a bank of only £100 and also without any tested trading plan to guide you. I would suggest you choose a particular instrument and observe how price moves.after a while you can develop your hypothesis that if price does x there seems to be a good chance y will follow. You can then test that to see if it is valid, establish your definitions and rules and trade it.

 

[elliot.baker.eb]

Thanks for the advice people. When people talk about a trading strategy, do they literally mean a rigorous set of unambiguous rules to follow upon which to base entries and exits and risk size etc., therefore never trading on "this feels like a sure thing" or "looks like it'd going to come down".

 

[barjon]

Yes, here's a link to how to draw up a comprehensive trading plan and a further link to a specific trading strategy with associated rules.


http://www.trade2win.com/articles/886-trading-plan-template



http://www.trade2win.com/boards/tra...line-approach-sla.html?highlight=Trading+plan

 

[elliot.baker.eb]

Thanks barjon

I notice that in the guide to making a plan Timsk has said:

"For example, it is almost impossible to day trade profitably using this trading vehicle [spreadbetting]."

I notice this document is now 11 years old. Does this statement stand true today? I had hoped perhaps this was related to the size of the spread and that this has decreased today.

With daily movements in FX ranging from 10 to several hundred or even 1000s of pips (Brexit day), AND with spreads on major FX pairs being as low as 1 or 2 pips, I fail to understand how it is "almost impossible" to profit from day trading via spreadbetting? I mean, no more impossible than to day trade profitably via any means. I presume spreads and daily ranges for stocks and other instruments are comparable.


Thanks for any input.

 

[tomorton]

Eliot, you might be right about spreads, but still wrong about daytrading. I am increasingly convinced that starting trading by daytrading is the single biggest reason the majority of new traders don't make it. I've got to suggest trading EOD with daily and weekly charts to develop your strategy and craft, microscope it to minutes and hours only when you're consistently profitable.

 

[timsk]

. . .I notice that in the guide to making a plan Timsk has said:

"For example, it is almost impossible to day trade profitably using this trading vehicle [spreadbetting]." . . .

Hi Elliot,
As I wrote that comment - I'll offer you my answer.

You're quite correct that the template is over ten years old and spread betting (SB) is now a very different animal to what it was back then. These days, the odds aren't stacked against you quite as heavily as they once were and, certainly, there are T2W members who day trade using SB firms. However, you still need to keep in mind that they (SB firms) are market makers and you're betting against them so, in this regard, nothing has changed.

SB firms make their own prices (as they've always done) and can skew them so that, in effect, you're paying a wider spread. Tight stops get hit that, otherwise, might not etc. Whereas, day traders who have accounts with a direct market access (DMA) broker are on a level playing field so, all other things being equal, they will fair better than traders using a SB firm. A member posted recently that IG (the biggest and best known SB firm) have only had 5 losing days in the last 4 years. I've no way of verifying this, but I wouldn't be at all surprised if it's true. As rules of thumb go, day trading with a SB firm is as tough as it gets and any negative impact on your PnL is likely to be greater than that felt by swing and position traders.

This slight skew in favour of the SB firm tends to be amplified when trading equities - which can have noticeably wider spreads. If you stick to the major indices (e.g. the Dax) then spreads are often very good. So, your choice of market and instrument will come into play here. Of course, there are good reasons to use SB firms to day trade in preference to bespoke DMA brokers. Apart from profits being tax free, costs saved in terms of data and charting software can be significant. Those who ague against day trading with SB firms will say this is the equivalent of fools gold - as the SB firms make you pay in other ways.

That's my take on how things stand today - Jon and Co may have a different view or more comments to add. In a nutshell, it's horses for courses.
Tim.

 

[barjon]

Thanks barjon

I notice that in the guide to making a plan Timsk has said:

"For example, it is almost impossible to day trade profitably using this trading vehicle [spreadbetting]."

I notice this document is now 11 years old. Does this statement stand true today? I had hoped perhaps this was related to the size of the spread and that this has decreased today.

With daily movements in FX ranging from 10 to several hundred or even 1000s of pips (Brexit day), AND with spreads on major FX pairs being as low as 1 or 2 pips, I fail to understand how it is "almost impossible" to profit from day trading via spreadbetting? I mean, no more impossible than to day trade profitably via any means. I presume spreads and daily ranges for stocks and other instruments are comparable.


Thanks for any input.

Pretty much agree with all Tim has said.

Day trading is at the top of the sport, as F1 in motor racing, and it's very difficult to make money consistently over a longish period of time. As Tomo says above, beginners jump into day trading and mostly fail, as they would if they leapt into an F1 racing car as their first experience of driving.

Do not be seduced by the 1000 points of daily movement. Unless you have absolutely iron discipline if you're on the right side of it you'd probably become increasingly anxious to take your profit and take it when it's got to about 25. If you're on the wrong side of it you'll probably be hanging on hoping it'll come back until the whole 1000 is lost or your account is blown on the way.

Nah, that won't happen to me I hear you say.............

 

[elliot.baker.eb]

Ha I hear what you're both saying... I think my feelings are skewed against your combined years (decades??) of experience by my two weeks of intraday demo trading on IG that has been nothing but success so far... so how could I ever lose! (sarcasm of course)

The thing is... I've not yet tried to make any bets that last more than 5 minutes to about 2 hours, I feel I have a reasonable handle on the "meaning" of 1 min/2min /5min /15 min charts, maybe check a 2 or 4 hour chart for any significant resist/support lines.

BUT I've never tried betting on longer time ranges. If I was to do this what should be my "most zoomed" time scale? Would it be say.... 1hr/2hr/4hr/ 1day/1week? and you just don't worry at all what the "instantaneous" price is? I presume this requires significantly larger stops than that stops of 5-15 pips I've been using on quick-bets?

Thanks again

 

[tomorton]

Ha I hear what you're both saying... I think my feelings are skewed against your combined years (decades??) of experience by my two weeks of intraday demo trading on IG that has been nothing but success so far... so how could I ever lose! (sarcasm of course)

The thing is... I've not yet tried to make any bets that last more than 5 minutes to about 2 hours, I feel I have a reasonable handle on the "meaning" of 1 min/2min /5min /15 min charts, maybe check a 2 or 4 hour chart for any significant resist/support lines.

BUT I've never tried betting on longer time ranges. If I was to do this what should be my "most zoomed" time scale? Would it be say.... 1hr/2hr/4hr/ 1day/1week? and you just don't worry at all what the "instantaneous" price is? I presume this requires significantly larger stops than that stops of 5-15 pips I've been using on quick-bets?

Thanks again

All my trades are triggered at pre-set price levels, I never open a trade "live". This means your entry itself is at a level that confirms your TA. e.g. if price in an uptrend has made a pullback lower and I think it might resume the upward movement, a stop goes in overnight just above the high of the last day's bar. If price trades up through my entry price the next session, the order is triggered: if it doesn't trade upwards but continues downwards, I've lost nothing.

Yes, stops will be wide. Typically for a trade like the one above, the stop would be just below the low of the last day's bar. so you need to adjust stake size so a single trade won't rip your account apart. But pips risked don't matter, its £'s risked that count.

 

[elliot.baker.eb]

Ok that sounds reasonable and less time consuming and nail biting than checking trades on my phone every 30 seconds all day! Do you believe spread betting to be a more viable platform for bets/trades on this time scale and why?

Thanks very much for all this explaining by the way.

 

[Fugazsy]

I really want to get into spread betting and I'm desperate to talk to someone about it. I'm just going to list my questions/observations here and people can answer if they wish...I've read some books, awareness of the basics etc, started demo trading about a week/2 weeks ago.

1. Do chart patterns like triangles, support/resistance lines etc. apply equally validly to all types of instruments, e.g. forex/stocks etc.? If so, why would anyone care what they were trading/betting on? If all that matters is the pattern on the screen, who cares if it's Microsoft or GBP/EUR or Soy beans? Discuss.

2. Are there statistics out there about the historical success rates of trading purely on chart patterns such as triangles, breaking through support etc.? Presumably they can't be more than 51% correct otherwise someone would just trade purely on patterns and have all the money in the world now?

3. What do you call the different time scales of trading?
Do most people stick to one time scale, e.g. intra-day (sub 4 hours), around a day - 2 days, a week, a few weeks, weeks - months? I can see pro's and cons to all time scales - can anyone recommend a particular book which might discuss time scales specifically?
Do different time scale traders have different pip targets? e.g. 10-100 in day trade? 500-1000 in a month long movement?

That's all for now. Any advice/book recommendations welcome.

Many thanks to anyone who takes their time to respond.

1.In my experience pattern do have merits but I would not count on them much.
A pattern is only a representation of the psychology of the mass participants, where they got in, where they got out, where the sidelines did not get involved, where they did and so on and on.

2. Yes, I am sure there are statistics (probably someone could not make it as a trader decided to make statistics instead) but a pattern will respond differently in a different market condition and the market shows a new face every day.

3.I learnt is best to view many time frames before you take a trade, my timeframe is the 5m and I also view the 15, 30 and 60 prior to do something.

NO, I have not book to recommend, they are all rubbish, not only that they will create concepts in you which will only keep you down.

If you like to read them do it but then you need to have enough strength to free yourself from the cabbage.

What do I recommend? Choose your timeframe and draw support/resistance lines on a bigger timeframe, when prices get there you will do something or nothing at all, 10000 hours of screen time will help you with what to do.

I hope it helps a bit.

 

[Splitlink]

I have been a direct access trader. Get it wrong and it is expensive. I think that the depth of one's pockets is the overriding factor in this. As I am fortunate in being a part time,pastime, trader I find that spreadbetting is the way to go.

Psychology is an important part of trading, too. fear, greed , the ability to be emotionless, are the greater part of a traders tools. Always, trade with an adequate account. That is another reason for SB over ditrest access.

Honesty? Moving goalposts? A lot of dealers and brokers defaulted on their clients in the crisis. My SB dealer gave me no problems. If one is trading with low funds, the problem is resolved. There is, only, one answer.

About the question of goalposts. Whenever I hear this, I compare prices with the market. They seem the same, or reasonably so, to me.

I do believe, though, that, with today's sophisticated software, stops are located and, when a lot of money is accumulated the dealer will take them out. The market does that, though, anyway.

That gives a clue on where to open trades-- your trades should be opened where you think the stops are going to be. Easier said than done? That's your problem!

This also gives an indication on patterns. Patterns are predictable and professionals know all about them. Professionals are, always, the ones that you are trading against.

However, if you ask me whether to go full time in trading? No way! That is what I think of trading, in general.

 

[gerryg]

I really want to get into spread betting and I'm desperate to talk to someone about it. I'm just going to list my questions/observations here and people can answer if they wish...I've read some books, awareness of the basics etc, started demo trading about a week/2 weeks ago.

1. Do chart patterns like triangles, support/resistance lines etc. apply equally validly to all types of instruments, e.g. forex/stocks etc.? If so, why would anyone care what they were trading/betting on? If all that matters is the pattern on the screen, who cares if it's Microsoft or GBP/EUR or Soy beans? Discuss.

2. Are there statistics out there about the historical success rates of trading purely on chart patterns such as triangles, breaking through support etc.? Presumably they can't be more than 51% correct otherwise someone would just trade purely on patterns and have all the money in the world now?

3. What do you call the different time scales of trading?
Do most people stick to one time scale, e.g. intra-day (sub 4 hours), around a day - 2 days, a week, a few weeks, weeks - months? I can see pro's and cons to all time scales - can anyone recommend a particular book which might discuss time scales specifically?
Do different time scale traders have different pip targets? e.g. 10-100 in day trade? 500-1000 in a month long movement?

That's all for now. Any advice/book recommendations welcome.

Many thanks to anyone who takes their time to respond.

1. Asked this question myself dozens of times and because it is still unclear about underlying concepts of the patterns like cups, alligators, head and shoulders etc.
What I really buy in is S/R and Resistance lines basically these are level where SL and pending orders are placed&can be explained with clear simple logic - sell on peaks, buy on bottoms. Basically if break it down to the fine processes of "bottoming" and "peaking" we can see that the price "runs out of steam" , because the higher is the prices the less traders want to support the move because risk are growing the price will reverse. Calculating mathematically this "risk variable" of price reverse which takes into account current market conditions would a be great step into understanding S/R levels on different timeframes. :whistling

Bounces and retracements are closely connected with S/R levels. Open USD/JPY after BOJ decision to see price peaks and bottoms it moves from 103 to 103.50 then 104,then back 103, 102.50, back to 103.
Clearly we see movements from S to R and Vice versa as these movements are purely speculational.


2. Make your own pattern tests on different patterns, everything you find on the net regarding this is a BS.

3. Regarding timeframes I tend to pick shortest to trade on 1 hour - to avoid paying extra costs (spread) and make same money. But another precious resources you spend when trading on higher timeframes is TIME. Holding trades 1M you can wait 3-4 weeks to close your position with SL and then second with SL it also puts pressure. So find your comfortable timeframe with balance between risk/return/time
Cheers.

 

[NVP]

Eliot, you might be right about spreads, but still wrong about daytrading. I am increasingly convinced that starting trading by daytrading is the single biggest reason the majority of new traders don't make it. I've got to suggest trading EOD with daily and weekly charts to develop your strategy and craft, microscope it to minutes and hours only when you're consistently profitable.

agreed Daytrading is not for amateurs ........and the lower TF you go the tougher it gets ..........start off on the high TF's ........it wont pay the bills but you have to start somewhere in this game

N

 

[Atilla]

I really want to get into spread betting and I'm desperate to talk to someone about it. I'm just going to list my questions/observations here and people can answer if they wish...I've read some books, awareness of the basics etc, started demo trading about a week/2 weeks ago.

1. Do chart patterns like triangles, support/resistance lines etc. apply equally validly to all types of instruments, e.g. forex/stocks etc.? If so, why would anyone care what they were trading/betting on? If all that matters is the pattern on the screen, who cares if it's Microsoft or GBP/EUR or Soy beans? Discuss.

2. Are there statistics out there about the historical success rates of trading purely on chart patterns such as triangles, breaking through support etc.? Presumably they can't be more than 51% correct otherwise someone would just trade purely on patterns and have all the money in the world now?

3. What do you call the different time scales of trading?
Do most people stick to one time scale, e.g. intra-day (sub 4 hours), around a day - 2 days, a week, a few weeks, weeks - months? I can see pro's and cons to all time scales - can anyone recommend a particular book which might discuss time scales specifically?
Do different time scale traders have different pip targets? e.g. 10-100 in day trade? 500-1000 in a month long movement?

That's all for now. Any advice/book recommendations welcome.

Many thanks to anyone who takes their time to respond.

Good balanced book to read is End to the Bull by Gary Norden.

You might find it interesting as he doesn't think much of TA either.

It was reviewed here but I can't seem to find the link.